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— Bloomberg (@business) July 12, 2016

RBS Executives Wilfully Obtuse

Andrew Tyrie, chairman of the Treasury Select Committee, is to write to Sir Philip Hampton, chairman of RBS, to complain about the evidence given by Chris Sullivan, deputy chief executive of RBS, and Derek Sach, head of the bank’s Global Restructuring Group (GRG) in June;accusing them of being wilfully obtuse.

Tyrie is quoted by the Telegraph:

“If this is how RBS deals with a parliamentary Committee, how much can customers and regulators rely on it to be straightforward with them?

I will be writing to the Chairman of RBS about this, and the Committee will report on it after the summer.”

The executives were originally summoned by the MPs to answer a number of allegations about the treatment of small firms by GRG contained in two highly critical reports on RBS.

One report by Lawrence Tomlinson, a Government adviser, alleged that the bank’s GRG division was forcing small businesses into administration so that the bank could take their properties and sell them for a profit.

Tyrie also said:

“Following the Committee’s decision to write to Sir Andrew Large for clarification, RBS has now offered the Committee what it euphemistically describes as ‘additional comments’. 

In fact, they have done a belated U-turn. It’s not as if the facts have changed. 

So it now appears that RBS has been wilfully obtuse with the Committee.” 

The financial services industry in the UK is quite simply a crock of shite!

Interest Rates

As I noted yesterday, don't expect interest rate rises anytime soon.

As per Mark Carney, Governor of The Bank of England, at today's Treasury Select Committee:

"The exact timing of that [increases in interest rates] will be driven by the data. But the most important aspect of the guidance that we're giving is that our view is that the increases in rates over the forecast horizon, in our best estimation, will be limited and gradual."

'Nuff said!

Bank of England Shaken By Rigging Allegations

Bank of England Governor Mark Carney has said that allegations of manipulation in the £3trillion a day foreign exchange market could prove to be a bigger scandal than the Libor rate rigging fiasco.

During a five-hour grilling by the Treasury Select Committee yesterday, Carney said that the bank was “ruthlessly and relentlessly” investigating the claims of manipulation, which has already seen the suspension of one member of staff from the bank.

Carney told MPs that it would create a new deputy governor position, with responsibility for markets and banking. That person would carry out "a root and branch review" of how the Bank conducts market intelligence.

Carney is quoted by the BBC:

"This is as serious as Libor if not more so because this goes to the heart of integrity of markets and we have to establish the integrity of markets."

He said the bank had no warning of the alleged manipulation before October.

Within 48 hours of hearing the allegations, the Bank had called in law firm Travis Smith to conduct an independent investigation. 

The chairman of the Treasury Committee, Andrew Tyrie, remains somewhat unconvinced:

"This is the first real test for the Bank of England's new governance structures. Early signs are not encouraging.

It has taken some time for the Bank's Oversight Committee to take the lead on accusations of misconduct relating to forex.

The public needs confidence that the Bank's governance structures will ensure that it gets to the bottom of forex-related misconduct allegations. The public also needs confidence that any misconduct in other areas will be discovered."

It is bad enough that "ordinary" banks rigged the system. However, for there to be reasonable suspicion that the Bank of England also was involved in such rigging is a hammer blow that may well do untold damage to Britain's standing in the financial world and the ability of the City to maintain its position as the "go to centre" for global finance.

Wheatley Lambasts Outrageous PPI Mis-selling

Martin Wheatley, the CEO of the Financial Conduct Authority (FCA), is currently appearing before the Treasury Select Committee. He is less than impressed with the fallout from the PPI mis-selling scandal and the way that the banks are handling complaints.

Currently the FOS is upholding 90% of PPI mis-selling cases referred to it after they had been rejected by the banks.

Wheatley says it is "absolutely not acceptable" and that it is "outrageous" that the number upheld by the FOS is so high. He stated that the FCA has been looking into how banks handle complaints, as per the Telegraph:

"We have taken action and we will take more action and we will continue to look at how banks handle complaints. 

We've got two large investigations underway and have two cases where we have issued strong fines."

Sadly PPI mis-selling is but one of many areas where Britain's financial services industry mired itself in its own shit.

LIEBOR - The Essential Truth

There is much hoopla going on in the media about this afternoon's bunfight at the Treasury Select Committee hearing, where Bob Diamond will be the guest star.

All attention and focus (thanks to deft media manipulation by Barclays) is on the alleged phone call from Paul Tucker (Deputy Governor of The Bank of England) on 29 October 2008:

"Bob Diamond received a call from Paul Tucker, the Deputy Governor of the Bank of England. The substance of that call was captured by Bob Diamond via a note prepared at the time. A copy of that note is appended to this document; it was circulated to John Varley, then Barclays Chief Executive, and Jerry del Missier, then President of Barclays Capital.

Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier. Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier. However Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep LIBORs so high and he therefore passed down a direction to that effect to the submitters ."

