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Fixing banks' boards

Robert Peston | 22:00 UK time, Sunday, 8 February 2009

On the face of it, the independent review of the UK banking industry commissioned by the Treasury should be radical.

In explaining why it needs a review, the Treasury identifies grave failings by non-executive directors of banks and by the owners of banks.

Boards and shareholders allowed remuneration practices which bestowed vast riches on individual bankers for taking risks that subsequently hobbled their banks and the economy. .

This was the result, or so the Treasury implies, of boards being given inadequate information and also being stocked with directors lacking the skills to assess banks' complex operations.

As for the big institutions which own the banks shares on behalf of those of us saving for our retirement, they failed to monitor what was going on inside the banks.

It all represents a terrible indictment of our stock-market based system of owning and managing big companies.

But anyone hoping for revolutionary recommendations from the Treasury's review is likely to be disappointed.

The Chancellor has appointed Sir David Walker to chair the review. - and he is seen in the City as one of them.

Based on his track record, Sir David is expected to try to fix the current governance system rather than declaring it bust and in need of replacing.

Comments

  • Comment number 1.

    Yes, at long last the Treasury Select Committee are calling the banks to account. However, can they add the Chancellor to the list for the Citibank influence, please?

    Let's look at his replacement for the double-hatted Sir Philip Hampton for a moment. As you know, it's incompatible that the Chairman of UKFI Ltd should also be one of his chief beneficiaries, at the same time as being responsible for removing all duty of care. Glen Moreno was previously Citigroup's Chief Exec, another of this week's UKFI appointees Michael Kirkwood was Citi's MD Global Banking and former head of Citi UK, as was RBS' non-exec John Mcfarlane. Guy Whittaker, RBS' Finance Director, was formerly Citi's Group Treasurer.
    Equally, Moreno's job as CEO of Pearson had him working closely with Baron Stevenson of Coddenham, HBOS' chair until the LBOS takeover, and chairman of the House of Lords Appointments Commission, responsible for the nomination of new members of the Upper Chamber. And that's not mentioning the Times' accusation against him...
    And the Chancellor claims ignorance!

  • Comment number 2.

    It's just the standard nu-labor tactic of delaying, sidetracking, looking like you care, agree with everyone, buy time, do nothing ,stay popular,spin,waffle and panic.

    Meanwhile in the real world someone else just lost their job.

  • Comment number 3.

    It's a disgrace that the Independent review wasn't wider examining the role of the FSA and also the actions of the Government who appear to have brought a couple of Banks with the accounts unseen, in the process bankrupting the country while it was in their care.

  • Comment number 4.

    The king is dead, long live the king. Business as usual, just a bit more circumspect.

  • Comment number 5.

    It is whitewash. It is just an excuse to postpone the debate.

  • Comment number 6.

    Robertwrote:

    "the Treasury implies, of boards being given inadequate information and also being stocked with directors lacking the skills to assess banks' complex operations"

    I still find it amazing that we should be surprised that company boards are filled with amateurs when we as a society prize amateurism almost above everything. We take a real pride in not being able to do sums - so should we be surprised that the managements of our companies are similarly skilled? They are after all made up of we ourselves!

    There is the notable case of the Financial Director of one of the big four banks not even being a qualified account, but a trader.

    The problem of supervision and company law and shareholders in the UK will show up the deficiencies in our ownership systems. We have single boards made up of management with a few of their friends as external directors. We have no supervisory boards with a statutory duty to have genuinely independent members of works councils or delegates from local authorities - the Higgs reforms of a few years back were just ignored and never implemented - another case of the regulator not performing!

  • Comment number 7.

    How would it be replaced and with WHAT?

    You are kidding when you write such simplistic abcdefg …..


    It requires proper regulation and proper understanding.


    For example

    The lack of knowledge on the BASIC products.

    Effectively the Banks all had Volatility positions and what has happened is the volatility has blown their positions up.

    That together with the Failure of risk assessment.

    Now ROBERT please stop it with you alphabet of nonsense.


    SUNDAY lunch with much VINO?

    Are going the way of the BANKERS?

    FACTS please!



  • Comment number 8.

    Regarding Sir David Walker
    Just as Sir Phillip Hampton, author of the Hampton report, was set to run UK Financial Investments Ltd, supposedly supervising the Banking Industry lifeline but excused any responsibility in the matter by the , so we now find the author of the Walker Report [Unsuitable/Broken URL removed by Moderator] on regulating the Private Equity industry, adopted by the Twelfth Special Report of the Treasury Select Committee, whilst actually a lobbyist on behalf of the said industry, acting as reporter on the crash!

  • Comment number 9.


    Just pick a few of the more intelligent and wise posters here. They'd do it for free, they'd get it right and finally there would be a ray of sunshine.

    But no.... same old waste of time.

  • Comment number 10.

    Robert , watched the news @ 10 pm and I thought you had got it right . The government is under a lot of political pressure and an independent review is a good diversion tactic to mitigate the bonus issue .
    Regarding the bonus system , I can't see the banks changing the culture and within a few years we will back to where we started with some minor alterations to the banking regulations.
    The concern I have , instead of the banks focusing on new opportunities and reviewing their business models , time and effort will be spent on this phony war pretending that they are acting in our interests.
    Its only last year that the finance sector created a big percentage of our GDP , I believe there will be new opportunities arising from the ashes . I hope this fact doesn't get lost in the political turmoil that follows . Governments running companies does'nt work , so we need to get these banks back into private hands asap.

  • Comment number 11.

    On the news tonight I heard Ali D blame the banks out right for the financial crisis.

