How to Spy on Your Bank

We all know that banks keep tabs on us, but isn’t it about time we spied on them too?

You’ve got a bank account, right? That means you’ve got a bank too – at least one of them. Wouldn’t it be nice to know what the people you’ve trusted with your hard earned cash are doing with themselves?!

Here’s how to check out what your bank’s been up to so you can decide whether they really deserve your custom:

Are they up for the job?

When you're digging for dirt on your bank the first place you should look is the FCA register. This alone will reveal a plethora of info about their background, commercial interests and faux pas - all you need to do is search for their name.

Simply by checking the FCA register you can find out what other guises your bank trades as (under the Names link); discover exactly what it’s authorised to do (and what it isn’t); and, perhaps the juiciest one, find out whether it’s broken banking rules in the past and any action the FCA has taken against it!

Are they financially sound?

Did you know that you can get a credit report for you bank and check up on them like they do you before approving you for a new product?

Three agencies offer independent rating services and these can be used to get an idea of your bank’s long term financial strength.

Standard & Poor’s and Moody’s are the two largest agencies and both are worth checking if you want to take a gander at your bank's credit report. Both agencies post up news and research articles on banks and building societies as well as their ‘meat and drink’ ratings of each bank’s creditworthiness.

Are they a safe bet?

A bank’s share prices give you an indication of both its growth, and investors’ confidence in its current and future plans.

A steady improvement in share price is generally preferable to unsustainable growth, while a dramatic drop often goes hand in hand with upheaval, uncertainty and risk.

Five UK banks are currently floated on the FTSE 100 stock exchange – Barclays, HSBC, Lloyds Group, Royal Bank of Scotland, and Standard Chartered PLC.

You can take a look at their current share price and which direction those shares are heading on the FTSE website.

Another interesting resource is Citywire’s comparison of executive pay to share price growth and shareholder dividens for the five UK banks listed on the FTSE 100 in 2011.

Broadly, investors are likely to complain if rising executive pay is coupled with falling share prices; while you as a customer might feel mistreated if board level pay goes up but lending is cut back!

Do they know the meaning of customer service?

If you want to find out whether your bank knows how to treat its customers, you need to head back to the FCA where you can check out its official complaint records.

These tell you how many people have complained about your bank, what the complaints were about and what the outcome was (essentially whether your bank was really in the wrong).

You can search for your bank’s current-year opened, closed and upheld complaints (where the customer ‘wins’) on the FCA website.

Even if your bank’s current complaint levels are high, if they'd down from last year it could mean they’re trying to improve their customer service. Because of this it's worth comparing your bank’s 2010 complaints record against this year’s performance so you get a better picture.

Are they heading for trouble?

While ratings agencies such as Standard & Poor’s, Moody’s and Fitch assess banks’ long term financial health, with a little bit of digging you can find out how well different banks are positioned to ride out a sudden economic downturn.

This is the classic ‘Google it’ approach, but with a twist: search for “half yearly accounts” when you Google your bank’s name. Then choose the latest set of accounts. What we’re looking for inside this is their 'core liquidity ratio', usually reported in the introduction or opening summary.

A bank’s liquidity ratio is essentially a reflection of the percentage of its total debts it can pay off immediately; so the higher the figure the more secure a bank is thought to be, and the better able to ride out an economic storm.

Take Nationwide’s 2011 accounts as an example (the liquidity ratio is reported on page 3). On an industry-wide level, the FSA reckons "...a rise in the liquidity ratio significantly reduces the risk of a banking crisis".

How ethical are they?

The unfortunate likelihood is, not very. Out of the UK’s 5 major high street banks, none fare too well in various ethical banking reviews.

Whether it’s investing in projects that are dangerous for the environment, investing in armament and munitions companies, tax avoidance or disproportionate executive bonuses – you’ll need to decide where to draw the line.

However, many banks attempt to offset this to a degree by giving to charity; HSBC, Barclays and RBS were all listed in the UK’s top 10 companies for charitable giving in 2009, published in a recent report (see page 7).

You can find summaries of how ethical your bank is on the Move Your Money website, an action group promoting ethical banking. And if you decide to change, there are one or two “ethical banks” available to consumers like you and me - CoOperative and Triodos to name just two - as well as various other ethical options.

While you may not always be able to get the ‘best buy’ rates or a full range of financial products, ethical companies including credit unions (e.g. London Mutual), social lending platforms (e.g. Zopa), and building societies such as Britannia can cater for many of your banking needs too.

So how can this all help?

Ideally all banks would offer the best possible rates for our savings, the lowest borrowing rates and the most helpful customer service. If yours is not quite there yet, finding out more about them can help you feel more in control about where your money is.

Remember that up to £85,000 of your money is protected per financial institution (read our guide: Which Banks Count as One? to find out more) and all regulated banks are judged by the Financial Obmudsman so you have some reassurance.

However, if you don’t like what your bank is doing and how it’s run, you know it’s time to jump ship to find an alternative that’s a better all rounder and more deserving of your custom.