UK looks to become a global provider of Islamic finance

A government organisation is looking to educate financial institutions in a bid to help the UK become a global provider of Islamic finance.

UK Trade & Investment, which incorporates the work of the Foreign & Commonwealth Office, has leant its support to a breakfast briefing hosted by the Association of Corporate Treasurers.

The aim of the briefing is to give financial companies more understanding of Islamic finance by explaining whom it applies to, how it can complement existing financial services strategy, and what the benefits are.

Sharia Islamic law forbids the practice of making money from money, such as charging or paying interest.

Sharia-compliant mortgages involve the bank buying the property with the buyer then buying it back and renting it at a slightly inflated price. Buyers also have to be sure that the money the bank is using to buy the property has come from permissible sources.

The sector is currently thought to be worth $500bn (£294bn) and it is predicted the sector will grow by a further 15% per annum over the next few years.

Andrew Cahn, chief executive of UK Trade & Investment, says: “In these tough times it's more important than ever that we make the most of growing sectors like Islamic finance.

"That's why it is important the UK's financial industry provides an open door and positions London as a leading western financial centre for Islamic finance.”

Richard Raeburn, chief executive of ACT, says: “A reduction in funding options with markets offering continually more expensive rates means that seeking alternative funding away from the traditional routes is an increasing trend.

"Islamic funding may not have been at the forefront of borrowers’ minds but the credit crunch has made an understanding of this market essential.”
www.mortgagestrategy.co.uk

edeus rumoured to be going into administration

Rumours are rife that edeus has gone into administration and that chief executive Michael Bolton has been made redundant from the firm.

Managing director Alan Cleary is thought to still be at the lender.

Nobody from edeus was available to comment.

edeus launched into the mortgage market in a blaze of glory in July 2006 with Michael Bolton and managing director Alan Cleary (both former HBOS employees) at the forefront of the firm.

The duo assembled an all star team from across the industry and were even
one of the first firms to adopt ‘eu’ at the end of the firm's website and email
address.

The new lender was an overnight success and edeus soon became the fastest growing new entrant the mortgage market had ever seen.

But the freeze in the credit markets quickly put paid to the ultimate Bolton and Cleary dream ticket.

edeus was quick to retaliate to market conditions and after successfully recruiting over 100 staff from rival lenders soon had to put out the fire with a swathe of redundancies in November last year.

By April this year another 50 jobs had gone to the wall.

In July 2008 it started to offer its now renowned and since copied Golden Goodbye offer to borrowers on its books. It also started to offer structured savings products from Newcastle Building Society.

Bolton and Cleary unveiled the name of their new lender edeus in July 2006, officially launching in September 2006.
Bolton said at the time the firm had been looking for a name that emphasised innovation, that was challenging and “would echo our core brand values of excellence, service, quality and speed”.

www.mortgagestrategy.co.uk

Not such a good idea after all?

With the nationalisation of the Bradford & Bingley, the last of the demutualised building societies has lost its independence.

Some people have been tempted to argue that this proves that converting from a building society to a bank was always a bad idea.

What looked like a good way of expanding business and becoming a modern, thrusting, go-getting organisation for the modern age (in other words, a bank) became something different - a new and exciting way to lose money.

But John Wriglesworth, an analyst of building societies for the investment bank UBS in the 1990s, and later a senior executive at the Bradford & Bingley, sees things differently.

"The reason the demutualised societies have gone has been due to investors having panic attacks," he said. "It has been a self-fulfilling, cataclysmic spiral into the abyss."

Way back when

Just 11 years ago, demutualisation among building societies was all the rage.

The year 1997 marked a sea change for a movement of safe and sound financial organisations, most of which had started up in the 1800s. One after another some of the biggest names jumped ship.

The Abbey National had struck out on its own back in 1989 to become a bank and, overnight, it converted its savers into shareholders. But with the Cheltenham & Gloucester agreeing to sell itself to Lloyds bank in 1995, the dam burst. Within the space of twelve months in 1997, the Alliance & Leicester, Halifax, Northern Rock and the Woolwich, all well known mortgage lenders, decided they wanted to be banks as well.

The Bristol & West jumped directly into bed with the Bank of Ireland that year, and two years later the Birmingham Midshires did the same with the Halifax. By the year 2000 the Bradford & Bingley was the last to join the stock market.

