Tag Archives: banking

If banks want regulation costs cut, they should be more trustworthy

With people like this in charge of banks - and then going on to important roles in Conservative-led governments, can either the banks or the government be trusted to do what's right for UK citizens?

With people like this in charge of banks – and then going on to important roles in Conservative-led governments, can either the banks or the government be trusted to do what’s right for UK citizens?

Banks and other financial organisations want the Conservative government to slash the cost of complying with new regulations, according to the Confederation of British Industry. Doesn’t your heart just bleed for them?

Thse are the organisations that sucked the UK into the global financial crisis and allowed the Conservatives to form a government after the 2010 election (they didn’t win it) with a false claim that Labour overspent.

Now they want the regulations that prevent them from causing another crisis to be eased.

Considering the banks’ record, it would be madness to do so. Let’s see how long it takes the Tories to comply.

According to The Guardian, “As the City recovers from the financial crisis, companies are lobbying for an end to criticism of the banking industry and an easing of rules designed to prevent another crisis.

“They argue the sector is a big employer and that the City’s position as a financial centre is important for the UK’s economy.”

Finance is indeed a big employer, here in the UK – but only because Conservative-led governments since 2010 have utterly failed to build up any other industry while continuing to pander to the banks.

Meanwhile, the taxpayer has been supporting banks heavily, with 4.21 per cent of government spending – that’s £41 billion per year – being supplied to these very profitable institutions for no very good reason.

And they’re complaining about the cost of regulations!

It gets better. The regulations against which they are complaining include:

  • The ring-fence required by 2019 to separate retail and investment banking, so that bad investments cannot affect the safety of depositors’ money.
  • The introduction of criminal liability for senior executives whose reckless behaviour causes their company to fail.

That’s right – bank bosses are angry that the government is actually trying to stop them from penalising ordinary account holders for their gambling losses, and upset that they might have to pay a debt to society if their decisions harm the viability of their firms.

Clearly these bankers have not learned their lesson and want to inflict further debt upon the taxpayer while making off like the bandits they are.

According to The Guardian, “HSBC has taken the lead for the banks by threatening to leave the UK if it decides the cost of remaining is too great. Britain’s biggest bank listed ringfencing and the [bank] levy, which HSBC says affects it disproportionately, as important considerations.”

This is the bank that, earlier this year, was implicated in one of the biggest organised tax avoidance schemes to be uncovered in the UK in recent times.

It is important to note that the survey was compiled with accounting firm PwC, which has been singled out by HM Revenue and Customs as having created hugely lucrative schemes to help companies and the hugely wealthy to avoid paying their taxes.

Shouldn’t the government’s response be: “F*** off, then – but pay your back taxes first”?

The last thing the government should do is give in to these demands, and taxpayers across the country should write in to George Osborne, warning him against any such move.

There is no reason to trust the banks with any more responsibility than the bare minimum. They simply haven’t earned our trust back yet.

If the banks want more freedom, they should be told to bloody well earn it.

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Labour’s new policies show it has been listening

He means business: Ed Miliband announces Labour's plans for business and industry at Jaguar Land Rover in the West Midlands.

He means business: Ed Miliband announces Labour’s plans for business and industry at Jaguar Land Rover in the West Midlands.

The Labour Party has announced a series of new policies intended to improve conditions for both small and large industries in the UK.

They are the latest in an apparently-unending flood of new policies to be placed before the public since the ‘long campaign’ began in earnest at the beginning of the year.

It seems likely that they follow on from a series of in-depth public consultations, such as ‘Your Britain’, that the party has always said would contribute to the shape of its 2015 manifesto.

For once, it seems, a political party was not lying!

Labour announced yesterday, “Ed Miliband will emphasise that Labour’s plan for creating wealth does not rely on just a few at the very top but on boosting productivity in every business and sector of the British economy.

“[He] will declare that Britain needs a better plan for prosperity than the Government’s failing plan which relies on allowing the most powerful and wealthy to do whatever they want.”

Crucially, the party is emphasising that “this modern industrial strategy is a different approach for Labour than in the past because it seeks to support working families not simply through tax-and-spend redistribution but by building a more inclusive prosperity.”

Here are the key points, as described by Labour:

Labour will back small businesses and new entrepreneurs who will provide the growth and jobs of the future.

