Will we always be second fiddle to the banks?

The situation regarding the banks is one that has dominated the credit crunch era as we started with some spectacular failures combined with spectacular bailouts. Yet even a decade or so later we are still in a spider’s web that if we look at say Deutsche Bank or many of the Italian banks still looks like a trap. Economic life has been twisted to suit the banks such that these days a new Coolio would be likely to replace gangsta with bankster.

Keep spending most our lives, living in the gangsta’s paradise
Keep spending most our lives, living in the gangsta’s paradise

Power and the money, money and the power
Minute after minute, hour after hour

Although upon reflection with all the financial crime that the banks have intermediated perhaps he was right all along with Gangsta. This morning has brought more news on this front as we note this from Sky News about HSBC.

HSBC has agreed to pay $765m (£588m) to the US Department of Justice (DoJ) to settle a probe into the sale of mortgage-backed securities in the run-up to the financial crisis.

It is the latest bank to settle claims of mis-selling toxic debt before the financial crisis.

HSBC has paid a lot less than the  Royal Bank of Scotlandwhich agreed to pay $4.9bn in May and Barclays’ $2bn settlement with the DoJ in March.

This is just one example of the many criminal episodes emanating from the banks and if we stay with HSBC there was also this reported by The New Yorker.

 In 2012, a U.S. Senate investigation concluded that H.S.B.C. had worked with rogue regimes, terrorist financiers, and narco-traffickers. The bank eventually acknowledged having laundered more than eight hundred million dollars in drug proceeds for Mexican and Colombian cartels. Carl Levin, of Michigan, who chaired the Senate investigation, said that H.S.B.C. had a “pervasively polluted” culture that placed profit ahead of due diligence. In December, 2012, H.S.B.C. avoided criminal charges by agreeing to pay a $1.9-billion penalty.

The tale of what happened next is also familiar.

The company’s C.E.O., Stuart Gulliver, said that he was “profoundly sorry” for the bank’s transgressions. No executives faced penalties.

Yet in spite of all the evidence of tax evasion and money laundering in the banking sector the establishment bring forwards people like Kenneth Rogoff to try to deflect the blame elsewhere. First blame cash.

Of course, as I note in my recent book on past, present, and future currencies, governments that issue large-denomination bills also risk aiding tax evasion and crime. ( The Guardian )

Then should anything look like being some sort of competition raise fears about it too.

But it is an entirely different matter for governments to allow large-scale anonymous payments, which would make it extremely difficult to collect taxes or counter criminal activity.

Does he mean like the banks do?

Competition seems to get blocked

This morning has seen this reported by the Financial Times.

Britain’s peer-to-peer lending industry fears being stripped of one of its key advantages after the UK regulator proposed to block the access of many retail investors, alarming some senior executives in the nascent sector. “This is a moment,” said Rhydian Lewis, chief executive of RateSetter, one of the UK’s biggest peer-to-peer lending platforms. “They are looking to restrict this new industry and it is wrong. This is how things get stymied.”

Still in some ways it is a relief to see the Financial Conduct Authority or FCA actually have some powers as after all it was only last week they were telling us they were short of them.

Given the serious concerns that were identified in the independent review it was only right that we launched a comprehensive and forensic investigation to see if there was any action that could be taken against senior management or RBS. It is important to recognise that the business of GRG was largely unregulated and the FCA’s powers to take action in such circumstances, even where the mistreatment of customers has been identified and accepted, are very limited.

It is important to recall that this was a very serious business involving miss selling and then quite a cover up which the ordinary person would regard as at the upper end of serious crime. Businesses were heavily affected and some were forced into bankruptcy. Yet apparently there were no powers to do anything about what is one of the largest financial scandals of this era in the UK. It is hard not to mull on the fact that a few years ago the FCA was able to ban someone for life from working in the City of London because of evading rail fares.

However if you are a competitor to the banking sector you find that inquiries and regulation do apply to you. However what was the selling of derivative style products to small businesses somehow escapes the net.

It is not the banks fault

A very familiar theme has been played out since the Bank of England announced a rise in UK interest-rates at midday on Thursday. The reality is that many mortgage rate rises were announced immediately but as social media was quick to point out there was something of a shortage of increases in savings rates. Here is one way this was reported by the BBC over the weekend.

Millions of people could get a better return on savings by switching deals rather than waiting for banks to increase rates, experts say.

A huge number of savers leave money languishing in old accounts with poor rates of interest, often with the same provider as their current account.