    Still no questions on how the regulations allowed the situation to arise, or questions on the lack of leadership when it was obvious that the level of debt was unsustainable.

    When will the journalist grow some and start exposing all those that contributed to the mess that we are all paying for.

    Its is your duty to make them accountable.

  • Comment number 12.

    Poacher turned gamekeeper,don't hold your breath.

  • Comment number 13.

    Robert, you say "Boards and shareholders allowed remuneration practices which bestowed vast riches on individual bankers for taking risks that subsequently hobbled their banks and the economy."

    I believe this is indicative of the corrupt "you scratch my back and I'll scratch yours" philosophy that exists at the highest levels of corporate power. The non execs and remuneration committees are all talking up the game so they can milk company profits for their own gain.

    The small shareholders have long been voicing their disapproval at the obscene levels of remuneration these directors approve for each other, but unfortunately they are shouted down by the institutional investors whose directors are also on the make.

  • Comment number 14.

    is it illegal to lose client's money?
    when sainsbury's pension fund took mercury asset management to court they settled to avoid bad publicity

  • Comment number 15.

    So much fuss has been made about the economic downturn and shortcomings . My view has always been with the fat cats taking as much as £17m on bonuses. My point is this is an HR Limitation which has been exploited over years and now the bottom has fallen out.

    I have a great belief I can create a middle ground to justify a bonus package that is meaningful, secure and justifiable. Employees will be as happy as their axe wielding bosses only more with an approach of a thinking cap. Funny to say we have the tools , application and resources but not being applied at the upper echelon of Power

    It is true the excesses must stop but we still need our High flying bosses at the rate of Tesco (Every Little Helps)

  • Comment number 16.

    All inquiries are done in this way - all the way back to Yes, Minister; there was a great episode on this I remember.

    Yet the banks are being hammered over their pay - where are the questions for the BOE, FSA and Government, who are all equally as culpable.

    Also, I note the BBC regulalry has these types of inquiry, yet jonathan Ross has a job. Careful where you cast the stones Mr. Peston.

  • Comment number 17.

    Not just the "nationalised" banks, please. Mr Varley and his people were going hell-for- leather to buy ABN for 60-plus billion, before "Sir" Fred's and the RBS consortium saved Barclays' skin by outbidding them in the stupid stakes.

    Varley's "independent" Barclays bank is still in existence purely by default. It could not have survived a full merger with ABN, including Lasalle and all its sub-prime mess.

    These are tainted people who should be shown the door - and certainly not people who should be taken seriously on the back of the Mickey-Mouse "profits" which will be unveiled to a gullible public tomorrow morning - and, no doubt, subsequently used to justify the payment of preposterous bonuses to keep on board all the "talent".

  • Comment number 18.

    Now isn't this a little brazen?

    Akin to the mafia being investigated, tried, and judged by their cousins!

    Do we really have to head off down to London and chuck them all out, the whole rotten little club, by the srcuff of the neck?

    We really want an honest, decent system that treats us ordinary Joes with a bit of respect.

    We are being taken for muppets, yet again. No matter what abilities Sir Walker has, he is too close to too many to even hint at indepedence.

    There are plenty of other well qualified people who could do this.

    I would prefer a police officer myself.

  • Comment number 19.

    GOLLY GOSH A REVIEW OF THE OBVIOUS

    ALL TOOOOOOOOOOO LATE!

    HOW ABOUT A REVIEW OF THE FSA AND

    THE BANK OF ENGLAND ASWELL AS

    NULABOUR.

    FLUSH THE LOT AWAY TO THE STYGIAN

    DEPTHS FROM WHENCE THEY CAME.

  • Comment number 20.

    Anyone interested in starting a GOOD bank, funded by savers, and offering them a good interest rate?

    Great market opportunity!

  • Comment number 21.

    Boards across the... erm... board, need to be replaced. Heads should roll. The bursting of the bubble was not unforseeable. It's just that the lazy incumbents were blinded by easy money. They should be replaced by any of the many that did call the bubble.

  • Comment number 22.

    It is right for Darling to lay the blame for the banks' misdemeanours at the door of the management and major shareholders but they were breaking no laws in their failures. The established retributions for running a business badly are loss of job/loss of share value. This is the way competitive business works.

    Until the present crisis, the dependence of the national and global economies on the banks had never been loudly enunciated and even if it had the push for profits (personal and company) would have resulted in its being ignored anyway.

    At the root of the problem is the fact that all governing bodies failed to see the consequences of what was happening or at least do do anything about it.

    I have only a limited knowledge of the intricacies of financial institutions but what seems clear is that two factors combined to result in this catastrophe viz. the ability to 'sell off' large blocks of loans to Special Investment Vehicles based on valuations which were clearly nonsensical and, most importantly, to be able to remove these from the banks' balance sheets, even though the banks were still ultimately responsible for them.

    This could only have been possible because the rules were wrong (i.e. that there was a failure of governance) and the responsibility for that lies with the FSA and/or the Bank of England and/or the government.

  • Comment number 23.

    The fundemental question is what are banks for? The boring bits of providing retail banking and lending to individuals and business has been undermined by their high risk activities especially in the USA and by trading in instruments that were originally set up to minimise risk, ended up maximising losses.

    The future activities of major clearing banks cannot be allowed to threaten the basic function of banks. Shareholders must bare some of the blame by insisting on ever higher returns and by backing the crazier management schemes and allowing renumeration schemes that reward risk taking above anything else. Regulation must be stricter.

    The review must lead to boring banks again. If investers want excitement then they will need to consider other investments. It should however be pointed out that banks continue to make substantial profits on boring banking - the shareholders and the managers should be content with that.

