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Knight Moves

06/07/2010

BBA Contact: Angela Knight

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Brussels looks at bonuses

06/07/2010

EU negotiators always bear in mind the looming summer break when planning meetings for negotiations on tricky pieces of legislation. In financial services there has been a glut of dossiers that have ended up in so-called trialogue discussions (i.e. negotiations between the European Parliament and EU Council, chaired by the European Commission as an impartial mediator) to find a compromise agreement.

This June, three initiatives came up for agreement: the package of legislation to review the supervisory architecture in Europe, the Alternative Investment Fund Managers Directive (AIFMD) and the third package of amendments to the Capital Requirements Directive (CRD 3).

Despite numerous meetings (on the supervisory package alone there have been 18 meetings in May and June 2010) only one of the three files has actually been agreed as the summer break looms. This week it will be rubber stamped by the European Parliament plenary session that ends on Wednesday. This session is the last one before the August break. The next time it is possible to aim for an agreement is the middle of September.

With this in mind negotiations have been proceeding at a fast pace. The CRD 3 proposal was agreed at the eleventh hour last Tuesday (29 June). As a transposition of the Basel Committee's international rule changes, the legislation should have been relatively straightforward. The final agreement focused on the differing positions between the Council and European Parliament on the provisions governing remuneration, particularly bankers' bonuses.

Lost in the publicity were a couple of major concessions the European Parliament made to the Council.

Bankers' bonuses remain, of course, a red-flag issue for politicians, so the public impression of this challenging package is that it will curtail the worst excesses of remuneration in the financial services industry. But a closer look reveals that the proposals approved last week are largely similar to what has been enacted already in the UK. In fact the UK was the only EU country to have taken these steps, so the consequence of this decision falls on other countries, not on us. The most significant difference is that the UK rules, imposed by the Financial Services Authority, apply only to 26 major financial firms: the CRD changes are not restricted in this way to large or systemically significant firms.

Throughout the financial crisis we have stressed the need for reform to be coordinated globally: on pay and bonuses, we urged the EU to resist the temptation to exceed the principles set by the G20's Financial Stability Board (FSB). And this appears largely to be what has happened. We also urged them to concur with the Basel Committee's view that there should be no specific definition of "complex re-securitisation". This has now been agreed. And we have pressed for a delay in the implementation of the directive in line with the Basel Committee's deadline of 1 January 2012 (rather than December 2011, which for many countries would mean implementation in the next tax year). This sensible concession, delaying implementation of the main measures for only a few days, remains to be agreed.

So while some very sensible changes have been approved and an achieveable timetable has largely been adopted, the political rhetoric has been significantly more aggressive.

All politicians, whatever their party, must remember two things: first, UK (and UK-quartered) banks have already made significant changes to their working practices; and, second, this is an international and mobile business. Yes we agree it is important to get it right on pay and bonus structures, but we also believe it is essential that these facts - and particularly the pay rules that have already been applied here - should take priority over a short-term political soundbites.

Banks are at the table for change - and have changed considerably in recent years. The industry is already preparing for negotiations on the fourth package of CRD changes, and the Basel changes that will precede them. These negotiations will be intense, focusing on the creation of a leverage ratio and the introduction of new liquidity and capital buffers.

But we hope they will be able to progress on a sensible, measured timetable so they can be rolled out without curtailing economic recovery. Throughout the crisis the industry has risked falling victim to the political imperatives that something must be done; that it is seen to be done; and it is done quickly. Where the formerly esoteric field of capital requirements is concerned, this is dangerous talk indeed.

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A Brief, Non-Party, Apolitical Announcement, issued on behalf of the banks

07/04/2010

So the general election campaign has started in earnest, and even today we have had the first taste of the bank-bashing we can expect in the coming weeks.

The incoming Government will face many challenges. On the top of the list are the twin issues of the huge deficit in the public finances and the economic recovery. But there is another related challenge: that of recognising that as well serving as a punchbag, the UK's banks can (and want to) play a major, constructive role in economic recovery. Remember this is an industry which provides jobs directly and indirectly for more than one million people and which even this year has contributed around £24 billion to the Exchequer.

But the sustained anti-bank rhetoric, the demonisation of the industry, the failure to recognise the very major and important substantive changes that it has made, and the potential of yet more taxes to come, are all contributing to the impression overseas that the UK is becoming increasingly hostile to the industry. They may play well with the voters but they are eroding our chances of winning business and jobs from overseas.

The financial crisis was global: some countries were more affected than the UK; some less so. But all other countries were less public about their problems than we were. The banks have accepted their share of the blame for the financial crisis and have said sorry both in words and in actions. But they are not the only group in the frame, as the industry is not responsible for the regulatory structure, nor foreconomic policy.

We know they know the facts of the financial crisis, assisted by the many good independent analyses of its causes, the failures and the successes. As they consider the industry's future we urge them all to be guided by the facts and by logic - and not by electoral expediency.

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More news from India

26/03/2010

Off to ICICI Bank, the fastest growing non-state bank in India, in one of those three-wheeled taxis - not the done thing apparently but easily the fastest way to cross Mumbai, a city full of bustle and enterprise.

En route I passed both the Bombay Stock Exchange and the National Stock Exchange; the former is the older institution which predominantly trades equities, and the latter the newer enterprise which specialises in derivatives trading.

There are contrasts everywhere. On the one hand the openness of India is demonstrated by open access to the trading market; on the other there is still a tendency towards protection, demonstrated by the very many state-owned banks and the limited number of licences given to new entrants each year. My impression is that it is an economy which will continue to grow its huge indigenous local market. The wind is very much in its sails.

I was attending the annual Mint debate, which was both televised and well publicised and tackled the topic of how competition can help financial inclusion. About 96 per cent of people have a bank account in the UK; in India the figure is 51 per cent. For inclusion read access and availability. It's not necessarily synonymous with being poor.

The platform featured both representatives of both domestic and foreign banks: not only the chairmen of the State Bank of India and of HFDC, plus the chief executive of ICICI, but also representatives from Standard Chartered, HSBC and Barclays. In fact Barclays was represented by its chairman, who had come to visit its significant operations in India.

India missed the worst of the global recession (though it shared the uncertainty, along with all other economies), but this was partly luck and partly their industries' focus on serving local markets predominantly: their international exposure was therefore proportionately smaller than other, similar-sized economies. And they have seen the opportunities they now face: this time India really can continue to grow in a controlled way and reward the expectations of its people.

India therefore has learned our lessons without enduring as much of the pain: an advantage it is well placed to take. Part of the solution to its financial inclusion problems lies with technology: here there are more mobile phones than bank accounts, so clearly an enthusiastic adoption of mobile banking is imminent.

Back in the UK we had a budget when we needed public expenditure constraints, a lending adjudicator when we needed more help for businesses and ever more backward-looking regulation on banks. India meanwhile is observing us to see what works well and what does not.

By the way it is also worth noting the number of women in senior positions in India's banks - Chandra Kochhar for example is the impressive chief executive of ICICI, and I am very pleased she will be coming to London this summer to speak at the BBA's annual conference. Hers promises to be one of the most fascinating presentations - we should all be ready to take notes.

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The news from India

23/03/2010

To Mumbai.  The reason being that the City of London is holding a series of events predominantly in Mumbai this week of which banking plays, not surprisingly, a major role.  They asked if I could make it for a couple of days and so I have literally two days.

There might be a British Airways strike on, but it looked like they were still flying to Mumbai and so on Monday (and after a full days work) I arrived at Heathrow for the 1845 to Mumbai.  Terminal 5 was extraordinarily empty and never ever have I managed to get through security so quickly.  It was more or less one security guard per traveller.

The questions I am getting are pretty much what I expected - and pretty much what I feared.  Is the UK going to really break up the large banks? Is the UK going to tax the banks more?  Is the UK going to do the same as the G20 or is it going to do more? How much further are the UK banks capital ratios going to have to rise?  Are the banks going to have to come east to make any money?  What does your regulatory change mean?  What is going to happen after the general election? 

There is you see a well-understood process which the UK is expected to bide by, because it is the way we always do it: the UK has a problem; the UK holds an inquiry; the UK produces the analysis of what went wrong; the analysis is deemed to be correct; there is a bit of a row; the changes start to be made; everybody else does it as well. 

The difference this time is that whilst the UK did the analysis, the changes underway dont seem to fit with that analysis nor do the actions match the rhetoric.  At the moment we seem to be going it alone with everybody watching surprised, rather than considering we are right - and the remarks about doing it with the G20 seem to be no more than empty words. 

And we have to be careful as we are the international centre and we are not actually behaving like one.

One last thing from my first morning of meetings is this: although the Indian banks didnt get into difficulty in the crisis they are still disliked.  Maybe there is one thing that the G20 can agree upon then: wherever we are and whoever we are, bankers remain Mr and Mrs Unpopular.

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North America - Day 3, Toronto

05/03/2010

And so to Canada and the first Starbucks of the trip (I am addicted to Starbucks). The coffee fortified the soul for the first flight out on Thursday morning. The early hour meant the now inevitable semi-strip routine at security - which this time paired a blond and slim lovely with the complete opposite - raised no more than a slight titter. Then, having been searched as if we were terrorists, and loaded - late - onto a little, noisy plane - dark and dank Washington gave way to perfect, clear and cold Toronto.

And then to the lunch and speech. Mine was not quite as prestigious as the annual Speech from the Throne in this still largely monarchist country but our discussion of global banking woes chimed well as it was budget day in Canada after a three month parliamentary recess which at least stopped politicians making anything worse.

Actually Canada has done rather well in the global crisis: its banks managed and its economy managed. Growth is up. And unemployment down.

