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.
Friday, July 31, 2009
Thursday, July 30, 2009
How Embarrassing
In a supreme twist of irony, the Office of Fair Trading (OFT), the government body set up to warn consumers against unfair trading practices and fraud, has itself become victim to a £250K internal accounting fraud.
£97K went awol in 2007/08, whilst the remaining £153K went missing in 2008/09.
It seems, according to the OFT accounts, the fraud was made possible "by a control weakness in the Accounts Payable process".
The case is now subject to legal proceedings.
As an experienced forensic investigator, and internal auditor, it never ceases to amaze me how many times the purchasing function is overlooked when it come to the risk of fraud.
Kick backs from suppliers, and inflated purchase invoices are one of the many myriad of ways in which a fraudster can skim the system.
I am surprised that the internal audit department of the OFT (assuming there is one) had not identified the systems weakness.
£97K went awol in 2007/08, whilst the remaining £153K went missing in 2008/09.
It seems, according to the OFT accounts, the fraud was made possible "by a control weakness in the Accounts Payable process".
The case is now subject to legal proceedings.
As an experienced forensic investigator, and internal auditor, it never ceases to amaze me how many times the purchasing function is overlooked when it come to the risk of fraud.
Kick backs from suppliers, and inflated purchase invoices are one of the many myriad of ways in which a fraudster can skim the system.
I am surprised that the internal audit department of the OFT (assuming there is one) had not identified the systems weakness.
Wednesday, July 29, 2009
BAA Losses Mount
BAA, has seen its losses on operating its airports (such as Heathrow - the scourge of the travelling classes - and Gatwick) mount.
Pre-tax losses (as per its half year report) at BAA's London airports trebled to £545.7M, primarily as a result of a drop in air passengers of over 4M.
Despite being burdened by debts of over £12BN (of which £9.5BN are secured against its London airports) BAA tried to reassure creditors that it was able to withstand the downturn.
Talks about selling Gatwick are still ongoing, BAA want more than the current £1.4BN offered by Manchester Airports Group. However, given the recession and decline in air travel as a result of increased taxes, BAA should consider itself lucky to have an offer at all.
Pre-tax losses (as per its half year report) at BAA's London airports trebled to £545.7M, primarily as a result of a drop in air passengers of over 4M.
Despite being burdened by debts of over £12BN (of which £9.5BN are secured against its London airports) BAA tried to reassure creditors that it was able to withstand the downturn.
Talks about selling Gatwick are still ongoing, BAA want more than the current £1.4BN offered by Manchester Airports Group. However, given the recession and decline in air travel as a result of increased taxes, BAA should consider itself lucky to have an offer at all.
Tuesday, July 28, 2009
Digital Britain
The government's oft repeated promises of creating a "digital Britain", fit for business in the 21st century, seem to have fallen a little flat if the findings of the report issued by Ofcom are anything to go by.
Over 50% of broadband users in Britain are receiving less than half the speed promised by their providers. At least half of users of services that offer "up to 8 Mbps" receive a typical speed of 3.9Mbps.
The further away a customer lives from the telephone exchange, or if they use the service between 8pm and 10pm, the slower the speed.
Copper wire, instead of cable broadband, also kills the speed of download.
Needless to say, being a British regulator, Ofcom couldn't quite bring itself to accuse the "service providers" of mis-selling their service.
The Advertising Standards Agency is also happy to play "sleepy old watchdog", and claims that marketing which gives an "up to" figure is not misleading.
Doubtless Britain will, one day, have a digital service fit for the 21st century. Unfortunately that day will probably dawn in the 22nd century. Much like the trains, the plans and money allocated to implement "modernisation/service improvement" plans will only ever produce a third rate service.
Over 50% of broadband users in Britain are receiving less than half the speed promised by their providers. At least half of users of services that offer "up to 8 Mbps" receive a typical speed of 3.9Mbps.
The further away a customer lives from the telephone exchange, or if they use the service between 8pm and 10pm, the slower the speed.
Copper wire, instead of cable broadband, also kills the speed of download.
Needless to say, being a British regulator, Ofcom couldn't quite bring itself to accuse the "service providers" of mis-selling their service.
The Advertising Standards Agency is also happy to play "sleepy old watchdog", and claims that marketing which gives an "up to" figure is not misleading.
Doubtless Britain will, one day, have a digital service fit for the 21st century. Unfortunately that day will probably dawn in the 22nd century. Much like the trains, the plans and money allocated to implement "modernisation/service improvement" plans will only ever produce a third rate service.
