Alliance and Leicester Profits Report---Bankers!

[Nattie]

On 27 July 2007 it was announced that the Office of Fair Trading had agreed with eight UK financial institutions to start proceedings in the
High Court of England and Wales in a test case to determine the legal status and enforceability of certain charges relating to unauthorised
overdrafts. Alliance & Leicester is not part of the proceedings, but will be bound by the outcome. As a result of the court case, together with
the Financial Services Authority waiver for personal current account claims, the provision we made in the first half of 2007 against

anticipated customer complaints about overdraft fees was released in the second half of 2007. PAGE 7.

Time to translate that. We knew we were going to have to pay up to shut em up but they didn't so thank god the FSA waiver gave us a hand cos we had money for what we expected to pay out but we spent it.

[Nattie]

Re: Alliance and Leicester Profits Report---Bankers!

The payment protection insurance product we offer continues to give customers valuable protection, especially at a time when the economic
outlook is uncertain. The review of payment protection insurance by the Office of Fair Trading and associated media coverage has, however,
resulted in a 16% fall in the number of our customers purchasing insurance in 2007 compared to 2006. PAGE 8

PPI is down because of the OFT and the media. You nasty people!

[argentarius]

Re: Alliance and Leicester Profits Report---Bankers!

Time to translate that. We knew we were going to have to pay up to shut em up but they didn't so thank god the FSA waiver gave us a hand cos we had money for what we expected to pay out but we spent it.

I think it's a bit more like:

- we set up a provision at 30 June because, at that stage, it seemed very likely that we would have to pay money out;
- we released the provision at 31 December because, at that stage, the certainty of us having to pay out any particular amount had diminished.

From an accounting point of view, it's necessary to provide for uncertain things which are probable to occur and where a reliable estimate of the amount can be made.

To quote the relevant accounting standard:

FRS 12's objective is to ensure that a provision (a liability that is of uncertain timing or amount) is recognised only when it actually exists at the balance sheet date. A provision should be recognised therefore only when:

1. an entity has a present obligation (legal or constructive) as a result of a past event;
2. it is probable that a transfer of economic benefits will be required to settle the obligation; and
3. a reliable estimate can be made of the amount of the obligation.

So, I'd suggest that at 30 June A&L believed that it was probable that a payment would be required, and A&L reckoned they could reliably estimate the amount, and accordingly they made a provision; at the year-end they've reconsidered and now believe that either it's not probable or that they cannot make a reliable estimate - most likely the latter as the amount could be anything depending on the magnitude of any ruling.

Having "spent" the money doesn't come into the equation.

[argentarius]

Re: Alliance and Leicester Profits Report---Bankers!

PPI is down because of the OFT and the media. You nasty people!

But unfortunately there will be many people, in a year or two's time, complaining that they haven't bought PPI and that they consequently cannot afford their loan repayments due to unemployment, sickness or whatever.

It is a shame that the media focus on PPI has been entirely on what a bad thing it is, and ignored the fact that competitively priced PPI can represent a completely sensible decision for many people.

You can buy competitively priced PPI on a standalone basis from many sources.