  • Comment number 24.

    "Boards and shareholders allowed remuneration practices which bestowed vast riches on individual bankers for taking risks that subsequently hobbled their banks and the economy. ."

    The individual bankers did not take the risks that "hobbled their banks and the economy". The Government did.

    The crisis is a systemic one. Individual bankers are paid to look after their individual risks on the assumption that regulators are looking after the stability of the system. The regulators and their Government masters failed at this task. They let positions build up across banks that would not be a problem individually, but are a very big problem collectively.

    You cannot charge individual banks with looking after the stability of the system.

  • Comment number 25.

    Looks like i have to take another

    DISHONEST BANK TO TASK FOR THE LOSS

    OF MY IDENTITY DOCUMENTS AND

    DEFAMATION.

    NICE PEOPLE TO DO BUSINESS WITH.

    APPARENTLY DEPOSITING MONEY IS BY

    INVITATION ONLY? WHOSE I WONDER:?

    THEY FORGET WHOSE MONEY IT IS.

    MUPPETS!!!!!

  • Comment number 26.

    "Sir" David Walker. Another one of them.

    Good Lord. Or is that an oxymoron?

    What chance do we have?

  • Comment number 27.

    This is a fine example of making the system so complex that only a few, if any understand the comlexity of it all, least the regulators, then milk it for all it is worth.

    The problem is that it is no good apointing someone who preports to knowing what is going on, or for that matter was party to instigating what has gone before. You need to bring in people with clarity of mind, and not corrupted by the system itself.

    The very people within the system are corrupted by the system itself. I have a degree in Physics and opted not to go into the city or finance for this reason, I was not attracted to wealth for the sake of wealth itself. I was attracted to making the world a better place for all. The argument that the city attracts the best people is defunct, it just attracts the greedy.

    What I am working towards is a way of producing energy that is not relient on oil, gas, or any other form of fossil fuel. That would be a big kick up the arse to the people that rule the world today.

  • Comment number 28.

    This is an exercise in blame storming and playing ti the gallery. The fault lies with the central banks (not controlling asset prices in the US and here) and the regulators. Yes, there is some responsibility for the investment bankers to own up for, but only after the man who (1) designed our pathetic regulatory system for British banks (2) set out the brief for the BoE in setting rates so they were not permitted to do anything about property prices and (3) lost control of public sector spending has taken some responsibility. Yep, that would be Gordon "no more boom and bust" brown...

  • Comment number 29.

    Happy times for Sir David and company!

    You sound as fed up about all this prevarication and delay as the rest of us do, Robert.

    We are becalmed, just listening to the latest lapping sounds hitting the side of this boat in an otherwise motionless sea.

    (Water, water every where,
    And all the boards did shrink;
    Water, water every where ,
    Nor any drop to drink.)

    You do have to wonder how a democracy can be so easily side stepped. I often wonder what would be happening now if Mo Mowlem, Robin Cook, Donald Dewar and John Smith were still alive today.

  • Comment number 30.

    Of course the inquiry is to be held by one of the bankers' own. It's not aimed at radical action, but at distracting and diluting the peoples' righteous anger at our failed government and their erstwhile friends in the City.

    It seems to me, back in the early '90s with the tory government in its death throes yet still getting elected, Labour politicians - or rather 'Blairites' - were more hungry for power than they were for socialism. Bankers were worried about losing their cosy positions with the ousting of Thatcher and Major's failure. So the same bankers managed to convince Gordon that he could pursue his dream of being Super-Gord, Saving The World and Creating a Fairer Britain [whilst Bliar pursued his dream.... of being prime minister], providing he played by their rules; which boiled down to that the workers would pay for it all whilst the capitalists and landowners became ever richer, with senior bankers heading the field. I dare say they shared their sheep shearing secrets with Gordon in some of the early meetings that he had with them in the late nineties. Now it's all gone horribly wrong; but no problem - us workers are still here to pay for the elite's gross deriliction of duty and lack of honour. Only now it's the workers not yet born as well.

  • Comment number 31.

    What is the point?

    It is clear that the system needs a radical overhaul. Once again, The great leader is trying to pull the wool over our eyes.

    Who is he kidding? Does he think the public will be satisfied with a little bit of tinkering around the ages. We should send him the answer - a resounding NO!

    I take it this chap is getting paid a lot of taxpayers pounds to carry out his investigation. Why should we pay him if he is not acting in our interests. Any fool could tinker with the current model. What we need here is a new way of thinking - outside the (banking) box.

    Come on Great Leader. Show us that you are capable of taking radical action. Enough of the piece meal - that won't get us anywhere. What we want is a new way forward.

  • Comment number 32.

    This is all hogwash.
    Just an attempt to lay all the blame at the door of the bankers.
    But Gordon the Golem never minded what the banks were doing when the good times were rolling. He praised them to the heavens. He allowed house prices to rocket, convinced that he'd abolished "boom and bust". Interest rates should've been much higher going into this downturn, giving more scope for movement by the BoE and also probably stopping the housing boom from escalting out of control.
    There's blame aplenty to go around. But it's shameful of the government to lay it all on greedy bankers. The sins of omission and commission by the Treasury and the BoE must also be investigated.
    Why wasn't the "independent" BoE encouraged to take house price inflation into account when setting interest rates? Ah, that's right, the housing bubble might not have been as bad as it was. And interest rates would've been higher and the Golem was always hailing his low interest rates.

  • Comment number 33.

    Can you please explain to me why when I breach my contract with a bank or finance company I have to pay a penalty, yet when a bank, or finance company breach their duty, they get to get massive bonuses. It appears to me there are two sets of rules here.

