Sir Fred Goodwin, Royal Bank of Scotland's former chief executive, blew £200M when he hired top sports stars on "reckless" contracts to entertain clients, as part of a £200M sponsorship binge, just a few weeks before he was kicked out of the bank.
Sunday, February 15, 2009
Friday, February 13, 2009
Brown Panders To The Headlines
Gordon Brown, sensing that the public are a tad "vexed" with greedy bankers, has decided to opt for the short term political palliative (used by politicians who are on the skids) of pandering to the public blood lust.
He appeared before the Commons Liaison Committee yesterday and said that banking bonuses should not be a "one way bet", adding that even though a bonus has been paid that where the recipient had been shown to have lost the company money that bonus could be reclaimed.
No doubt, in the limited imagination of the headline grabbing politician, this may seem to be a terrific idea. However, reality is a cruel mistress and there are a number of questions that arise:
1 Over what period would the employee be liable to repay a bonus?
2 Precisely what would be the criteria for reclaiming the bonus?
3 What happens if the employee cannot afford to repay the bonus?
4 What happens if the employee leaves the firm?
5 Will this "bonus reclaim" option be only applicable to bankers (whom Brown hates), or to all companies and even politicians (who fail to deliver on their promises)?
In short, the idea is unworkable and Brown knows that full well!
He appeared before the Commons Liaison Committee yesterday and said that banking bonuses should not be a "one way bet", adding that even though a bonus has been paid that where the recipient had been shown to have lost the company money that bonus could be reclaimed.
No doubt, in the limited imagination of the headline grabbing politician, this may seem to be a terrific idea. However, reality is a cruel mistress and there are a number of questions that arise:
1 Over what period would the employee be liable to repay a bonus?
2 Precisely what would be the criteria for reclaiming the bonus?
3 What happens if the employee cannot afford to repay the bonus?
4 What happens if the employee leaves the firm?
5 Will this "bonus reclaim" option be only applicable to bankers (whom Brown hates), or to all companies and even politicians (who fail to deliver on their promises)?
In short, the idea is unworkable and Brown knows that full well!
Thursday, February 12, 2009
A Failure of Regulation
The Times reports that the Financial Services Authority (FSA) claims that it raised concerns about internal risk controls at HBOS in 2002.
Yet nothing appears to have been done, why?
Moreover, why was Sir James Crosby (who has now resigned from the FSA), CEO of HBOS between 2001 and 2006, appointed deputy chairman of the FSA by Gordon Brown?
Yet nothing appears to have been done, why?
Moreover, why was Sir James Crosby (who has now resigned from the FSA), CEO of HBOS between 2001 and 2006, appointed deputy chairman of the FSA by Gordon Brown?
Tuesday, February 10, 2009
A Collective Spanking
Sir Fred Goodwin and Sir Tom McKillop, the former chief executive and chairman of RBS, will apologise for destroying one of Britain's leading bank at a meeting of the Treasury Select Committee today.
Also attending the trial by humiliation will be Andy Hornby and Lord Stevenson of Coddenham, the former chief executive and chairman of HBOS.
Whilst all of this may make the politicians feel important as they are seen to flex their muscles in the headlines, the very pressing questions of what to do about bonus payments in the future, and how to avoid a similar disaster needs to be addressed.
Chancellor Darling has promised a review. Unfortunately that will not be completed until the end of the year. Just in time for the next round of bonus payments!
Also attending the trial by humiliation will be Andy Hornby and Lord Stevenson of Coddenham, the former chief executive and chairman of HBOS.
Whilst all of this may make the politicians feel important as they are seen to flex their muscles in the headlines, the very pressing questions of what to do about bonus payments in the future, and how to avoid a similar disaster needs to be addressed.
Chancellor Darling has promised a review. Unfortunately that will not be completed until the end of the year. Just in time for the next round of bonus payments!
Monday, February 9, 2009
Barclays Uses Commonsense
Not all banks have their heads up their own backsides, when it comes to bonuses and the public perception of failure and greed.
Barclays today announced a profit of £6.1BN (after £8.1BN of write downs), ahead of forecasts but 14% below last year. Barclays also announced that it would not be paying bonuses to its executive directors, and only pay bonuses to those below board level.
