UK News
Insights from the UK and beyond
from Breakingviews:
RBS has tough fight to put value in wholesale arm
By Margaret Doyle
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
Royal Bank of Scotland, the state-owned UK lender, is cutting its investment bank, again, and is merging it with its international payments unit. The new division aims to make more than the 12 percent groupwide cost of capital. It must do at least that to have any value. But it is a big ask given regulatory and political headwinds.
The cash equities business was never a strength for RBS - not even after the purchase of Hoare Govett which came with the disastrous ABN Amro acquisition of 2007. The fixed income business is stronger. Indeed Greenwich Capital Markets, acquired with NatWest, is something of a jewel in what is otherwise a pretty tarnished crown. Helped by Greenwich, America contributes the largest share of RBS’ investment bank revenues, almost one-third of the total. It also earned a healthy 24 percent return on equity in 2010.
Sadly, the strengths are shrinking. Greenwich was a big player in now-diminished U.S. mortgage trading and returns will come under further pressure because Basel regulations require RBS to assign more capital to fixed income. Moreover, new UK rules that will ring-fence retail banks from riskier wholesale arms raises the latter’s cost of funding. Analysts at Credit Suisse forecast that, without restructuring, return on equity at the investment bank would have shrunk to 6 percent.
from Breakingviews:
UK banks need government to solve funding squeeze
By George Hay
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.The Bank of England is tooling itself up. The UK central bank announced on Dec. 6 a new facility to help domestic lenders if the euro zone crisis causes a fully-fledged freeze in short-term funding markets. But banks may still need more help.
The BoE already has two ways to combat liquidity squeezes. It allows banks to borrow against liquid collateral for three or six months through its Indexed Long-Term Repo (ILTR) auctions. And it allows desperate banks to swap illiquid collateral for gilts for up to a year via its Discount Window Facility (DWF) – in return for a fat fee and big haircuts.
from Breakingviews:
Bank capital debate obscures more urgent reform
By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
LONDON -- Before the crisis, financial regulators were often accused of being in thrall to bankers. Today, they are in greater danger of being captured by academics. British boffins have recently got bogged down debating whether banks should hold significantly higher levels of equity. Even if the idea is right, it is not remotely realistic. Policymakers should concentrate on more modest but practical reforms.
from Funds Hub:
Utilities vs banks: The evidence
Alpesh Patel caused quite a stir on Britain's Radio 4 this morning. The CEO of boutique investment house Praefinium Partners argued that Bob Diamond was on "a suicide mission to bring down capitalism". No word yet from the Barclays CEO on that one.
Maybe that was just the line his PRs had promised to the BBC producers to get him on air, though, and there is more logic to Patel's more substantial point about value creation in the banking sector in relation to bonuses and pay.
Satisfied bank customer?
We’re wondering who is.
We see bailed-out banks returning to profit at the same time as headlines about others still refusing to lend. The personal finance pages are bristling with stories about mortgage famine . Big businesses may have been overcharged for banks’ services in raising new equity capital; lending to smaller businesses is down, and the interest offered on savings is so derisory, would-be savers are being pushed into taking more risk to try to preserve their capital.
What are we missing? What is the magic ingredient that makes you as a customer happy with your bank? Or are we right in thinking “customer satisfaction” is a figment of executive imagination? Tell us your stories.
from The Great Debate UK:
Not much stress, not much test
-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own.-
Back in the 1950’s, when most women stayed at home while their menfolk went out to work, a favourite trick of life insurance salesmen was to walk into the prospect’s home at dinner time and ask the wife:
from The Great Debate UK:
Banks, borrowing, bonds and Britain’s budget
-Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. Join Reuters for a live discussion with guests as UK Chancellor George Osborne makes an emergency budget statement at 12:30 p.m. British time on Tuesday, June 22, 2010.-
George Osborne must be thankful to Don Fabio and his boys for ensuring that Wednesday’s tabloids will have other things to think about than the Budget, because it is going to be one of the toughest ever.
Send in questions for city minister Paul Myners
City Minister Paul Myners is among a handful of people with first-hand experience managing the financial crisis over the past year.
On Dec. 16, at 9 a.m. British time, Myners will deliver a speech at an exclusive Thomson Reuters event in London on a proposal the government says will strengthen the City’s role as a global investment banking hub. He will also announce a series of policy measures designed to enable an effective resolution for failing firms.
What do you think of the bank charges ruling?
Banks have won a two-year court battle, dealing a major blow to hundreds of thousands of customers seeking to claim back billions of pounds of what they say are unfair overdraft charges.
The new Supreme Court found that the Office of Fair Trading cannot use customer protection rules to investigate whether the fees were levied unfairly.
Too big to fail? Guerrilla central banking and the last resort
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.
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The Wall
