Banks Pay Out £1.2bn Over Mis-Selling Swaps

Britain's banks are paying out more than £1bn to small business that were mis-sold complex interest rate swaps, according to the City regulator.

The Financial Conduct Authority (FCA) said the first tranche of payments amounted to £1.2bn.

It said the figure is just under a third of the £3.75bn set aside by four high street giants.

Barclays, HSBC, Lloyds Banking Group and the Royal Bank of Scotland are involved in compensating businesses over the mis-sold hedging products.

In May, the FCA told the banks to examine around 30,000 cases for possible mis-selling.

The order came after it found "serious failings" in the way the products - commonly known as swaps - were sold to small and medium size (SME) businesses.

The swaps were sold on the basis that they would help to protect SMEs against the risk of rising interest rates.

But when rates fell the businesses were left with large debts, typically running to tens of thousands of pounds.

The SMEs also faced penalty charges if they wanted to break the contracts they were tied to.

Many of the businesses said they had not been told about the break clause penalties when signing the initial contract.

Around 30% of customers reviewed have not been compensated as they were deemed savvy enough to have understood the products' risks.

More than half of the remaining cases were then offered alternative hedging products rather than full cash compensation.

The FCA said by the end of June 16,000 customers had been sent decisions about redress.

Of that total, 13,500 were offered compensation from the banks with a cash component in the settlement offer.

The FCA said to date 8,000 customers have accepted the compensation terms.

Last month, the watchdog said nine banks involved in the review had a met a 12-month deadline to look at all cases.

Although it added that some banks still had not relayed the decisions to all customers.

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The Week's Big Business Stories

Watchdog's Warning Over In-App Purchases

Updated: 2:24pm UK, Friday 11 July 2014

A consumer watchdog has warned parents to check settings on their mobile devices, after Amazon was sued over children making unauthorised in-app purchases.

Britain's Competition and Markets Authority (CMA) told Sky News: "Our advice to parents is to check their device settings, play their child's games themselves and read the game's description online.

"The CMA (and its predecessor the Office of Fair Trading) has been working closely with the online and apps based games industry, both in the UK and Europe, to put safeguards in place to ensure children are protected from making unauthorised payments and that customers are always treated fairly.

"If they have any concerns at all, they should contact Citizens Advice."

The warning comes after the US Federal Trade Commission (FTC) launched legal action over claims the online retail giant has not done enough to stop children spending money without parental consent.

The company said it would not agree to an out-of-court settlement with the FTC.

Amazon previously said that it was prepared for a court battle and that it had refunded parents who complained after being billed for the apps.

The dispute centres on children's games downloaded via Kindle tablets, and the difficulty differentiating virtual and real currency for purchase of virtual items.

In-app charges were introduced in 2011 and no password was required for purchases between $0.99 and $99 (£57).

The following year passwords were introduced for purchases over $20 (£11.60).

But the FTC said that although it updated password procedures last year, there was a period where children could still buy apps.

One customer complained that her daughter had incurred charges of more than $350 (£200) while playing a game.

The FTC said thousands of consumers had been affected and unauthorised charges ran into the millions.

FTC consumer protection director Jessica Rich said: "A central tenant in consumer protection is that you need to obtain consumer consent before placing charges on their bills.

"That applies all places, from brick-and-mortar stores to app stores."

The legal action seeks both refunds for consumers and a ban on billing account holders for in-app charges made without their consent.

Last week the FTC launched a similar lawsuit against T-Mobile, and in January it reached a $32.5m (£19m) settlement with Apple over in-app charges.

Charges racked up by children without parental consent has also caused concern for PayPal, which is owned by eBay.

In April, Sky News revealed PayPal was changing its terms and conditions for account users.

A new clause, activated last month, said users must agree to "take all reasonable steps to protect the security of the personal electronic device through which you access the Services (including, without limitation, using pin and/or password protected personally configured device functionality to access the Services and not sharing your device with other people)."

Paypal denied it was banning account users sharing their computers.

A spokesman said: "The new wording in our User Agreement says that users should take reasonable care when sharing devices so their PayPal account is not compromised."

Meanwhile, the celebrated children's author Allan Ahlberg revealed he turned down a lifetime achievement award after learning it was sponsored by Amazon.

In a letter to the Bookseller, he complained about Amazon's UK tax arrangements, whereby revenue earned in Britain is accounted for in low-tax Luxembourg.