  • Comment number 34.


    I'm sure that Sir David Walker will not be influenced by his friends in the city but I anticipated that his report will say.

    1. We must pay bonuses to attract the brightest and best to the industry.

    2. If we don't pay bonuses there will be a brain drain.

    3. We must have better bank directors and pay them bigger bonuses.

    4. We must give big bonuses to bankers who put their heads on the line by taking lots of risk.

    (4. doesn't sound quite right but I'm sure it involves them putting their heads somwhere.)

  • Comment number 35.


    PS and I forgot,

    5. We musn't give way to the politics of envy - solution: bigger bonuses all round!

  • Comment number 36.

    So the so called enquiry is to be a PR stunt whitewash smudge op THE BANKERS AND THE POLITICIANS ARE ONE OF THE SAME - surprise surprise.

    Bankers will get their last bonus' as paid for by the tax payer and get to keep the millions/billions they have earnt in creating this collapse.

    But at least in the 'future' 'bankers' of 'quasi nationalised banks' will not get such huge bonus' nor such wages - BUT WAIT - DOES THIS MEAN SUCH FUTURE 'BANKERS' WONT ACTUALLY BE 'BANKERS' RATHER THEY WILL BE CIVIL SERVANTS!

    The ROBBING BANKERS by then will be long gone having run away with the loot knowing they have bled the syystem dry, dis-associating themselves just before such banks start to implode taking UKplc with them.

    No doubt they will then turn around and blame it on the civil servants running the banks and offer some alternative solutions?

    SOUNDS LIKE A PLAN TO ME!

  • Comment number 37.

    Well You're in disagreement with your friends Nassim Nicholas Taleb and Nouriel Rubini.

    They're stating that the important change is bankers bonus' in the past and are agitating to have those bonus' confiscated:

    http://www.facebook.com/group.php?gid=51818722129


  • Comment number 38.

    Robert Preston:
    I think that is a good idea, on fixing the banks boards of directors...

    ~Dennis Junior~

  • Comment number 39.

    Enough of this.

    We will have no economy left by the time the investigations and enquiries are over.

    Does our government not realise we are sick if all of this and yet another enquiry will not keep us quiet any longer!

    Serious fraud investigations, massive overhaul of pay structures at banks and government-now please. The country won't wait much longer.

    While waiting for the outcomes, try the following:

    Ban bonuses
    Raise interest rates
    Stop all repossessions as a result of credit crunch redundancies.
    Lower income tax thresholds drastically.
    Stop homebuyer packs
    Outlaw lawyers who ambulance chase
    Ban all quangos
    Sweeping government cuts-eg-do we really need a Minister for European Expansion, and drastically cut MP expenses.
    Invest in research, development and manufacturing
    Ban off shoring of call centres-make it tax efficient to keep them in this country.

    Again, just for starters.

    Stop the woffle and dancing round the mulberry bush.

    Let's see some definitive action.

  • Comment number 40.

    And just how will the markets react in the morning?

    All this carry on over bonuses and enquiries will have the stock exchange all of a either again!

    If that happens, there will be a very real risk of real risk that there will be no money for bonuses anyway!

    Just take a look at what people are going to do with their money if bonuses are paid-only a fool wouldn't take them seriously!

  • Comment number 41.


    Alastair Darling said yesterday, 8th February 2009 that nobody
    associated with these large losses should be allowed to walk
    away with large bonuses.

    A couple of days ago I posted that the governments were warned
    by regulators, Howard Davies, as far back as 2002 and provided a
    couple of links to support that contention.

    I said there is no way they can credibly say that nobody saw it
    coming. And that must include Gordon and Tony.

    Should Alastair's remark today also apply to Tony Blair?

    Tony Blair's government having got rid of Howard Davies appoints
    Callum McCarthy the ex BZW Barclays' investment bank man, as
    chairman of the FSA. Callum McCarthy described himself as a
    deregulator rather than a regulator and lived by the mantra of
    the market. Even after having a market man and deregulator
    become chairman of the FSA it didn't stop Tony trying to cramp
    their ability to regulate further by accusing the FSA of 'hugely
    inhibiting business'.

    Quote from the Telegraph:- "McCarthy was knighted years ago,
    soon after Tony Blair publicly claimed that FSA red tape was
    'hugely inhibiting business'. McCarthy fired off a four-page
    letter denying bureaucracy but soon after proposed scrapping 300
    pages of the 700-page Conduct of Business Rules. The knighthood
    suggested he had made up with the PM."

    In Paul Mason's blog post "An Orwellian episode" he writes:- "We
    don't know how the spat ended because Tony Blair's reply to this
    letter has been suppressed under the Freedom of Information
    laws. What we do know is that the FSA was under political
    pressure from the Labour government to be even more hands-off
    than it already was."

    In Lord Turner's Economist's Inaugural City Lecture of 21
    January 2009 he says.... "The far bigger failure - shared by
    bankers, regulators, central banks, finance ministers and
    academics across the world - was the failure to identify that
    the whole system was fraught with market wide, systemic risk."

    It's clear that although Lord Turner is admitting the failure of
    finance ministers which means the team of Brown and Blair, he is
    excusing and muddying the waters in rue Yes Minister fashion by
    trying to share the blame out with "academics across the world".

    The truth is that academics warned of the dangers, and any
    regulators who showed any signs of doing anything about it were
    moved and/or criticised. It is clear that it was the politicians
    who failed.

