A Big Brother Banking Era Is Dawning

There are new ideas and practices coming to the fore in the banking sector, which, are to make it much more difficult for banks to bend or disregard the rules in future.

Lenders are already checking mortgage brokers that have been offering dodgy advice online. Several brokerage firms have been forced to close this year already due to their suspect practices.

So, in this new age which is dawning you would think that investors would lie low if they have something to hide wouldn’t you? Many people will be surprised to learn how some landlords openly talk on property forums and at networking events about doing dodgy deals. Some larger landlords have already been investigated and prosecutions are pending.

You will also witness the larger landlords owning a few hundred properties, many of whom had the banks in their pockets, beginning to sell large chunks of their portfolios ( possibly before the investigators get wind of their past deals and start to look a bit closer at them.)

What’s It All About?

For those that don’t know already, lenders now employ forensic accountants whose job is to check any suspect deals from brokers and individuals. Forensic accounting and fraud investigations are now at unprecedented levels due to the banking crisis and credit crunch, which have fueled a flurry of investigations into financial statement reporting and irregular business practices which contributed to the current crisis.

Regulatory enforcement efforts are being stepped up as well, focusing on these institutions’ lack of consistent internal controls, governance and oversight. At the same time, the banking sector continues to face ongoing challenges to combat money laundering, while grappling with growing regulatory pressures and fast-changing financial landscape.

This is a new dawn we are witnessing. Banking worldwide is evolving. The tick box culture of mortgage applications will become an altogether tighter ship. The back door dodgy mortgage deals will also start to get stamped out.

In The News This Week

Iceland’s top financial investigator is to set up an American-style SWAT team to try to prevent another meltdown in the country’s banking system. The unit will be sent in to offices without notice to investigate banks and other financial institutions suspected of not sticking to the rules. Gunnar Andersen, Director General of the FME, Iceland’s financial supervisory authority, said that “forensic examinations” would be carried out on site.

In an interview with Complinet, the world’s leading provider of compliance solutions he said:

“We are trying to change the whole Icelandic banking culture; risk management was very poor and due diligence not observed.” ( Really?!) He went on further; “There was a complete lack of self-criticism, people wanted to believe everything would be all right.”

Some would say there was also a complete lack of self control.

Gunner blamed unrealistic assessments given to the banking institutions.

“These ratings certainly influenced the thinking of regulators and investors. This was a factor that should not be taken lightly”.

In October 2008, Iceland experienced the worst economic crash of any country in peacetime in October 2008. The Icelandic banks failed because of excessive risk taking, inadequate management and lax government supervision. Its authorities denied responsibility and protesters finally forced the government to resign.

Sounds a lot like greed doesn’t it? Our banks are not far behind them either.

**UPDATE: Remember, if you are experiencing banking problems and need help read our Commercial Loans Restructure Page.

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