A wise and sensitive political decision, all the more so because the government does not have a stake in Barclays. The Royal Bank of Scotland would be wise to take note of this.
Barclays today announced a profit of £6.1BN (after £8.1BN of write downs), ahead of forecasts but 14% below last year. Barclays also announced that it would not be paying bonuses to its executive directors, and only pay bonuses to those below board level.
A wise and sensitive political decision, all the more so because the government does not have a stake in Barclays. The Royal Bank of Scotland would be wise to take note of this.
Friday, February 6, 2009
Bank Of England Cuts Rates Again
The Bank of England cut rates again yesterday (from 1.5% to 1%), in another attempt to draw a red line under the recession and falling confidence.
Not a moment too soon, judging by the report in the Times that notes that the number of businesses filing for administration (after adjustments for one multi operation failure) in the last quarter of 2008 was 1,289 (a rise of 124%).
However, the Bank of England knows that the rate cuts are meaningless, if banks continue to provide the lifeline of loans and finance to struggling businesses and individuals. To this end it is clear that quantitative easing (ie printing money) is necessary, and will have to be implemented soon.
In other news I am pleased to see that RBS have been reading this site:
Quote:
"I wonder how many of the RBS board will resign for their folly, end eschew generous payoffs?"
RBS have just axed 7 non executive directors, in an attempt to distance itself form those who brought about its destruction.
Quite why RBS needed so many NEDs (given that they allowed Fred "The Shred" and his acolytes to destroy the bank - ie did nothing) remains a mystery.
They would have been well advised to read my advice about the role of NED's, published in 2003. RBS might have been been saved, had they followed that advice.
Not a moment too soon, judging by the report in the Times that notes that the number of businesses filing for administration (after adjustments for one multi operation failure) in the last quarter of 2008 was 1,289 (a rise of 124%).
However, the Bank of England knows that the rate cuts are meaningless, if banks continue to provide the lifeline of loans and finance to struggling businesses and individuals. To this end it is clear that quantitative easing (ie printing money) is necessary, and will have to be implemented soon.
In other news I am pleased to see that RBS have been reading this site:
Quote:
"I wonder how many of the RBS board will resign for their folly, end eschew generous payoffs?"
RBS have just axed 7 non executive directors, in an attempt to distance itself form those who brought about its destruction.
Quite why RBS needed so many NEDs (given that they allowed Fred "The Shred" and his acolytes to destroy the bank - ie did nothing) remains a mystery.
They would have been well advised to read my advice about the role of NED's, published in 2003. RBS might have been been saved, had they followed that advice.
Thursday, February 5, 2009
Pigs At The Trough
The management of the Royal Bank of Scotland, bailed out by the taxpayer to the tune of £20BN, isn't going to allow anything as inconvenient as gross incompetence (it is expected to announce a loss of £7BN-£8BN for 2008) to get in the way of its bonus payments.
The Times reports that RBS is planning to pay large bonuses to thousands of its City traders and senior bankers. Some of the payments are expected to reach tens of millions of pounds, with some bankers in line for six-figure payouts.
It seems that the culture of arrogance is alive and well at RBS, despite the fact that the management should hang their heads in shame for destroying one of Britain's leading banks.
Lord Mandelson, Business Secretary, put it rather more diplomatically then myself (however, it is clear that he is not best pleased):
"What I would say is please be mindful about how this looks and what public opinion will be.
Obviously you have to work in a market where you have got to recruit the best people, keep the best people in place and motivate them.
But they have also got to consider how it looks and how it seems when those mistakes and losses have been made."
The Times reports that RBS is planning to pay large bonuses to thousands of its City traders and senior bankers. Some of the payments are expected to reach tens of millions of pounds, with some bankers in line for six-figure payouts.
It seems that the culture of arrogance is alive and well at RBS, despite the fact that the management should hang their heads in shame for destroying one of Britain's leading banks.
Lord Mandelson, Business Secretary, put it rather more diplomatically then myself (however, it is clear that he is not best pleased):
"What I would say is please be mindful about how this looks and what public opinion will be.
Obviously you have to work in a market where you have got to recruit the best people, keep the best people in place and motivate them.
