Run On Cyprus Banks

Cyprus State TV RIK has confirmed (albeit obliquely) that a run on the banks in Cyprus has started, by announcing that banks will remain closed on Tuesday and Wednesday.

The idiots who put forward this absurd plan will soon realise that whatever cobbled adjustments that they may come up with today, they cannot put the genie back in the bottle.

They have in one fell swoop destroyed the Cypriot banking system.

In other news, the Russians will be adjusting the terms of their loan to Cyprus!

Oops Apocalypse!

The markets open for trading in but a few hours, yet Cyprus has delayed its vote on the "bailout" (state sponsored theft) plan until tomorrow afternoon.

Chaos will ensue, and the banks that this "plan" was meant to save will collapse.

The Wheels Fall Off Cyprus's State Sponsored Theft Plan

As George Osborne (clearly caught by surprise by the theft of people's savings in Cyprus) announces that the UK will compensate British troops and British government workers in Cyprus hit by the planned "bank levy", it seems that the wheels are already falling off this harebrained idea.

In order for the bailout, and planned state sponsored theft, to take place the Cypriot Parliament has to ratify it. The debate was to have taken place today. However, as a result of the not unsurprising outpouring of anger by Cypriot citizens over the smash and grab raid on their accounts, it has now been postponed until tomorrow.

I will wager that this odious plan will die a very painful death, as the politicians are made to realise that theft (especially when orchestrated by the state) will not be tolerated by the people.

Live Tweets About Cyprus

State Sponsored Theft

In an action that can only be described as "state sponsored theft", depositors in Cypriot banks will be hit with a one off tax on their savings, as part of the €10 billion bailout for Cyprus from the euro zone and the International Monetary Fund.

Accounts with more than €100,000 will be taxed at 9.9%, those with less at 6.75%. The money will be taken on Tuesday (Monday being a bank holiday).

It is clear that the governments of the Eurozone will do anything to keep the failed Euro experiment alive, resorting to state sponsored theft as and when required.

Clearly those with money deposited in Eurozone accounts cannot trust the governments of the Eurozone. Anyone with any commonsense will withdraw their money immediately, and place it outwith the Eurozone.

Oh and by the way, the fact that the money will not be taken until Tuesday gives people three days to empty their accounts via ATMs.

Rest assured this insane idea will cause a run on the banks in Cyprus, and will cause catastrophe in the financial markets on Monday.

How Banks and Finance Companies Work

ECB To Recruit 800 More Staff

The many millions of people in the Eurozone who have been made redundant because of the policies of the ECB need fear for their futures no more, the ECB is planning to recruit more staff.

Unfortunately the ECB will only be recruiting 800 more staff, paid for out of the pockets of the hapless European taxpayers.

For why does the ECB need to increase its headcount?

In December EU finance ministers agreed to make the ECB chief supervisor for banks in the Eurozone, the deadline for full implementation of the supervisory role being March 2014, thus the ECB believes that it needs extra staff in order to fulfill its new role.

The new supervisory powers of the ECB are one further step towards full monetary union. Those who are recruited would be advised to be aware that, despite the hubris of the politicians and technocrats, the Euro experiment will end in tears, as such their roles cannot be seen as anything more than temporary.

Troika Postpone Greek Decision

The Troika have left Athens without signing off on the next tranche of bailout loans for the country. They will return in April.

It seems that despite Greece making "significant progress", there remain "technical issues" that need to be resolved before Greece receives the next Euro2.8BN of bailout funds.

The sticking point appears to be whether Greece is making progress on substantially reducing (25,000 job losses by 2014) the size of its civil service.

The £60BN Banking Black Hole

The shareholder group PIRC has done a calculation that warns of a potential black hole in the accounts of British banks, relating to bad debts the banks may have to write off in coming years but have yet to subtract from profits, together with other items such as deferred bonuses not booked.

Amongst those with potential black holes are HSBC with £10.4BN of hidden losses, the Royal Bank of Scotland with £9.4BN and Barclays with £7.3BN.

PIRC applied old-style UK GAAP accounting rules, which applied for 100 years until 2005, to the figures released in the 2012 banks’ accounts.

Basel rules require banks to declare half the expected losses over a year. However, bad loans and expected losses do not appear in the banks’ accounts under International Financial Reporting Standards (IFRS).

The Telegraph reports that the Bank of England has suggested the total could amount to £60BN.

This needless to say means that those politicians who hope that banks will increase lending are pissing in the wind, as banks are scrambling to build up their balance sheets in preparation for the next self inflicted financial disaster (such as PPI mis-selling).

Bankers' Pay Unfair

A global survey of 619 bankers carried out by Selby Jennings revealed that 67.2% of bankers were “unhappy with their overall remuneration package” for 2012. In London the figure was slightly better, a "mere" 63.9% were dissatisfied.

Even when asked to take into account current market conditions, 48.4% stated that their pay was unfair.

The Telegraph reports that 75% of those who responded earned more than £50K.

What does this survey tell us?

That bankers are out of touch with reality?

Possibly, however for the survey to be meaningful it would have had to have also been conducted across other professions. I would warrant that many people from many professions, if asked, would complain that they were not paid enough!