·         Cutting business rates

·         Improving training and apprenticeships

·         Promoting competition in energy and banking to ensure market efficiency, lower bills and better access to finance

·         Handing more economic power to every part of the UK with £30 billion of devolved funding

Labour will back our biggest exporters which need certainty to invest:

·         Staying in a reformed EU and not taking risks with our membership

·         Building a strong economic foundation with a tough and balanced approach to cutting the deficit

·         Making long-term investment by implementing the Armitt Review recommendation for a National Infrastructure Commission

·         Guaranteeing Britain has the most competitive rate of corporation tax in the G7

·         Promoting long-termism by changing the rules on takeovers

Labour will back our big employing sectors such as retail and social care by tackling undercutting, with firms coming together to raise productivity and standards: 

·         Industry led bodies to raise productivity, like we have now in the car industry

·         Banning exploitative zero hours contracts

·         Raising the National Minimum Wage closer to average earnings  – £8 an hour by 2020

·         Offering tax breaks to employers who adopt the Living Wage

·         Making it illegal to undercut by exploiting migrant workers

Labour will back every sector of the economy by ensuring the public sector plays an active part in driving up productivity by: 

·         Recognising its role in supporting cutting-edge innovation and research

·         Making strategic investment and procurement decisions

In a speech at Jaguar Land Rover in the West Midlands, Mr Miliband was expected to attack the current situation under the Conservative-led Coalition government: “When working people are held back, the country doesn’t prosper as it should. When families don’t have money to spend, it holds back our economy.  When there is so much insecurity in the economy, businesses can’t plan for the long term. When people don’t have the chance to develop their skills and pursue a promotion, our companies become less productive and less competitive in the world.”

He was expected to promise support for both small and large businesses: “The jobs of tomorrow will come from a large number of small businesses, not simply a small number of large ones. Our plan recognises that. We will have a fairer tax system, keeping corporation tax the lowest in the G7 for large businesses, but also cutting and freezing business rates for smaller ones. We will create a British Investment Bank, supported by a network of new regional banks and more competition in business banking on the high street, to help small businesses grow. And a new Small Business Administration to co-ordinate work across government to help small businesses succeed.”

There are also plans to decentralise power, moving it away from London, and to help businesses plan for the long term.

That’s a lot of information to absorb in one go. What do you think of it?

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Great Coalition failures: Banking

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Everybody seems to have had fun with yesterday’s analysis of the Coalition Agreement and its provisions on ‘Jobs and Welfare’ – so let’s have a look at another part of it:

1. BANKING

The banking crisis, coupled with incessant propaganda from the Conservative Party and the right-wing press, brought down the Labour government in the 2010 general election. The incoming Coalition government promised reform – but did it deliver?

In recent years, we have seen a massive financial meltdown due to over-lending, over-borrowing and poor regulation [Conservatives were lobbying for less regulation, right until the crash happened]. The Government believes that the current system of financial regulation is fundamentally flawed and needs to be replaced with a framework that promotes responsible and sustainable banking, where regulators have greater powers to curb unsustainable lending practices and we take action to promote more competition in the banking sector. In addition, we recognise that much more needs to be done to protect taxpayers from financial malpractice and to help the public manage their own debts.

  • We will reform the banking system to avoid a repeat of the financial crisis, to promote a competitive economy, to sustain the recovery and to protect and sustain jobs [flannel – but it is just an introduction; setting out the stall, if you like].
  • We will introduce a banking levy and seek a detailed agreement on implementation [The levy, as eventually imposed, was effectively a tax break for the banks, whose share prices actually rose when it was announced].
  • We will bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector; in developing these proposals, we will ensure they are effective in reducing risk [The Coalition’s bank levy was devised to raise no more than £2.5 billion per year, while bonuses for the year of its introduction were believed to total around £7 billion. No effective effort has been made to curb excessive bonus payments in banks].
  • We want the banking system to serve business, not the other way round. We will bring forward detailed proposals to foster diversity in financial services [diversity has fallen off], promote mutuals [these plans were criticised as having ‘no legs’] and create a more competitive banking industry [no sign of this yet].
  • We will develop effective proposals to ensure the flow of credit to viable SMEs [by the end of 2013, more than 70 per cent of small business owners said they believed the government had produced little or no effect in this regard]. This will include consideration of both a major loan guarantee scheme and the use of net lending targets for the nationalised banks.
  • We will take steps to reduce systemic risk in the banking system and will establish an independent commission to investigate the complex issue of separating retail and investment banking in a sustainable way; while recognising that this will take time to get right, the commission will be given an initial time frame of one year to report [current situation: banks have until January 2015 – nearly the end of the Coalition’s term in government – to detail how they propose to manage this separation].
  • We will reform the regulatory system to avoid a repeat of the financial crisis. We will bring forward proposals to give the Bank of England control of macro-prudential regulation and oversight of micro-prudential regulation [some reform appears to have taken place but have not yet been tested].
  • We rule out joining or preparing to join the European Single Currency for the duration of this agreement.
  • We will work with the Bank of England to investigate how the process of including housing costs in the CPI measure of inflation can be accelerated [this has not happened].
  • We will create Britain’s first free national financial advice service, which will be funded in full from a new social responsibility levy on the financial services sector.
  • We take white collar crime as seriously as other crime, so we will create a single agency to take on the work of tackling serious economic crime that is currently done by, among others, the Serious Fraud Office, Financial Services Authority and Office of Fair Trading [plans for this agency will not be published until the end of 2014 at the earliest].