One of the guests asked why - when Canada was so reviled for its 'safety first' regulation before the crisis - has no one seen fit to apologise for the slur now it has turned out to be the great survivor. It's a fair point. The commendable performance of Canada is treated almost a if it has done something vaguely wrong in managing so well - as if they should have done the decent thing and got into difficulty like everyone else.

The frustration is evident. But Canada's real worry is being forced to implement solutions to problems they don't have. Canada is forever in the shadow of its big and powerful neighbour. So surviving the first ever global recession rather better than the US is, like beating the Americans to the gold in the Olympic ice-hockey, a source of both national pride - and national uncertainty.

Taking up the tune from the first questioner I was asked how Canada, a relatively small country, could be more than a minor voice at the decision table. Self-evidently the answer is, 'don't be the voice - be the chairman'. Still, it's a valid point, especially as local, regional and international standard-setters are deciding the future by addressing the problems of the past and not by learning lessons from those out who weathered the storm.

I was then asked if I thought getting the solution wrong would see jobs go and the world facing up to a "double-dip" recession. And that's just it. None of these regulatory changes are, in the end, about banks - it's what happens to the availability of credit. And no-one is going to cost it all, or do the sums, except for the industry. But everything we say is seen as suspect and deemed to be special pleading.

And then came the killer question: why - when the G20 said change should be synchronised and yet some countries were acting late, some early and some weren't doing anywhere at all - should international banks stay in the UK if Britain is making business more expensive and the climate is more hostile. The answer is clear: big markets; big internationality; big support services; and everything that flows from that. But the question is out in the open and not just whispered in the coffee bars. This is dangerous ground - but also a wake up call.

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North America - Day 2, Washington

04/03/2010

Another long day on Capitol Hill with nine meetings back-to-back. Regulators and politicians defined the day and so now, with a crab cake to the right of me (a Washington speciality) and a smooth glass of Pinot Noir to the left (another local speciality), I'm taking some time to reflect on the meetings, the comments, and the messages of the day.

Washington and London share many similarities. Washington is cold and damp and still not able to throw off a long and protracted winter. London has been the same. (There is something about the global warming message that simply does not seek to chime with our personal experiences!)

Washington has had to deal with some extraordinary financial circumstances following the 2008 financial crisis. It is now handling the long and drawn out tale of regulatory changes, tax changes and 'who does what' changes. And you can easily substitute the word 'Washington' for 'London'.

So if the problems are the same, what are the differences?

Yesterday (Wednesday) we visited three of the four main financial regulators. (We had met the Federal Deposit Insurance Corporation [FDIC] on Tuesday, which has responsibility for the small banks of a similar size to most of the UK building societies.) The day started at the office of the Comptroller of the Currency whose web extends to larger banks, but not the big international banking sector where the regulatory responsibility lies with the Fed. The fourth main financial regulator is the Securities and Exchange Commission (SEC), which monitors banks' market-related activities.

It is not just complicated to explain, it is just complicated. And how these four actually manage to work together is not entirely clear either. Regulatory regimes grow and shift for various reasons. Businesses adjust because of the regulatory regime in which they operate. Sometimes it works; sometimes it doesn't work; changes get made; the chess pieces shift but judgement of the actual outcome and the benefits remains obscure.

Nevertheless, a very strong and coordinated message from all the regulators we saw was this: since that 2008 low point - when Merrill Lynch had to be taken over by Bank of America; Goldman Sachs and Morgan Stanley had to become bank holding companies; AIG had a massive injection of capital from the taxpayer; and Lehmans failed - a lot of strong ground work has been done. The opportunity has been taken for a mature, considered analysis of the regulatory environment: what went wrong, what went well, what needs to be changed and what should be left the same. This strategic review is the defining approach by the US to both the international proposals and their local home grown thinking.

It is frankly an adrenaline shot to realise that here in the States, the potential effect that regulatory change might have on the wider economy is at the forefront of regulators and politicians minds. In fact, here in the US, right around the block everyone has been telling me that the reason there is so much concern about the provision of credit to businesses (particularly to SMEs) is because people think the regulators are gripping the lenders - that is the banks - too tightly. What an eye opener it is to see that understanding and that preparedness to publicly explain!

There is also the political overlay. Our politics in the UK may be complicated but at least we understand the process. The government makes an announcement; a little time passes; legislation appears; it usually goes through the House of Commons; it then goes to the House of Lords; various amendments in both the House of Commons and the House of Lords are proposed; some amendments get passed; the legislation is completed; the Queen gives her approval; we have a new law.

In the US, the President makes a proposal; the House of Representatives thinks about it; the Senate thinks about it; the House of Representatives proposes legislation which at some point gets approval; the Senate proposes another set of legislation on the same topic which it thinks about and usually - in a much longer period of time - gets some sort of approval or not; there is a reconciliation process; and only if the reconciliation process succeeds is there some legislation. But that legislation may be wholly different from the announcement that was originally made by the President.

In this whole area of regulatory reform in the US the statements that are being made and the policies that are being proposed by the President are a long way away from that which is being proposed, considered, and expected to pass through Congress and the Senate. What this means for the banking industry is that while it is important what Obama says regarding banking changes (implementing some form of divide between investment banking and other activities, and who pays what and for whom) the power and the ultimate outcome is detached from the President. The outcome ultimately depends on what the Senate passes, the House passes and the deal that is done in the reconciliation process. Understanding how 'bi-partisanship' operates is key: any change in legislation is much less within the power of the President and much more with a handful of Senators and Congressmen.

But hurrah for the US authorities as, whether regulators or politicians, they have all grasped the simple truth that a modern banking system underpins a modern economy so any decisions that affect it have to be costed first and implemented second, not implemented first and costed second.

The UK should please listen to that simple truth.

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North America - Day 1, Washington

03/03/2010

It may come as a surprise to people used to seeing the US as the home of everything big and bold but the vast majority of its banks are actually rather small. Since the crisis began they have had to wind down 140 banks and currently the FDIC has another 700 or so - representing about 10 per cent of the total - on its watch-list, a barometer of the seismic shifts in banking the way Californians must be looking at Haiti and Chile as indications of the stability of the San Andreas fault. The international banking system is clearly not back on solid ground yet with aftershocks still coming from problems in the commercial property sector even after the housing market would seem to be settling down.

A lot of water has flowed under the bridge since the financial crisis started but it would seem from my first impressions that the UK is a little ahead of the wave.

In the UK the Bank of England is an effective resolution authority that can step in if things begin to wobble  We have already passed legislation to reform the banking industry - the Banking Act 2009 - and are well advanced through the parliamentary progress of the Financial Services Bill. We have reformed much of our retail banking business. And crucially we have made changes to the capital rules that are the footings for our commercial edifice. UK banks already hold more capital than required under international rules and are at the heart of the discussions with the Basel committee.

We all learned that a shock in the US could send ripples round the world. And I was interested that, here in the US, the so called 'Volker' rule on bank splitting now looks much more likely to be done by regulation, requiring more capital to be held in the trading book where riskier activities are undertaken. Again this is something already under way in the UK. I just hope that all the necessary reform at home and around the world doesn't get held up by political process.

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IoD "Banks not lending" claim

16/02/2010

Normally, I have the greatest respect for Miles Templeman and the Institute of Directors but today they are just wrong. They are promoting a wholly misleading impression of what is happening in bank lending.  

In a grab for headlines they've put out a release suggesting 60 per cent of businesses can't get finance. But their numbers don't stack up; of the 1,450 directors surveyed three-quarters didn't want any credit, so it was only the residual 150 -  or just 12 per cent -  who experienced problems.  

I have run a business during a down-turn and have every sympathy with people struggling to hold on to business and attract new orders. It's not easy.  

So I know the IoD story was not just misleading, it was incomplete. It said nothing about why people had been turned down. Did they have a viable business plan? Had they given the bank all the information it needed? Was there something lurking in their credit history that damaged their chances?  

Banks want to lend to viable businesses. That is the bread and butter of banking.  

And they are continuing to lend. New lending by the major high street banks is currently running at well over 500 million each month and the total lending by banks to small businesses is currently just under 56 billion. Bank of England statistics show that small businesses are paying back loans and that new money is being lent. The reality is that banks are not only continuing to lend to existing customers but have also filled much of the vacuum left by overseas and non-bank lenders who are no longer providing business finance.  

But lending has to be based on the ability to repay. Businesses have to be able to demonstrate how they are going to get through the downturn. Banks need to see how loans can be repaid and will shy away from a picture of ever rising debt. Sadly, in a recession some business plans are not viable because customers have simply walked away.  

As I said, banks are in the business of lending but let's not forget it's not their money and banks have a duty to their savers and investors too. This is why banks have to carefully consider all the risks when making any loan. Then they will make a commercial decision based on all the information they have, the business's ability to make repayments and other risks including the sector in which the business operates. 

Banks are not walking away form their responsibilities either to businesses or to the real economy. We are not turning away viable propositions and we are not walking away from our commitments with the UK economy. I find it hard to believe that grabbing a cheap headline is the right way to talk to your bank - or to help customers find the deal they need.

Read the letter to Miles Templeman here.

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The Turner Tax?

28/08/2009

So Lord Turner, the Financial Services Authority chairman, has told Prospect magazine that London’s financial district is too big and that some of its activity is “socially useless”. Plus he threatens that if his recently-issued Code of Conduct on pay does not work, then a new transaction tax should be levied on the City’s activities. 

Well that wrecked my plans for a day off. In the gaps between my flurry of interviews with the major broadcasters yesterday, I put together an article for the Evening Standard setting out the banking industry’s views.  