The City regulator says they are missing out on up to £480m in interest.

So it’s our own fault and we need to sharpen up! As us amateurs limber up the professionals seem to be playing a sort of get out of jail free card that in spite of being well-thumbed still works.

Following the previous Bank rate rise in March, interest paid on half of all savings accounts failed to rise at all. Of those that did, the average rise did not match the Bank of England’s increase.Since Thursday’s rise there has been very little movement in rates,………..

Oh and March seems to be the new November at least at the BBC.

We also got a hint as to why the environment might be getting tougher for peer-to-peer lenders.

Bank of England governor Mark Carney suggests new entrants are increasing competition, creating better deals.


There is quite a bit to consider here as we look around UK banking. Looking at RBS there is the problem that the UK is invested at much higher levels. The 251 pence of this morning is around half the level that the UK government paid back in the day. Perhaps that explains at least some of the lack of enthusiasm for prosecuting it for past misdemeanours. Especially as the sale of 7.7% of its shares back in June illustrated a wish to get it off the books of the UK public-sector which still holds around 62%.

I note over the weekend the social media output of HSBC finds itself under fire reminding us of an ongoing issue..

Planning your next trip? Get cash before you go, to make the most of your holiday time.

The response is from Paul Lewis who presents Radio 4’s MoneyBox.

Dreadful advice. (a) HSBC rates not great (b) using a HSBC card abroad is subject to a hefty surcharge but using a Halifax Clarity card is not. This is why never go to a bank for advice it’ll only give you sales.

The old sales/advice issue rears its ugly head again as we note that the advice will of course be rather good for the profits of HSBC.

Moving onto the FCA and the Bank of England it is hard to see a clearer case of regulatory capture or as Juvenal put it so aptly back in the day.

Quis custodiet ipsos custodes?

Or who regulates the regulators?




How many more promises about Royal Bank of Scotland will be broken?

This morning has seen an event that has become a regular event in the credit crunch era. In fact it has become so regular that I note analysts are calling it a “surprise”! That is the annual event where the figures of Royal Bank of Scotland are produced and they are again bad. We are seven years or so into the credit crunch but the promised recovery here appears to be like the “train in the distance” sung about by Paul Simon. Let us take a look at today’s problems for it. From Reuters.

Royal Bank of Scotland (RBS.L) said it would take a surprise 2.5 billion pound ($3.58 billion) hit to its fourth-quarter profits after setting aside more cash to cover litigation costs, compensation for mis-selling loan insurance and an impairment charge at its private bank.

You might reasonably think that this is bad enough and I did warn about the surprise bit. But wait like the doppelgänger of the gift which keeps on giving there is sadly more to come.

RBS said in a statement that it would also make a 4.2 billion pound payment into its pension scheme due to changes in its accounting policy, while it will set aside an extra 2.2 billion dollars for mortgage-related litigation in the United States.

So the clear winners here appear to be the lawyers who lose about as often as top bankers. I am reminded of my article on pensions on Monday as we see “accounting policy” lead to a substantial change in another situation which is a shambles. Also if we look at the BBC we see that there is more.

In addition, it will write down £498m from its private bank Coutts.

We also got a statement that could have been produced in any of the years since the UK taxpayer bailed the bank out.

“I am determined to put the issues of the past behind us and make sure RBS is a stronger, safer bank,” chief executive Ross McEwan said.

“We will now continue to move further and faster in 2016 to clean up the bank and improve our core businesses.”

It is rather like the time in each ECB meeting when President Draghi talks about the need for structural reforms because if you turn up next time and there it is again. The 2016 in the statement could be replaced with 2015,14,13,12, and so on. Or to put it another way in the words of Talking Heads.

Same as it ever was

Same as it ever was


If we consider this in terms of that ITV television program let us consider this from Mindful Money on September 11th last year.

we expect to spend much of the next 18 months simply marvelling at the sheet size of the RBS’ capital surplus and wondering why it is just sitting there gathering dust,’ he said.

They must be greater value now at 254 pence than the 330 pence of back then so you can buy and marvel at the capital surplus or perhaps not. The poor UK taxpayer is in at around £5 so they are far away from the profits which were originally promised.

A journey back in time

If we jump into the TARDIS of Dr.Who then we see this from Chancellor Alistair Darling in the Guardian on the 13th of October 2008.

There is every reason to be confident that, as we go through this, the British taxpayer will get his money back.

