RBS, and us, the taxpayers, will be having to cough up £2.17 million to pay an FSA fine incurred by Churchill Insurance and Direct Line. Both Churchill Insurance Company Limited and Direct Line are private companies, owned by the Royal Bank of Scotland Group Plc..

It was discovered that both of these companies had altered customer files to remove and downplay complaints against them.

The FSA has pointed out that overall the changes to the customer files have not affected customers, however, the act of removing or editing customer complaints is a serious breach of FSA rules and it has therefore imposed a hefty fine.

In one case a member of staff had also forged the signature of colleagues. It is a requirement that any changes to client data are checked and verified before being updated. These rules usually apply only to general administration, such as the updating of accounts and processing of corporate actions for shareholders. The fact that an individual had been forging signatures is another serious breach and highlights how easily fraud and corruption can take place in the workplace.

The FSA have also pointed out that while the managers were not aware that these alterations had taken place, they had not taken appropriate measures to ensure that staff were aware that such alterations were against company policy and FSA rules. A lack of staff training is something that the FSA takes very seriously. For example, all staff working in investments and dealing with client money must go on money laundering courses every 2 years to ensure that they are kept up to date on rule and regulations.

This news has not affected Royal Bank of Scotland Group plc  (Public, LON:RBS) share price, it is currently trading at 24.86p, up 0.04% so far today.

Peacocks, the Welsh retail giant owned by the Peacock Group that grew from very humble beginnings in a penny arcade in Chesire is on the brink of falling into administration.

It developed as a retailer of woman’s clothing and has grown in recent decades to become a more dominant brand on high streets across the UK.

Peacock’s has around 600 stores in the UK and 100 overseas stores. It employs around 10,000 staff in the UK.

It’s main problem is that it is around £240 million debt and is struggling to manage its debts. Analysts have pointed out that RBS has stopped lending to many retailers and this credit crunch is strangling cash flow and forcing retailers, large and small, out of business.

There is no news on their Twitter feed at the moment. A few days ago there were reports of problems with the Peacocks website,

“Guys and girls, we’re sorry about our website issues, we’re working really hard to get things fixed - 14 Jan”

Peacock has filed an “intention to appoint administrators” and has 10 days to attempt to restructure its debt before it starts to go into administration.

More on Peacocks’ challenge to avoid going into administration soon.

1958 Saab 92B

Saab Automobile AB, maker of classic cars such as the Saab 99, Saab 900, Saab 900 S Classic Convertible and Saab Sonnet, has filed for bankruptcy.

Its former owner, General Motors, recently turned down an investment from the Chinese company Zhejiang Youngman Lotus Automobile Co. Ltd that would have provided a life-line for Saab.

Saab employs around 3400 people, many have been without pay. The bankruptcy and liquidation deal will hopefully provide a payout package for its employees, although it is not known if an emergency fund can be provided before Christmas.

Saab started out in 1944 as Svenska Aeroplan AB when its Project 92 created the first Saab car, the Saab 92001 (also known as the Ursaab). This was the most aerodynamic car ever built – Saab used its skills in the aviation industry to produce a car with a very low drag coefficient (0.30).

Saab-Scania was formed in 1969 when Saab and Scania-Vabis Am merged. A decade later Saab made a deal with Fiat and the Lancia Delta was rebranded as the Saab 600. This led to a range of cars on the same Type Four chassis, including the Saab 9000, Alfa Romeo 164, Fiat Croma and Lancia Thema.

In 1989 General Motors controlled a controlling stake in the business and launched the new Saab 900 in 1994. The success of this and the Opel Vectra that was built on the same platform, Saab made a profit in 1995, the first in 7 years. In 2000 General Motors bought the remaining Saab shares to take full ownership.

Unfortunately GM’s decision to launch the Saab 9-2X (that was based on the Subaru Impreza) and Saab 9-7X (that was based on the Chevrolet Trailblazer) resulted in a commercial disaster.

GM put Saab under review in 2008 while deciding if it could turn the business back to profit. Talks of sales and takeovers continued for several years and eventually GM agreed to allow Spyker to purchase Saab. In April 2011 Spyker announced plans to focus entirely on the Saab brand by selling off its sports car business. However, by June problems in the supply chain led to parts shortages and this had a knock-on effect, by July Saab was struggling to pay the salaries of 1600 workers.

Saab filed for bankruptcy protection on September 7, 2011 to keep the company alive until a Chinese investment could be agreed. However, the Swedish courts rejected the petition for bankruptcy protection.