    As Paul Mason, Newsnight´s economics editor, also points out,
    Gordon Brown as Chancellor of the Exchequer said in a June 2007
    in a speech to Mansion House. "I believe it will be said of this
    age, the first decades of the 21st century, that out of the
    greatest restructuring of the global economy, perhaps even
    greater than the industrial revolution, a new world order was
    created."

    I can't help but wonder if Gordon Brown wasn't indicating an
    astonishing degree of prescience for one, who had in Lord
    Turner's words, failed to realise that "the whole system was
    fraught with market wide, systemic risk."

    Or should we conclude Gordon Brown did know all along, but had
    done nothing for electoral reasons, or because he had his eye on
    becoming Prime Minister and First Lord of the Treasury himself?

    In Docking bankers' pay Robert Peston, the BBC's business
    editor, writes "the luckiest bankers may turn out to be those
    who were sacked last year for their incompetence and managed to
    walk away with payoffs and fat pensions"

    So is Tony Blair now a lucky banker? It was he who as First Lord
    of the Treasury encouraged the regulators to leave the city
    alone. Did he get his own large bonus for failure after leaving
    his position?...

    Tony Blair joins investment bank JP Morgan.
    http://news.bbc.co.uk/1/hi/business/7180306.stm

    "JP Morgan, one of Wall Street's leading banks, is part of JP
    Morgan Chase & Co, a global financial services firm with assets
    of $1.5 trillion (£760bn) and operations in more than 50
    countries."

    "Mr Blair earlier told the Financial Times he planned to take up
    'a small handful' of similar roles with other companies in
    different sectors."

    From the Times online:- "He is believed to have held talks with
    other banks, such as HSBC and Citigroup, about such roles and
    there was speculation at the end of last year that he would take
    a position at Credit Suisse because of his close friendship with
    Russell Chambers, one of the bank´s senior executives...." and
    ...."Jamie Dimon, chief executive of JPMorgan Chase, said Mr
    Blair would be 'enormously valuable' to the company. 'There are
    only a handful of people in the world who have the knowledge and
    relationships that he has.'..."

    From the Guardian:-
    Zurich Insurance job takes Blair's earnings above £7m

    From the Times:- "Tony Blair has come under attack from the
    Chinese media after he was allegedly paid $500,000 (£237,000)
    for a three-hour trip to a luxury Chinese housing estate"....
    ..."Mr Blair gave a speech in Hong Kong at a lunch hosted by
    Merrill Lynch, the financial services firm which is one of the
    world's biggest investment banks, before heading to engagements
    in the booming cities of Shenzhen and Dongguan on the Chinese
    mainland."

    So, it would be interesting to watch Alastair Darling be
    questioned by any journalist, Paxman perhaps, about saying that
    nobody associated with these large losses should be allowed to
    walk away with large bonuses.


  • Comment number 42.

    Judging by the speed of previous New Labour reviews, the outcome won't be heard until they're out of power anyway.

  • Comment number 43.

    I'm having to draw cash from my personal savings to cover my small business's tax bill, thanks to the shocking mess banks and politicians have made of doing their jobs.

    Obama caps bankers' pay, just like that.

    The Labour Government orders a year-long review of the industry.

    For how much longer do we have to put up with this shambles?

  • Comment number 44.

    Questions for Robert Peston

    Robert,
    Can you please enlighten your readers on the details of the UK Governmnet insurance scheme for bank's loans.
    I understand the following:
    1. For a fee of about 4% of the value of assets UK Government will insure assets of the banks while leaving the assets on the balance sheets of the banks;
    2. In case of insured assets being written off completely bank will suffer a loss of 10-15% and the rest is suffered by the Government
    3. The fee will be taken in cash, preference shares or warrants

    I do NOT understand the following:
    1. Based on what value of assets insurance fee is calculated?
    2. Who decides which assets to insure and which ones not to insure?
    3. Are the conditions of the scheme being discussed with each individual bank separately or are there certain framework with conditions and any bank are free to participate?
    3. What about assets that temporarily lose value (written down) but later they would appreciate if the economy and proporty market recover? Will they need to be insured?

    Previous so called "bank bail outs" of UK Government were on punitive terms and, I believe, are quite profitable for tax payer. After mid October 2008 "bail out" - shares of RBS, LLOY and HBOS fell down significantly. Is this "bail out" going to be similarly punitive to the banks?

  • Comment number 45.

    Quick comment.

    Having worked with senior execs in banking for more years than I care to remember, one thing always struck me.

    Remuneration was based on short term goals resulting in short term strategies, short term views on the share price, and short term profits.

    The guys involved didn't care about tomorrow because they would've moved on by then.......

    Why else would anyone buy a sub prime credit card book? In theory....yeah we could sting the customers for ridiculously APRs , but when they couldn't pay......well, 40% of sod all is still sod all....

    Short term greed for personal gane is, I fear at the heart of many of the banking industry's problems....

  • Comment number 46.

    Are Commitees, Select Commitees & etc. MP's bonus's.?

    How many MP's are on Boards of Directors.?

    How many MP's does it take to change a light bulb.?

  • Comment number 47.

    Weak response from The Government. The plain fact is that they are toothless but unwilling to admit it!

  • Comment number 48.

    Who was it who said "procrastination is opportunity's natural assassin"? We have decisive action from the newly elected President of the United States, whilst the UK Government misses yet another opportunity for a long overdue change to our banking system.

    Does the Chancellor read your blog Robert? If so he might be influenced by the weight of public opinion wanting real and immediate changes to the financial system, but I doubt it!

  • Comment number 49.

    One worthwhile thing that could be actioned quickly is to require directors of banksto be suitably qualified bankers or accountants. A second would be to make them liable for all loses. They are in a privileged position which demands onerous responsibilities. The risk of lossing all would cool it!