If we look at the review of 2012 by The International Financing Review then things were apparently on track.

In some ways, however, RBS is well ahead of the pack…….RBS was forced to concentrate on what it was good at and should come out of its current (second) restructuring as one of the more efficient banks in the industry.

My old employer Union Bank of Switzerland had a go too back then.

However, with 2013 expected to be the last year of significant restructuring for RBS, it is likely to be one of the first European banks to have dealt with legacy issues

If we advance to the figures released in January of 2014 we see that BlueBullet on Twitter had a wry take on events.

Dear Dragons Den, I have 80% share. Losses this year are £8 billion. I am paying out £0.5 billion in bonuses. Would you like to invest? #RBS

Andrew Bailey

Whilst you may not have heard the name you are virtually certain to have seen it as Andrew was Chief Cashier of the Bank of England and so his signature was on banknotes issued then. He is and will soon be was a 30 year insider at the Bank of England and is currently performing the roles shown below.

Deputy Governor, Prudential Regulation at the Bank of England and Chief Executive of the Prudential Regulation Authority (PRA),

He is now about to be head of the Financial Conduct Authority or FCA although the date on which he will assume the role is unspecified. This role has in football terms had an “interim manager” who unlike Rafa Benitez did not want a permanent role. Actually since the sacking of Martin Wheatley there was a shortage of people willing to take on the role. Presumably they were concerned about the contradiction between the fact that Mr.Wheatley got the order of the boot and how the Chancellor described him.

Britain needs a tough, strong financial conduct regulator. Martin Wheatley has done a brilliant job of launching the FCA in tough circumstances.

So brilliant he got removed! Now we have got ourselves an insider and I have to confess I am troubled by this development. The Bank of England has had a troubled record itself with the Li(e)bor and foreign exchange scandals where it seems to have done much more covering up than exposing. Also Andrew Bailey put senior bankers above the law of the land back in 2012. Here is a letter from a Mrs. N. Turner quoted on the blog of the journalist Ian Fraser on the subject of prosecuting banks and their directors.

would be a very destabilising issue. It’s another version of too important to fail. Because of the confidence issue with banks, a major criminal indictment, which we haven’t seen and I’m not saying we are going to see… this is not an ordinary criminal indictment.

Her concern was that banks and bankers were being put above the law. I expressed my concerns on this issue on the Investment Perspectives show on Share Radio yesterday.


Also there has been another development at the FCA as the Financial Times informs us.

Today (26 January), the FCA separately announced the appointments of Baroness Sally Hogg, chairman of the audit committee at John Lewis Partnership, and Ruth Kelly, former global head of client strategy at HSBC Global Asset Management, as non-executive board members from 1 April.

Why is this an issue well even cuddly old John Lewis has a dark side from its sale of its store card business in 2003 and yes it was sold to HSBC and Ian Fraser has summed it up on Twitter thus.

well the £1bn of allegedly illegal store-card charges were gouged from, inter alia, customers of JLP store cards.

If you have seen the name Hogg before well her husband claimed moat cleaning in his parliamentary expenses and her daughter is now Chief Operating Officer of the Bank of England as well as of course the many roles the Baroness has. That family is pretty much what some would call “the great and the good” for which you can find many definitions in my financial lexicon for these times.

Lets us move on with the thought that if you were allegedly picking people to cover something up then those with a past history which involves themselves would be at the top of your list…


If you would like to take The Matrix style red pill then the Financial Times offers to help you.

Andrew Bailey’s appointment as head of the FCA given the thumbs up by the City:

For those who took the blue pill that is a potential sign of what Taylor Swift called “trouble,trouble,trouble”. We find that RBS is singing along with Talking Heads and should be filed along with the other basket cases such as Deutsche Bank and Italy’s Monte Paschi.

We’re on a road to nowhere
Come on inside
Takin’ that ride to nowhere
We’ll take that ride

Policy could not be more bank friendly and yet they are still in quicksand. A sign of this is that if today’s title seems familiar then you are right as I have plagiarised myself and used one from the 2014 results of RBS.

Mark Carney

He came under fire at the Treasury select Committee for being an “unreliable boyfriend” if I may put it like that on the subject of what term he will serve. Graeme Wearden of the Guardian regularly quotes my research and output and I guess I have been something of an influence. I am glad to see that the message is spreading!

If Mark Carney does 8 years at the he’d finish in summer 2021, when the top job at the IMF becomes free…