Today Saab officially filed for bankruptcy.

Photo by Martin Bergstrand

Thomas Cook issued 3 profit warnings this year and has now announced losses of £400 million. It is planning some major restructuring to solve its cash crisis. There will be around 200 store closures with redundancies all over the country. There are 110 stores that will definitely close, although no jobs will close before Christmas. In total it is expected that around 1000 jobs will be lost over the next 2 years.

It was less than a month ago that we reported that Thomas Cook shares plummet on debt Worries and that Thomas Cook was securing more funds from its investors.

The recent merger with Co-op boosted their high street shops to around 1400, and there are now simply too many high street shops in their portfolio.

Share price has crashed by 90% this year. Thomas Cook was trading at a high of 206.8p in 2010 and is currently trading at 14.41p (9am, 14/12/11). You can follow the latest share prices at here: www.google.co.uk/finance?cid=716892.

Thomas Cook sells around 22 million holidays a year in the UK and still controls a huge part of the UK market. Like many other businesses it is selling more of its products and services online via its website. People are still using Thomas Cook to search for and book holidays (22 million is a very healthy number of sales for any business) but rather than go to the shops many people are online.

Thomas Cook Airlines will also be losing 6 of its aircraft. It got a very bad review from Which? this year, placing it below Ryan Air in terms of customer care and service.

Too Many Cheap Holidays Sold

Thomas Cook’s problem has been selling too many cheap holidays, with typical holidays sold including 2 start bed and breakfast deals to the Mediterranean and similar cheap and discount deals.

The suggestion is that for Thomas Cook to really thrive again it needs to start selling higher quality holidays which will have a larger profit margin. Some of the holidays sold may have been making them a loss, once the cost of sales is factored in.

Overall Thomas Cook’s sales are strong and it is hoped that this restructuring will result in a complete turnaround. Thomas Cook is no longer competing with other high street holiday companies, it is competing with the like of Expedia, Last Minute, Travel Supermarket and Virgin Holidays.

News just in. HSBC has just been handed a £10.5 million fine from the FSA for giving poor advice to the elderly. This is the biggest fine ever given to retail bank by the FSA. Further to this fine HSBC is expected to have to pay out a total of £29.3 million to resolve the whole issue.

The inappropriate advice was given by on of HSBC’s subsidiaries, according to the FT today. The subsidiary under the spotlight is NHFA Limited who advised 2485 customers between 2005 and 2010 to invest in asset-backed investment products.

The problem was that for many of the people receiving investment advice, their life expectancy was already below that of the period for a return on the investment (typically 5 years). Many customers were forced to make early withdrawals which led to a rapid reduction in their capital investments.

In an independent review of investment advice it was found that 87% of customers had been given unsuitable advice, or at least had made unsuitable investment decisions for their own personal situation.

Also the FSA have said that it appears that NHFA advisers did not take into account the tax status of investors before giving their financial advice.

Elderly customers at most risk

The NHFA had a very old customer base, with an average age of 83 years. This meant that there was a much greater risk of the investment vehicles that were being sold would be unsuitable, as it is generally expected that most of the investors will not live until the end of the period.

The total investments declared inappropriate by the FSA came to £285 million, which represents around £115,000 per investor.

Beach of Principle 9

The FSA have stated that the failing were in breach of “principle 9″ which should ensure that investment advisers consider the personal circumstances of an investor before making a recommendation.

HSBC have taken action to correct the mistakes made and the NHFA has been closed to new business since July 2011.

Warning to Investment Advisers

Tracey McDermott, the acting director of enforcement and financial crime at the FSA has said that this fine will hopefully set an example to other investment advisers;

“This penalty should serve as a warning to firms that they must have the right systems and controls in place to manage and identify risks when they acquire new businesses. A failure to do so can lead not only to detriment to their customers but to significant reputational and regulatory cost.” Tracey McDermott, FSA, 2011.

• Source: FSA fines HSBC £10.5million for mis-selling products to elderly customers – FSA Press Release
• FT Adviser: FSA fines HSBC £10.5m over mis-selling

Arcadia, the parent company of many popular high street stores such as Top Shop, BHS, Burton, Dorothy Perkins, Wallis and Miss Selfridge, has announced that it will be closing up to 260 stores after seeing a 38% reduction in annual profits. The retail sector is still a long way from recovering from the global economic crisis and there is no sign of a let up any time soon.