This is all very well, and has given Barclays the veneer of an "excuse"; wherein it can imply that it was asked to fiddle the rates. It has also given the Tories an opportunity to unleash the hounds, and castigate various Labour ministers of the day.

However, let us not forget the essential truth, Barclays were fiddling the LIBOR rates long before the alleged phone call took place.

For why?

To make a profit for their own greedy ends, not to save the country or the bank from financial ruin.

Let us not forget that!

NatWest's Death March To Self Destruction

As we enter day 7 of NatWest's technical meltdown and its death march to self destruction, the hapless and hopeless bank has warned its 17 million customers that the problems may well last for a few more days.

Neither the customers nor the financial regulators are particularity impressed with NatWest's handling of this. Andrew Tyrie, the chairman of the Commons Treasury select committee, is quoted by the Telegraph:

 “It seems scarcely credible that something like this, which has caused problems for hundreds of thousands of people, could have gone on for so long. No doubt the committee will want a full explanation.” 

Still there is good news for the shareholders. The glitch has meant that the capital reserves of NatWest have been boosted and, even better, the bank made some short term profits by providing customers with an 0845 number (ie one that costs the customers money) to ring to complain (NatWest have relented and now provide a free number and will reimburse the costs of the calls).

All in all a shambles by anyone's standards!

King Rewrites History

Sir Mervyn King, Governor of The Bank of England, has stirred up a hornets nest after his recent BBC radio lecture in which he rewrote history and his/the Bank's role in the financial crisis.

Amongst other things, King said that the Bank would be very happy to co-operate with another inquiry into the collapse of Northern Rock (the bank that the Bank of England refused to bailout).

This willingness to co-operate rather took the breath away of Andew Tyrie, chairman of the Treasury Select Committee, who said that the Bank "should get on with it at the first available opportunity".

Others on the Select Committee expressed astonishment at the Governor's comments, given that the Committee has asked the Bank on numerous occasions to co-operate with an inquiry only to have their requests refused. The Bank remains the only member of the tri-partite system not to have published a review into its role in the crisis.

A Continent of SPIVs - Kicking The Can Down The Road

Sir Mervyn King, governor of the Bank of England, is appearing before the Treasury Select Committee (TSC) today.

He has told them that he has little faith in whatever "plan" is agreed by the Eurozone "leaders" (aka "Clown College"). In his view, whatever is decided at tomorrow's EU summit will not solve the region's underlying problems; it will only buy one or two years of breathing space.

Quite!

In the unlikely event that Clown College can come up with a plan to "kick the can down the road" for a year or so, how will this be financed?

It seems that, as Europe is skint, they will be tapping the IMF (funded by the USA) for the money which will be provided via a Special Purpose Investment Vehicle - aka SPIV.

How very appropriate!

Now repeat after me, and learn this for prep:

- There is no plan
- There was no plan
- There will never be a plan

Minuscule Chance Of Euro Collpase

Stephen Nickell, a member of the Office for Budget Responsibility (OBR), told the Treasury Select Committee that there was a minuscule (1.7%) chance of the Euro collapsing.

Ireland, despite initial fears of it not being able to pass its budget package, looks like it has gained enough support for it to be able to approve its budget this afternoon; thus offering much needed respite to the beleaguered Euro.

Time will tell as to whether the 1.7% (such a precise figure!) odds quoted by Mr Nickell reflect reality.

History is littered with the corpses of previous attempts at currency unions.

Bank Bashing

Citywire reports that the new chairman of the Treasury Select Committee, Andrew Tyrie, has told the Times that bank-bashing by ministers is 'unconstructive'.

What planet does this man live on?

Banks have failed the British people and the British economy. They continue to offer lousy service, and treat their customers with contempt.

Until they improve their ways, "bank bashing" is exactly what is required.

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!

Overpaid But Currently Worthless

Stephen Hester, the CEO of Royal Bank of Scotland (RBS), has told the Treasury Select Committee today that his parents believed that he was overpaid.

However, in his first year of tenure he has agreed to take no salary and his bonus is linked to the RBS share price (theoretically it might be worth £10M over 3 years). This means, at the moment, his package is technically worth zero.

Financial Prisoners

Keith Morgan, head of wholly owned investments for UKFI, gave evidence to the Treasury Select Committee yesterday. He painted a bleak picture for those hapless 85% of Northern Rock borrowers trapped in the wreck of that once respected bank.

Seemingly they will become financial "prisoners" when they are assigned to Northern Rock's "bad" bank.

Some 476,000 mortgage borrowers (some of whom were foolish enough to borrow up to 125% of their property value) will be transferred to the "bad" bank (hereinafter called Northern Rock Assets Management), because they will be unable to remortgage elsewhere.

Approximately 10% of the loans are in arrears.