Lord Turner said the City has been allowed to grow too big, and the Exchequer’s reliance on such a massive contributor to the country’s economy has had a destabilising effect on the country. These comments are extraordinary. Britain has a history of building world class industries only then to make bad decisions, often in the heat of the moment, and so lose them abroad. Should we really add financial services to this list? I think we should not. 

I would agree that thought should be given to diversifying the UK economy and diminishing its reliance on financial services. Certainly we should be supporting manufacturing and entrepreneurship to build strong businesses for the next generation: that is, create better conditions for other sectors to grow stronger – they have put forward many proposals on this – rather than cut down one of our few international successes and adversely impact the million or more jobs that rely on it and the big tax it pays. 

London has been the engine room of the UK economy for many years now. If it were to become public policy to try to shrink its financial sector this would happen very quickly: any numbers of other countries are lining up to get a piece of the action and Lord Turner’s words will be of keen interest to them. 

One of his justifications for his views on the sector is that much of it is “socially useless”. In an industry the size of the City, it is quite possible that there is some activity going on that is not essential but that is at the margin. Recessions are in any event the harshest critics of such activity, and root them out quickly. The businesses criticised by Lord Turner are the foundation of the economy of the UK, and without the financial innovation they undertake, this country would be have to seek to finance itself much more from overseas. That is a good way of making the credit crunch worse not better and prolonging the recession here.  

But it’s his proposal of a new tax on financial transactions which has caused particular controversy. It confuses two issues: the perceived inequity of bonuses and the need to curb the excesses of globalisation. 

On bonuses, all UK banks have committed to complying with the FSA’s new code of conduct, and consulting with the regulator on future and significantly more restricted remuneration strategies, concentrating on long term performance criteria. If banks do not satisfy the FSA, their capital requirements will be hiked higher, limiting their ability to build their businesses.  

But if that fails, Lord Turner says a new transaction tax should be levied. These Tobin taxes as they are known, are named after the economist James Tobin who some 30 years or so ago proposed a tiny surcharge on all foreign currency transactions across the world, and the funds used to redress some of the imbalances of globalisation and dampen speculation. It has never been introduced, as like all fine Utopian ideals it is too far from practical reality to have any effect other than ones that are wholly damaging. That is why no Government has ever introduced one! 

So I have a message for Lord Turner and that is this. I am a believer in the UK as a country and in the financial services industry. London is a great world class centre, vital to the British economy, and like all countries we have been hit by the world global crisis. It is surely much better to work together – industry; regulator, Government and others – to continue to change what needs to be changed, than to advocate an approach that will damage London and the UK.  

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Responding to the Lib Dems

13/08/2009

The Liberal Democrat leader Nick Clegg surprised us yesterday with the announcement that he is going to table a motion when Parliament returns (on Monday 12 October, that is) concerning the ongoing case on fees for unarranged overdrafts.

We offer all MPs regular briefings on this and all banking issues, and maintain formal and informal contacts with them wherever possible. As Nick Clegg has published his letter on this issue, we publish below the letter we wrote to him today

Dear Nick,

Having read reports of your views on the current court case on unarranged overdraft fees, I thought it would be helpful to make you aware of the facts.

I have used the expression "unarranged overdraft fees" as of course most people either make their overdraft arrangements first, or do not have an overdraft in the first place. Only a minority borrow money that they haven't got without making arrangements first. More education in this area - and with financial issues generally - can only be beneficial and if you wish we can arrange with pleasure for you to see some of the projects that the banks either run or support.

However, the position of unarranged overdraft fees within the UK's regulatory and legislative framework is far from clear. This has come to the fore as the UK has implemented the European requirements known as the Unfair Terms in Consumer Contracts Regulations (UTCCRs) in a way not only different from other countries but also resulting in uncertainty over what is covered by UTCCR and who has responsibility for deciding what in a number of areas.

As a result, seven banks and one building society proposed to the OFT that we should approach the courts for a decision on whether and how the UTCCRs might apply to this issue. The current case therefore is first about whether unarranged overdraft charging terms can be assessed for fairness under the UTCCRs (where we await judgement from the Law Lords) and second, if the charging terms can be assessed for fairness, whether the terms are unfair. The case is not about what an unarranged overdraft fee should be, nor - given where we are in the legal process agreed with the OFT - is it at this stage about whether they are fair.

You have been reported as saying that all unarranged overdraft fees should be paid back. I am sure that must be incorrect as you will be aware that the cost of providing the service is significant and one that customers would not want to see withdrawn. The courts have already acknowledged this at earlier hearings. The default rate on these overdrafts is significant too. The 80 per cent or so of borrowers who made their financial arrangements before borrowing are not surprisingly concerned that the commentary too often sidelines them in favour of those who did not.

As an industry we seek to be fair to all our customers. We are concerned that this particular issue is too often wrapped up in soundbites which are neither fair nor helpful to the many people who have an interest in this issue.

Yours sincerely, 

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Fixated on pay

17/07/2009

Sitting in the airport lounge waiting for a replacement plane (as the one I was going to catch got struck by lightning!), I have read more of the papers than I otherwise might.  There is the usual clutch of shock horror flu stories, the BBC has been accused of ageism for sacking older female presenters (and as an older female I am with the sisterhood on this one), and the police now have agreed that if you are a pagan copper you can have Hallowe’en off instead of Christmas day. Hmm.

And then there is stuff about the Walker Review. I am thoroughly disappointed by a lot of the reaction.

Some have said there is not much in it, which is so wrong that I can only presume they haven't read it. Others have called it the new Sarbanes Oxley, which again it isn't as it carefully treads a path that is not new legislation but which beefs up the existing Combined Code of corporate governance - and the boards.

As a nation we are, as usual, unable to get off our fixation with pay. If Walker hadn't gone down this route - advocating general disclosures for senior executives’ pay - then this report would rapidly have been ignored. That in turn would be the most dangerous option of all: if we don't, as an industry, offer more openness about our pay structures voluntarily, we will get legislation. No one should underestimate just how much this industry will become even more of a football over the next 10 months as we enter one of the toughest political fights for two decades. There are no votes for being nice or even fair to the banks.

While it is absolutely correct that people with bonuses, and those- without, will have made mistakes, pay is the issue on which the industry will principally be judged: we must look at ourselves from the perspective of the judges and act accordingly. Walker’s recommendations on pay are not that bad.

Laughably, those who represent the major investors are also calling foul at the Walker proposals. Walker recommends that as shareholders - the owners of the companies – they need to adopt a set of principles to engage with the companies they own, to focus on long term strategies and not just on short term returns. What is a shareholder if not an owner? For years small shareholders have been engaging with companies and have been rightly bitter about the absence of the big shareholders on some of the difficult issues. The companies themselves have often had difficulty in getting that engagement too. So come on, fund managers: you have been vocal enough about contracts, golden parachutes and pay structures in the past; you have done nothing but bitch about the banks over this last two years; now is your chance to join in. Don't be shy - you have responsibilities too, so step up to the plate.

There are problems with Walker too, though. The first (see my last blog below) involves the pay of Goldman Sachs, and at some point maybe some other non-UK banks. The British public has been led to believe that the banking problem is predominantly UK in nature, and that it can be sorted out by the UK Government by new regulations and laws. They have been encouraged in this view by some in the press who simple engage in “banks this …” or “banks that …” language. Whatever we may think about Goldman Sachs’ pay (and the expression “extraordinarily insensitive” is the politest I can think of), the agreement is between the bank and the US authorities - and not us. Is it not about time the politicians and the FSA said this?

This neatly brings us to the second problem: the international one. We will make changes and so should others - and on the same timetable. In April this year the G20 agreed all this: now others should either take these steps or un-agree what they said at the time. And in the UK we also need to sort out the difference between “thought leadership” and “first mover disadvantage”!

The third problem is that this Walker report is an interim report. The final will be in November, as is the Queen’s speech, and we already know there will be financial services legislation announced then. So there is plenty of time not only for these recommendations to change - by which I mean get worse - but also to make a legislation slot available if needed.

Seldom do we grow a world class industry in the UK but in financial services we have and the most important part of that is banking. Meanwhile many here want to take revenge against banks, regardless of the consequences, whilst India and China wait. How we react to Walker, to last week’s Government White Paper and the further list of ideas expected over the next 10 months is hugely, hugely important.

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But what does it all mean?

13/07/2009

So we’ve now had White Paper Week. Many of us are reading the proposals of Government (and then reading them again). So how extensive are they and how much wiser are we about the future?

The answer (as of today) is that there are some very significant regulatory changes - both explicit and implicit - within the White Paper. For example, it states: “the Government agreed with the 28 recommendations of the Turner Review.” This actually means the amount and quality of capital in the financial system will be increased, banks will be required to build up countercyclical capital buffers, there will be a leverage ratio in the UK, the liquidity requirements will be increased, the deposit guarantee scheme will be strengthened (coupled with the likelihood of it being pre-funded) and pay and bonus practices will come within the regulatory framework.

Then the FSA will be given a clearer freedom to act “pre-emptively to prevent instability” and the Government will give the Bank of England (or the FSA, as appropriate) further powers to implement the new global standards that the G20 has called for.

And then there is more. The FSA will be able to change its rules in future where necessary to meet any of its objectives without consultation: not just in the area of consumer protection (as is the case at present). For what are known as “significantly systemic firms” (definition as yet undecided) there will be requirements to put in place “stronger resolution arrangements” - otherwise known by the catchy buzz term living wills - which mean that the large firms will have to make arrangements so that if they get into difficulty they have their own resolution regime, rather than have to fall back on the tax payer. This is clearly going to have big consequences for large banks and inevitably will involve capital requirements being linked to the size and complexity of the firm. The bottom-line intention by Government is that there be “sufficient change at the centres of banks for them not to over-indulge in risky activities throughout the economic cycle”. And on stability issues the White Paper envisages that firms will be encouraged to “reduce or at least better understand the riskier activities they undertake (for example, proprietary trading) and reduce the moral hazard problem by removing the incentive for firms to become systemically significant.”