Adrian Coles, of the Building Societies Association (BSA), disapproved of all this at the time, but does not hide his amazement at recent events. "It has been utterly, unbelievably, astonishing," he said. "Seeing the swift disappearance of the former societies in the firestorm, which I don't claim to have predicted, has also been astonishing."

No guarantee

In fact the B&B directors campaigned against converting to be a bank, but were defeated after a saver from Northern Ireland, Stephen Major, succeeded in forcing a vote on the issue among members the year before.

"It's unfortunate but that's the way these things go," he told the BBC regretfully.

"Nine years ago we didn't think about credit crunches or that building societies or banks could go bust.

"There's no guarantee it wouldn't have happened anyway," he added.

According to the BSA, the total value of the payouts in 1997 amounted to £36bn in shares and cash into demutualisation. The B&B members were simply too keen to cash in on the value of their society, and so it went the same way as the other societies.

Share options

So why did all this happen?

Until the mid 1980s building societies dominated the mortgage lending business, more or less as a cartel. That changed with the 1986 building societies act, which also paved the way for demutualisation.

The house price boom of the mid and late 1980s alerted the banks to the rich picking to be had in home loans, as well as selling endowment investment policies, house insurance and, so they thought, estate agency.

They also recognised that the quickest way to get a large slice of this profitable business was to buy up an existing lender. And according to John Wriglesworth, directors of building societies were only too keen to join them. "They used words like 'freedom to compete' and 'access to capital,' but the main reasons were excessive pay, share options and testosterone".

Investment banks from the City and Wall Street did their best to speed up the process, touring the boardrooms of the larger building societies, convincing their directors that now was the time to break the mould and demutualise.

The fact that these investment banks often made large fees as advisers to the eventual flotations or takeovers was not a coincidence.

Funding

For the past decade the banks, building societies and other specialist lenders have all taken part in the biggest house price, and mortgage lending, boom in the UK's history.

One thing that has helped the banks in particular has been their ability to borrow money from other financial institutions, rather than just from savers, to fund their mortgage lending.

Building societies are restricted by law to funding just 50% of their lending this way and the average among societies is much less, at about 30%. It is this borrowing, and the current difficulty in repaying it, that lies at the heart of the problems that have been experienced by the Northern Rock, Halifax and now the B&B.

"With hindsight they raised more money than they would have done had they stayed as building societies and with the credit crunch that now looks like a mistake," said Adrian Coles.

But John Wriglesworth argues that losing their independence because of this was certainly not inevitable for the former mutuals, especially for the Halifax and the Alliance & Leicester. "They had a viable comprehensive strategy - their demise is due to the exceptional circumstances, based on fear breeding fear, not their areas," he said.

"There was no reason for the Northern Rock to go down the sub-prime route, or for the Bradford & Bingley to go down the buy-to-let route."

http://news.bbc.co.uk/

FSA fines GE Money £1.12m

The Financial Services Authority has fined GE Money Home Lending £1.12 million for systems and controls failings that resulted in 684 borrowers suffering financial loss in excess of £2.3m

This is the first time the FSA has fined a mortgage lender in relation to its lending processes.

The FSA says this action sends a clear signal that lenders’ management must treat all their customers fairly and prevent them suffering detriment.

The news follows concerns raised by housing minister Caroline Flint at this week’s Labour conference, on the number of second charge repossessions initiated by GE Money. For the full story see this week’s Money Marketing.

The regulator revealed that the customers affected were those whose mortgage contracts were subject to a retention clause, where a sum of around £3,000 was withheld from the mortgage advance - typically where the borrower was required to carry out specified repairs to the mortgaged property.

The firm’s mortgage terms and conditions provided that these retention monies would be retained for six months and that during this time the borrower would be charged interest on the full mortgage loan including the retention monies. After six months the retention monies and accumulated interest should have been released to the borrower or applied to reduce the outstanding mortgage loan.

The firm’s terms and conditions did not make it clear to all customers that they would be charged interest on the full mortgage loan, including the retention monies, during the six month retention period. The FSA has also revealed that due to inadequate systems and procedures at the firm, retention monies and accumulated interest were not always paid to borrowers or applied to their outstanding mortgage loan after six months and the firm continued to charge some borrowers interest on retention monies beyond the six month retention period.

