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Banking Commission: Basel not enough to make banks safe

Robert Peston | 14:30 UK time, Saturday, 22 January 2011

I took seven things away from the speech today by John Vickers, the chairman of the Independent Banking Commission that has been asked by the chancellor to advise him on how to make the banking system safer and how to improve competition between banks.

First, the commission has already concluded that the new international rules known as Basel lll to force banks to hold more capital and liquid resources, and lengthen the maturity of their debt, do not go far enough.

He has signalled that the commission does not believe that for what are known as systemically important banks - huge banks such as Barclays, HSBC and Royal Bank of Scotland - the new 7% Basel minimum ratio of equity capital to assets (loans and investments) would adequately reduce the risk of taxpayers again bailing out big banks in future crises.

This will trouble the likes of Barclays and RBS, because almost anything that the Commission does ultimately recommend to make them safer would reduce their profitability (at least in the short term).

Second, the commission - like the Bank of England - is persuaded that it is profoundly unhealthy that the biggest banks, especially those engaged in retail banking, are able to raise money more cheaply because of creditors' perception that the state will always rescue them as and when they run into difficulties.

This is how Vickers puts it:

"Systemically important institutions now have an implicit guarantee for risk taking activities, particularly those related to and/or inseparable from retail banking. The distortion, which is also a distortion to competition with other institutions, should be neutralised or contained."

Third, the central task for the Commission is to propose reforms that would heap all the costs of a banking failure on to creditors and investors, while avoiding any serious disruption in the transmission of money, savers' access to deposits and the provision of credit to households and small businesses.

Fourth, the more extreme versions of so-called narrow banking, in which banks that look after our deposits would be banned from lending our cash to businesses or individuals, would impose excessive costs on the economy.

This will disappoint the campaigners for more radical banking reform, who are convinced that the current basic structure of banking - called fractional reserve banking, in which short term deposits are 'transformed' into long-term loans - is flawed.

Fifth, the tax system, which makes it cheaper for all companies to fund themselves with debt rather than loss-absorbing equity - because of the deductibility of interest - is at the heart of the problem, because it provides a powerful incentive to banks to minimize their holdings of equity.

Sixth, the Commission is highly sceptical of the arguments of universal banks - those like RBS, Barclays and HSBC which combine retail banking and investment banking - that they are intrinsically safer than banks that are more specialized.

Seventh, the proposed solution to all of this looks as though it will involve significantly higher capital requirements for systemically important banks (which might well include a huge retail bank such as Lloyds), so that they are better able to absorb losses.

And although it is fairly clear that the Commission would quite like to see some kind of separation of retail banking and investment banking (not necessarily full and formal bifurcation or demerger, but perhaps putting the distinct activities into separate subsidiaries that would have their own capital and would be capable of being physically carved out in a crisis), what is less obvious is whether it wants such separation to be effected by legislative fiat or encouraged through capital surcharges on those banks which choose to remain huge and universal.

Finally some of you may think none of this is sufficiently bold. But the big banks will view it, rightly, as a threat to the ability of their investment banking arms to generate huge profits. And they will fight hard to prevent the ideas of Vickers and co becoming - for them - a painful, bonus-squeezing reality.

UPDATE 17:47

And another thing. It is proving immensely difficult for the Treasury to reach agreement with the UK's four biggest banks on new commitments to lend to small business, support a new so-called Big Society Bank and declare that they have moderated their bonus payments (a bit).

As a result there won't be an announcement on all this deal - which goes by the moniker of Project Merlin - early next week, which is what was expected.

Sources tell me that there is "still a way to go, on lending in particular". So talks will continue over the coming weeks.

Apparently the snafu is to do with "company governance", whatever that means. But bankers seem to think a deal is more likely than not, in the end.

All a bit odd, since you'd think RBS, Barclays, HSBC and Lloyds would all be desperate to show that they're doing their bit to support small businesses and economic recovery - and take some of the sting out of the widespread criticism of the substantial bonuses they are set to pay.

UPDATE 18:11

Also one banker told me that George Osborne apparently does not want his first punch up with the new shadow Chancellor, Ed Balls, to be over why there is no promise to reduce bonuses to any substantial extent.

"HMG does not want to give Balls a platform against Osborne next week", the banker said.

Which means that the Treasury isn't particularly upset - or so I am told - that it is taking a bit longer than expected for the banks to ensure that the deal isn't in breach of their responsibilities to shareholders.

UPDATE 00:20

A source close to the Chancellor says that the banker I quoted above got it wrong on George Osborne's supposed lack of desire to have a scrap with Ed Balls on the banks.

The source said: "This would be a great issue on which to take Balls on, especially as he was City minister at the height of the boom...The reason for delay is that we're not satisfied we have a good enough deal. You'd expect us to drive a hard bargain for taxpayers.

"This would be a good opportunity to remind Balls that he designed the tripartite (regulatory) system that failed so badly and ended up with us owning these banks."