Gordon Brown, in rare display of decision making and speed, is rushing to return the "good" part of the bank to the private sector.

For why?

So that the Tories cannot claim credit for doing so, when they win the election next year.

Hardly a noble motivation!

Toothless and Muddled

The Treasury Select Committee put the boot into the Government's white paper on financial regulation, and called it "toothless" and "muddled" as it has failed to address the key weaknesses in Brown's failed and derided tripartite system.

As ever, the fundamental weakness of the tripartite system is that there is no one actually in charge of it.

The Treasury's "solution" is to create a fourth body to oversee the the tripartite (named the "Council for Financial Stability")

An absurd idea which would only add to the muddle, confusion and buck passing.

However, all of this is but fanciful dreams akin to rearranging the lifeboats on the Titanic, the Tory Party will abolish the FSA once it is elected and the responsibility for supervision will be returned to the Bank of England.

Myners Lambasted

The hapless and hopeless Lord Myners was on the receiving end of another public humiliation yesterday, as the Treasury Select Committee gave him a well deserved public kicking.

Reviewing the shambles of Sir Fred "The Shred" Goodwin's £16.9M pension payoff, the committee stated that Myners was too much of a City insider to properly police payments and failed to provide "adequate oversight".

The Committee stated that Myners should have sacked Sir Fred, and that Myners should not have allowed the RBS board to handle negotiations with Sir Fred.

The Committee heaped further humiliation upon Myners' shoulders by calling him "naive".

Why does this man still have an official role in government?

Oh, how naive of me, because he is a friend of Brown!

50% Tax Rate Own Goal

Unsurprisingly, the politically motivated 50% top tax rate introduced by Darling in last week's budget has proven to be an own goal.

The Treasury admitted that billions of pounds of revenue would be lost, as high earners take the high road and leave the UK.

Mike Williams, the director of personal tax at the Treasury, told the Treasury Select Committee that only 31% of the possible total income from the tax increase will be received by the Treasury.

Last week the Chancellor said that the rate change would raise £1.1BN. However, figures now show that £2.5BN will in fact be lost via perfectly legal tax avoidance schemes, or by moving abroad.

Another nail in the coffin of last week's dismal budget.

Labour Chancellors never seem to learn the lesson that the politics of envy, when applied to tax, simply backfires; as they lose more money than they gain.

Plan B

Unsurprisingly, given that no one believes his forecasts, Alistair Darling will be asked by the Treasury Select Committee what his "plan B" is.

The Committee will ask Darling what his policy will be, if the economy does not recover next year (as per his forecast).

That is a valid question.

However, it misses the point that the economy may well recover more robustly and more quickly if the politicians stop meddling with it and changing the ruoles of the game (eg taxes etc).

Unfortunately, were the politicians to leave well alone and allow tax rates etc to be set in stone for a multi year time period, people would rightly ask "what exactly is it that you do?".

A Serving of Pork Pie

Could it be that the Treasury Select Committee, investigating Sir Fred's RBS pension, were served a slice of pork pie the other day by Myners?

"The Times has learnt that Sir Tom McKillop, the bank's former chairman, has written to the chairman of the Commons Treasury Select Committee, offering to provide fresh evidence after hearing Lord Myners's testimony last Tuesday.

Sir Tom is understood to dispute what Lord Myners told the committee when he said that he was not informed about the size of Sir Fred’s pension pot during negotiations last October over the Government’s rescue package for the bank.

In fact, according to Sir Tom, Lord Myners was told exactly how much the pension was worth...."

Myners - A Lesson in Failure

Lord Myners attempted a bravura performance yesterday in front of the Treasury Select Committee, wrt their investigation into Sir Fred "The Shred's" RBS pension.

Unfortunately for Myners, he wasn't terribly convincing as he sought to deflect people's attention and pass the buck by saying (in a tone of "disgust") that the RBS Board had "bent over backwards" to reward Goodwin.

Other "playing to the gallery" quotes from Myners included gems such as:

-"beyond my comprehension"

-"extraordinary"

-"outrageous"

On listening to Myners one would be forgiven for thinking that he played no part in the affair whatsoever. Unfortunately for the hapless and hopeless peer of the realm, Myners had a very large role in the affair.

Myners admitted that he had been warned by Bob Scott ex head of RBS's remuneration committee that "The pension will be enormous, you know that".

Did Myners then, on being warned of this, ask how much the pension would be?

Can you guess the answer?

Yes that's right, Myners claims he didn't ask!

"I sought no information."

Either the man is lying, or else he is surely one of the most incompetent fools ever appointed to represent the taxpayer.

As Michael Fallon MP put it:

"Either you were party to very expensive back-scratching, or you neglected your duty to the taxpayer."

The bottom line is that Myners failed in his role, over such an obvious and easy target.

The question now is, given that the government failed in this relatively simple matter, what other horrors are lurking in the details of the bailouts that they have agreed to on our behalf?