When a mortgage with an outstanding retention was redeemed, the firm did not always deduct the retention monies and accumulated interest from the outstanding mortgage loan. This resulted in some borrowers overpaying the firm when redeeming their mortgage.

FSA director of enforcement Margaret Cole says: “The firm’s failings were serious because a large number of borrowers, including some with impaired or non-standard credit profiles, were put at risk of financial loss. The firm identified the systems and control failings in 2004, but despite internal recommendations that improvements be made, no corrective action was taken for more than two years.

“I emphasise that we expect high standards by lenders in their administration of their mortgage book.”

As a result, the regulator has ensured that customers who suffered financial loss as a result of the retentions failings were properly compensated.

GE Money says it will commission an external review of the issue and will share the report with the FSA. It says it also has stopped using the retentions mechanism.

Because GE Money agreed to settle an early stage of the proceedings, it had a 30 per cent reduction in the FSA penalty. The FSA says if it were not for this, it would have fined GE Money £1.6m.

In total, including both regulated and non-regulated mortgage contracts, GE Money has paid 5,245 customers redress of £7.04 million in relation to their mortgage retentions.

www.moneymarketing.co.uk

Ex-mutuals fall to the bottom of food chain

The financial jungle is full of endangered species at the moment. But building societies - those perennial dinosaurs of the sector - appear to be in relatively fine fettle.

With families seeking safe havens for their cash, and the global lenders on the retreat, dull and conservative customer-owned lenders have been hoovering up record savings as their commercial cousins stagger under the weight of toxic debts.

Building society bosses must be taking particular satisfaction at the beleaguered state of those ultimate turncoats - the former mutuals.

Abbey National was the first of the building societies to seek a stock market listing in 1989, but the high tide was in 1997, when four societies floated.

For a while the wave of demutualisations proved to be a boon for customers, who enjoyed a cash and shares bonanza of £20bn. Yet many of the former societies have since found themselves in deep water.

The woes of Abbey were an early foretaste, as the firm's overly-ambitious Treasury department racked up huge losses on dodgy loans, forcing it into the arms of Spain's Santander in 2004.

More recently, Alliance & Leicester was snapped up by Santander after being pushed into the mire by the wholesale lending drought. HBOS, the owner of former society Halifax, is being scooped up by Lloyds TSB amid its own funding woes.

Bradford & Bingley is expected to fall into the hands of a rescuer under the worried watch of the Financial Services Authority. And the less said about Northern Rock the better.

Adrian Coles, head of the Building Societies Association, is scathing about the record of members that abandoned their mutual status.

In their eagerness to drive up returns, managements bit off more than they could chew, he claims. 'They took their eyes off the customer focus and began to think money was more important than people.'

Bruno Paulson, UK banks analyst at Sanford Bernstein, is a little less emotive. He argues that firms such as A&L and B&B simply lacked the scale and diversification to withstand a major market maelstrom.

HBOS and Northern Rock expanded their businesses at breakneck speed, leaving them with too little funding from depositors when the wholesale markets dried up.

He said: 'Some of the demutualised lenders had a decent run for a while, but they all ended up coming a cropper. For some the problem was a lack of scale, while others misjudged risk as they chased growth and diversification.'

For investors who held onto their shares after demutualisation, the record has been pretty grim. For example, B&B floated at 248p, but it is now trading at 28¼p. Northern Rock started life on the stock market at 452p, but shareholders are expected to get precious little compensation following its nationalisation.

That said, it is possible to display a little too much schadenfreude at the fate of the ex-mutuals.

www.thisismoney.co.uk

Temenos names Mike Head global partners director

Swiss core banking vendor Temenos has appointed Mike Head to lead the development of its global partners programme.

As global partners director, Head is charged with expanding the programme to include new firms as Temenos looks to increase its geographic reach and capacity and win clients for its T24 and core banking products.

Reporting to COO Mark Cullinane, he will be a member of the management board and based in the company's London office.

Previously Head was programme director for German software giant SAP - building its reseller partner channel in Europe. After leaving SAP he was responsible for the start up of software implementation and development vendor Pecaso.

Andreas Andreades, CEO, Temenos, says that having built up its direct channel, the firm is now looking to expand the partner programme and become the "preferred partner of the world's largest systems integrators".

