What turned Britain against the big banks?

The UK has been rocked by several banking scandals over the decades, some of which have been part of times of global economic crisis – including the deep recession that began in 2007-08.

Here are just some of the major UK banking scandals in living memory, which have led many people to turn away from the traditional big banks and look for alternative current accounts in the UK.

In fact some people go further than that and argue that action should be taken against the bankers responsible, while many billions of pounds have now been paid out in compensation by the banks.

But more than a decade on from the global financial collapse, world economies are still picking up the pieces, with budget deficits and austerity measures commonplace – while the big banks make money hand over fist.

Endowment mortgages mis-selling

Around the year 2000, the endowment mortgages mis-selling scandal broke, as a growing number of people realised their endowment policy would not pay off their mortgage in full.

Endowment mortgages worked by investing your money in the stock market and hoping to earn enough in gains to pay off your mortgage.

But some people were not properly warned of the risks if the stock market did not perform well, or if it dropped just before your endowment policy was due to mature – leading to one of the first really high-profile mis-selling scandals of the modern era.

PPI mis-selling

Just a few years later in 2005, a large complaint was brought relating to Payment Protection Insurance, or PPI mis-selling.

This was supposed to cover your repayments on things like loans and mortgages if you were out of work, but a lot of people were sold policies they were not eligible for, such as self-employed individuals.

PPI mis-selling was probably the highest-profile scandal of them all, and a huge compensation industry sprung up around it, with a deadline for claims finally set for 2019.

Sub-prime lending crisis and Credit Crunch

In 2007 the sub-prime lending crisis led to what was originally called the Credit Crunch, which rapidly became a full-scale deep global recession.

Events were triggered by mortgage providers lending too much at too high risk on unrealistic valuations of properties.

The market was unsustainable – and when it eventually collapsed, it lit the fuse for the worst global recession in living memory.

Credit default swap scandal

Soon after in 2008 there was a slightly more technical scandal involving credit default swaps, a type of investment most ordinary people had probably never heard of.

In essence, credit default swaps are a way to bet against a debt going unpaid – so if the debt defaults, you have the security of the credit default swap as a kind of insurance.

But any gambler knows you can’t bet both ways and come out in profit, and when large numbers of sub-prime mortgages began to default during the Credit Crunch, it wasn’t long before the big investment banks, especially in the US, started to collapse too under the weight of unprofitable credit default swaps.

Old and outdated

The global financial sector has worked hard to recover from these shocks – paying out billions and billions of pounds in compensation to those affected along the way – and some UK banks were even bought by the government to prevent them from drowning in their own debt.

It’s left many people jobless and even homeless, while many others have no faith left in the conventional British high street banking sector.

But at the same time, new entrants into the UK financial services landscape are offering alternatives, such as the Arro Personal Account – a UK account with sort code and account number, based online, and not issued by a bank.

An ethical account

The Arro Personal Account throws out the old style of banking, where the banks make their profits by pushing debt on to you and selling you add-ons you don’t need.

We are not a bank, and we are proud to be different. We publish our account fees upfront so you always know what you are signing up for, and we ringfence customer deposits so no matter what happens, we can always pay you your full account balance.

Our online dashboard is purpose-built and thoroughly tested for security, and our servers encrypt all data sent to and from our customers.

We use simple online databases for 160 countries to verify your ID when you apply – allowing us to be secure while still offering our guaranteed acceptance for all eligible applicants.