Loans and Finance

Loans and Finance

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News and information about loans, money, debt, finance and business issues.

Friday, July 30, 2010

Goldman Sachs Bans Swearing

Goldman Sachs, known by some as the "giant blood sucking squid", has issued a rather bizarre directive to employees banning them from swearing in internal emails.

Employees emails will be censored, and unacceptable words removed. Employees are also banned from using swear words with asterisks and shorthand for expletives.

Is this due to a sudden twinge of morality?

Errrmm...no.

Goldman Sachs have been highly embarrassed by the release of emails, during investigations into the bank's conduct, that contained a fair number of swear words.

Given human nature, and particularly the aggressive nature of those who work for Goldman Sachs, I doubt that this ruling will have much effect. Their staff will find ways around it.

I suspect that the next release of emails from Goldmans (if there is one) will doubtless emulate the Nixon tape transcripts "expletive deleted", which is just as bad.

I would suggest that they devote their energies, and morality, to more pressing matters.

Thursday, July 29, 2010

Metro Bank Opens Its Doors

Britain's financial services industry has, without a doubt, a well deserved lousy reputation for customer care, honesty, service and providing reliable decent products.

Therefore it is to be welcomed that Metro Bank, the first new high street bank in 100 years, has opened its doors today.

Metro Bank claims that it will revolutionise British banking by offering retail opening hours, unparalleled service (eg toilets in branches) and a simple range of products that will be suitable for everyone.

The first branch has been opened in Holborn. It plans to have 200 branches within 10 years.

The bank will keep its branches open from 8am to 8pm Monday to Friday, as well as from 8am to 6pm on Saturday and from 11am to 4pm on Sunday. The bank will be closed on four days of the year; Christmas Day, New Year's Day, Good Friday and Easter Sunday.

However, as with all matters financial, it pays to look at the fine print.

Sadly the products offered are not yet competitive enough to appear on the best-buy tables, many in fact pay below the industry average.

The question is will this bank survive ten years to grow and prosper, or is it just a short term gimmick?

Wednesday, July 28, 2010

Interest Rates To Stay Low

Mervyn King, Governor of The Bank of England, has told the Treasury Select Committee that given that risks posed to the economic recovery there will be no rush to raise interest rates.

King also gave the Chancellor, George Osborne, a mild vote of support noting that the recent emergency budget had not made a "significant difference" to the chances of Britain suffering a double-dip recession.

Hardly a ringing endorsement!

Tuesday, July 27, 2010

£1M Payoff

Tony Hayward, the outgoing CEO of BP, has negotiated a £1M payoff and a £10M pension pot.

As a result of the oil spill BP reported in its Q2 results a provision for $32.2BN and a loss of $17BN, the largest loss in British corporate history.

Quite why BP's all but invisible chairman, Carl-Henric Svanberg, who described the residents of the Gulf Coast as "small people" remains in situ is a mystery.

Monday, July 26, 2010

Stress Test

Unsurprisingly most of the banks subjected to the rather modest "stress test" imposed by the EU Committee of European Banking Supervisors passed.

Only 7 of the 91 tested actually failed.

All in all a damp squib, that has achieved absolutely nothing.

Friday, July 23, 2010

A Straw In The Wind

Britain's truly lousy banking system (appalling service, arrogant treatment of customers, extortionate charges etc) has been ridiculed and criticised for years, without any apparent effect on its performance or attitude.

The only way that the hapless and long suffering customers will ever see an improvement, is for a new "customer focused" competitor to enter the market and shake things up.

The BBC note that straws in the wind, in the form of Project New Bank and others, may be about to start the ball rolling:

"Project New Bank, is reported to be preparing to bid for 600 branches which Lloyds is being forced to sell off as the price for accepting tax-payer aid during the 2008 banking crisis.

The US-based JC Flowers is in talks to take over the building society Kent Reliance in a bid to acquire a foothold into the UK market.

And on 29 July, a new venture called Metro Bank is due to open its first branch in Holborn, central London, before rolling out across the capital and, backers hope, the rest of the UK.

