The Great Debate UK
By Peter Thal Larsen
The author is a Retuers Breakingviews columnist. The opinions expressed are his own.
The failure of Royal Bank of Scotland shows bank reform still has some way to go.
The report should dispel any doubts that new Basel III rules make banks safer. Using this measurement of capital, RBS's equity Tier 1 capital ratio at the end of 2007 was around 2 percent -- well below the 7 percent now considered to be an acceptable minimum. Under the new regime, RBS would have been prevented from paying a dividend at any time from 2005 onwards. Its heavy dependence on short-term funding would also now be deemed unacceptable.
However, RBS's collapse was also a failure of supervision. The FSA describes in painful detail how its team of supervisors -- which comprised just six people, compared to 23 today -- did little to challenge the bank's assessment of the risks it faced. That approach reflected the reigning theory of efficient markets and political pressure to maintain a "light-touch" regulatory regime. Both those factors no longer apply. Moreover, UK bank supervision is being transferred to the Bank of England.
-Jeremy Edwards is Head of Banking & Financial Services at Firstsource Solutions. The opinions expressed are his own.-
The recent publication of Sir John Vickers’ International Commission on Banking (ICB) finally gave the banking industry a glimpse of the long-promised change in regulatory regimes following the global financial crisis. The report comes at the same time as a torrent of new regulations and legal changes: the recent High Court ruling on the misselling of payment protection insurance (which is estimated to cost the banks £8 billion), the Treasury report on financial regulation, and the Basel III regulations that will force banks to hold greater liquidity. If adopted, many of these recommendations will create unprecedented change for the banking industry.
– George Hay is a Reuters Breakingviews columnist. The opinions expressed are his own –
The UK’s forced investments in the banking sector are in rude health. The 41 percent holding in Lloyds Banking Group and 70 percent stake in Royal Bank of Scotland are comfortably above where the government bought the equity. But that doesn’t mean whoever wins next week’s general election should charge into a sale.
Europeans won't be amused by the alleged Goldman Sachs scam. ABN Amro, and therefore ultimately Royal Bank of Scotland, ended up losing $841 million in the allegedly fraudulent collateralised debt obligation investment concocted by the investment bank. Meanwhile, IKB, the bust German bank, lost nearly $150 million.
These European banks were some of the biggest financial mugs in the last years of the credit bubble. But the allegations levelled by the Securities and Exchange Commission don't concern the folly of the buyers and insurers of subprime mortgage investments. Goldman is accused of misleading investors. The UK and German states, which bailed the banks out, will be livid if the case is proved. Goldman denies the charges.
from UK News:
Deciding it was safe to come clean because banks are now on a more even keel and the worst of the credit crisis is behind us, the Bank of England has told the nation that at the height of the turmoil it secretly lent Royal Bank of Scotland and HBOS a colossal £62 billion, which is more than the entire British defence budget.
Both banks faced the imminent closure of high street cash machines and the curtailment of normal banking operations across the country.
Britain's asset protection scheme, invented to protect the banking system, is morphing into a bureaucratic monster. It's time to kill it off. Though state support is still needed, there are simpler ways for the government to prop up its ailing lenders.
More than seven months after it was conceived, and five months after Royal Bank of Scotland and Lloyds Banking Group signed up to use it, details of the APS have still not been agreed. The sheer task of sifting through 585 billion pounds worth of loans to be insured by the government means any final agreement is months away.
Sir Win Bischoff appears to relish a challenge. His brief spell as chairman of Citigroup was spent resisting regulators who wanted to break up the bank. If the veteran banker takes over as chairman of Lloyds Banking Group, his first fight will be with competition authorities in Brussels. This is one battle where it would be better if Sir Win did not live up to his name.
– Neil Collins is a Reuters columnist. The opinions expressed are his own –
LONDON, April 8 (Reuters) – BP has undergone a critical period of self-assessment over the last four years. The chairman, no less, says so in the oil company’s annual report.
from The Great Debate:
People are up in arms about bankers receiving bonuses when the banks they worked for have gone down the pan. But isn't it just as shocking that so many state-backed financial firms still subsidize the eye-popping wages of sporting superstars through rich sponsorship deals?
It's the same story on both sides of the Atlantic. Citigroup, which received $45 billion from the U.S. government, is sticking with a $400 million marketing deal from 2006 which includes the naming rights for the new home of the New York Mets baseball team, which will be called Citi Field.
from The Great Debate:
Nationalization of weak banks in Britain and the United States may be preferable to current plans for insurance and soft "bad banks" schemes which risk being swamped by future losses as assets, especially real estate, continue to crater.
An insurance program, getting banks to identify their riskiest assets to the government which will insure them for a fee, is one of the main planks of a UK plan to bail out banks unveiled this week.