  • Comment number 50.

    For those that were unable to get the answer to my question "How many MP's does it take to change a light bulb?" here is the answer :-

    The Government has decided to form a cross-party select committee to get the necessary information, the committee should report back in 3 years time.
    [sic]

  • Comment number 51.

  • Comment number 52.

    #46 electrocad
    "How many MP's does it take to change a light bulb.?"

    None - but it takes about 600 to debate and legislate on coping with darkness (preceded by quangos and focus-groups) .

  • Comment number 53.

    What on earth is wrong with BBC blog software? It must have been written 'in-house' or bought on the cheap.

    It can't cope with a pound sign £££ (a normal ascii character). Pathetic on a blog dealing with finance and economy.

    It's not possible to preview a post before submitting it to check for typos, content and spelling.

    Once an entry is 'submitted' the text area is cleared.
    These are all really basic requirements for these sort web-entry software applications.

    There are plenty of well tested and bug-free blog and message board packages available.

    Another poster commented on this months ago - why no improvement.

    Come on BBC, smarten up.

    Groucho



  • Comment number 54.

    I hope the inquiry would include accountants and auditors who must have known what was going on and if they didnt are guilty of a dereliction of duty...another too late ineffective "solution" from this useless government........

    To solve the problem of ineffective boards, do as the banks do....when i want a business loan i have to pledge my house etc....So any bank that needs a taxpayer "loan", make all directors personally liable for any loss....

  • Comment number 55.

    Re 53 OldGroucho
    What's wrong with the Beeb's software? It was bought as part of a Gopvernment project to digitise TV. As a result, we have a house full of TVs each of which needs its own decoder, as nobody thought to make a decoder capable of translating multiplexed digital into multiplexed analogue, and a signal which collapses in the BEEB with alarming frequency. In other words, par for the course for a digital project, the only digit that matters being the one irremediably fixed.

  • Comment number 56.

    #52 You're not joking, look at the way they're handling the rewiring of the Commons at the moment. It hasn't been done since they rebuilt it in the late 40s, apparently...
    How many MPs does it take to change a light bulb? One to hold it, about 2000 inner circle members do dance around him making it look like something's happening, and 6 billion ordinary trogs being forced to make the world turn around them, led by this blasted blog.

  • Comment number 57.

    How many MPs does it take to change a light bulb? Depends on the analysis...

  • Comment number 58.

    "Who is watching the watchers"

    #53 OldGroucho

    This, of course is a minor technical detail.
    Much more unsettling is that I've been trying to make a serious point and express an opinion since 7.30 this morning - i've tried to submit a much longer post about 4 times today and..... it has simply vanished into the BBC ether - not even an entry to say it was 'awaiting moderation' - it did not break any of the BBC house-rules - this is censorship - not moderation - censorship plain and simple. If you won't allow ideas to be expressed other posters and readers will slowly and quietly melt away.
    While the moderators may be watching the content of the blogs and editors watching the moderators and senior managers watching the editors and the board watching the managers - who is watching the board.
    "Who is watching the watchers"

    O.G.

  • Comment number 59.

    In future, MPs do not need to change a light bulb. Gordon has decreed that there will be eternal light and he's banished darkness from the earth forever.

  • Comment number 60.

    Re #58
    Well - I've just attempted to post the blocked comment again - for the last time.
    If it fails to appear my suspicions regarding censorship will have been confirmed and I shan't bother with the BBC again.
    I'll miss John Humphries and Radio 3 but not much else.
    There are plenty of other news outlets.

    Well, there's no sign of it - I guess that confirms my doubts ... Bye bye.

    "...and thanks for the fish."

    Groucho

  • Comment number 61.

    "lacking the skills"

    The society grossly overvalue skills. Skills can be taught and learnt in a relatively short time compared to the forming of the character of diligence, dedication, take responsibilities seriously and integrity.

    Thee are so few ....

    I once worked with somone who is very smart. Very smart in work avoidance, very smart in piggybacking on other people's work and achievements, very smart in playing the stock markets whilst during and using company tiem and resource, very smart in threatening to call the unions if his "privileges" are challenged ...

    I suspect the same attitude and behaviour goes right through the system and society.

  • Comment number 62.

    The review will report too late to prevent investment banking bonuses this year - and thats the real point here - whatever has happened I think that thegovernment will do nothing to upset the city even if that means riding a wave of bad press as the bonuses are paid.
    Makes you wonder who actually runs this country ?

    My view is don't pay the bonuses to any investment banking arm employee and if they threaten to walk ask them 'where?'
    and if they threaten to sue, then lets see the arguments they have to justify the paymernt .. should be fun !

  • Comment number 63.

    Presumably the bankers will recognise the efforts of the Government to skate over the appalling practices of the last 10 years by voting them back into office!

  • Comment number 64.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 65.

    It is astonishing that the government thinks that tinkering with the existing regulations is suffficient when the present financial system has failed so utterly and completely.

    Where is the vision and determination to formulate a new system that promotes fair rewards and a stable financial system that serves the long term needs of the country? We need to get rid of the short-termism and financial speculation that has made a few obscenely rich to the ultimate detriment of everyone else.

    Retail banking should be separated from so called investment banking. Retail banks should be tightly regulated and their exposure to risk limited. Never again should the state have to bail out a bank.

    Let the speculators gamble and speculate so long as their actions do not endanger the rest of the economy and so long as they are allowed to go bust when they fail without detriment to the wider economy.

    We need a more balanced economy where great engineering and innovation is applauded, rewarded and supported. The real economy should not be the plaything of financial speculators. Rather, the City should be a source of stable and long term finance.