Temenos already has partnership deals with IBM, HP, Metavante, Oracle, Logica and Interactive Data, among others.

Says Head: "My role will be to bring to the core banking market the practices and the discipline that a partners programme requires for success".

www.finextra.com

HBOS 'might be bought out by JPMorgan'

A consortium headed by US investment bank JPMorgan could soon take over HBOS, the Daily Telegraph reports.
While the members of the group have yet to be finalised, the bank is thought to have already held talks with parties including the National Australia Bank and private equity firms.
The Spanish financial services firm Santander, which recently announced a successful takeover bid for rival UK mortgage lender Alliance & Leicester, is also likely to be approached, sources indicated.
For its part, JPMorgan is understood to be more interested in taking up an advisory role for the consortium, rather than purchasing large pieces of HBOS itself.
This is due to the fact that the bank is otherwise engaged, after taking over stricken investment bank Bear Stearns in March.
Commenting on the potential acquisition to Bloomberg, Singapore-based Leslie Phang at Schroders said: The trend in consolidation in the financials is poised to accelerate.''
None of the parties apparently involved in the deal wished to comment.

www.bobsguide.com

TietoEnator Turnaround Continues

IT services company TietoEnator has reported a 270% increase in net profit to 18.7m euros ($30m) for the second quarter, on revenueup 11% at 480m euros ($761m).

For the first half, the company reported a 20% increase in net profit to 35m euros ($55m) on revenue up 8% at 948m euros ($1.50bn). During the quarter, processing and network revenue grew 16% to 113m euros ($179m), healthcare and welfare revenue rose 25% to 42m euros ($67m), telecoms and media revenue increased 10% to 178m euros ($282m), and banking and insurance revenue grew 9% to 77m euros ($122m). Geographically, Finland and Sweden contributed to 74% of revenue.

Hannu Syrjälä, president and chief executive at TietoEnator, said: "The second-quarter results strengthen our view that we are on the right track in turning the company around. We have concluded several major agreements in 2008 and succeeded in outpacing our market in many areas, reflecting the good momentum in the company.”

www.computerwire.co.uk

Government launches rent now buy later scheme

The pilot project will be open to households earning under £60,000, who will be able to rent the property at a discounted rate for two or three years, and will be given the option to buy it.

Rents will be 80% or less of the real market value, in order to save up for a deposit.

The scheme, which will be managed by the Housing Corporation, will be open to buyers who qualify for the government's new-build HomeBuy scheme, but are currently unable to buy. They would have an option to buy 25% or more of the property at any time under the scheme.

The government had previously extended the shared ownership scheme from key workers to those households earning £60,000 or less.

Bids will have to be made for the rent first, buy later scheme through registered social landlords.

Lembit Öpik, Liberal Democrat shadow housing minister, says: "Another day, another new affordable housing announcement. The government’s hot air will not hide the fact that 10% fewer shared ownership homes were provided last year than in 2006.

"What is strangely absent from this announcement is any suggestion of how the government imagines the rent-to-buy scheme will be paid for."

He adds: "With building firms making redundancies and councils strapped for cash, who does the government expect to fund it? Councils should freed to borrow so they can buy up empty homes to meet the huge demand in social housing."

www.mortgagestrategy.co.uk

Peter Heigho (Trigod/ The Key)

Peter Heigho, the designer and founder of both the ‘Trigold’ and ‘The Key’ software systems, has joined Enterprise Group as its head of e-commerce.

Heigho is tasked with developing Enterprise’s back-end processing systems and the ongoing integration of EDGEv2 with a growing list of third party systems.

This appointment follows recent announcements from Enterprise regarding high profile promotions and departures, indicating that Enterprise is rapidly adapting its senior team to the changing market conditions and its future strategy.

Michael Clapper, Enterprise Group’s CEO, says: “Peter’s track record speaks for itself and we are extremely fortunate to secure his invaluable experience which will help ensure our future success.”

“We now have over 10,000 brokers using the broker-facing ‘EDGEv2’ system, and we have already launched two of our new consumer-facing affiliate sites.

"Our strategy is now to focus on our strengths as a technology provider - specialising in the mortgage and loans space, and adding a range of products where consumers and brokers need accurate and fast comparison and execution.”