Now most of this stuff was expected in some form. And the next stage is going to be all about how many changes there will be, what are the costs and what will be the timescale for implementation?

And of course this is without the extensive retail agenda that is also in the White Paper.

However there are two more sets of proposals to come and, whether flagged as white papers or green papers, their content will be important and much of it will be also be adopted - again at a speedy pace. The first paper is going to be from Sir David Walker, is expected on Thursday and will focus on the governance of large corporates and particularly banks. It is bound to focus on risk of course, and what non-executive directors are expected to do about it. My money is on a separate Risk Committee as a sub-committee of the board, with non-execs as members and with significant powers. In fact non-execs will get a lot more responsibilities on the one hand; but on the other, the political correctness typified by the Higgs rules on corporate governance (mainly on the “diversity” of board members) will be kicked towards the long grass. Banks and other large or complex companies will be allowed again to have more people with relevant experience on the board without falling foul of the diversity police.

Next, whether in the Walker proposals or in the second “white paper” expected from the Tories in 10 days or so, pay packages will rush up the agenda - especially if substantial bonuses are paid by some of the investment banking community. Please note that none in officialdom or in the ministerial ranks have yet had the guts to point out that the pay structures are predominantly agreed in the country where the headquarters are located. So in the UK the only real involvement that the authorities have over pay is with the UK banks - not with most of the investment banking community. Pity they have not been clearer about this, as when pay next hits the high spot the BBA will have to make this point for them, though no-one will want to listen. An entire industry will get it in the neck as a consequence. However, the industry does also hold its fate in its own hands on this issue. In this febrile political environment, nothing should be ruled out. If the industry is seen to abide by the spirit of what is required on pay packages (as well as the actuality) then OK. If not, then there will be trouble.

The paper from the Conservatives will repeat their earlier announcement that they would put supervision of the large entities (such as banks and insurers, plus the building societies) back with the Bank of England. The Financial Services Authority then becomes a conduct of business regulator – but there is more to come. My guess is that they will say more about the relationship of the New Bank of England with the New FSA and also what it is that the New FSA would do in future. They may set out in broad terms their view of the capital and liquidity control mechanisms (which inevitably will be different to that of the Government White Paper) or they may decide that is too much detail. My other guess is that they could go for another major statement, possibly about consumers and consumer protection (after all BIS - formerly BERR, formerly DTI - put out its own White Paper last week with a lot of credit and consumer protection proposals in it). The Conservatives could decide to take responsibility for credit for deposit takers from the OFT and give it to this to their New FSA.

And will the Conservatives offer a commentary about those banks that have taxpayers’ money in them? I certainly hope not. George Osborne made some remarks in that direction a few weeks ago and the EU Competition Commissioner Neelie Kroes made comments at our BBA Conference ten days ago. To remind you, she said: “Having cooperatively agreed changes to several German banks, our attention must turn to UK banks …”  And then she gave a broad outline of what she meant. Howsoever their shareholdings may be owned, though, banks are commercial organisations: they need to get on with the job of banking and restructuring (if and when necessary) out of the spotlight. Whilst the European Commission has a locus in their future under state aid rules, the Government has an obvious interest - as does the taxpayer - letting them get on with the job. Supervision conducted quietly rather than under the spotlight is likely to bring a much better result for all – the taxpayer, the country, the competition concerns of the industry, the shareholders and the customers.

Britain seldom builds a world class industry, yet in banking and financial services it has done just that. The consequences of the credit crunch have hit all countries and a number as badly as the UK. But few had the budget deficit that we had and so most have been in a better overall economic position to weather the storm. Also most countries have put to one side now the haranguing of the industry, as their authorities not only have been honest enough to recognise that they bear some responsibilities too but also that shouting and bawling is both pointless and damaging.

Apart from the budget deficit problem, the prime difference between us and other countries is our point in the political cycle. The general election is about 10 months away and it’s going to be a dirty fight. It always is when the polls are the way they are at the moment. The industry has made errors and can expect few, if any, public friends. However if the politicians use the financial services industry as a political punchbag in the run up to May next year, the damage will be serious. I know that this always happens with the NHS and often with education too and it’s not right for them either. I know also that priorities never fail to amaze. When the love lives of Jordan and Madonna command pages of print and the death of Michael Jackson resulted in such extensive news coverage, the judgements made on our behalf about what is and what is not news and what is and what is not important have gone seriously wrong.

And so: whether it is the Government White paper of last week, a Walker review this week or white paper number two to come, it may be tempting to use the industry as a punchbag - in fact it may be very tempting. So, to the politicians may I just say this: There is an economy to attend to and a public sector deficit that is big. You spend it; we make it. Surely it is about time to call truce with us, sort out the future in a more reasoned manner and just move on.

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Crunch time in the EU

09/06/2009

On Thursday 4th June I participated in the Times debate on what was initially described as “Who Bust the Banks?”, but by agreement from all parties was changed to a more positive and appropriate discussion on the issues and the way forward. That evening however the Times could hardly contain its excitement at its big scoop that we would all learn of at 10pm. That was of course the resignation of James Purnell, whose letter was featuring on its Friday front page.

With a good audience and with the measured “elder statesman” remarks of Sir Brian Pitman and Sir David Mayhew, this was not the bunfight so many such events turn into, but there was also an absence of real understanding from that audience as to just how many changes our banking industry will undergo, and what the subsequent costs will be of doing business, due to increases in capital, in liquidity and in other areas which will not actually be decided in the UK but in Europe.

And that European agenda is long, with the Commission already having announced that two further packages of Capital Requirements Directive amendments are to be published, to be expected this summer and this autumn. The June amendments will link capital to pay, put capital against re-securitisations and address the treatment of capital in the trading book. In the autumn meanwhile the Commission will set out the amendments it is proposing on “dynamic buffering” (essentially building up capital reserves in the good times), the definition of capital, the removal of national discretions and options, liquidity and leverage ratios. This is a long list and if addressed with care, balance and sensitivity then these extra requirements have the ability to bring the right result of greater stability, not restricting or making unduly expensive the broad range of normal business activities. The industry also recognises full well that changes have to be made, and it is absolutely engaged in the discussions of what, where, when and how.

But to get all this right requires close contact and engagement at all levels with the EU authorities. And the European elections have taken place at a time of high political turmoil. Will we get a coherence among the UK MEPs or is the variety such that our UK voice is quietened too much? Similarly, as the old Commission times out at the end of the year and the new Commission comes in, will the UK continue to have a serious portfolio or will we become the Commissioner for Administration? The UK has not been viewed well by most of our continental partners since the credit crunch hit as we are deemed to hold a greater responsibility for it and its impact on Europe than any other country except America. Also negotiating in Europe requires political strength and the one thing that we do not have at the moment is anything other than a very difficult situation.

So Europe is of compelling importance. It is imperative that the UK negotiates well and in every way, from the top of the industry to the bottom and to the authorities. For those of us who considered the Turner Review good (and indeed I am one) remember that most of the Turner proposals can only be implemented through the EU and international institutions. Even when that institution is not in the EU, for instance the Basel Committee on Banking Supervision, then what is decided there gets imported into our requirements through the Brussels process.

Having the financial crisis is bad enough. Having a political crisis on top of a financial crisis makes a bad situation worse.

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Commission proposals on European financial supervision

29/05/2009

Given the continuing furore over MP’s expenses and the small matter of the Champions’ League final, few people will have focused on the publication this week of the European Commission’s proposals for the future of the supervision of financial institutions in the EU. Not a subject to get headline writers reaching for their pens, then, but a vitally important one nevertheless for ensuring that the right mechanisms are in place to guarantee the future safety and soundness of banks operating in the UK.

Given that many banks in Europe operate in more than just one member state, EU leaders identified at an early stage in the crisis a need for the EU to have processes in place to monitor financial stability across the EU and to harmonise national approaches to the supervision of banks to ensure consistently high standards. With this in mind, they commissioned a group of distinguished wise men, under the chairmanship of Jacques de Larosière, to develop proposals on how this might be achieved. The report of this ‘High Level Group on Financial Supervision’, published in February, proposed a new two tier framework for European financial supervisory activities:

• At the macro level, the creation of a new European Systemic Risk Council to oversee the stability of the financial system as a whole and to provide early warnings of risks as and when they emerge; and
• At the micro level, a European System of Financial Supervisors to oversee the supervision of individual financial institutions which would work in tandem with national supervisors.

The Commission’s proposals published this week endorse much of what M de Larosière proposed.

We too can support much of the proposals. Whilst the regulation and supervision of firms in the UK must continue to be the ultimate responsibility of the UK authorities – Treasury, FSA and Bank of England – and be set in the context of global standards and agreements (such as those reached at the G20) the EU is a vitally important market and EU legislation which permits banks to operate across national boundaries gives the UK a real interest in ensuring that banks, and their supervisors, based in other member states meet the highest regulatory standards.

So, what do we agree with? The European Systemic Risk Council is a good idea and can work well with our own Bank of England and the international bodies which perform these exercises such as the International Monetary Fund. It is very important, however, that this new body represents the whole of the EU and not just the eurozone. Whilst the Commission proposes that the central bank governors of all 27 member states will be members of the Council, we think it is right that the chairman should be drawn from a country outside the euro to ensure it does not become captured by euro issues.