Monday, July 27, 2009
Grill Party
Alistair Darling will be holding a "grill party" today, to which the CEOs of Britain's leading banks are invited.
Darling will use the "grill party" as an opportunity to express government "concerns" over the lamentable level of bank lending that is holding back the possibility of pulling out of the recession.
Lloyds Banking, RBS, HSBC and Barclays will all attend the meeting.
Darling is quoted:
"That is why we will be going through with each individual bank asking them why is it, at a time when the cost of borrowing is coming down, it would appear that the cost to small business appears to have gone up?
We're playing our part, the banks have got to understand that the public will not understand it if they do not play their part to the full."
Quite what Darling thinks he will be able to do to persuade the banks to lend more is not clear.
Additionally, as Vince Cable notes, why has it taken Darling this long to realise that there is still a problem wrt bank lending?
Darling will use the "grill party" as an opportunity to express government "concerns" over the lamentable level of bank lending that is holding back the possibility of pulling out of the recession.
Lloyds Banking, RBS, HSBC and Barclays will all attend the meeting.
Darling is quoted:
"That is why we will be going through with each individual bank asking them why is it, at a time when the cost of borrowing is coming down, it would appear that the cost to small business appears to have gone up?
We're playing our part, the banks have got to understand that the public will not understand it if they do not play their part to the full."
Quite what Darling thinks he will be able to do to persuade the banks to lend more is not clear.
Additionally, as Vince Cable notes, why has it taken Darling this long to realise that there is still a problem wrt bank lending?
Friday, July 24, 2009
Economy On The Skids
As Labour try to divert the public's attention with its headline grabbing "swine flu hotline", the economy continues to slide.
GDP fell by 0.8% in the second quarter of this year, this is the fifth consecutive quarter fall.
"Experts" had been expecting a fall of around 0.3%.
GDP has already fallen by 3.16% this year, realists expect it to fall by 4.5% by December (the Treasury has been predicting a maximum fall of 3.75%).
So much for "green shoots"!
GDP fell by 0.8% in the second quarter of this year, this is the fifth consecutive quarter fall.
"Experts" had been expecting a fall of around 0.3%.
GDP has already fallen by 3.16% this year, realists expect it to fall by 4.5% by December (the Treasury has been predicting a maximum fall of 3.75%).
So much for "green shoots"!
Thursday, July 23, 2009
Every Cloud...
Whilst Britain bunkers down in preparation for the so called Swine Flu "pandemic", GlaxoSmithKline hopes to reap the benefit of 18 years of preparation by generating £600M from its Relenza treatment this year.
The British Government has ordered 132 million doses from GSK and Baxter, an American company.
Quite what the profit margin GSK makes on a dose of Relenza is unclear. The company have dismissed rumours that it plans to sell it at £6 a dose, compared to £1 a dose manufacturing cost.
Doubtless our "economically astute" government has negotiated a "good" price!
The British Government has ordered 132 million doses from GSK and Baxter, an American company.
Quite what the profit margin GSK makes on a dose of Relenza is unclear. The company have dismissed rumours that it plans to sell it at £6 a dose, compared to £1 a dose manufacturing cost.
Doubtless our "economically astute" government has negotiated a "good" price!
Wednesday, July 22, 2009
Careless HSBC
HSBC has been fined over £3M by the FSA, for the "careless" handling of confidential details of tens of thousands of its customers.
HSBC's data security failed, causing the bank to send "large" quantities of unencrypted private details via courier to third parties and leave information lying on open shelves and in unlocked cabinets where it could have been lost or stolen.
In two episodes, similar to the datagate fiasco at HMRC,
unencrytped CDs holding thousands of private customers details were lost in the post.
Ironically, one of the lapses occurred after HSBC had received a warning about its security procedures.
The FSA stated that it was shocked that HSBC had acted so carelessly despite warnings.
HSBC, having been hit where it hurts (in the pocket), said that it has taken a "number of remedial actions" including contacting the customers involved, improving staff training and demanding that all electronic data in transit is encrypted.
Stable doors and bolting horses spring to mind!
HSBC's data security failed, causing the bank to send "large" quantities of unencrypted private details via courier to third parties and leave information lying on open shelves and in unlocked cabinets where it could have been lost or stolen.
In two episodes, similar to the datagate fiasco at HMRC,
unencrytped CDs holding thousands of private customers details were lost in the post.
Ironically, one of the lapses occurred after HSBC had received a warning about its security procedures.
The FSA stated that it was shocked that HSBC had acted so carelessly despite warnings.