But they have also got to consider how it looks and how it seems when those mistakes and losses have been made."
Wednesday, February 4, 2009
The Ring of "Strength"
The Times reports that the Icelandic company Baugur (which means "Ring of Strength") is about to fall into administration.
Baugur owns/controls a number of UK retail companies including Iceland, Hamleys, House of Fraser, Goldsmiths, Mappin and Webb, Principles and Whistles.
The move to administration has been brought about by the collapse of talks with Landsbanki, an Icelandic bank, over restructuring Baugur's £1BN debts.
A classic example of the dangers expanding too fast using other people's money.
Baugur owns/controls a number of UK retail companies including Iceland, Hamleys, House of Fraser, Goldsmiths, Mappin and Webb, Principles and Whistles.
The move to administration has been brought about by the collapse of talks with Landsbanki, an Icelandic bank, over restructuring Baugur's £1BN debts.
A classic example of the dangers expanding too fast using other people's money.
Tuesday, February 3, 2009
FSA Asleep At The Wheel - As Per Usual
Yet again Britain's hapless Financial Services Authority (FSA) has been found to be asleep at the wheel.
It transpires that way back in 2005, the FSA was warned by Tony Shearer (CEO of Singer & Friedlander Group) not to give the go-ahead for the Icelandic bank Kaupthing's acquisition of Singer & Friedlander.
For why?
In Shearer's view the management of Kaupthing were not "fit and proper" to control a British bank.
Mr Shearer will repeat these allegations to the Treasury Select Committee tomorrow, and tell the committee that the FSA rushed through the approval of the change of control.
Kaupthing recently hit the headlines when it was nationalised by the Icelandic Government, after the UK Treasury seized Kaupthing Singer & Friedlander to protect the interests of depositors and taxpayers.
The FSA deny Mr Shearer's version of events. They are quoted in The Times:
"In such circumstances the FSA always conducts checks and only approves the change [of control] if we are satisfied our requirements will be met. In this instance, we do not believe the statement made to the Treasury Select Committee represents an accurate summary of the events."
The trouble is this is but one of a long list of instances whereby the FSA has been found to be asleep at the wheel (eg Northern Rock, endowment compensation, PPI, bank charges etc)
The FSA:
- Hopeless
- Hapless
- Useless
- Toothless
It transpires that way back in 2005, the FSA was warned by Tony Shearer (CEO of Singer & Friedlander Group) not to give the go-ahead for the Icelandic bank Kaupthing's acquisition of Singer & Friedlander.
For why?
In Shearer's view the management of Kaupthing were not "fit and proper" to control a British bank.
Mr Shearer will repeat these allegations to the Treasury Select Committee tomorrow, and tell the committee that the FSA rushed through the approval of the change of control.
Kaupthing recently hit the headlines when it was nationalised by the Icelandic Government, after the UK Treasury seized Kaupthing Singer & Friedlander to protect the interests of depositors and taxpayers.
The FSA deny Mr Shearer's version of events. They are quoted in The Times:
"In such circumstances the FSA always conducts checks and only approves the change [of control] if we are satisfied our requirements will be met. In this instance, we do not believe the statement made to the Treasury Select Committee represents an accurate summary of the events."
The trouble is this is but one of a long list of instances whereby the FSA has been found to be asleep at the wheel (eg Northern Rock, endowment compensation, PPI, bank charges etc)
The FSA:
- Hopeless
- Hapless
- Useless
- Toothless
Monday, February 2, 2009
Back From The Dead
It would seem that the much lamented corpse of Woolworths may be about to rise from the grave, albeit in a reduced form.
Shop Direct has bought the name, and intends to relaunch it online this summer.
Needless to say, as Shop Direct already owns other brands (eg Littlewoods and Kays) and that Woolies will only be an online presence there will be little opportunity for many of the old staff to be rehired.
Indeed, Shop Direct announced jobs cuts last week.
Shop Direct has bought the name, and intends to relaunch it online this summer.
Needless to say, as Shop Direct already owns other brands (eg Littlewoods and Kays) and that Woolies will only be an online presence there will be little opportunity for many of the old staff to be rehired.
Indeed, Shop Direct announced jobs cuts last week.
