Does ‘fine inflation’ make banks less attractive?

His comments have produced howls of derision on a few forums, where those posting have pointed out that he bought the shares recently — and at that time the same risks would have been known.

But put this to one side and consider the implications of the high-profile fund manager saying that “fine inflation” makes banks a less attractive proposition.

First, consider this from the point of view of investors. Bank shares are widely held by small investors who may still be clutching “windfall” shares or have bought them for the income (when they all paid an income).

Should these investors be reconsidering banks, if they have not already done so?

Should investors be reconsidering banks, if they have not already done so?

The other issue is whether large fines could at last have a constraining effect on the bad behaviour of banks.

In the not-so-distant past, fines imposed had as much impact as a fly buzzing around an elephant’s bottom. A wag of the tail and it was brushed away with scarcely a thought.

For example, in 2003 Lloyds received a then record FSA fine of £1.9m for mis-selling precipice bonds.

In that year, its pre-tax profits were £4.4bn and total group assets were £252bn. The fine was 0.043 per cent of annual profits. Would that have provoked a change of culture? Not on your nelly.

But in 2012, HSBC was fined $1.9bn (£1.1bn) for failing to prevent Mexican drug cartels laundering money through its accounts Now that should have hurt.

Mr Woodford is concerned that more huge fines could hit the sector as a result of the investigation into historic Libor and foreign exchange market manipulation.

As ever, overseas regulators are willing to impose harsher sanctions than UK regulators. If potential investors are being scared off by the size of fines, it will compound the pain inflicted by those fines.

It may, finally, provoke the culture change some of our banks still desperately need.

Banks’ customer service: shameful

From a consumer’s view, there is little evidence that banks are mending their ways. Many may no longer be offering “advice”, but they are still being as bloody-minded when dealing with complaints.

The Financial Ombudsman upheld a staggering 78 per cent of complaints made by consumers against HSBC in the first half of this year; Lloyds had 66 per cent upheld, the same as Barclays.

At one time, uphold rates generally ran at about one in three cases. Many of these extra cases are undoubtedly provoked by banks giving customers the brush-off in the hope they will go away.

The worst that can happen from their point of view is that the Ombudsman will do the legwork for them.

Add these figures to the fact that banks have been forced to re-open 2.5m PPI cases and you have a pretty accurate reflection of where customer service comes in their list of priorities.

That is how it will continue until they are punished enough in their pockets to force a change of culture.

Consumers and their advisers can add to the pressure. Those who stick with their bank are accepting the status quo. By moving to those with better records on customer service, they can improve the chances that one day we will have better banks.

N’wide evades the Isa issue

Like many savers I am frustrated at how little I earn on cash Isas, so when I got a letter saying that my Web Isa Issue 2 is about to mature, I dropped Nationwide’s customer services an email.

I asked why I could not transfer my money into its top-paying Flexclusive Isa, a question I suspect crosses the minds of many customers. The reply, which spelled my name incorrectly, did not address the question.

Instead it said: “Under the Government’s Individual Savings Accounts (ISA) scheme, there are two types of ISA: Cash ISAs or Stocks and Shares ISAs. In a tax year you can open one of each of these types of ISA, both of which do have maximum subscription limits for each tax year.”

It burbled on about Tessa Isas, pointed me to a web link on savings rates and told me I could visit its IFAs. In all, I was offered four web links in what was clearly a cut-and-paste standard response. There was no attempt to answer my simple question. So 0 out of 10 for customer service there, Nationwide.

Tony Hazell writes for the Daily Mail’s Money section