HSBC, having been hit where it hurts (in the pocket), said that it has taken a "number of remedial actions" including contacting the customers involved, improving staff training and demanding that all electronic data in transit is encrypted.
Stable doors and bolting horses spring to mind!
Tuesday, July 21, 2009
A Massive Fraud on The Taxpayer
Fresh embarrassment for the government, as its economic "credentials" and "honesty" have been once again found wanting. This time the shortfall between government spin and reality has been highlighted by The National Audit Office (NAO), which has refused to sign off part of the Treasury's annual accounts.
For why?
Seemingly there are some quite serious problems relating to the government's insurance scheme, which was designed to help banks with bad loans.
The scheme was announced in February, and was designed to provide banks with protection against future credit losses on certain assets in exchange for a fee, its ultimate goal was to kick start the lending process.
However, the NAO states:
"In 2008-09, HM Treasury incurred some £23.8BN more resources than Parliament had authorised in the Supply Estimate. This represents an 'excess' for which further Parliamentary authority is required."
In other words the government and Treasury attempted to act "ultra vires" (outwith its authority), its promises vastly exceeded its powers/reality.
Vince Cable, Liberal Democrat Shadow Chancellor, used a more picturesque language and described the scheme as "quite simply a massive fraud on the taxpayer".
Quite how many "frauds" of this nature the government has tried to foist upon the taxpayer is unclear.
However, yesterday's much trumpeted Nissan deal, re electric batteries and the possibility of producing an electric car in the UK, may yet be blocked by the EU.
I fear, wrt the workers who have been told their jobs are safe, it may still be too early to pop the champagne corks.
For why?
Seemingly there are some quite serious problems relating to the government's insurance scheme, which was designed to help banks with bad loans.
The scheme was announced in February, and was designed to provide banks with protection against future credit losses on certain assets in exchange for a fee, its ultimate goal was to kick start the lending process.
However, the NAO states:
"In 2008-09, HM Treasury incurred some £23.8BN more resources than Parliament had authorised in the Supply Estimate. This represents an 'excess' for which further Parliamentary authority is required."
In other words the government and Treasury attempted to act "ultra vires" (outwith its authority), its promises vastly exceeded its powers/reality.
Vince Cable, Liberal Democrat Shadow Chancellor, used a more picturesque language and described the scheme as "quite simply a massive fraud on the taxpayer".
Quite how many "frauds" of this nature the government has tried to foist upon the taxpayer is unclear.
However, yesterday's much trumpeted Nissan deal, re electric batteries and the possibility of producing an electric car in the UK, may yet be blocked by the EU.
I fear, wrt the workers who have been told their jobs are safe, it may still be too early to pop the champagne corks.
Monday, July 20, 2009
Dead Man Walking
The Tories have promised to abolish the hapless and hopeless Financial Services Authority (FSA) when, as seems likely, they win the next election.
The FSA was set up by Gordon Brown in 1997, as part of his much derided and failed tripartite regulatory scheme. It has had many "triumphs" since inception, eg:
- standing up for the life assurance industry against the hapless consumers who were conned into buying worthless endowment mortgages
- allowing the board of Northern Rock to destroy the company
- allowing RBS to come to edge of ruin
- allowing banks and credit card companies to charge extortionate rates of interest
- allowing banks, credit card companies and loan companies to sell ineffective and over priced PPI
- standing by as the banks operated the world's largest Ponzi scheme (bundling and selling worthless debt in a frenzy of greed)
- allowing the banks and mortgage companies to push Britain into an unsupportable level of consumer debt
More generally asleep at the wheel, and lacking any real pro active energy, the FSA will not be missed by the consumer; but may well be by its paymasters in the financial services industry (whom the FSA stood up for on numerous occasions).
Responsibility for regulation of the financial markets will be given to the Bank of England, and a new consumer protection agency will be created with the necessary "clout" to make sure the public were treated fairly.
Not before time!
The FSA was set up by Gordon Brown in 1997, as part of his much derided and failed tripartite regulatory scheme. It has had many "triumphs" since inception, eg:
- standing up for the life assurance industry against the hapless consumers who were conned into buying worthless endowment mortgages
- allowing the board of Northern Rock to destroy the company
- allowing RBS to come to edge of ruin
- allowing banks and credit card companies to charge extortionate rates of interest
- allowing banks, credit card companies and loan companies to sell ineffective and over priced PPI
- standing by as the banks operated the world's largest Ponzi scheme (bundling and selling worthless debt in a frenzy of greed)
- allowing the banks and mortgage companies to push Britain into an unsupportable level of consumer debt
More generally asleep at the wheel, and lacking any real pro active energy, the FSA will not be missed by the consumer; but may well be by its paymasters in the financial services industry (whom the FSA stood up for on numerous occasions).