Heigho adds: “I have been seriously impressed with Enterprise, its team and its EDGE system.

"Having worked very closely with many systems and teams within the mortgage industry, I am in no doubt that Enterprise has a very exciting future and I’m very much looking forward to being a part of it."

Nationwide launches 48-strong broker sales force

Nationwide has launched a 48-strong broker sales force in a bid to show its commitment to the intermediary market.

Each of the business development managers will be supported by a sales support adviser who will handle queries and trouble-shoot problems when BDMs are unavailable.

Nationwide says it also has a dedicated team of telephone-based business
development advisers who will concentrate on intermediaries based in
more remote geographic locations.

The sales force will be headed up by head of sales Ian Andrew who joined last year from Northern Rock.

Nationwide group executive director Matthew Wyles says: "At a time
when some lenders are pulling back, Nationwide is renewing its long-term
commitment to the intermediary market. The new sales force is part of a
broader initiative which also includes a review our mortgage processes
to make them more broker friendly and a slick new online system."

Your podcast guide to... Treating Customers Fairly

http://www.cii.co.uk/pages/news_events/tcf.aspx

C&G appoints new intermediary sales director

Cheltenham & Gloucester has appointed Jon Farley as its new intermediary sales director.

Farley joins from Barclays where he was regional sales and service director at its premier banking division. He will start at C&G on July 7.

He will be responsible for growing and developing C&G’s intermediary proposition in the marketplace.

C&G managing director Joy Griffiths says: “Jon will be a strong addition to our leadership team. He has extensive experience of sales and relationship management in a number of industry sectors and will play a key role in ensuring that we continue to grow our intermediary business.”

Farley adds:“C&G enjoys a longstanding, well regarded reputation within the intermediary market and this appointment reflects a real commitment to this sector. I am looking forward to taking on the challenge of this new role and continuing the growth of the C&G offer.”

www.moneymarketing.co.uk

87% of assessed firms failed to meet March TCF deadline

Only 13 per cent of firms assessed by the FSA met the March treating customers fairly deadline, which required them to have management information in place to test their TCF systems.

The FSA says that many firms have invested “significant time and energy working to measure TCF” and the regulator still expects 80 per cent will meet the December deadline.

The FSA has published its latest update on firms’ progress towards the December deadline, which requires all firms to be able to demonstrate they are consistently treating their customers fairly.

The regulator says it will take “tough action” on the worst performing firms, including enforcement action with increased penalties, a requirement for firms to hire external consultants and visits from FSA specialist teams to assess firms’ progress.

The regulator has published further material illustrating good and poor practice as part of its update, using examples observed during its recent assessments.

The FSA says an update on the progress of small firms in particular will be published early next year.

FSA director of treating customers fairly Sarah Wilson says: “Having appropriate MI or other measures in place puts firms in a position where they can measure the quality of the outcomes they are delivering for consumers. These results show that adequate MI is not yet fully in place in the firms assessed – it does not mean that they are treating their customers unfairly.

“However, we now expect all firms to maintain their momentum and to undertake a significant amount of further work to meet the December deadline of demonstrating that they are consistently treating their customers fairly.”

www.moneymarketing.co.uk

Halifax's £245 fee for a new mortgage

The Halifax, Britain's biggest mortgage lender, is to introduce a £245 charge for new customers. Its so-called 'mortgage account fee' will apply even to those who choose to pay a higher interest rate to avoid arrangement fees.

The bank said the new fee will replace its previous £175 mortgage exit arrangement charge.

It scrapped the charge last July following pressure from the Financial Services Authority watchdog. Critics said the bank, owned by HBOS, is simply recouping lost revenue.

Louise Cuming, head of mortgages at moneysupermarket.com, said: 'HBOS has waited until the exit fees debate has died down before sneaking in a more expensive charge. I urge HBOS to scrap this decision.'

The FSA, which regulates banks, said the matter is not an issue for it.

A Halifax spokesman said the new fee is clear and upfront and replaces several charges.

'We are very late introducing it,' she added. 'The Abbey did it a year ago and is charging £350. Our single fee is less than the total of all the previous fees we have charged.'

www.thisismoney.co.uk

IMLA and the CML pair up on lender IT survey

The Council of Mortgage Lenders and the Intermediary Mortgage Lenders Association have teamed with Frank Eve Consulting to analyze how lenders and brokers use the internet to speed-up the lending process.

