UK News

Insights from the UK and beyond

Nationalisation: an act of mercy for RBS?

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Royal Bank of Scotland’s controversial former Chief  Executive Fred Goodwin once memorably referred to the  consolidation of smaller British lenders as “mercy killings.”

Goodwin was speaking in 2001, when he could still bask in the glory of RBS’ audacious acquisition of larger rival NatWest the previous year, a deal that set the standard by which all banking takeovers were judged.

How times have changed. Goodwin has gone, quitting after the credit crunch forced RBS to surrender a majority stake to the government in exchange for a 20 billion pound taxpayer-funded bailout and write down billions in relation to its acquisitions.

To make matters worse, RBS on Thursday reported the biggest loss in British corporate history, and said it had negotiated further state support which could boost the government’s stake in the bank as high as 95 percent.

Should banks sponsor sports stars?

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A bit like asking turkeys to vote for Christmas, parliamentarian John Mann has called on the likes of tennis player Andy Murray, equestrian star Zara Phillips and motor racing great Sir Jackie Stewart to scrap their sponsorship contracts with the Royal Bank of Scotland.

Bleeding red all over its accounts and shedding thousands of jobs, the struggling Scottish bank has been heavily criticised for doling out bonus payments to staff despite receiving billions of pounds of state aid.

The “shotgun wedding” of Lloyds and HBOS

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“If you think you want to advance on this, we will deal with the competition issues” — so said Gordon Brown to Lloyds Chairman Sir Victor Blank last September, sweeping away the one big problem to a merger between Lloyds and HBOS.

At the time, Brown said the government had acted quickly and decisively in removing competition concerns and prodding the merger forward, despite concerns about the risk that Lloyds was taking.

Bankers offer act of contrition

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In the Middle Ages the four ousted British bankers who brought the Royal Bank of Scotland and HBOS to the brink of collapse would have probably had to endure the public humiliation of sitting in the stocks. 

On Tuesday the likes of former RBS chairman Tom McKillop and  former RBS chief executive Fred Goodwin had to undergo a more civilised form of public humiliation – a grilling by Parliament’s Treasury committee.

from Global Investing:

Careful what you say

Bank executives beware. Turn your microphones off during what are likely to be stormy shareholder meetings this year.

Insults are likely to fly at many bank AGMs this year from shareholders angry at their board for losing billions, sending shares crashing, making ill-advised purchases or for their role in the global economic crisis. Bankers are unpopular after more than a year of grim news.

from Global Investing:

And the next Iceland is…

If there's one thing you don't want to be, it's the next Iceland.

Since its currency, colossally indebted banking sector and economy collapsed in spectacular fashion in October, the country has become a byword for an economy that has truly hit the rocks.

Within weeks, banking problems and currency falls meant Hungary was being hyped as a "second Iceland", at least until a joint International Monetary Fund and European Union rescue package restored some stability.

from MacroScope:

A path strewn with difficulties

An old Chinese proverb states that it is better to take many small steps in the right direction than make a giant leap and fall back. Judging by the number of bank lending initiatives announced over the past three months, British policymakers are taking this to heart.

On Monday, Britain announced no fewer than eight measures to kickstart lending in its credit-starved economy. Despite pouring 37 billion pounds of public money into major banks last October and pledging hundreds of billions more in guarantees, the government had to admit it needed to take more credit risk off banks' books.

Global problem or self-inflicted wound?

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The government has unveiled a second package of measures aimed at getting the banks to start lending again and helping the economy off its knees.

The new package follows last October’s 37 billion pound bank bailout which ministers have reluctantly had to concede was not enough. It may have shored up their capital positions but it did not prompt them to start lending again. The latest plan aims to give them a hefty nudge in that direction by offering them insurance against losses and guaranteeing their debt.

Easing the pain for small businesses

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The government has unveiled a plan to guarantee up to 20 billion pounds of loans to help small businesses survive the credit crunch.

But there are concerns that will not be enough to get the banks lending sufficient funds to help businesses get access to cash.

Women in the boardroom

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Women should be considered for new board positions in banks bailed out by the government, to counter the male dominance of senior directorships at the biggest companies, the Cranfield School of Management has recommended. “The evidence is that women are not more risk-averse, but they are more risk-aware,” it says.

 

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