Amazon's UK subsidiary reached sales of £4.3bn last year but it paid only £4.2m in tax.

Amazon.co.uk saw a 56% rise in profit to £17m during 2013, along with a 13% rise in UK revenue.

Mr Ahlberg wrote: "Tax, fairly applied to us all, is a good thing. It pays for schools, hospitals - libraries!

"When companies like Amazon cheat - paying 0.1% on billions, pretending it is earning money not in the UK, but in Luxembourg - that's a bad thing.

"We should surely, at the very least, say that it is bad and on no account give it any support or, by association, respectability."

Approached by Sky News, Amazon UK declined to comment on Mr Ahlberg's action and it was awaiting a response from the US parent firm about the FTC action.

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Asian Group Swoops On New Look's French Arm

By Mark Kleinman, City Editor

New Look, one of Britain's biggest fashion retailers, is in advanced talks to sell its struggling French operations to a Far Eastern conglomerate.

Sky News has learnt that the private equity-backed chain is close to bringing the curtain down on more than a decade of efforts to improve the fortunes of Mim by offloading it to Asia Global.

In a statement issued on Friday to lenders, bondholders and investors in its other debt instruments, it said: "New Look confirms that it has received an indicative offer from Asia Global for Mim, its standalone French retail business, and has entered into a period of exclusive discussions with them.

"Negotiations are at an early stage and there can be no certainty that a transaction will be concluded.

"A further announcement will be made in due course as appropriate."

Mim, which operates from more than 300 shops across France, has been a drag on New Look's performance for some time, prompting its parent to take a £64m writedown on the value of the subsidiary's assets in June.

It is not clear what value will be attributed to the business by a takeover by Asia Global.

New Look, which took full control of Mim in 2004, is owned by Apax Partners and Permira, which have been shareholders for a decade.

An attempt to float New Look was aborted in 2010 because of difficult stock market conditions, and Anders Kristiansen, its chief executive, has made it clear that it will not try again until its £1bn debt-pile has been reduced.

Under Mr Kristiansen and his predecessor, Alistair McGeorge, New Look has outperformed many of its high street rivals, refusing to engage in heavy early discounting during last year's crucial Christmas trading period.

In a statement issued last month confirming underlying pre-tax profits of just over £200m for the year ended March 29, Mr Kristiansen said: "Our decision to build scale in four key geographies namely - China, Poland, Russia and Germany, is, we believe, key to New Look's future continued success.

"In the year we opened our first five stores in China and bought back our Polish Franchise providing us a solid base from which to grow.

"Our strategy is to focus on building and developing the core New Look brand in the UK, internationally and online and on that basis we have taken the decision to explore strategic options for Mim, including potential divestment."

A New Look spokeswoman declined to comment further on the discussions with Asia Global.

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Church Of England Severs Ties With Wonga

The Church of England has announced it has withdrawn its investment from controversial payday lender Wonga.

It comes a week after the firm agreed to pay £2.6m in compensation to 45,000 customers after it was found to have sent letters from two fake law firms.

In a statement the Church of England said: "The Church Commissioners no longer have any financial or any other interest in Wonga.

Wonga recently paid £2.6m customers that received fake lawyer letters

"The Church Commissioners estimate that if they had had to sell their entire venture capital holdings they might have lost £3-9m to remove the exposure to Wonga, which was worth less than £100,000.

"The Commissioners are pleased that another way forward has been agreed given their fiduciary duties to clergy pensioners and to all the parts of the Church they support financially."

The statement continued: "The Commissioners' focus remains the mission they share with the Archbishop of Canterbury - supporting the ministry and growth of the Church of England. 

Complaints about payday lenders have doubled since 2012

"The Commissioners will also continue to seek ways, consistent with their fiduciary duties, to support the Church's priority of promoting responsible credit and savings."

The declaration comes a year after the leader of the Church of England -  the Archbishop of Canterbury - vowed to "compete" Wonga out of existence, when it was first revealed the Church invested in the company.

The Most Rev Justin Welby said in July 2013 that he wanted to force Wonga out of business by expanding the Church of England's credit union plans.

The number of complaints about payday lenders has doubled since 2012. The most common complaint was from people who had been pestered for cash even though they had not taken out a loan.

In almost two thirds of cases that the Financial Ombudsman took on, the office found in favour of the consumer.