Responsibility for regulation of the financial markets will be given to the Bank of England, and a new consumer protection agency will be created with the necessary "clout" to make sure the public were treated fairly.
Not before time!
Friday, July 17, 2009
Strike
Barclays' 25,000 staff are to be balloted on strike action in response to the bank's plans to close its final salary pension scheme.
The staff union, Unite, claims that members are "incensed" at the plan to close the scheme and move members to a defined contribution scheme.
The ballot will be held in August, with any strike action taking place in September.
It is likely that the results of the ballot will be scrutinised by other unions and companies, as many are considering plans similar to Barclays.
Indeed, British Airways announced today that it will take back £300M pledged to its pension fund to pay retirement benefits if the company goes bust as part of a plan to boost its liquidity by £600M. BA's pension fund is estimated to have a deficit of around £3BN.
The staff union, Unite, claims that members are "incensed" at the plan to close the scheme and move members to a defined contribution scheme.
The ballot will be held in August, with any strike action taking place in September.
It is likely that the results of the ballot will be scrutinised by other unions and companies, as many are considering plans similar to Barclays.
Indeed, British Airways announced today that it will take back £300M pledged to its pension fund to pay retirement benefits if the company goes bust as part of a plan to boost its liquidity by £600M. BA's pension fund is estimated to have a deficit of around £3BN.
Thursday, July 16, 2009
Greater Transparency for Banks
Sir David Walker has published an initial 140 page report on banking governance that calls on banks to disclose more details about their highest paid employees, and to impose strict rules wrt deferring bonus payouts for at least three years.
Sir David calls on executive board members, whose pay is above the median, to maintain a shareholding equal to their total historic compensation.
Sir David also calls for a far greater role for non-executive directors and large shareholders to oversee companies, and challenge them about their strategy.
Risk committees should have a greater role, including the power to block large transactions.
The final report will be published in November.
Sir David calls on executive board members, whose pay is above the median, to maintain a shareholding equal to their total historic compensation.
Sir David also calls for a far greater role for non-executive directors and large shareholders to oversee companies, and challenge them about their strategy.
Risk committees should have a greater role, including the power to block large transactions.
The final report will be published in November.
Wednesday, July 15, 2009
Unemployment Up
Following on from yesterday's inflation figures, that showed a fall, the unemployment figures published today show an unexpectedly large rise of 281K to 2.38M.
The level of unemployment is expected to peak next year at around 3M, as the government's cuts in the public sector start to bite.
The level of unemployment is expected to peak next year at around 3M, as the government's cuts in the public sector start to bite.
Tuesday, July 14, 2009
Inflation Falls
The Consumer Price Index (CPI) has fallen below the Bank of England's 2% target, for the first time since September 2007, to 1.8%.
The alternative Retail Price Index (RPI) measure, which includes housing costs, fell from -1.1% to -1.6% as a result of falls in mortgage costs.
RPI is used to determine some pay deals.
When CPI falls to below 1% (as it is expected to do) Mervyn King (Governor of the Bank of England) will have to write to the Chancellor to explain the fall.
However, before the champagne corks start popping, people should realise that by next year the downward pressure on these measures (as a result of lower mortgage deals and cheaper oil) will have abated and the measures will start to rise again.
The alternative Retail Price Index (RPI) measure, which includes housing costs, fell from -1.1% to -1.6% as a result of falls in mortgage costs.
RPI is used to determine some pay deals.
When CPI falls to below 1% (as it is expected to do) Mervyn King (Governor of the Bank of England) will have to write to the Chancellor to explain the fall.
However, before the champagne corks start popping, people should realise that by next year the downward pressure on these measures (as a result of lower mortgage deals and cheaper oil) will have abated and the measures will start to rise again.
Monday, July 13, 2009
Paper Losses
UK Financial Instruments (UKFI), the body that manages the Government's shares in Britain's semi nationalised banks (RBS and Lloyds), is sitting on paper losses of £10.9BN.
The UKFI says that every household in Britain has over £3K invested in Lloyds and RBS shares
It is likely, given the shambolic state of the banks' finances, that Britain's households will hold their £3K "investment" for many years to come.
The UKFI says that every household in Britain has over £3K invested in Lloyds and RBS shares
It is likely, given the shambolic state of the banks' finances, that Britain's households will hold their £3K "investment" for many years to come.
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