This year the study will focus on how lenders integrate their technologies into the broker point of sale systems and the priorities for lenders in terms of third-party integration.

It will also be extended to review broker point of sale systems, application processing systems and sourcing systems. The goal is to help lenders and brokers establish an overall e-commerce strategy and prioritize IT spending.

The study will define basic threshold requirements, best practice and emerging best practice in lender-broker technology.

Data collected will be used for the Mortgage Strategy Technology Service Awards to be presented at a presentation lunch in November.

Frank Eve, managing director of Frank Eve Consulting, says: “This year’s study will show how the mortgage e-commerce environment is adjusting to the effects and implications of the credit crunch. We will be evaluating Lender – Distributor connectivity and considering where lender strategies will lead the industry, with particular focus on how lenders are integrating with broker point of sale systems and trading platforms.”

Michael Coogan, director general of the CML, adds: “One year on, and the market environment is very different for lenders and brokers as we embark on this year’s benchmark study.

“But the application of information technology will continue to be important to our industry. We are therefore pleased once again to support the study, and look forward to seeing how IT innovation is helping lenders and intermediaries address the new challenges confronting the industry.”

GE Money finalises Polish bank deal

GE Money announced that it has closed the transaction to buy Poland’s BPH Bank, once the country’s third-largest, but now barely making it into the Top Ten there. In its glory days, BPH was the subsidiary of Germany’s HVB, and acquired a reputation for good customer service and fast growth. When Italy’s UniCredit bought HVB in 2005, BPH was partially merged with UniCredit’s Polish bank, Pekao, the country’s second-largest bank, taking the corporate banking, investment funds, stock broking divisions.

Having lost many of its best employees, large parts of its most lucrative businesses, and several hundred branches, BPH was still an attractive target for GE Money, which was looking to expand in the Polish market. GE Money paid about €625 million ($970 million) for BPH, not a lot for a Polish bank, and plans to invest an additional $50 million this year, with a total of $150 million to be invested over the next few years. Polish regulators approved the sale of BPH this month, and the two banks should merge next year. The new bank will be headed by Jozef Wancer, who originally helped build BPH into one of the country’s largest banks. A priority will be to re-establish the bank’s corporate banking. In December, BPH had no corporate customers, now it has 600, said Mr Wancer. By the end of the year, he hopes to double that. The goal is for the bank to climb back into Poland’s Top Five in five years.

The two banks’ strength is in consumer lending, where GE brings an aggressive approach to mortgage and consumer loans, while BPH has a national network, and a well-known brand. GE has a problem loan ratio of about 1.6 per cent, while BPH’s is a better-than-industry-average of 4 per cent.

“We are very bullish on the prospects of the Polish market,” said Dmitri Stockton, president and chief executive of GE Money in central and eastern Europe. “Our risk management capability is one of our strengths. It’s a key thing we have to offer.”

www.leasingworld.co.uk

TietoEnator slumps as bid talks end

Shares in Scandinavian IT services vendor TietoEnator slumped in morning trading after it said talks with potential suitors had ended without any firm offers.

TietoEnator's shares slipped 6.3%, or EUR0.88, to EUR13.03 in morning trading after the vendor released a statement saying it had ended discussions with "a number of strategic and financial parties" after they failed to result in "any firm and actionable offers".

TietoEnator has been talking to various parties since receiving an unsolicited EUR15 per share bid from private equity firm Nordic Capital in March. The offer period for Nordic Capital's bid - which the board urged shareholders to reject - lapsed on 26 May, after being put back three times.

But in the company statement, Anders Ullberg, chairman, TietoEnator, says: "Having evaluated these alternatives and the inherent nature of each potential offeror, and their value attributes, the board's unanimous view is that it has not received a firm and actionable offer that represents a fair value for shareholders and optionholders, and therefore all discussions between the company and potential offerors have come to an end."

Norwegian newspaper Dagens Naeringsliv reported today that TietoEnator's rival EDB Business Partner had decided not to make a bid after its partner, US private equity firm Blackstone, withdrew from the process. According to the report, without Blackstone EDB and fellow consortium member Telenor could not afford to beat Nordic Capital's earlier offer.