On the micro front, we welcome the fact that the Commission proposal explicitly states that the focal point for day to day supervision should remain with national supervisors. For dealing with those banks that operate in more than one country, it recommends the use of ‘colleges of supervisors’ which draw together the national supervisors from each country in which a cross-border firm operates to share views on the risks it faces and agree regulatory standards. This too is a positive development. Much of what is proposed for coordinating and harmonising the approaches of the 27 national supervisors in the EU is built on what is already in place. This again is a good thing. Now is no time to be wasting on protracted discussions about the right institutional model for supervision. The important thing is that what is put in place works.

An area to which we will need to give much further thought, however, is the suggestion that there could be some issues on which the new European System of Financial Supervisors could take decisions in exceptional circumstances to overrule those taken by national supervisors. Whilst we acknowledge that this possibility it is set out as very much a last resort option, it could undermine national authorities and exacerbate risks to the financial system if the decisions are not based on a proper understanding of local conditions. There will be much further discussion of this issue in months to come.

The next step for this debate is a discussion by EU finance ministers on 9 June followed by a discussion of EU leaders on 18 and 19 June. There is also a consultation on the proposals to which we will most certainly be responding by the deadline of 15 July.

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Taxing our way into trouble

20/05/2009

What a relief! The banks have now been replaced on the front pages of the newspapers by those two groups for whom it is a more normal position - the politicians and B-list celebrity bust ups!

However, to take a more serious note, the attention on Budget day and thereafter has to date focussed principally upon how much the Chancellor is proposing to borrow. In the Finance Bill though, lie a number of areas of particular significance to business, of which one is the new regime of taxing foreign profits.

Not surprisingly there has long been a desire to simplify the foreign profits tax regime by UK companies of all sizes and types. In any event, following a decision relating to Cadbury Schweppes, the current UK arrangements were not considered to be legal by the European Court of Justice and so something different had to be put in place. The foreign profits proposals were announced, a consultation followed and in the Budget came the commitment that dividends paid by UK subsidiaries in other countries would be passed back to HQ free of tax. That is the good news. At the same time what is known as the “worldwide debt cap” (the anti-avoidance mechanism which prevents too much borrowing in other jurisdictions) will be put in place, so a UK company cannot avoid paying the right amount of British tax by the use of artificial constructions. Again, that is fair enough.

But for the financial services companies there is obviously a problem here as the business of financial services companies, banks in particular, is one of borrowing and lending. Debt is, therefore, the business they are in. In response to this, the Treasury has promised us what is known as a financial services exclusion from the worldwide debt requirements, but in order to qualify as a financial services company, not surprisingly, the company has to be undertaking “qualifying activities”. That list of qualifying activities excludes many activities such as fund management, global custody, investment banking and stockbroking. There is a second test available for those who don’t come within the financial services exclusion, known as the gateway test, which is supposed to be simple - but the word simple does not sit easily with tax legislation.

On Tuesday 19th May the Finance Bill actually began its Finance Committee stage. Also on Tuesday 19th May was the first meeting between the industry and HMRC for the purposes of trying to thrash out the details of the financial services exclusion and the details of the gateway test. Even on the assumption that we can come to a successful conclusion in these discussions rapidly, it still means that something of such extraordinary importance to many major UK companies will have to be created through a series of amendments by the Government to its own Finance Bill. Therefore there will be limited time and ability to work out their impact and to achieve further changes if they are not right.

A second Finance Bill requirement involves the new responsibilities placed on the finance director (or other relevant individual) to confirm personally the accuracy of the accounts - and to be fined if this is not correct. The issue here is not that accounts are necessarily wrong, but as we all know, the accounts of any major company are inevitably complex and equally inevitably subject to a series of judgements about the application of the various accounting requirements, rules and interpretations. In addition, banks are major tax gatherers for HMRC through PAYE, national insurance and stamp duty. Theses processes can and do go wrong as new tax changes get made – now at least twice a year. So in placing this additional responsibility on the finance chiefs of all UK-incorporated companies and UK subsidiaries in the UK, and with a start date of January 2010 for major companies (of which the banks are a large slice) we have all the potential for a UK version of Sarbanes Oxley.

I suspect that we may well be able to argue all these points into a slightly better place than at the time of writing this blog. However there is a bigger picture to all this too, and that is external perception. The external perception of the UK is not very good right now, and added to this now is another large Finance Bill with significant issues about corporate taxation, personal tax and even personal pensions. At the same time there is turmoil in our parliamentary system - all at just the very moment when we need to be portraying ourselves as moving forward, in control of our future and dealing with our serious economic and stability issues.

Whilst markets have looked up, our economy has problems and unemployment is rising. Shortly a large number of young people will exit university: many will not get a job and a big majority of them (because of the way higher education is now funded) will have a significant debt as well.

I certainly know what one of them is doing in the face of all this: he is deferring, yet again, his place at a major redbrick university as he is yet to be convinced that a university degree will actually advance him in life. Instead, having qualified as a diving instructor, he has set up, with two others, Dive the Gap (www.divethegap.co.uk) a company that provides, among other things, internships for graduates through dive training in the Red Sea: this gives them another skill that could lead a career around the globe if they subsequently find the world of work doesn’t want them, graduates or not.

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The state of play on unclaimed assets

06/05/2009

I must respond to Stephen Bubb's blog entry in which he refers to me as “that woman who runs the British Bankers’ Association”.  How nice of him to refer to me in such a polite way.  I do appreciate though that manners, just like accuracy, do not seem to be the nature of today’s environment!

The facts are as follows:

i) The banks’ first priority is to find the individuals who own the unclaimed assets.  There is a great website and a lot of publicity surrounding this.  As a result the banks, the building societies and National Savings & Investments are reuniting tens of thousands of people with the accounts they forgot they had. 

ii) What is left, and is classified as dormant or unclaimed (by the law just passed), then gets put to the good causes that were set out by HM Treasury a couple of years ago.  That is, the decision on the purposes to which the money is put is not for the banks to decide. 

iii) The banks are signed up to this process.

I think it is essential that the correct information on dormant accounts is widely circulated.

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Is banking too big?

28/04/2009

Announced yesterday was the return of King Coal. The decision was finally made that the UK needed to get on with looking at the future as a number of our power stations are simply wearing out. Nuclear stations need to be built too but that will take a lot longer as we have long since lost our nuclear engineering expertise to other countries.

But now we fill the gap with building new coal-powered stations. In so doing we will provide jobs and will help support manufacturing. Plus the carbon capture arrangements – which are doable – meet the green agenda too.

Coming from the manufacturing heartlands of the UK I will be sorry to see so much manufacturing decline and diminish in its importance to the UK economy.

Many have been questioning whether the financial sector contributes too large a percentage of GDP, but that is in fact the wrong question. What has happened over this past decade or so is that whilst the financial sector has grown fast there has not been a commensurate growth in the industrial part of our economy.

So now as we consider collectively, and separately, the changes to the banking industry and its regulation, there are a number of lessons and examples from manufacturing. First, if we regulate an industry so that it ceases to be competitive on cost terms, that industry declines and is lost to our country. Second, countries are themselves competitive and if the UK misses a beat on supporting a particular industry, then other countries move in and then expertise is lost. The presence of a thriving industry means jobs are created and taxes are paid. Decline in an industry means that jobs are lost and taxes reduce. Third, self-sufficiency is still important, even within a globalised world. Just as many in Europe saw the consequences of becoming reliant on gas from Russia, so similar dependency on others for other vital requirements (such as finance) carries with it a comparable vulnerability. We have already seen a significant amount of finance exiting the UK on the back of the credit crunch, as foreign banks operating here have been required to look to their home market first.

And size does matter too. Big companies require big banks to finance them. Taking actions that will reduce artificially the size of a bank would be very adverse for financing the UK economy and getting it out of recession.

It is a very long time since the last recession. In fact you have to be over 40 to have actually worked through the last recession. And that in turn was nothing like as serious as the one of the late 1970s and early 1980s, felt so deeply by the Midlands and the north. And when you do not have experience of a previous recession then it is harder to get through, though many people are instinctively taking the right steps of managing their money better, paying back their debts and generally drawing in their horns. On a macro-economic basis, tax and spend is not usually the answer, although this time around the global nature of the current crisis, some spending and some taxation seems to be the accepted theology.

Some of the taxation measures in the Budget certainly will impact particularly the more wealthy individuals in the economy. They in turn tend to be the ones who are the senior management within our companies, so we need to be careful. Fifty per cent seem reasonable to many under the circumstances, though by the time national insurance is added in and loss of at least some tax relief on pension contributions, that 50 per cent is in effect significantly higher. It is a bit of a case of “Hush, hush, whisper who dares: a great many taxpayers are saying their prayers” - prayers that they don’t get caught by the increased tax.

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Thoughts from Stockholm

24/04/2009

(Editor’s note: Angela wrote this blog in the margins of the European Banking Federation meeting currently taking place in Stockholm)

A couple of days after the Budget and how does it look? Well, as happens so often these days I am in Europe hearing from the perspective of other countries what their take is on Britain. Some of the banter was hardly surprising, though nevertheless rather uncomfortable too.

Here in Stockholm I have only seen a selection of the post-Budget newspapers but I have got the gist of the national debt comparisons (the remarks of the Italian representative here were along the lines of “welcome to the club”). Now the UK always prides itself on not having the same debt as Italy, though Italy is still a country that is surviving. However there does remain – still – a certain respect of the way in which Britain does so much openly, whether it is our Budget and the subsequent critical commentary afterwards or whether it is banking intervention and the critical commentary afterwards. Indeed there is an awareness in all my fellow European countries that whilst the banking industry certainly does bear responsibility for banking problems, at this point in many countries’ political cycles the industry is carrying a disproportionate responsibility. After all, we do not decide monetary policy or fiscal policy nor are we in-charge of regulation.