Barclays' 428 Millionaires

As Barclays annoucnes that it could cut up to 40,000 jobs, it has also revealed that 428 of its employees received salaries and bonuses worth more than £1M in 2012.

Antony Jenkins, CEO, received payouts worth £2.6M, including a £1.47M long-term incentive award. Mr Jenkins declined an annual bonus.

Five unidentified senior executives, not on the Barclays board, earned more than Mr Jenkins; with the bank’s highest paid non-board level executive receiving a package worth £3.75M.

However, as per the Telegraph five of the bank's staff, not among its senior executives, earned more than £5M last year.

RBS Systems Crash Again

Up to 17.5 million RBS banking group customers (NatWest, Bank of Ulster and RBS) were left without their money last night as the bank’s systems crashed yet again.

These systems outages are becoming somewhat tiresome!

Payday Loan Companies Drinking In The Last Chance Saloon

The Office of Fair Trading (OFT) has come up with the unremarkable conclusion that there is evidence of widespread irresponsible lending by payday lenders.

The OFT has targeted the leading 50 payday lenders (which account for 90% of the market), and has proposed to refer the payday lending market to the Competition Commission.

Clive Maxwell, OFT chief executive, is quoted by the Telegraph:

"We have found fundamental problems with the way the payday market works and widespread breaches of the law and regulations, causing misery and hardship for many borrowers. 

Payday lenders are earning up to half their revenue not from one-off loans, but from rolled over or refinanced deals where unexpected costs can rapidly mount up."

The review carried out by the OFT noted that particular problem areas included; lenders failing to adequately assess affordability before lending, failing to explain properly how payments will be collected and aggressive debt collection practices.

The OFT noted that:

"Payday lenders' revenues are heavily reliant on those customers who fail to repay their original loan on time."

The OFT have now presented the 50 with the "last chance saloon option", namely that they must take "rapid action" to address the OFT's concerns and show within 12 weeks that they are fully compliant.

Any firms which fail to cooperate will face enforcement action.

Whilst the action will, to some extent, rein in the mainstream payday lenders there still remains those who operate outwith the law; namely loan sharks. Unfortunately those people, so desperate that they will borrow from payday lenders that charge extortionate rates of interest, who are denied credit from payday lenders in the future will be forced to go to loan sharks.

The fundamental problem is not that of extortionate interest rates, but of a large swathe of society that has run out of credit, cash and options.

Ombudsman Swamped By PPI Claims

Unsurprisingly, the PPI mis-selling scandal (one of the many scandals that have destroyed the reputation of the UK's financial services industry) continues to hit the headlines.

The financial ombudsman service (FOS) reports that it is taking on 2,000 new cases a day, with numbers rising at "unprecedented" rates.

The BBC reports that the FOS received 211,885 new PPI complaints in the second half of 2012. These accounted for nearly 75% of the 283,251 new complaints sent to the ombudsman during the six months.

The average that a successful claimant receives in compensation is around £3K, representing a gross cost to UK banks of £15BN.

Lloyds TSB Bank had the highest number of PPI cases referred to the ombudsman of any institution during the second half of the year, but the ombudsman found in the customers' favour in 86% of the cases against the bank.

Needless to say, as the number of referrals to the FOS rises, so does the length of time it takes for the ombudsman to make a determination. It seems that the delays are also increasing because some companies are causing unnecessary delays.

Natalie Ceeney, chief financial ombudsman, is quoted by the BBC:

"As the complaint levels show no sign of slowing, consumers are increasingly having to wait longer to get their complaints sorted - with many businesses still continuing to cause unnecessary delays.

Where businesses have shown a real commitment to better customer service and diligent complaints handling - including actively engaging with the ombudsman - cases are resolved more quickly and easily, to the benefit of everyone."

None of this is surprising, those who were sold PPI will see this as an opportunity to try to obtain a refund (irrespective of whether they were mis-sold PPI or not) and the banks will do everything they can to try to reduce the costs of the claims.

That being said, had the banks not incentivised their staff to sell policies that were in many cases clearly inappropriate to people who didn't need them/couldn't claim on them when they needed to, then this entire mess could have been avoided.

The greed of the banks is now being repaid by the perspective that the banks' customers have that there is "free" money to be made.

As the old saying goes, "what goes around, comes around".

Greece Downgraded To Emerging Market

On Friday Greece was reclassified from a "developed" to an "emerging market" by Russell Investments, a major US based fund manager that manages $162.9BN of assets.

Its rationale being that Greece no longer met "macro- and operational risk criteria" for developed market status.

Russell Investments is quoted by CNBC:

"It takes three years of sustained changes in economic criteria for a country to be reclassified.

Russell's methodology requires developed markets, in general, to be the least risky and most efficient in which to trade, with emerging and frontier markets progressively more risky and less efficient along the spectrum."

The fact, and indeed the timing, of the downgrading does not augur well for Greece as today the Troika return to Athens to assess the country's progress on economic reforms that were required in its bailout terms, before further aid is released.

With not hint of implied irony Latvia has chosen to day to formally apply to join the Eurozone, despite the fact that 2/3rds of the people of Latvia are against joining!

It would seem, as ever with the Euro experiment, that the vanity and egos of the politicians outweigh the wishes and commonsense of the people.