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Watchdog's Warning Over In-App Purchases

A consumer watchdog has warned parents to check settings on their mobile devices, after Amazon was sued over children making unauthorised in-app purchases.

Britain's Competition and Markets Authority (CMA) told Sky News: "Our advice to parents is to check their device settings, play their child's games themselves and read the game's description online.

"The CMA (and its predecessor the Office of Fair Trading) has been working closely with the online and apps based games industry, both in the UK and Europe, to put safeguards in place to ensure children are protected from making unauthorised payments and that customers are always treated fairly.

"If they have any concerns at all, they should contact Citizens Advice."

The warning comes after the US Federal Trade Commission (FTC) launched legal action over claims the online retail giant has not done enough to stop children spending money without parental consent.

The FTC has tried to reach a settlement with Amazon over the issue

The company said it would not agree to an out-of-court settlement with the FTC.

Amazon previously said that it was prepared for a court battle and that it had refunded parents who complained after being billed for the apps.

The dispute centres on children's games downloaded via Kindle tablets, and the difficulty differentiating virtual and real currency for purchase of virtual items.

In-app charges were introduced in 2011 and no password was required for purchases between $0.99 and $99 (£57).

The following year passwords were introduced for purchases over $20 (£11.60).

But the FTC said that although it updated password procedures last year, there was a period where children could still buy apps.

One customer complained that her daughter had incurred charges of more than $350 (£200) while playing a game.

PayPal has altered its user agreement to help stem unauthorised purchases

The FTC said thousands of consumers had been affected and unauthorised charges ran into the millions.

FTC consumer protection director Jessica Rich said: "A central tenant in consumer protection is that you need to obtain consumer consent before placing charges on their bills.

"That applies all places, from brick-and-mortar stores to app stores."

The legal action seeks both refunds for consumers and a ban on billing account holders for in-app charges made without their consent.

Last week the FTC launched a similar lawsuit against T-Mobile, and in January it reached a $32.5m (£19m) settlement with Apple over in-app charges.

Charges racked up by children without parental consent has also caused concern for PayPal, which is owned by eBay.

In April, Sky News revealed PayPal was changing its terms and conditions for account users.

Amazon routes its UK sales through an office in Luxembourg for tax purposes

A new clause, activated last month, said users must agree to "take all reasonable steps to protect the security of the personal electronic device through which you access the Services (including, without limitation, using pin and/or password protected personally configured device functionality to access the Services and not sharing your device with other people)."

Paypal denied it was banning account users sharing their computers.

A spokesman said: "The new wording in our User Agreement says that users should take reasonable care when sharing devices so their PayPal account is not compromised."

Meanwhile, the celebrated children's author Allan Ahlberg revealed he turned down a lifetime achievement award after learning it was sponsored by Amazon.

In a letter to the Bookseller, he complained about Amazon's UK tax arrangements, whereby revenue earned in Britain is accounted for in low-tax Luxembourg.

Amazon's UK subsidiary reached sales of £4.3bn last year but it paid only £4.2m in tax.

Amazon.co.uk saw a 56% rise in profit to £17m during 2013, along with a 13% rise in UK revenue.

Mr Ahlberg wrote: "Tax, fairly applied to us all, is a good thing. It pays for schools, hospitals - libraries!

"When companies like Amazon cheat - paying 0.1% on billions, pretending it is earning money not in the UK, but in Luxembourg - that's a bad thing.

"We should surely, at the very least, say that it is bad and on no account give it any support or, by association, respectability."

Approached by Sky News, Amazon UK declined to comment on Mr Ahlberg's action and it was awaiting a response from the US parent firm about the FTC action.

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BA Owner IAG 'To Cut 1,600 Jobs' At Iberia

The owner of British Airways and Iberia said it would begin consultations over nearly 1,600 job cuts at the struggling Spanish carrier.

International Airlines Group (IAG) said up to 1,581 staff may be at risk of losing their jobs.

The move follows hundreds of redundancies at Iberia last year.

That round of cuts prompted widespread industrial action at the airline.

IAG said it has informed employees and unions of the planned reform.

It added that the cuts were discussed earlier in the year during negotiations with union representatives.

The parent company said: "This option was discussed as part of the collective bargaining negotiations with the airline's unions last April.

"It is a continuation of Iberia's transformation plan to introduce permanent structural changes across the airline enabling it to grow profitably in the future."