It is in this context that it is worth reflecting on some of the changes that are being proposed in relation to banking regulation and to the wider financial services community. Whilst there is an understandable rush to put in place new regulations to control risk better and to apply more capital so that some of the activities of banks are limited, the reality is that all banks are conservative now and will be for some years to come. The fundamental issue is going to be more like ensuring that sensible risk taking does continue, rather than preventing it taking pace. And the “shadow banking” sector will now come under much more regulatory scrutiny and regulatory requirements.

Shadow banking is very much an undefined term but should actually be an expression that applies to entities that undertake the fundamental activity of a bank: maturity transformation. It is, though, being used much more loosely to encompass hedge funds and, no doubt, many more entities as well. Shadow banking has become an expression to cover everything that is suspicious or not liked in the financial sector. But here there has to be great, great care.

I am not going to say that regulating these entities is wrong. Far from it. However they have been suppliers of credit to the market. As the economy turns, if these shadow banking entities, however we define them, are regulated in the wrong way then the sole providers of credit will be the banks. They can only do so much. It is going to be a very tight judgement call: to make the right changes to reflect the public anger in a way that does not ultimately have the effect of hampering the UK recovery.

And the universal or broad based bank is another question too. In the UK, in France, in Belgium and other countries the questioning of the banking model that combines both retail and wholesale activities is running strong. The debate is one that needs to take place and a good debate is one that comes up with the right answer. Splitting up the wholesale activities from that of deposit taking – so called safe, utility banking – is the simple proposal for bringing long term stability to the financial system. Like all simple proposals it is unfortunately the wrong one as to do this would heavily impact the ability of banks to finance companies and the real economy. The actual issue is one of effectively controlling the risk of the activities, of which most would highlight proprietary trading as being the high risk one.

So how does one get this across? If a simple argument that can be encapsulated in one sentence requires a paragraph response then it matters not whether that response is right or wrong: it simply will not be heard. Articulating the reasons for what needs to be done and what does not need to be done not only needs to take place between the industry and the policy makers but it also needs to find a way of at least being listened to in the wider public domain. It is, after all, people who vote, not companies.

Light is dawning slowly across Europe onthe reality of some of these issues. Most countries do not have the same type of white hot media as the UK and so banking associations are not subject to the sort of barrage of questions and requirements that the BBA gets. Whilst the white heat is uncomfortable it also means that it is not possible to fail to understand, or even avoid, what the public thinks of the banking industry – the industry that each of us around the European Banking Federation table represents.

In the BBA’s response to the Chancellor’s Budget we said the key to recovery was getting the financial system working again. How boring! So thank you Dominique Strauss-Kahn, who has just said on television that “the key to recovery from the recession is fixing the world financial system”.

Dominique, you said it first!

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Budget Day Blog (2)

22/04/2009

OK we might not have read every word but I think now we can offer a more detailed view. This is a difficult Budget for difficult times. The Chancellor’s emphasis on maintaining financial stability is the right one and key to resolving the high public borrowing requirements is getting the financial markets working better. 

The banks are committed to carrying out their responsibilities in supporting businesses and individuals through the downturn. We will continue to work closely with the Government and other organisations to bring this about.  With most other mortgage lenders exiting the market, the banks have therefore committed to increasing the supply of mortgages.

The increase in ISA limits will encourage people to save for their financial futures.

The reduction in pension tax relief and the increase in income tax for higher earners will obviously affect many who work in the City.

Another measure with particular relevance to the City is the package of reforms on the taxation of foreign profits.  Banks are major international organisations and the industry remains one of the most significant contributors to the economy. It is important that the UK remains the international financial business centre of choice, given the key contribution this can make to future prosperity, and so these tax changes must be implemented with very considerable care.

The Chancellor also announced that there will be a white paper in the next few weeks setting out the details of the commitments that were given at the G20 on financial matters and on the changes to banking regulation which the authorities have been consulting on for some time. This white paper will be an important one for the industry and needs to create the right balance: restoring confidence and trust in the UK financial sector whilst reinforcing its ability to compete in the global market place.

By the way, we also posted some updates on Twitter - we're BritishBankers if you'd like to follow us!

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Budget Day Blog (1)

22/04/2009

So it's early afternoon on Budget Day and we are currently scouring the documents. There were some interesting comments in the speech and we will be commenting in more detail here shortly.

But for the moment our comment is this:

“The banks fully recognise the costs involved in the stability package and have committed themselves publicly to repaying this debt in full as quickly as possible. They are also committed to carrying out their responsibilities of supporting businesses and individuals through this difficult time.

Banks remain major contributors to the Exchequer and also attract international business to the UK. The Chancellor has announced that a white paper is due shortly to set out changes to the regulation of banks. The British Bankers’ Association contributes in detail to all initiatives on changes to regulation, and we will continue to work with the Government and regulators to drive reform which will restore confidence in the UK’s financial sector.”

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Taxing issues at Budget time

21/04/2009

With tomorrow’s Budget shaping as one of the most anticipated in living memory – if not exactly for the happiest reasons – much of the nation’s attention will be focused firmly on the subject of tax. So here are a few timely thoughts on taxation… 

Understandably, much has been said about taxpayer money being used to stabilise banks during the current financial turmoil. Some, but by no means all, UK banks have needed direct taxpayer support to deal with the most challenging financial conditions in generations. Similar measures have been needed in the US, Europe and other parts of the world.

UK banks are committed to working closely with the Government to reverse the downturn as quickly as possible and reaffirm Britain’s position as one of the world’s leading economies.

But when we debate the role of taxpayers, we must not forget that over the long term banks themselves have been, and will continue to be, massive payers of tax – as well as contributing hugely to the economy with export earnings, jobs, community support and sponsorship for sport and the arts.

According to the latest BBA Abstract of Banking Statistics, every 10 minutes banks pay £170,000 into the Exchequer directly through taxation and earn £266,000 for the UK's balance of payments.

And research shows that for every £1 financial firms pay in corporation tax, they pay another £1.50 in other taxes and collect a further £2.25 for the Exchequer by deducting tax at source from savings. So, as well as being big payers of tax, banks are integral to making tax policy work.

In its Budget submission, the BBA has urged the Government to address a number of issues on taxation and red tape.

We want to see a redoubling of effort to avoid bureaucratic European proposals that add nothing to tax revenue.  We seek a commitment to consultation on the draft code of practice on taxation of banks. Indeed we want meaningful consultation from the Government on policy changes generally – not merely discussions around decisions that have already been made.

Along with others, we also seek confirmation of whether VAT will increase to 17.5% on 31 December. Businesses need time to make the needed systems changes and given that the proposed VAT change would take place during a holiday period, banks need as much advanced notice as possible.

Above all we want the Government to work with the financial services industry to sustain the UK’s position as an attractive, competitive, international marketplace. This will in turn provide impetus for economic recovery and ensure that our industry can sustain long into the future the remarkable contribution it has made to the British economy over many years.

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What next for London?

02/04/2009

So I've been asked whether, post-crunch, London can retain its position as the world's financial centre. It's an appropriate question since today's G20 meeting puts us once again at the centre of things.

So here are my thoughts.

London's position as the world's financial centre is not ours by right: it is the result of many years of an innovative industry, the policy of successive governments, the ability to build a critical mass including the essential services that surround finance such as legal, accounting and dispute resolution, skilled individuals, a good regulatory framework and the time zone.  Put together this has created a favourable environment for international business but one which we will need to work hard at to retain.  On the back of the crisis in the world financial system, many countries are now vying for a bigger slice of the international financial services action.  To retain our position not only do we need to make the right changes to UK regulation, but these changes must continue to ensure that the City provides an attractive, competitive and international market place sensitive to the needs of the many and various entities that operate within it.  This means we make the international changes when the other countries make them – leading must not mean first mover disadvantage.  It means that the costs of new requirements must not result in a sector that becomes non competitive or unable to innovate.

And it means recognising that the majority of banks have not made mistakes and the sector is enormously important to the UK economy.

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In praise of the broad-based bank

30/03/2009

In the last six months there has been an increasing number of comments about why banks should be split up. Some say that banks are too large; others say that much of the activity of banks is “utility” services, therefore what is needed are utility banks separate from investment banks – some form of a new Glass-Steagall Act.

Now in the face of the problems in the banking system, and with the well known difficulties of the investment banking arms, coupled with the involvement of the taxpayer in bringing stability to some of the industry both in the US, the UK, elsewhere in Europe and around the world, there is not only a valid point about banks’ activities but also about why taxpayers money should be used to stabilise the industry when other industries are allowed to fail.

Firstly, normal business common sense has always said, and rightly so, that any business with a large range of customers and a broad range of suppliers is much more likely to survive a difficult economic period, provided that it is properly managed, than a business with a narrow range of customers and a narrow range of suppliers. This is the same in banking as in anything else. Looking at which banks have got into trouble, overwhelmingly the majority have been the narrow-based banks. The Wall Street investment banks are now no more as they have either had to be taken over or they have become “bank holding companies” in order to take financial support from the Fed. Then many of the mortgage banks in the US have got into difficulty too - perhaps most spectacularly Freddie Mac, Fannie May and IndyMac, and there are more besides. In the UK, the Northern Rock and Bradford & Bingley were narrow-based utility banks as was HBOS, the largest mortgage provider in the UK. So whilst RBS was, and indeed still is, a broad-based bank, nevertheless the point holds true that the majority of failures come from the narrow banks. This is the pattern reflected in other countries as well.