Conclusion: Where the Coalition has made decisions, they have been weak, meaning banks have enjoyed business as usual for the last four+ years instead of enduring the promised crackdown. Many measures – like the separation of retail and investment banking that we were told was absolutely vital to protect our savings – have not happened at all.

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Does anyone remember those pesky banks? (Fixing the economy part three)

I was listening to Gideon George Osborne’s Autumn Statement the other day – and my word, don’t I wish I hadn’t! In between lapses of concentration due to boredom and bursts of sudden fury, depending which idiot pronouncement he was drooling, I had the odd lucid thought, one of which was this:

The financial crisis was caused by bankers. Did anyone ever identify who they were?

It’s a good question and one that I don’t believe has ever been answered. A cursory search reveals no list of British names on the Internet but I don’t think we can blame it all on Fred Goodwin, can we? (Fred ‘the Shred’ was, you’ll recall, stripped of his knighthood due to his role in the banking crisis, as chief executive of the Royal Bank of Scotland)

If nobody else has been named, we can conclude that none of them have been made to account for their actions or pay recompense to those of us who have had to suffer hardships – some extreme – indeed, some fatal – as a result of the foolhardy way they gambled with money that was not theirs and nearly brought the global financial edifice crashing to destruction.

It’s nearly five years since the crash. We can reasonably expect that these people are still in position, still taking home huge bonuses every year (debate among yourself whether they have earned these amounts or not). They have not been held accountable. It seems increasingly unlikely that they ever will.

But their organisations have absorbed huge amounts of public money, paid during the great bailouts of 2008 onwards by the UK Treasury in order to keep them going. It seems to me that these fatcats should be on starvation rations until that debt is paid off but I don’t see that happening. This leads me to my next question:

When are we going to get our money back?

The answer comes to mind immediately: If events continue along the current pattern – never.

That’s not good enough. In fact, it’s downright disastrous for the British economy because we all know by now – and the Autumn Statement confirmed it – that the welfare squeeze and other measures that Gideon has levelled at those of us on low or medium incomes, for the hideous crime of having nothing to do with the banking crisis that led to the recession, isn’t going to make anything better. In fact it can only make matters worse.

Consider fiscal multipliers. Every pound invested by a government in its economy generates more money as it goes through the system. The classic example is investment in construction, which yields more than £2 for every £1 spent. But if you subtract money – for example, by a fiscal squeeze – it follows that the economy suffers a greater loss than just the money that was taken away. I believe writers other than myself have suggested that the planned extra £10 billion welfare squeeze will remove £16 billion from the economy.

Meanwhile the banks, that caused the crisis, are off the hook and free as birds.

I have already stated my belief that the economy needs government investment in order to grow. If that investment took place, people would start making money again and they would logically put it into the banks. At this point, I suggest it would be reasonable to start encouraging the banks to start paying off their debt to us; there could be no argument that repayment would harm their viability as they would be benefiting from new money.

They could start paying a financial transactions tax (FTT) at a rate of 0.1%, applicable to all transactions through the CHAPS (Clearing House Automated Payments System) which is used to make same-day, irrevocable payments. If spent on deficit reduction alone it was envisaged in 2010 that this would halve the deficit by 2013/14. The introduction of the tax at that time would also have fended off overtures of a rise in regressive taxes such as VAT to 20 per cent, which left the most vulnerable in society picking up the bill for the mistakes of the very well-off. It differs from the ‘Robin Hood’ Tax Campaign for a 0.05 per cent tax on banking transactions, as the latter targets a broader range of banking activities. Most of the major EU countries supported such a tax, and on July 18, 2010, the then-head of the IMF, Dominique Strauss Kahn, announced he would back it.

I would also continue levying the Bankers’ Bonus Tax introduced by Alistair Darling in 2009, which raised £2 billion, and extend it to other institutions such as hedge funds and private equity houses, which benefited from the bailout through government-backed guarantees and quantitative easing.