Ullberg says the vendor will now concentrate on the restructuring and cost cutting programme it embarked on in January, designed to generate annual savings of more than EUR100 million by the end of 2009.

The performance improvement programme, followed an 18-month run of volatile earnings at TietoEnator, which had mainly been caused by project over-runs in the company's banking and insurance and healthcare and welfare units. The vendor is also eliminating 800 jobs, mainly in Finland and Sweden.

TietoEnator slumps as Nordic Capital sells stake

Shares in Scandinavian IT services vendor TietoEnator have slumped on news that Nordic Capital's bid vehicle Cidron Services has sold off a 4.4% holding in its business.

TietoEnator shares closed 8.32% lower at EUR14.76 yesterday and continued to fall in morning trading after Cidron Services said it had sold a 4.4% shareholding at an average price of EUR16.50 per share. The stock was trading at EUR14.70 at lunchtime today.

Cidron is pursuing a hostile takeover bid of TietoEnator and launched a EUR15 per share, or EUR1.1 billion, offer for the vendor in April. Since then Cidron has pushed back the offer period for its bid three times. The offer period is now expected to end on 23 May.

According to press reports investors have been waiting to see if Cidron ups its offer for TietoEnator, but the move to sell the 4.4% stake implies the equity outfit is pulling back from the bid.

The TietoEnator board has repeatedly rejected the EUR15 per share offer. Furthermore, last week a group of shareholders that hold a combined 10.4% stake in TietoEnator said they will not accept the offer. This appears to have scuppered the Cidron deal which was dependant on holders of at least 90% of TietoEnator's shares accepting the deal.

In its latest statement TietoEnator has again repeated its rejection of the Cidron offer and says its board is "in active dialogue on, other alternatives to enhance shareholder value. The board will keep the market informed if a firm and actionable alternative for shareholders materialises that could bring more value for shareholders than TietoEnator's revised strategy," says the statement.

Reuters reported last week that Blackstone, Telenor and EDB Business Partner are in talks with TietoEnator about a white-knight bid. Citing "people close to the matter", the report said the consortium is considering a bid before merging the firm with EDB.

However a separate report by Reuters rules out CapGemini as a potential bidder for TietoEnator.

According to the report, Capgemini's CEO Paul Hermelin has stated that TietoEnator is too big for CapGemini to buy.

Faster payments service launching Tuesday 27th May

The final week of testing has been completed prior to the launch of the Faster Payments scheme and consumer advice has been issued.

The Faster Payments Service, which includes standing orders, is the banking industry’s response to Government concern that the UK did not have a low cost, quick and efficient electronic payment mechanism.

With just a few days to go until the launch of the new scheme, APACS, the UK payments association, has issued new materials to help customers wishing to benefit from the service, as it begins its rollout on 27th May.

APACS has produced a new, downloadable advice guide, How to use the Faster Payments Service, along with an online easy-to-use sort code checker www.canipayfaster.co.uk. Customers can input any UK sort code to check whether it is able to receive Faster Payments.

Paul Smee, APACS chief executive said: “The final part of this enormously complex project has been to test the new system in a live environment. This week hundreds of penny payments have successfully been made between the participating banks. The Service is now ready to start being rolled out to customers next Tuesday.

“Although the initial rollout will be gradual, and some customers may not be using the new service immediately, we expect that in the coming months this will ramp up to enable large numbers of customers to benefit from it. After such substantial investment by the industry we’d like, in time, to see the new Faster Payments Service being used for all of the UK’s internet, phone and standing order payments.”

Stephen Ley, a partner in Deloitte’s Enterprise Risk Services practice specialising in payments and retail banking said: “The Faster Payment system will be a challenge for banks which could lead to increased risk of fraud as it will be harder for banks to detect and block fraud in the time window available. The existing process relies, in part, on banks having sufficient time to detect suspicious transactions.

“A number of banks have opted to issue card readers which work with their customers’ debit card to create a more secure authentication and authorisation process. With over 20 million customers regularly using internet banking, increasing online safety is clearly a priority.”

When Faster Payments goes live transactions will be limited to £10,000 for immediate payments and £100,000 for standing orders, although some banks may choose lower limits. In time it is expected that these limits will be increased.