  • Comment number 66.

    a number of us serial posters seem to be having trouble if we want to post anything longer than a quick hello...

    without even a message to say 'in moderation' or whatever.

    One might become suspicious if one was of a cynical disposition.


    Alastair Darling has a great opportunity just now to save some face and make some progress.

    The Banks appear to have thrown down the gauntlet on bonuses, so he has an easy chance to up the stakes, bring in some heavies on the regulation side and on the boards and remuneration committees, and have the Dark Lord Mandy accost some cowardly bankers one by one in the dark alleys around the City and issued some subtle threats.

    I for one am not afraid of a banking brain drain, & don't know many others who live in fear of losing some of the current banking talent.

  • Comment number 67.

    The prospectors running our banks realised that their was more, to be madoff the fools gold that came from their AAA's holes ,than tinkerring with their regular digitall riddle

    ,so they dropped their pans and invited the jolly roger crowd to make their regular deposits in return for the AAA perfumed Strategicaly Hyped Investment Tranches [which went up as well as down ].


    Only a giant collosasstommy bag made out of taxipayerr Financial UK'd investments can save their deposits now.

    Gordon Gekho chamber Brown can save the wicket , providing he covers his bails from the top spin bowlerr hated types

  • Comment number 68.

    OK. It looks as if The Gutless are not going to stop bonuses now.

    The report will take months.

    What about suspending bonuses until the report comes out?

    Logically the enquiry should find that no bonuses are justified.

  • Comment number 69.

    One reform should be that managers of pension funds should attend company AGMs and represent the best interests of their investors. This would involve voting against excessive bonuses and renumeration.

    They should not be allowed to lend out shares to speculators without the permission of their investors.

  • Comment number 70.

    Company employee/director beneficial loans have a tax rate of 6.25% levied on them for amounts over 5000 GBP HMRC have just reduced this to 4.75%.

    http://www.hmrc.gov.uk/employers/ebik/ebik3/beneficial-loans-04.htm

    This is the sort of greedy bonus reporting you should be making, never mind the banks. It bears no relation or reality to the UK bank rate.

    What are you going to do about it? Talk to a Treasury fat cat!

  • Comment number 71.

    ROBERT Getting Muddled with the BIG picture and the DETAIL>


    Why do you find it so hard to separate the different factors.

    Maybe it has something to do with the whole banking financial journo community?

    Maybe it’s why we are where we are now.!


    1 the BOARDS and the Bosses

    2 the Traders risk takers of fixed profit related deals etc

    3 bank clerks …..

    4

    5

    6

    etc etc

    This is not simple is it ?

    Just as it is not simple to pay out a bonus on a TRADE which will possibly not realise a loss or profit for 20years.

    I say Pay them when the Trade is closed and finished rather than at the end of the year the Trade was started. SIMPLE?



  • Comment number 72.

    FSA gloomy over economic outlook


    WHAT

    They don't exactly have a good track record of predicting DO THEY ?

  • Comment number 73.

    The nub of the matter is that boards have been given inadequate information and directors lack the skills to assess banks' complex operations. Both of these faults stem from the same cause – banks are allowed to present highly complex accounts which are incomprehensible without copious notes, which are generally phrased in language deliberately designed to obscure and obfuscate. The fault must be laid at the door of the Financial Services Authority (the regulator), the Bank of England (BoE), and the Government.

    All accounts should be comprehensible to the intelligent layman and not merely to economists, statisticians, accountants, and those in the know. For various reasons that may not be easy to achieve in the accounts themselves, but there could be a mandatory report, the object of which would be to make the accounts clear, transparent, complete in every respect, and understandable. I am not talking about dumbing down the report to a level at which the dumbing down process makes it unintelligible. I am talking about a report that makes the bank’s operations clear in plain English, with examples if need be. If you want to know how this might be done look at Robert’s report Are Barclays’ profits irrelevant and see the way he has written it. Also look at Comment # 132 from MrTweedy, and the examples given there.

    The chilling truth is that UK banks have gross external debts exceeding $7,000bn (£4,800bn @ £1 = $1.4734). The figures are difficult to dredge up unless you know where to look for them, but they are not mysterious and unknown figures and are certainly available to the BoE, the Government, and the Office for National Statistics (ONS). That they should be unknown to the Prime Minister and his Chancellor is inconceivable. Since there is a great deal that is mysterious about financial and statistical jargon, it is worth spelling out precisely what gross external debt is. Gross external debt, at any given time, is the outstanding amount of those current, and not contingent, liabilities owed to non-residents by residents of an economy that require payment of principal and/or interest by the debtor at some point in the future. In other words, the external debt of the banks is quite simply money that it owes to foreigners.

    The BoE Accounts are just as incomprehensible. They clearly want to obfuscate. They give, for example, a value for the bullion they hold but do not specify the date of the valuation or on what gold price it was based. The Government does the same thing. I wrote asking the Treasury to quantify the gold bullion held; they ignored my request.

    One would expect simple and clear reports on the level of Government debt. There is no such thing. We are always told about Government borrowings on current account, a mere £40bn or so (“the lowest of all our European allies”), but we are not told about the fact that the gross external debt of central Government is $362bn with a further $27.7bn owed by UK monetary authorities. One has only to look at the fact that there is an amount of £158bn owed by the Government on Bonds and Notes to know that the figures bandied about in Parliament are a grotesque understatement.

    Government, the ONS, the BoE and the Banks all contrive to make it as difficult as possible to get to the truth, which should be the whole truth and nothing but the truth, reported in clear, simple, and understandable language. If that were done people in this country would know at a glance where the economy is headed and could boot out a Government failing in its duty.

