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Expert comment from leading figures within the business community, on a variety of topical issues across a range of sectors. INVESTOR’S DIARY FAR TOO OFTEN, BANKS’ BEHAVIOUR MAKES THE BLOOD BOIL There was a time, not that long ago, when banks were considered solid, well- respected institutions upon which we could rely to show discretion, prudence and to behave in a professional manner befitting their status. How times change. Let me give you an example. I was recently charged £22 by a bank after they claimed to have completed what they called a ‘complex calculation’, even though I’d done the arithmetic for them. I wrote back, reminding them they were a bank and surely capable of calculating compound interest. I attached an invoice for £22 to cover the cost of the letter and the bank cancelled their ridiculous fee. Far too often, banks’ behaviour makes the blood boil. Almost everyone has a tale to tell of being ripped off, overcharged or simply ignored by an industry, which is now viewed with suspicion (at best) by wary customers. But could a change be on the way? On either side of the Atlantic last month, the consequences of unexpected action by two banks provided their customers with a decidedly welcome boost. In Canada, customers with credit cards issued by JP Morgan Chase were told they couldn’t make any card repayments because the bank had cancelled their debt. That’s right – in one fell swoop, Chase wrote off everyone’s credit card debt. Imagine how some people, lying awake in bed the night before, worrying about how they could make their regular monthly credit card payment must have felt when they heard the news. ‘Over the moon’ doesn’t begin to describe it. One lady, checking her outstanding card balance online, expecting it to be $883.67, saw it had dropped to zero. She called Chase, only for the woman at the other end to confirm there was nothing more to pay. “Take it as a gift,” suggested the Chase lady. Take it as a gift? You would want to take her out for a drink. Chase announced a couple of years ago that it was exiting the Canadian credit card market and stopped accepting new card applications some time ago. Nevertheless, instead of selling the remaining debt to a company willing to collect it, they preferred to cancel their customer’s indebtedness altogether. Perhaps there was an element of favour- currying involved; if so, it certainly worked. Closer to home, Scandinavia’s largest lender, Nordea Bank, revealed that it was launching a 20-year, fixed interest rate mortgage. Nothing unusual 12 | in that nowadays, except the mortgage interest rate is zero. For the whole twenty years. In one of the finance industry’s greatest understatements, Lise Nytoft Bergmann, an analyst at Nordea in Denmark, told Bloomberg that “It’s never been cheaper to borrow.” Actually, that’s not quite accurate: it currently is cheaper to borrow through Jyske Bank, Denmark’s third-largest bank. From last month, customers may apply for a 10-year fixed rate mortgage with an interest rate of minus 0.5%, meaning they could pay back less than the amount they borrowed. In other words, if you bought a property for £200,000 and paid off your mortgage in full in 10 years, you would repay the bank just £199,000. What’s going on? Is this sudden display of largesse a sign that banks crave our collective goodwill once more, or has there been a purge of some of the more unsavoury characters at the helm of these institutions? Possibly not. Let’s assume it was probably cheaper for Chase to simply cancel credit card debt in order to exit a market it’s been keen to leave for a few years. Nordea Bank’s announcement, however, is a sign that, in Denmark at least, banks are prepared to take a longer-term view and consider domestic mortgage holders to be a much better risk than some of the alternative lending opportunities they have. It also suggests that Scandinavian banks expect property values to rise over the long term too. Should we prepare for similar displays of banking generosity here? Don’t hold your breath. But just in case one of our banks breaks rank in an attempt to attract mortgage customers keen to start an investment property portfolio, for instance, setting aside a deposit with which you intend buying a property ready would make good sense. Alternatively, there could be merit in becoming a modest shareholder in the British bank seeking first mover advantage in what is already a hugely competitive mortgage market by charging its customers nothing to borrow.