In a bid to take on the established players by focusing on consumers, branches of Metro Bank will be open from 0800 until 2000 and at weekends. Cashiers will not be shielded from the public by security screens, and managers hope that free services like coin-counting machines, toilets and biscuits for the dogs of passers-by will attract new customers through their doors.


We shall see.

Thursday, July 22, 2010

Tomorrow Is Stress Test Day

The EU have asked 91 banks based in the EU to show how much additional capital they would need in the event that economic conditions worsen over the next two years, or in the event of a "sovereign shock".

The results will be published tomorrow.

Despite the fact that some countries are hinting that their banks have passed, analysts have cast doubt on the rigour of the tests.

Tuesday, July 20, 2010

Farking Crazy

I see that the government, despite claiming that it wishes to simplify taxes, is planning to increase stamp duty on homes deemed to be energy inefficient.

I understand that at one stage the government had considered banning the sale of energy inefficient homes.

The new tax, which will most assuredly negatively impact the housing market, will theoretically come into force in 2012.

They must be farking mad!

Monday, July 19, 2010

Moody's Puts The Boot In

Moody's, the credit rating agency, has put the boot into the Eurozone by downgrading Ireland's credit rating to Aa2.

The agency notes the country's weak growth prospects and shattered banking system as the rationale for the downgrade.

This comes at a "difficult" time for the Eurozone, as this weekend the International Monetary Fund (IMF) and the European Union retracted a Euro 5BN tranche of a 20BN line of credit for Hungary, as talks between the lenders and Hungary broke down over the country's budget plans.

Stress tests on 91 European banks will be published this Friday.

The Euro has a "bumpy" week lying ahead of it!

Friday, July 16, 2010

Windfall For RBS

RBS, the "people's bank", will collect a nice little windfall as result of the decision by Goldman Sachs to take a $550M hit to settle civil fraud charges over how it marketed the sub prime mortgage product.

RBS is due to pick up $100M from this, because marketing materials for the Abacus 2007-ACI transaction allegedly contained incomplete information. RBS lost $841M from the deal with Goldman.

However, rumours abound that RBS may sue Goldman for the remaining loss.

Thursday, July 15, 2010

Position Vacant

Those of you with a penchant for foreign travel and a desire to promote British business abroad may care to apply for the position of Trade Minister, which has been vacant since the formation of the new government.

It seems that David Cameron has offered the role to a number of high profile figures. However, they have all turned him down flat.

Still interested?

Well, before you rush to post your CV's to the PM, you might like to know that the post is unremunerated (the government has already hit its limit of salaried ministers).

Aside from working for free, you will also have to put your assets into a "blind trust" during your period of tenure; in order to avoid issues wrt conflict of interest.

Still interested?

No?

I thought not!

Wednesday, July 14, 2010

The Orifice Of Budget Responsibility

Sir Alan Budd, who is leaving as Chairman of the Office for Budget Responsibility after a mere 3 months in the role, appeared before the Treasury Select Committee (TSC) yesterday.

The TSC was keen to probe beneath the public perception that the OBR is not as "independent" as the government, and indeed OBR, would have us believe.

Sir Alan claimed that he had not come under political pressure recently, even though he released public sector jobs data early. He claimed that this was to correct a misinterpretation of figures leaked to the media, the fact that this was of benefit to David Cameron who used the data with glee was (of course) irrelevant.

Sir Alan, who has yet has no successor to replace him, has issued advice to the successor as to the future of the OBR eg:

- the need to relocate it outside the Treasury,
- allow Parliament a role in appointments to the OBR's key committee
- employ both external and Treasury staff to produce its forecasts and analysis.

He neglected to add that his future successor needs to be put on a contract longer than 3 months, allegedly the length of Sir Alan's contract (one wonders why, if that is truly the case, there is no successor lined up yet?) if he/she is to be effective.

As to whether the government and Treasury actually want a truly independent OBR, remains to be seen. Doubtless their choice of Sir Alan's successor may shed some light on that.

We await the announcement with interest!

Tuesday, July 13, 2010

FSA Takes Aim At Reckless Mortgages

As the housing market looks set to fall again, the soon to be emasculated Financial Service Authority (FSA) is using its last moments on earth to take a pot shot at "reckless" mortgages.

