A rising economy and all the aspects that it is raised with make the deepest of impacts on the people, their functioning, and the way they bank. Of course, banking is one of the prime activities people engage in. With keeping the savings to investing huge as shareholders, banks are relied for their ability to pay back. But the payment protection insurance scandal has shown nightmares to people who bank with the largest of Banks of economy with absolutely no trail to foresee their bright future.
With the economy rising to almost double in the past few years, the number of people taking the help of the payment protection insurance has been certainly on a rise. Bank’s non-ability to repay the claim amounts has taken a toll on the lives of people especially the shareholders.
The Situation of the Bank
The largest of institutional banks of the economy has been facing a financial crunch in paying off the claim amount. With an increase in the claims of about 380000 people filling claim against the banks, the liability of the banks has reached 27 billion Euros which is way more than expected. The claims are being rejected by banks on account of non-ability until the financial services Authority came up with an imposition of fines and regular for the banks, requiring them to process the PPI claims and repay all of their outstanding.
The banks started handling and settling the old claims along with keeping 14 billion Euros aside for handling the new claims. This repayment of the claims has brought about a crunch in the bank’s Balance sheet and with huge losses to be covered; it is a reason to worry for the shareholders too.
What shareholders are tensed about?
Shareholders are the people who have invested in the banking shares and are partners to them in profits and losses. Their major worry is that in spite of the economy developing and the bank making huge profits but the outstanding claims are going to bring down a loss to their side. With needs to meet the liabilities, when the bank fails to repay is a nightmare and the shareholder’s are worried about getting no dividends and profits for a long time now.
The banks had, however, started neglecting the claims soon after the regulation was made again striking off the claims by people. But the Prudential Regulation Authority has advised the band to regularize their Balance Sheet as soon as they can pay the claims.
The good news is that there have been increasing numbers of rulings in favour of the banks, decreasing the payment protection insurance claim liability bit by bit. But the banks soon will be wanted to pay the claims and settle the accounts which shall be an awakening to both the banks and the shareholders.
Author Box: Arthur Cooper updates you about the financial news that is influencing the world today. He sheds light on the payment protection insurance and how banks are trying to manage the finances while intending to settle the debt.