Arcadia plans to allow store leases to run until their expiry. Arcadia has around 3,100 stores globally of which 2540 are in the UK and 580 are franchised stores spread across over 35 other countries, including a flagship Topshop store in New York.

Sales are down by around 4.4% this year across the board. Arcadia has around 450 leases due to expire in the next few years and so will be letting around half of these lapse. The shops making the biggest losses will be the ones that closed. Overall Arcadia has made a pre-tax loss of £253 million on sales of £2.6 billion.

“This is as tough as it’s going to be” ~ Sir Philip Green

Arcadia employs around 44,000 people in the UK and is one of the largest private employers in the country.

Weather Problems

As if all time high unemployment and increasing costs of living are not enough to contend with, the unexpectedly warm weather has also been blamed on reduced sales. Usually October and November see sales in winter clothing increase, however this year the warm weather has kept people out of the stores. There may be a surge in sales of woolly jumpers and warm coats over the Christmas period, but so far the early signs are not promising.

Sir Philip Green., CEO of Arcadia, told the BBC that £53 million was “lost” as it decided not to pass on the VAT increase to its customers. They have already closed 60 stores this year. He hopes that there may be other opportunities in the future.

Christmas Predictions

Sir Philip Green thinks that this will be another late Christmas for retailers with many shoppers looking for bargains in the sales rather than spending large amounts before Christmas.

Billionaire Sir Philip Green owns Arcadia through Taveta Investments Ltd.

More from the BBC: Arcadia set to close up to 260 stores as profits fall

This morning Thomas Cook share price has fallen sharply after the announcement that it has suffered a “deterioration of trading in some areas of the business” and is in talks with its lenders to secure additional loans to cover operating costs.

Currently Thomas Cook is seeking a further £100 million just 32 days after already receiving the same amount. Thomas Cook has no defaulted on any loans and has said that it just wishes to raise more capital for improved cash flow. Its CEO, Sam Weihagen, says that Thomas Cook is robust business with a great future.

Thomas Cook has approached partners in commercial airspace to sell its stake in National Air Traffic Services (NATS) to raise around £60 million.

The Arab Spring has affected Thomas Cook badly as many of its popular holiday destinations are in Tunisia and Egypt. Thomas Cooks owns many hotels and provides package holidays to this region which are usually very popular for those seeking winter and late Spring sunshine.

Also the severe flooding in Thailand caused a huge fall in demand for trips to one of its most lucrative regions.

The Eurozone crisis has also resulted in a downturn in demand for European holidays to Greece as well as many other popular destinations. Travel to France and Belgium has also reduced. Many families are starting to cut back on holidays abroad, instead remaining in the UK for a “staycation” rather than spend limited household funds on family holidays.

Currently Thomas Cook’s net debt stands at £900 million, which consists of an existing £150 million loan and £850 million credit facility.

Overall a combination of political unrest, natural disasters and the economic downturn has contributed to Thomas Cook’s bad year.

Share price has now fallen 67.04% this morning and by 95% from its high point in January 2011.

Thomas Cook is not the only travel company to suffer, Tui shares have also fallen by around 67% this year.

Thomas Cook have delayed issuing their annual results until the discussions with its lenders are concluded, but do state that “The Company expects to report a headline operating profit for the year ended 30 September 2011 broadly in line with previous guidance” (Source: www.thomascookgroup.com)

• Thomas Cook share price: 13.69p -27.42p (-66.71%) – 10.43am, 22/11/11
• Latest prices: www.google.co.uk/finance?client=ob&q=LON:TCG
• Thomas Cook investors portal: www.thomascookgroup.com/investors
• Telephone for Thomas Cook Group plc Investor Relations:  +44 (0) 20 7557 6414

Thomas Cook shares 2001. Source: Google Finance

News just in that Virgin Money has bought Northern Rock for £750 million. This means that Richard Branson is now a high street banking tycoon. Virgin Money have only bought the “good bank”, the government will keep the bad debts / “bad bank”.

George Osbourne said that the deal will be a good thing for British tax payers and families as it will provide renewed competition.

The headquarters for Virgin Money is also in Newcastle which will ensure that many if not all jobs will remain in Newcastle, certainly good news for employees and families.

At a time when some European banks could be at risk of nationalisation a British bank is being returned to the private sector.

The Government have still made a significant loss on this deal, having paid over £4 billion for the bank to save client investments.