In May amid a major restructuring, IAG reported a first quarter loss of £123m - down from £227m in early 2013.

BA made an operating loss of £4m in the first quarter compared to a £60m loss a year ago.

 "Iberia has almost halved its losses from quarter one last year," IAG chief executive Willie Walsh said at the time.

"The airline continues to benefit from restructuring and these figures don't reflect the impact of recent pay and productivity agreements which took effect in April."

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Mystery Belize Tech Stock's Value Soars 25,000%

A mysterious technology stock has gained nearly 25,000% in a matter of weeks - giving it a market cap of $6bn (£3.5bn).

However, financial statements reportedly indicate that Cynk Technology has no revenue, assets or full-time employees.

It operates a website called IntroBiz.com - which describes itself as a social marketplace where users pay to be introduced to business professionals and celebrities.

On its entertainment section, "connections" with A-list stars such as Johnny Depp, Nicole Kidman, Emma Watson and Leonardo DiCaprio are offered for a set fee of $50 (£29.18) - although there appears to be no link between the celebrities and the site.

The Wall Street Journal wrote: "How can a social network that no one has ever heard of suddenly be valued at more than $6bn?"

Until now, the Belize-based firm has been virtually unknown, but the "penny stock" started its meteoric rise on June 16.

Its value soared from six cents (4p) to more than $13 (£7.59), and it is now worth more than Spotify and Domino's Pizza.

In earlier regulatory filings, the company said: "We believe that people will pay for introductions that are meaningful since it can save or create significant value to someone's life such as to find the right executive, nanny, software developer – or even the right squash player.

"Instead of paying for a lunch that neither party wants to eat, parties can get down to business knowing that their time has been valued."

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Shareholders Slam £23m Burberry Boss Pay Deal

More than half of shareholders at the annual general meeting (AGM) for luxury retailer Burberry have rejected a pay deal worth up to £23.6m for the chief executive.

Some 52% of votes cast in the non-binding ballot did not support the remuneration report for Christopher Bailey or the other executive directors of the 158-year-old retailer's plan.

Included in the payment is his annual salary of £1.1m – which has not changed since his last role – and a golden handshake worth £7.25m provided to Mr Bailey if he loses his job.

It would also include his £440,000 allowance, which Burberry said does not include allowances for clothing or a company car.

A large part of the package includes a performance-based bonus and participation in the firm's executive share plans, any awards from which will vest from 2017.

Chairman John Peace defended Mr Bailey's pay at the meeting, arguing that the pay is comparable with competitors.

Burberry defended the pay deal for CEO Christopher Bailey

He said: "We know the amount paid to Christopher is a lot of money but much of it is performance related."

Mr Bailey took on the role of chief executive alongside his role as chief creative officer last May. He joined the firm in 2001.

Burberry also defended Mr Bailey ahead of the AGM.

It said: "The board believes that Christopher's vision and leadership will keep Burberry on the forefront creatively, digitally and financially."

But the Institute of Directors (IOD) said the revolt was a "warning shot" over pay concerns.

IOD director of corporate governance Dr Roger Barker said: "Burberry shareholders have fired a warning shot with today's vote.

"They are clearly not convinced that executive pay at the company has been transparently linked to tough performance targets.

"The onus in now on the board to urgently engage  with shareholders to convince them they are responding to their understandable concerns."

Burberry also mentioned in its 2013/14 annual report that Mr Bailey's promotion would "create further value for shareholders in the next exciting stage of its evolution".

Earlier this week, the Investment Management Association gave Burberry an "amber top" rating on the proposed pay policies, hinting that its members, who account for 15% of the stock market, should carefully read into Mr Bailey's awards before making a final decision.

As well as the controversial pay deal, other issues debated at the London AGM include the directors' remuneration policy and report.

The meeting comes after shares in the designer brand rose 2% on the FTSE 100 early on Thursday, when like-for-like sales were up by 12% in the three months from June 30.

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World Cup Betting Set To Smash £1bn Barrier

Bookmakers are expecting to smash betting records for Sunday's Fifa World Cup, as punters embrace placing wagers through mobile devices.

Ladbrokes, Britain's second biggest bookie, has predicted an industry-wide taking for the tournament to break the £1bn barrier.

It said an estimated £40m would be waged with it on Sunday's final, beating the figure gambled on the 2012 Champions League final between Chelsea and Bayern Munich.

