Archive for Barclays

This feels like a BIG moment!

Posted in Banking with tags , , , , on July 2, 2012 by Tom Leatherbarrow

Sometimes watershed moments in politics only become clear with hindsight. The implications of the defeat of Barbara Castle’s In Place of Strife legislation for example, which was designed to bring the trade unions into line at the end of the 1960s, only became clear when the unions lost all control in the 1970s. The rest is history.

Sometimes however, watershed moments are more easily discernible and I think the Barclays scandal is one of them. The ironies with this story just keep piling up on top of each other. Investment bankers, the ultimate free marketeers, were going around rigging the market. Marcus Agius, Group Chairman of Barclays and Honorary Chairman of the British Bankers Association which sets LIBOR, sat atop an organisation which was screwing over his own trade association and its members.

Where do we go from here? I’m not sure I agree with calls for another public inquiry into the banking culture in the UK. What are we going to learn that we don’t know already? That the investment banking system is corrupt?

My view is that this is a big moment for the politicians. We have had Commissions, Inquiries, Reviews, appearances before Select Committees and much finger pointing but little has actually been put onto the statute books. If I was in Cameron’s position, I would do the following:

1: Implement the Vicker’s Commission Report with a deadline of 2015 brought forward from 2019. The Government cannot afford to kick this into the long grass a moment longer.

2: Implement a UK version of the Volcker Rule which prohibits proprietary trading by the banks on their own account. The banks have to get back to serving their clients and customers not just making money for themselves.

3: Beef up the Financial Services Authority (or the Financial Conduct Authority in its new guise) with enough budget and people to launch investigations into financial malpractice. Then do the same with the Serious Fraud Office.

4: Set up another Commission or recall Vickers and ask him to look into the economic implications of a forced separation (not just a firewall) between retail and investment banking along the lines of Glass Steagall.

Finally, if I was PM, I would pull the CEOs and Chairmen of all UK-listed banks into 10 Downing Street and say the following: “We are doing this. If any one of you so much as threaten to pull your head offices out of the UK (in my opinion a hollow threat!) I will personally front a campaign to encourage the British public to close down all their current accounts, savings accounts, ISAs and other financial products and transfer them to mutuals.”

All of this will go against the PM’s instincts. His late father was a stockbroker, but even he would now surely realise that, to paraphrase Philip Augar, gentlemanly capitalism has died a death. Now is the time for action.

If Cameron wants a Thatcher Moment he should go after the bankers!

Posted in Banking, business with tags , , , on June 28, 2012 by Tom Leatherbarrow

A few months ago the Government saw great opportunity in the proposed tanker driver strike.  The word from Tory Central Office (we know this because it was all over the newspapers) was that the Government saw the dispute as a potential ‘Thatcher Moment’ when the Government rallied the general public around a foe that threatened the economic prosperity of the country and defeated it, just as the Lady had with the miners.  Francis Maude was duly sent out with the advice that we should all stock up on petrol by filling jerry cans, just as the Thatcher Government had stockpiled coal.  We all know how it ended.

My feeling at the time was that the Government was fighting an old battle.  Much has changed since the long summer days of 1984.  The Public & Commercial Services Union went on strike over outsourcing of jobs on Monday, did you notice?  I suspect not because three separate tranches of legislation, the Prior Act, the Tebbit Act and the Trades Union Act of 1984 have brought the unions into line, democratised them and left them needing to listen to their members before the shout goes up “everybody out.”  If they step out of line the penalties can be ferocious, as the miners found out.

So where should the Government look if it wants a ‘Thatcher Moment’?  News comes this morning of another powerful pressure group who threaten the economic prosperity of the country. In fact this pressure group has already been bailed out once by the public to the tune of hundreds of billions.

One suspects that Barclays £290 million fine levied by both the Financial Services Authority in London and the regulators in the United States for manipulation of interest rates is just the tip of the iceberg. If RBS, HSBC etal get sucked into this then the entire integrity of UK banking and LIBOR (London Interbank Offered Rate), which is used to fix mortgages amongst other financial instruments across the globe, will be called into question.

I could go over, once again, all the arguments for dealing with the bankers, including the ‘too big to fail’ argument, bonuses, lending to small businesses, the rebuilding of balance sheets with QE money, but why bother?  All you need to do is Google any of Mervyn King’s, the Governor of the Bank of England’s comments over the last few years to see how worried he still is.

I have no doubt that the bankers will want to position this as a victimless crime, but somebody, somewhere is always holding the dumb money.  If it is found that it is the general public, among others, who have been screwed over once again this story has the capacity to make the leap from the business pages to the front pages.

If Cameron wants a ‘Thatcher Moment’ which cuts through to Joe Public or Worcester Woman, this morning it is staring him right in the face!

The real point about Barclays’ tax bill

Posted in Banking, business with tags , , , on February 22, 2011 by Tom Leatherbarrow

Barclays have paid £113 million in Corporation Tax which equates to approximately 0.97 per cent of the company’s pre-tax profits of £11.3 billion

£113 million still sounds like a lot of money until you realise that the UK’s Corporation Tax rates currently stand at 28 per cent. What, I hear you ask, happened to all the money?

Apparently, Barclays wrote it off against losses in American subprime mortgage trading. Barclays excuse is that under UK Corporate Tax law losses made in any business division can be written off against Corporation Tax. So, in other words, Barclays played in the casino of mezzanine credit default swaps, lost and now the Exchequer is out a lot of money. (Those interested in casino banking and how our banks got involved in all of this this should read The Big Short by Michael Lewis).

Whilst this is a clear violation of the principle of risk and reward, the foundation upon which investment decisions are made, the real point is that all of this is legal. Successive Governments consistently promise to close tax loopholes, but instead leave this gaping chasm open to abuse.

Why don’t they close this loophole? Because our politicians are scared stiff that major corporates like Barclays and HSBC, who have already threatened to leave the country, will up sticks and set up in a low tax economy like the one just off our shores. It’s called Ireland and it has a Corporation Tax rate of 12.5 per cent.

So the next time you hear an Opposition party say that they are going to close tax loopholes when they get into Government treat it with the scorn it deserves