  • Comment number 74.

    Sir David Walker is probably the worst person imaginable to address the City issues. At one time a very highly regarded regulator, with the highest standards, he went to the dark side when he accepted a very highly paid position at Morgan Stanley. I had occasion to blow the whistle on the egregious practices and unethical behaviour of Morgan Stanley Private Wealth Management in 2000, but was completely ignored by Walker, who did not appear to want to even hear the issues.

  • Comment number 75.

    Walker defends 'wimpish' recommendations
    Catherine Craig
    20 Nov 2007

    "Sir David Walker has insisted that his recommendations for transparency and disclosure in private equity have not been toned down since his initial proposals in July, despite criticism"
    http://www.efinancialnews.com/usedition/content/2449224494/restricted

    Walker review anniversary brings calls for greater transparency
    Paul Hodkinson
    20 Nov 2008

    "Pressure is growing for the UK private equity industry to become more transparent in publishing details of buyouts, after research sought by Financial News found just 56 companies had complied with the Sir David Walker review, which was published a year ago today."

    http://www.efinancialnews.com/archive/keyword/"Sir%20David%20Walker"/1/content/3352534292/restricted

  • Comment number 76.

    IMHO, None of the banks that have needed government money should be allowed to pay a bonus. Had it not been for the bail-out they would probably have folded and a great many of the employees would be out of a job. On the same vein, any bank that has not yet required govt assistance should be allowed to pay a bonus if it sees fit, but in doing so it would be forefeit any future assistance if it runs in to trouble. They can not expect to pay a bonus today and come running for help tomorrow. If they are confident that they can pay bonuses and survive they should be allowed to reward their staff, but do so at their own risk, not ours.



  • Comment number 77.

    @73 newProtectorCromwell

    I read your contribution with great interest.

    Hope to be given more clear facts and figures by you in future!

    I have no confidence in seeing the back of this government, they have managed to trick us out of everything so why would they not manage to hold onto power?

  • Comment number 78.

    One can only repeat

    "NO REWARD FOR FAILUcRE"


    Which leaves us a choice between The raving loonyparty and lord buckethead, once ecclipsed by the incompetitiant .


    Dimockracy has turned into a pack of jokers trying to perform for deck heads looking for a fool house .


    Its not their AAA'ces they have up their sleaves its Jokers ever ready to be played to keep fools in happy valley ,whilst whats left is shared out as .bonuses.


    AAA's repositories will be filled with freshly printed jokers and the resultant legal "pot"bequeathed by our magnificent men in their filing machines ,to future generations to get "up diddleee up up " on .


    Most Banks long ago replaced their boards with thick short planks first walked by the risk manmagers then the shareholders then the government and now the customerrs .

    Ha ha me artease.

    [This post has re expurgated to satisfy the moderators]

  • Comment number 79.

    @ newProtectorCromwell

    I guess you are a oldschool banker yourself.

    Why don't you go into politics, very quickly please - something desperately needs to be done before we run a ground. We need to change the captain and the crew, who I fear are only concentrating on building their own life rafts at the moment.

  • Comment number 80.

    @ 73 newProtectorCromwell

    I think you should post this contribution onto the next blog, whenever that is, hopefully 11th February, as the comment you make is of such interest.

  • Comment number 81.

    This country is in crisis, indeed the world is in crisis, mainly through croporate greed and excessive worshiping of money.
    The Chancellor has the trump card iin his pocket but will not use it.
    The trump card is to tax bonus payments at 97.5%. It is time that sensible salaries and bonuses are paid. If a person is "worth" the bonus paymment then make the bonus payment part of the salary package.

    The part nationalised bank directors should be paid as directed by government, Barack Obama has just restricted payments of the top executives in corporations being funded by governement loans at $500,000. with no bonus. The same should be applied here albeit the sum should be £250,000 more than enough for anyone to "exist" on. Should the recipients not like it they know where the front door is!
    If I delivered as so many cheif execs have I would not have a job, let the price of failure start at the top of the pile rather than at the bottom.

  • Comment number 82.

    I have just seen a convoy of trucks on the M1 heading for the Palace of Westminster

    There is
    • An animal truck full of bulls

    • A tanker with 12,000 gallons of white wash

    • A converted tar laying truck full of hot air

    • A curtain side artic full of plastic cover-ups

    • A bus full of annalists, investigators, mathematicians and statisticians

    • A muck spreader which is continuously toped up by the by product of the animal truck

    • Two armoured treasury vans full of money for the golden goodbyes and a few golden hellos

    • A truck of pink ribbon

    • Five large attics full of paper

    • At least twenty paper recycling vans bring up the rear.

    They have a police escort to prevent the public from getting close or being invited to shout out any information that may guide the investigators as to the feeling of the nation

    Why is all this needed simply because we are going to have an inquiry to investigate what went wrong in banking bonuses and the financial sector and then recommend how it can be resurrected in a different form.

    Please stop treating the electorate like a bunch of unruly school kids who need to be told teacher knows best again. We know what went wrong it is called greed what we need is a fundamental review of the way we are going to remain influential as a nation in a global society a decision as to what shape we want our community our life style our ethics and morality to have in the future.

    A plan as to what has to change to take us to our ideal state with a fit and proper government to lead us there.
    Will we get that, will hell freeze over?

    So I am of for some large umbrellas to protect me from this convoy when it starts to discharge its load on us all.

  • Comment number 83.

    Robert Preston:

    I am hopeful that fixing banks boards will be a very important step towards the redemption of a solution....

    ~Dennis Junior~

 

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