Market leader William Hill said that its prediction of seeing £200m in bets for the full tournament has already been smashed.

The total is double that achieved by it during the 2010 tournament and shows the growth in football betting among younger gamblers who have grown up on a diet of live televised matches.

It said: "On top of the predicted turnover having been obliterated, the pre-tournament forecast of 17 million bets being placed has been broken as well."

It said Germany are 4/6 to win the World Cup while Argentina is at 6/5.

Bookmakers had viewed the World Cup as an opportunity to build market share before the introduction of new taxes over the next year - expected to cost the industry about £400m.

William Hill said the best game for punters was the Brazil v Croatia match, after it enhanced the price of Brazil winning to even money.

On Wednesday, bookies said that four gamblers struck gold after laying money on Germany to beat Brazil by 7-1 in the semi-final.

Meanwhile, the biggest single bet for the market leader was in the group stages when a punter in Nevada put down $350,000 (£200,000) for Argentina to beat Iran.

In addition to a greater turnover compared to the last tournament, the biggest difference is how bets have been placed this year.

Ladbrokes said: "The most memorable thing about this tournament for the industry will be the fact that it has been the biggest event for mobile betting by some way in history.

"That's because a total of 60% of digital bets have been placed via mobile devices."

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MPs: Taxpayer Short-Changed On Royal Mail Sale

By Mark Kleinman, City Editor

The controversy over the £3.3bn privatisation of Royal Mail has erupted again as an influential group of MPs has criticised Vince Cable over his handling of the sale.

In a coruscating report, the Business, Innovation and Skills (BIS) Select Committee endorsed the view of the National Audit Office (NAO) that taxpayers had been left short-changed by Royal Mail's flotation.

MPs said the taxpayer may have lost out by up to £1bn.

Cable was criticised for referring to the share price increase as 'froth'

The MPs said that Mr Cable and his officials had been gripped by "a fear of failure", placing undue emphasis on the risks of a strike by Royal Mail workers when pricing shares in the company at 330p last autumn - well below the projections of some investment banks.

Confirming Sky News' exclusive report earlier this week the committee said Mr Cable had been wrong to label the instant post-privatisation surge in Royal Mail's share price as "froth".

"The Secretary of State's initial use of the term referred to the 'immediate aftermath' of the flotation. This was subsequently extended to months and then possibly years," the report said.

"As a result we do not find the argument of 'froth' as a credible response to the significant increase in the share price."

The MPs added that the Government had been served poorly by its City advisers, who they argued had made insufficient effort to maximise Royal Mail's value during the privatisation process.

And they said that taxpayers would miss out on future increases in the value of potentially lucrative property assets.

Friday's report comes nine months after Royal Mail was sold in the biggest state sell-off for a generation.

It threatens to prolong the debate over the sale even as ministers contemplate the future of taxpayers' remaining 30% shareholding in the company.

The Government sold 60% of Royal Mail to outside investors last October, including a significant chunk to more than a dozen so-called priority investors who were earmarked as long-term shareholders.

Shares in Royal Mail surged more than 35% on the first day of trading

These institutions, some of which sold their stakes within days of the flotation after the shares surged, included the Kuwait and Singapore sovereign wealth funds as well as the asset management arm of Lazard - ministers' independent adviser on the sale.

The BIS Committee's recommendations include a ban on independent advisers to the Government being allowed to buy shares during future asset sales.

People close to Lazard pointed out that its fund management arm is segregated from the advisory business which worked on the sale.

The post-flotation hike in Royal Mail's share price, which included a rise of more than 35% on the first day of trading, sparked criticism that the stock had been undervalued.

Although the shares have retreated from their post-privatisation peak, they were trading on Wednesday at around 474p, roughly 45% higher than the price at which they were sold by the Government.

Mr Cable embarked on an attempt to head off criticism over the sale earlier this week when he announced that Lord Myners, the former City minister, would undertake a review of the structure of Government privatisations.

Shadow business secretary Chuka Umunna said Mr Cable had presided over a "first-class short-changing of the taxpayer".

"Taxpayers have been short-changed to the tune of hundreds of millions of pounds while large City investors, who were placed at the front of the queue by ministers, have been laughing all the way to the bank at the public's expense," he said.

"There are a huge number of questions which ministers need to answer on the mistakes which have been made."

A further report on Royal Mail's sale is expected to be published by the Commons Public Accounts Committee within weeks.

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