If banks continued to pay excessive bonuses then the tax yield would remain high, accruing a large amount for the Treasury, and a permanent bonus tax could lead to bonus payments being reduced as a way to avoid tax; discouraging the payment of bonuses.

This windfall tax has been replicated in France, where the government warned banks that if they did not obey the strict guidelines on pay they would be excluded from competing for exclusive government contracts.

How about a remuneration cap? This would be a short-term ceiling on total remuneration, given as both cash and share options. This would tackle flagrant high pay, shoring up balance sheets and providing a level playing-field across the banking sector.

The link between excessive pay and the economic crisis is widely acknowledged. Remuneration caps could therefore give greater economic stability to the banking system.

I would also create a High Pay Commission – an open, balanced and thorough examination into pay and income at the top in order to find long term and tested solutions into how better to reduce excessive risk and excessive rewards.

Obviously I would separate banks that engage in ‘retail’ activities from those that engage in ‘investment banking’. I would close that casino because the players use other people’s money. Also, ‘casino’ bankers would be less likely to make riskier choices as they would not have protection from the taxpayer. They would also be regulated, to ensure their actions do not put the economy at risk. I understand this is taking place but I can’t fathom why the government is dragging its feet.

Banks should be encouraged to profit by serving their customers well and collectively providing liquidity and capital to the economy.

These banking regulations would be best enforced multilaterally, by other countries as well as the UK, but this should not stop the UK government taking action on its own.

The disproportionate influence of the financial sector over the UK economy leaves it particularly vulnerable to future crises and we should not allow ourselves to be at the mercy of international consensus.

We know that some automatic opposition to these policies will include fear-mongering that talented individuals will leave Britain in droves and growth will be hit. Evidence indicates this is unlikely but if they want to go, I say, let them. There are plenty more talented people just itching for a chance to take their place.

Others will claim that some tinkering with the system, such as banks planning how they wind-up and toughening up existing rules on capital adequacy and liquidity, will solve all our problems. They won’t. There are some fundamental problems that need to be solved if we are to avoid repeats of this crisis.

Better people than myself have said we must reverse the trend of the past 30 years, where private financial risk has been publicly shared and the gains increasingly privatised.

That’s the truth of it. If we can’t punish the transgressors, we can at least claw back the money they have taken.

David Cameron’s dream: a Britain without hope

Here’s an article that brings home the truth about David Cameron’s “Hopeless” Britain. It’s entitled ‘This cruel welfare system is steadily crushing lives – where is the anger?’ Read it and weep.

Having read it myself, I’m glad to see that at least one Guardian contributor appears to agree with my opinion of Liam Byrne, as expressed in my blog back in January.

I believe I can answer the question posed by this article. There isn’t any anger because the prevailing emotion is DESPAIR. John Harris correctly deduces the government’s attitude to welfare, as prompted by companies like A4E, Working Links (who?), Serco and G4S. The trouble is, this is the government’s attitude, and we’ve seen that its far-right policy isn’t for changing just because benefit recipients are suffering!

There will be no Parliamentary rebellions; the Tory back-benches are behind Mr Cameron all the way and the Liberal Democrats are useless as anything but Tory enablers. The saddest part of their involvement is the fact that they will be blamed more than the Tories themselves.

The despair has spread to other scandals – the current banking issue is a prime example. The government wants an inquiry led by its own ministers, right? We know that half of Conservative donations come from the financial sector; Mr Cameron’s personal fortune is based in banking and tax avoidance (or so we’re told); the millionaires in his cabinet are heavily involved in banking. Therefore we can deduce that any minister-led inquiry will whitewash the banking sector and those who have been fleecing us – ‘us’ being ordinary working- and middle-class people who have to use banks to keep what’s left of our cash safe – will go scott free. The people see no way to prevent this.

Finally (although I could go on), Mr Harris asserts that the previous government’s social reforms are partly to blame for our current woes. There is certainly an argument for this and, together with the Labour leadership’s apparent inability to champion popular opinion, it means the people cannot expect the situation to improve, no matter who gets into power after the next election.

This is Britain under David Cameron. Hopeless. Perhaps this is why he is so fond of saying that word at Prime Minister’s Questions. It’s certainly why despair is the prevalent emotion, rather than anger.

Personally, I refuse to give up. I say: Britain needs to change. And the way to make sure it does is to be as vocal about it as possible. Demand change at every opportunity. Force ministers to explain themselves wherever they go. Make their position as difficult as it can be – after all, that’s what they’re doing to you.

If you give in to despair, and let them walk over you, then you’re as much a part of the problem as they are.