Secondly, I think that those who call for splitting up banks have forgotten that the actual business that a bank undertakes, which is maturity transformation, is itself an inherently risky activity. Banks do borrow short in order to lend long. Why? The answer is that companies, to build their new factories and individuals to buy their houses, require finance for a period of five, ten, 15 years or more, whilst those who lend money to banks (the savers) want either instant access for their cash or want to be able to get it out in a much shorter period of time than the borrowers need to borrow for. So turning to finance mortgages or personal loans for any fixed period of time, a bank needs to have a treasury function and that treasury function has got to be pretty sophisticated to provide say, a fixed interest loan or a fixed interest mortgage. If that bank is to finance companies, then the sophistication increases: not surprisingly, company finance is not only of a much bigger magnitude of that of individuals but also is more complicated. It finances for leasing, factoring, working capital, fixed capital, plant machinery, to name just a few.

Multi-national companies require banks that can assist them in multiple jurisdictions with different laws, different listing rules, different finance requirements and more. So to say that the banks should not be able to offer this wide range of services would be a very poor decision and would significantly adversely affect the UK economy: these services underpin the requirements of their individual customers and are vital for corporate Britain.

Thirdly, no other country is going to do this. The only other country that has really been talking about splitting up the banks (which is the USA) has just gone in totally the opposite direction. So are we really saying that the UK is the only country that cannot have a broad-based bank? Are we really saying that China can, India can, America can, Canada can, Australia can, France can, Germany can, Italy can but the UK cannot have a broad-based bank? If we are, then there will be a huge exit of business out of the UK and with it will go jobs, tax revenues and the business that relies on the broad-based banking business as well.

The time has come for the case to be made for the broad-based bank. Yes of course it has got to be controlled better with improved risk techniques, closer regulation of the more adult variety and more capital applied to activities (for example the trading book). Incidentally, it was not the industry’s decision to reduce the capital on the trading book: that was the decision of the international authorities. They made a mistake – a big mistake – and they are going to have to change the international rules. In addition, the broad-based banks have been fundamental in contributing something in the region of £50 billion a year into the UK economy. They have certainly been the largest corporate tax payers and have provided successive governments for the last decade and more with the finance they need for the social programmes, for the growth in the economy and for individuals to have what individuals, and particularly the younger generation, have been told to expect as their right – easy credit for today’s gadgets and consumer goods.

It is worth remembering that the banks did not run the economy, they did not create to regulate the regulatory framework, and they did not make the rules. The banks did not liberalise the credit legislation either! Some banks did not control risk as well as they should have done, and that is well known, but to place all of the problems at the door of the industry and to split up a broad-based bank as a solution lacks intellectual integrity, economic sense and political honesty.

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The message is getting through

26/03/2009

Although much attention is still being paid to RBS, and what ministers did or did not know of pension payments, I sense that there is now a broader appraisal. MoneyFacts, for example, has shown that banks offer better rates than building societies on mortgages and savings accounts. BERR has found that a lot of problems with the Enterprise Finance Guarantee Scheme have been due to the scheme not being properly understood (due to communications glitches) and that “the taxpayer cannot take the risk that the business person or entrepreneur does not want to take himself”.

Next we see that on mortgage provision the major high street banks have in fact increased market share. In other words, it has shown that it is the banks that are continuing to lend and others are finding it increasingly difficult, if not impossible, to remain in the mortgage market. And now, a building society has very publicly got into difficulty. The economy is evidently in difficulty and trying to resolve the problems is not easy. Thus, while it is hardly surprising that the banks remain directly in the firing line, this little list at least gives some indication of how the balance truly lies.

Considering the write-offs and the losses and now the proposal from the US to try again with a “toxic bank” option, it is hardly surprising that regulation stays right on the table and will remain there for the G20 in a few days time. Turner has received many plaudits and rightly so for his Review which provides further insight on the “how did we get here” question as well as the second question “and what are we going to do about it now”.

As we start the discussions with Turner and with the EU Commission/de Larosiere Group, and also with what comes out of the G20 next week, there are two things that the UK needs to do quickly. The first is to be absolutely positive that we are going to make many of the regulatory changes such as for capital and liquidity in conjunction with the European and international authorities. Second, that whatever we do locally and however we do it on regulation, the UK will still ensure that it provides an attractive competitive international market place, sensitive to the requirements of the many and various entities that operate within it. Failing to do either of those things will be prejudicial to this international centre and will slow up the recovery of the economy."

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From Andrew Neil to Mervyn King

18/03/2009

Spring sprung at the weekend, the sun came out, the daffodils bloomed, the birds tweeted and the G something or other of finance ministers quietly got on with their work in deepest Sussex, and mobile Sky outside broadcast van or similar backed its way up the drive. Could this last I ask myself, and on Monday the answer was no.

But interesting is the tone and temper of the commentary and views seems now to have shifted a little. Banks are at last able to get on with doing their job and whilst we will no doubt have a few more turns around the subject of bonuses (in particular individual’s pensions, plus did or did not ministries or ministers really know about pension pots) the tension is now moving to the real economy and what we do about the increasing number of people who are now both over indebted in the one hand and are losing their job on the other.

The figures paint a mixed picture. On the one hand people are doing what they need to do and that is paying back their debts, not using their credit cards so much and not spending. On the other hand, although arrears and repossessions have gone up in the housing market, the banks have honoured their commitments and, whilst their share is over three quarters of the market, their repossessions are the lowest of all types of lenders.

Tuesday and it's back to normal.  I was asked on The Daily Politics as to why did I defend the pariahs instead of going and being say, an organic farmer! But that’s Andrew Neil doing his usual questioning and actually the show is good fun. More serious is that the major part of the discussion – or interrogation I should really say – was about a leak regarding the Turner Review on how we change regulation for banking. The leak, or trail, was that Turner was going to say that a mortgage lender could only lend three times the salary of a borrower. The proposition by the Politics programme and indeed by others was that if this was right it would bring prudence into the market and banks should be limited in this way. However, they clearly hadn’t done the maths.

Three times the average salary is somewhere between £75,000 and £80,000 and the average house price is £150,000. So limiting mortgage lending in this way would have three dramatic effects. The first is that some people who have got mortgages would fall into the “bad” group. Secondly it would destroy house values. Thirdly you would remove from a generation their opportunity to get on the housing ladder. The reality is that lending has got to be truly affordable for mortgages, as elsewhere, and not based on some formula or interpretation that self evidently does not, when scrutinised, stand the test of common sense.  I live in hope that common sense will still prevail in this and in other areas.

More opaque but of equal importance, Tuesday also began the serious discussion about the de Larosière changes for financial regulation across Europe. Dry in one respect it may be, but the impetus for change in legislation in Europe is unstoppable and the UK has lost a lot of respect and ability to influence. Engaging now in every direction and in every respect to achieve the right de Larosière result is essential, otherwise we will see a gravitation of power towards the eurozone and a consequent marginalisation of the UK. Interestingly, at lunchtime the Centre for the Study of Financial Innovation was discussing some of these issues in a completely packed hall down a side street in the City. CSFI is an excellent ginger group (I would say that because I am on its council) but in that packed hall many of the contributors fought old battles and made comments that ranged from inappropriate to barking. I except from that my two excellent colleagues, Bill Eldridge of Credit Suisse and Nick Collier of Morgan Stanley.

And then the international bankers had their dinner with Mervyn King at the Mansion House. A much more subdued occasion than would normally be the case, as we are a subdued industry, but it is equally one of the few place where one can go and be among friends. This time it was not the industry that the Governor was commenting about but rather it was the FSA and Government. We filed in, we did our bit, we applauded at the right place, we went home. I look forward to the days when these occasions truly are more cheerful and happy events.

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Not quite the regulatory apocalypse

12/03/2009

When on earth did financial regulation get so interesting? Hector Sants (the FSA's chief executive) has earned well-deserved coverage for his speech earlier today on the future of financial regulation (I was there and yes I clapped heartily - it was a good speech).

But it didn't herald some sort of regulatory apocalypse, nor did it advocate an about face, a retreat, nor anything other than a bold step forward for the regulator. As I see it, Hector Sants has confirmed there is a place for principles-based regulation but he is taking it another way: not moving towards prescriptive rules ut towards what really matters - judging firms on their outcomes.

I have long though that the FSA was too concerned with the execution of rules - looking at firms in a compartmentalised way rather than across the broad sweep of their business.  Now he is saying that the FSA is going to supervise the businesses, looking at their decision making processes and the outcomes of the decisions they make. This also means ensuring the non-executive directors are up to the task of questioning and criticising business strategy - which, when you are talking about an internationally-active bank, means finding and resourcing some exceptional individuals. This can only be right.

He used tough language, but that is to be expected. The world of financial regulation is changing significantly. The FSA has claimed enormous authority in the debate by publicly reporting on its shortcomings during the Northern Rock's troubles. No other financial regulator anywhere in the world has been as frank and as open about its shortcomings - and it was by no means the only institution to have made mistakes.

Now we look forward to next Wednesday and the publication of the FSA's discussion paper on the future of regulation. There has evidently been a lot of contemplation and reflection at Canary Wharf. It will be enormously interesting to see what conclusions they come to.

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That pension story

01/03/2009

Despite the interest in the prime ministerial speech, top of the news was still the size of the pension, or alleged size of the pension, of the former chief executive of The Royal Bank of Scotland. The thing is, anyone who has had just a passing glance at the remuneration report in the previous year’s annual report and accounts will have known that Fred’s pension pot was going to be big. So what was it that meant this pension, albeit an extraordinarily large one but which had been agreed by ministers (or at least one minister) last October, should suddenly come out of nowhere to hit the high notes of the news?