The FSA has put forward proposals for new rules wrt mortgages, and is "adamant" that the new rules will include a ban on lending without proof of income.

It wants to ban self-certification mortgages.

The FSA wants to "go back to basics" of responsible lending.

The FSA claims that it wants to prevent people falling into debt as a result of overburdening their finances when buying property.

All very well, maybe, but was it not during the "watch" of the FSA that self certification mortgages took off?

Why this sudden change of heart?

Have the banks not already significantly tightened up their lending rules, as buisinesses and propsective house buyers can attest to?

Is this not really a case of the FSA trying to make themselves look useful in their dying days?

Monday, July 12, 2010

Recession Worse Than Thought

The ever "reliable" Office of National Statistics (ONS) has issued revised data for the UK economy for Q1 2010.

The revised data shows a decline in output of 6.4%, compared with the original data that showed a 6.2% decline in output.

However, the ONS has left its earlier estimate for Q1 growth of 0.3% unchanged.

The bad news is that the "growth" was on the back of a revised increased in government consumption of 1.5%, rather than the original increase estimate of 0.5%.

Quite what use these statistics, and indeed the ONS, are to anyone given that they are subject to regular revision and that they are after the event eludes me.

Friday, July 09, 2010

Level Playing Field

The government has announced that it will switch the index linking of private sector final salary pension schemes from the Retail Price Index (RPI) to the consumer price index (CPI).

This is in line with the similar measure announced in last month's emergency Budget relating to public sector pensions.

CPI excludes house prices and mortgage payments, is consistently lower than RPI. It is estimated that private pension incomes will fall between 10%-25% in retirement.

The CBI is pressing for legislation to allow those schemes who are specifically required to use RPI to be able to use CPI.

Thursday, July 08, 2010

Bankers' Bonuses

The European Parliament has approved a plan to place limits on bankers' bonuses from as from next year, the rule will be applicable to all 27 EU members.

Bankers will receive no more than 30% of their bonus immediately and in cash, the limit falls to 20% for larger bonuses.

The remaining payments will be deferred, and linked to long-term performance.

There will be no cap on what bankers can be paid.

This will have precious little effect on bankers:

1 The rules will not be enforced until next year. Therefore this year bankers will ensure that bonus payments are front end loaded, to avoid the limit next year.

2 Pay levels will be increased to avoid the limits.

3 Banks will circumvent the rules by paying bonuses offshore.

Wednesday, July 07, 2010

Public Sector Pensions

Trouble is brewing in the public sector, the Institute of Directors (IOD) and the Institute of Economic Affairs (IEA) have (via a joint commission) called for a radical overhaul of public sector pensions in addition to the pay freeze that is to be implemented by the government for all but the lower paid.

As a starting point they have called for a 2% increase in contributions from public sector employees.

The commission also wants other major changes, as they argue that the true value of the main unfunded public service pension schemes is over 40%, yet the combined value of employer and employee contributions is approximately 20%.

Needless to say the unions representing the public sector do not buy into this argument. They point out that the pay levels of the majority of the public sector is so low, that the pension is the "reward" for accepting low levels of pay.

All very well, maybe, if the country can actually afford the cost.

Monday, July 05, 2010

Cuts

The Chancellor, George Osborne, is using zero based budgeting to reset the country's battered finances.

He has ordered a purge of capital spending, and review of every single capital expenditure project, to run alongside the annual expenditure cuts demanded of every department of between 25% and 40%.

It is likely that the 40% target is being used as an exercise to "scare the chickens" into grudgingly rolling over and accepting 25% cuts.

Thursday, July 01, 2010

Nervous Markets

The markets displayed nerves today, ie indexes fell, as a result of disappointing Chinese financial data that showed a slowing of growth, and a warning that Moodys may downgrade Spain's debt rating in the coming months.

Meanwhile there are riots on the streets of Athens, as people protest about government plans to impose austerity measures.

My advice to the protesters is to focus your anger (peacefully I might add) not against your government's austerity measures, but against your government's decision to remain in the Euro; which is preventing the government from using monetary policy to ease the debt crisis.