This month, Channel 4’s Dispatches revealed that banks are charging local councils an extortionate 7.8% interest on loans, referred to as LOBOs. Councils are using taxpayers’ money to pay back loans and interest to banks while having to cut back on public sector services.

We all use banks but not many of us know what goes on behind the scenes or what changes in the banking world actually means for our pockets.

I spoke to Mr Brajeshwar Sharma, CEO of Union Bank of India about new regulations for bankers, the crisis in Greece and what it means for the rest of Europe, and how Chancellor George Osborne’s budget will impact both the banking world and us.

Founded in 1919 and inaugurated by Mahatma Gandhi in 1921, Union Bank of India is the sixth largest bank in the UK and where the government owns the majority. On the day of interviewing Mr Sharma, the bank celebrated one year of business operations in the UK, so I was honoured to congratulate Mr Sharma on the show!

As CEO, Mr Sharma has many years of experience in the world of finance and banking, and with the bank opening 100 digital branches in India, I wanted to know how technology has revolutionised and digitalised the banking world?

Mr Sharma explained his is fortunate as he has seen how the banking sector has operated during both the manual and technological era. He was part of the technological revolution where he headed a regional computer service in India.

Although he was rooting for technology on the show, and how you can now calculate interest with the click of a finger rather than it requiring real man-power, Mr Sharma did explain the challenges that arise with the opportunity of the advancement of technology.

We are more vulnerable to threats when it comes to online banking and people can become victims of fraud and phishing scams. Mr Sharma gave some key advice to stay safe online:

  • Never give out your passwords online
  • Never give out your personal details online
  • Be cautious if you are receiving emails that ask for this information
  • Do not respond to such emails

Mr Sharma advised signing up to SMS alerts from your bank so that if a transaction is made by somebody other than yourself, you will instantly be alerted by your back via text message. You can obtain this facility via your bank. And if you do fall victim to fraud, you should immediately contact your bank helpline, and ‘prevention is better than cure’ so avoid divulging details about yourself when asked to on any emails.

When it comes to overseas banking, Mr Sharma explained that people who are tech savvy prefer using the online method whereas some people prefer a personal experience; and that Union Bank attempts to provide and facilitate for both.

We then moved on to some another current topic of interest which is the Conservative Party Summer Budget, announced by Chancellor George Osborne on Wednesday 8th July. Mr Sharma explained some key points that people should know:

  • The National Minimum Wage for 18-20 year olds will rise from £6.50 to £9.35 by 2020
  • Inheritance Tax for properties worth up to £1 million will not be taxed by 2017 but will cost the government £1 billion per year
  • Basic tax rate for businesses will go from 20% to 19% by 2019 and to 18% in 2020. This will make it the lowest rate in the entire G20.

Focusing on changes to banks, we spoke in-depth about the Bank Levy.

A bank levy is a tax the bank pays over its total liabilities. If the liabilities exceed £20billion the bank must pay a levy. Customers’ deposits are actually regarded a liability, which Mr Sharma agreed does not sound too good!

The Chancellor announced that this levy will be phased out but will technically be replaced by an 8% surcharge on profits. So, the banks ultimately end up paying the government regardless of whether it is on top of liabilities or on top of profits.

With the levy being phased out, I wanted to know if this will attract and boost business with overseas banks, especially considering HSBC wants to relocate to outside the UK?

Mr Sharma described the UK market as lucrative and attractive – after-all, Union Bank opened a branch in London after 96 years of doing business in India.

When it comes to HSBC’s move, Mr Sharma could not comment as to why they want to move. He speculatively commented that regulators are now ring-fencing risky investment banking from retail which could be a reason why HSBC is considering relocating.

I wanted to touch upon new regulations that The Bank of England Prudential Regulation Authority and the Financial Conduct Authority have unveiled new regulations on bonuses. They are as follows:

  • Senior UK bankers will have to wait up to seven years to receive their annual bonuses in full, and three years to receive any pay out
  • Top bank executives will have a 10-year wait to be sure the bonus won’t be clawed back
  • Risk managers will wait five years to receive any performance awards in full, and traders and other “risk takers” will have at least a three-year wait.

The measures have been put in place to cut back on risk-taking. But what does it mean for bankers and more importantly what does it mean for us?

Mr Sharma explained that sometimes the sales and incentive-driven culture means customers are miss-sold products or over-sold services resulting in them losing a lot of money. The regulations mean top bank executives that push products in return of monetary incentives will have to wait ten years to receive any monetary benefits accrued, such as bonuses, and they can be clawed back if the person in question is found guilty of any wrong-doing and risk-taking.

The cap and restrictions will give customers confidence in banks and in investment banking which is risky but has better returns than retail banking.

Trust is a key factor when it comes to banks. One article stated the banks will find a loophole somehow which clearly touches on a lack of trust in banks. Also, after miss-sold PPI claims, bonus scandals, and the fact high street banks are always in the news, I asked if people can trust their banks?

A genuine man, Mr Sharma argued against the viewpoint of the article and stressed that it is only the minority few that have given banks a bad name but most are above board and transparent.

We then went on to discussing the crisis in Greece and how people are limited to withdrawing 60 Euros per day. Mr Sharma explained that the Greek economy is not big enough to have any drastic effect on people’s pockets but it does have an effect on the stock market as a whole.

On Monday 14th July, Greece agreed to bailout terms with the rest of the European countries and has been given three years to pay back 80million Euros.

Overall, it was extremely insightful speaking in-depth with Mr Sharma about current, top news stories and explaining how they, if they do, affect us and our personal finances.