Let me try and answer this question. Recall that at the end of last week the Treasury Select Committee (TSC) had in front of them the new Chairman and the Chief Executive of the Financial Services Authority (the uncorrected transcript is now online here). That Treasury Select Committee - which has honed its skills on interrogating and making life difficult for those which appear in front of them - was majoring throughout last Thursday on how the FSA had regulated and how it missed the problems.

What was it - the TSC were asking - about how the FSA regulated that meant that activities which (in the cold light of day) look extraordinary had not at least been questioned at the time? The answer came back that it was due to light-touch regulation - and furthermore, that the light-touch regulation of the FSA was at the order of the Treasury. That was how it appeared on Peston’s Picks, the blog on the BBC website, more or less before the Treasury Select Committee interrogation had even finished. Less than an hour and a half after that blog appeared, suddenly the shock horror of the pension fund hit the airwaves, drowning out what had been said or implied at the TSC. You do not have to be a conspiracy theorist to believe that the reason for a pension suddenly becoming such a pulsating issue was because otherwise the story that was going to run was that it wasn’t the FSA who had voluntarily done light-touch on the systemic banking issues, but the Government.

But I leave conspiracy theories for others. This blog just charts the events and their timeline - and incidentally how another weekend was messed up. Though we still did manage roast chicken on Saturday night and steaks from the local cows on Sunday!

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Saturdays mean Sky

28/02/2009

Another weekend, another Government announcement. This time at the Labour Party Policy Weekend, the Prime Minister decided that he was going to announce that RBS was going to concentrate on lending to small businesses (which actually RBS had announced the previous Thursday), that the Northern Rock was back in the market to provide mortgages (which had been also announced a few days previously) rather than continuing to offload its mortgage book as had been the case in the previous year, and that everyone should continue to condemn the entire banking industry.

So I welcomed back the Sky mobile van and the BBC opened up their Reading studio so I could respond on behalf of the banking industry. I talk to the same group of extraordinarily pleasant cameramen and television technicians each week – and they’re all wondering why on earth we are going round in the same circle Saturday after Saturday (which we have gone round so many times before!). This just confirms what we all knew, that the news obsession with banking is centred on some presenters and journalists and the rest are as fed up of the subject as the viewers are.

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TGI Friday

27/02/2009

I think most of us will be saying this! Reflecting on the news yesterday, the row over Fred Goodwin's pension pot and what was the nature of any agreement on this will continue to dominate for some time and will resonate for much longer.

Of more lasting substance though is the announcement of the second loss insurance that RBS has taken out against some asset portfolios. This is the key to cutting what has become know as the ‘feedback loop’ between the financial sector and the real economy. Instead of having to reserve capital on a ‘just in case’ basis, RBS will be able not only to continue to lend but also to lend considerably more.

And despite much talk in other countries, the evidence shows unquestionably that all the major countries of Europe have the same issues as the UK. Their banks have both the structured products that are at the root of the problem and the declining asset values brought about by economic recession. So the UK has owned up and provided a template which I will be sending to all my counterparts in the other European countries. Our economy and their economies are intertwined. Switzerland is getting on with reconstruction and, by virtue of its bank going bust, so is Brussels. Ireland is doing its bit on stability and the Netherlands has taken a stake in ING and is seeking to reconstruct ‘new ABN’. Parking national pride is not easy and getting on with the job of reconstruction is difficult and expensive – but it is essential for all EU countries and delay will make it harder rather than easier.

So as the next few days will no doubt be wall-to-wall pensions, pay and who said what to whom and where, with jobs and losses running a strong second place, the real story is in the details of the asset protection scheme. Breaking the downward spiral here and elsewhere really would make it TGI Friday and TGI Monday/Tuesday/Wednesday/Thursday as well.

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UK Financial Investments Ltd. - a force to be reckoned with

25/02/2009

It’s Wednesday and last night I finally got to read the UK Financial Investments Ltd concisely titled document – “An Introduction: Who we are, what we do and the Framework Document which governs the relationship between UKFI and HM Treasury”. The document in fact is almost shorter than the title but the importance of it is huge.

UKFI is the organisation set up by Government to manage its (or the taxpayers) holdings in the banking industry: RBS and Lloyds TSB for now, and at some point Northern Rock and the Bradford and Bingley. It has a board of seven of which one is its chief executive, the former second permanent secretary to the Treasury. It then says on page seven: “we are a small company with a number of full time employees including the Chief Executive currently expected to be around 15 at full staffing.”

So UKFI is clearly not just an ordinary investor but a seriously activist investor in some of the banking industry – and not unreasonably, as there is an awful lot of taxpayers’ money tied up. I move though to page nine and “Our Objective”. There it explains that the goal of the UKFI is to manage the investments and to develop and execute a strategy for disposing of the investments in an orderly and active way through sale. Hurray! This is the first clear and unequivocal statement that the UK is not proposing to have a state-owned banking system but rather it is proposing to sell the investment and pay back the shareholders – that’s the taxpayers – so hurray a second time.

Reading on, while it holds the shares, UKFI’s four principles will be monitoring performance; intervening when necessary; voting; evaluating and reporting. Fine. Then it is also seeking to ensure that bank boards are operating effectively and that company strategies protect and enhance shareholder value. But at the same time it also makes it quite clear that if UKFI has concerns about strategy, operational performance, acquisitions or disposals it will intervene with the board. Similarly, UKFI will vote its shares wherever practicable to do so and inform the company in advance of any intention and rationale - and will furthermore disclose how UKFI have voted.

So let’s be quite clear: this is an activist investor of the type that we possibly have not seen to date and the UKFI is a force to reckon with. And not just a force for those banks whose shareholding it is managing on behalf of the Government: because it is going to be saying publicly what it is doing, UKFI will become a standard setter in a number of key areas for the banking industry in the UK.

Bedtime reading is worth doing – and perhaps I can say to the UKFI that next time you have your photographs taken do you think you could decide as part of your rule making and in accordance with the principles of your organisation that perhaps just one of you smiles?

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Trips to Westminster - small business lending, ID cards and more

24/02/2009

Another week, another speech to deliver – followed by a Q&A session on banking. This time it was over in Westminster on Monday evening and the questions were perhaps not quite as good as the American European Business Lunch that I attended last week, and certainly it was rather more bloody. But then that is part of the job I do, and it was soothed by a rather nice couple of glasses of white wine courtesy of one of the Lords. That was in fact my second visit to Westminster of the day, having spent an extraordinary 45 minutes in the early afternoon being ‘sold’ the benefit of the National ID cards by the minister with responsibility for identity.

And then it was back again to the Commons on Tuesday with the Lib Dems and, yes, it’s banking and the lending to small businesses. Why, I hear you ask, do we not brief them in writing? The answer is we do - frequently and clearly, and in some length – but the one-to-one visits are still necessary.

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Boys and their toys

22/02/2009

Who said my life isn’t different? Saturday was shopping and cooking, and Sunday I was car builder’s mate lying underneath a car that my eldest son is building. I was tasked with hanging on to various nuts and bolts, while he had the rather cleaner job of tightening it all up. I look forward to when it is finished – at least I think I look forward to when it is finished, as then I can see I will be accompanying him on the test drive… and he’s no slow coach.

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European Banking Federation - not just another talking shop?

20/02/2009

After speaking at the American European Business Association lunch on the ever-popular subject of what did the banks do and what should happen next, it was off to Prague for the European Banking Federation executive committee meeting. The EBF ExCo slowly trots round European capitals, though why it cannot stay in Brussels for its meeting (where the secretariat live) I do not know. When the EBF does get to a decision it is actually quite powerful because it represents so much of the industry in Europe. But often it remains a talking shop.

By the time I arrived at my hotel on Thursday night they were all just rolling back in from dinner and the meeting itself commenced on Friday. It was a talking shop meeting! Amongst some of the interesting pieces of information, though, were that it remains only the UK and Irish who have expressed regret on behalf of their banking industries: the other countries’ associations have not done so and not only do they think that they have nothing to express regret about, in some instances they consider that I have let the side down by publicly saying that the industry is sorry for its part in the current problems.

But then equally it is only really in the UK and Ireland (and to a certain extent the Netherlands and Switzerland) that the industry has been open about what its exposure is to sub prime and structured products – the products that are causing all the problems. In a number of other European countries, including two of the major ones, they are yet to ’fess up. While it is clearly for them to decide, it is certainly not going to help in righting the wrongs of European economies or enabling a quick recovery.

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Blast from the past

17/02/2009

A call about Shell, and the capital gains tax row that erupted in 2005 when it merged with Royal Dutch Petroleum. The issue was that while most people either got shares or cash without having to pay tax, some UK shareholders in Royal Dutch got a big capital gains tax hit. The campaign was huge and eventually Shell came up with an alternative which sorted out the tax problem. By then, though, some had unfortunately already paid the tax. The call was about whether that tax was in fact lost forever and the reason it came to me was because I had been part of the campaign to get Shell to change. Injustices never truly go away, even though changes are made.

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Banking for ex-offenders

16/02/2009

UNLOCK (the charity who campaign for reformed offenders) and others came for a seminar on access to banking for those who are leaving prison. It is an industry issue because most prisoners either do not have a bank account or their old account is dormant and they are not sure how to resurrect it. If they are going to get back on their feet, a bank account is a big part of getting started - from social security onwards. Projects are up and running, looking at various ways in which complications can be overcome, and it is interesting to see the results. Helpfully it is advised by a mixture of ex prisoners and prison officers, which will help to get this tricky proposition correct.

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