Virgin Money currently specialise in home insurance, credit cards, pre-paid travel money cards, pensions, insurance and savings. This is certainly an exciting move for Virgin.

George Osbourne and the coalition government may have made a huge loss on the deal but it is thought that this is the best deal possible for the tax payer.

Northern Rock customers will be able to maintain their accounts, the rebranding of Northern Rock to Virgin Money will start in January 2012.

The biggest news of the day is the shares in Reckitt Benckiser have fallen sharply. So far today (25th October 2011) shares have fallen by 121p down to 3,325p, a drop of 3.51%. The FTSE 100 has also seen a large overall fall today.

The reason for the drop stems from reforms in the US health care system which affect the pharmaceutical markets.

RB’s 3rd quarter earnings for 2011 have actually beaten forecasts, however, the remainder of 2011 and start of 2012 is going to be more challenging.

Source: Google Finance

Drug Rebates under American Healthcare Reforms

Part of the problem is rebates to be paid out to US users who bought up Suboxone tablets in advance of an anticipated price increase. The health care reforms means that drug makers such as Reckitt Benckiser will have to help finance medicine for low income elderly and disabled clients on the Medicare health care system.

Reckitt Benckiser is also predicting an 80% reduction in American profits if a competitor starts selling an their own version of Suboxone.

The Suboxone Crisis

Suboxone is a pain reliever that is also treats additions. Its main function is to treat opioid addiction but it also works very effectively at treating moderate chronic pain which affects many disabled and elderly people.

As more people live to be older there are more cases of people suffering from chronic illness. The ever increasing obesity epidemic does not help matters either. The result is more people in need of medication to numb the pain that is a long life of ill health.

Reckitt Benckiser were the first to market the drug, originally under the names Temgesic and Buprenex. The actual drug is buprenorphine. This drug replaced Methadone as the main drug to treat addictions.

In short, the American health care reforms have turned a very profitable product into a costly, or at least less profitable, product for Reckitt Benckiser.

Web resources:

• Reckitt Benckiser website: www.rb.com/home
• Product site: www.suboxone.com
• Reckitt Benckiser Says U.S. Reform to Hurt Drug-Unit Profit - Bloomberg update
• Recket B. share prices and latest news: http://www.google.co.uk/finance?cid=10831624

Some French banks have “enormous exposure” to the Greek debt problems. As a result Credit Agricole and Societe General have been downgraded. BNP Paribas is considering “massive restructuring” to reduce costs.

José Manuel Barroso, the European Commission President, has said that the current Eurozone crisis is a “fight for the future of the Euro itself“.

When I worked in “The City” as a corporate actions clerk (sorry, analyst) I worked for one of the French banks. All throughout the sub-prime disaster that toppled the mighty Lehman Brothers and helped to trigger a collapse of the world economic system my bank consistently said that they were in a strong position and immune to the problems because they had not invested in these debts.

Well, now it turns out that they were just fortunate for a while to have invested in different debts which took a little longer to default.

Soc Gen and BNP Paribas in Asset Sell Plan

BNP today announced plans to sell off EUR70 billion of “risk-weighted assets” . So far BNP is looking safe as it was not downgraded by Moody’s. However, Michael Hewson from CMC Markets thinks that is just a matter of time before BNP Paribas goes the same way as the other French banks.

French Bank Share Price Losses

Losses so far in the last 2 days:

• BNP Paribas 2.9% – get latest prices: www.google.co.uk/finance?q=EPA:BNP
• Credit Agricole 4.5% - get latest prices: www.google.co.uk/finance?q=Credit+Agricole
• SocGen 4.1% - get latest prices: www.google.co.uk/finance?q=EPA:GLE

The fear is that these French banks simply have no means to deal with the sudden and catastrophic Greek debt problem. Like any business that invests heavily in a risky and narrow field, a major economic problem quickly turns into a bigger financial crisis.

These banks may have mostly escaped the American sub-prime crisis of 2008 but they are now suffering from their own problems.

However, BNP Paribas estimates that it will suffer a EUR1.7 billion loss as a result of the Greek problem but as it has made a first half pre-tax profit of EUR7.4 billion it can cope with the losses. So although they are not immune to the global economy crisis they can still weather this storm better than some other banks.

The big question now is, what is next? Where will the next major crisis strike? Or is this marking then end of the global economic problems and the restructuring and reposition of assets across the world banking system is making a more solid and safer platform for future investments?

Quotes in first paragraph from the BBC News economics correspondent – if you know his name let me know!