I have to say, direct hostilities between Osborne and Balls - as and when they start for real - should be quite a spectator sport.

Comments

Page 1 of 2

  • Comment number 1.

    "This will disappoint the campaigners for more radical banking reform, who are convinced that the current basic structure of banking - called fractional reserve banking, in which short term deposits are 'transformed' into long-term loans - is flawed."

    I might be wrong, but I think this could be the first time you've mentioned the phrase "fractional reserve banking" - are you about to let the cat out of the bag?

  • Comment number 2.

    It seems like we won't get real reform that ends fractional-reserve banking until there is another crisis in which the banks are "too big to save", never mind "too big to fail".

    Money should be created democraticaly by governments instead of privately by banks. It should be spent into the economy rather than lent into the economy. See:

    www.jamesrobertson.com/book/creatingnewmoney.pdf

  • Comment number 3.

    The part of Sir John Vickers' talk today that I noticed was his discussion of the degree of leverage of UK banks and how this has changed over time. Particularly his reference to the lending multiple pertaining to the period of 1960 to 2000 (20 times) and that of the noughties (30 times).

    I have to suggest that if the Bank of England, FSA and HM Treasury did notice this change why did it not concern them? Or alternatively if they did not notice were they demonstrating a terrible dereliction of duty?

    This dramatic error by the regualtors must not go unremarked as it was this change that gave rise to the idiotic expansion of debt that created the bubble and the subsequent crash.

  • Comment number 4.

    PS is the full text of Sir John Vickers' talk available? If so where?

  • Comment number 5.

    Bob Diamond scored a spectacular own goal at the TSC the other week when he stated that 'banks should be allowed to fail'.

    The only way to ensure that is to split the likes of Barclays up in order that they are not TBTFail or as Robert put it in his programme last week, TBTSave.

    Retail banking should be the only banking sector that should be allowed to receive a state guarantee. Retail banking should be boring and it should certaily not be associated with casino like activities of the investment banking kind.

    Retail banks should not be allowed to be associated with any prop desk trading whatsoever.

    WE MUST HAVE A GLASS-STEAGALL STYLE SEPARATION THAT IS ENSHRINED IN LAW SO THAT THE SPIVS CAN NEVER SEEK THE PROTECTION OF A STATE GUARANTEE TO BAIL THEM OUT EVER AGAIN.

    NO AUSERITY WITHOUT SIGNIFICANT BANKING REFORM!

  • Comment number 6.

    So if I've understood that properly? The state decides how big a business is allowed to be? bp and shell to follow? Sort of reverse capitalism? I thought the banking collapse was to do with the property market? Apart from RBS who went bust because of the disastrous takeover bid, it mostly building societies that took the hits.....bradford & bingley, northern rock, alliance & leicester, Halifax part of HBOS etc. Barclays, HSBC with their investment arms survived as would Lloydstsb if Gordon Brown hadn't interferred. So the banks will be broken up into smaller banks and taken over by Santander!

  • Comment number 7.

    All very good and sensible proposals - now lets see if the government has got the will and nerve to put them into practice.

    One thing I would have liked to have seen is a recognition of the distorting effect on the economy of banks preference of lending against property. That was at the heart of the crisis, and really needs to be addressed.

  • Comment number 8.

    Oh what a laugh!
    The banks know, k n o w , that as well as being too big to fail they are quite simply too big for any government with a finite term in office to mess with.
    The banks know that the government knows that the economy is completely dependent upon the good will of the Banks.
    That is why the Banks did not really bother that a left leaning government like Blair's pretended to be was nominally in power.
    The Banks were in power and still are.
    Cameron and his chums might be having their turn but in reality it is the Banks calling the shots. For themselves. They both know it.
    All that will happen is that the Banks will offer a few platitudes up for the government to look like they are in power. After all it wouldn't do for hoi poloi to consider the government utterly powerless. Cable for all his bluster will be shown to be out of it. And just to rub it in the Banks will look favourably on Murdochs' requests for money.
    Think like a Banker. Can you really see this government doing anything but anything the Banks want?
    The Banks are the economy - stupid. Real stupid, but they are the economy.
    And they know it.

    This state of affairs will only change when something real bad happens.
    And then the banksters will simply move to pastures new, leaving debt in their wake.
    Blaming government for not looking after little details.


    #1 davidbrent
    FRB has been mentioned on mainstream media for some little time.
    Mervyn even spoke about it and it was reported.
    But the ramifications have been kept away from the electorate as being too thought provoking. Perhaps they are. Might lead to something real bad happening.

  • Comment number 9.

    Technically the banks *think* they are the economy.

    In reality the banks keep the economy from working. Their policies put people out of work, keep people in debt, increase commodity prices through casino speculation, and create inflationary asset bubbles.

    There is no greater drag on prosperity or democracy than the current banking system.

    Prosperity won't be restored until the banks are neutered and their profiteering is reined in.

    So no - these proposals don't go far enough. They're a start, but that's all.

    The debate about the banks is just getting started. And while I'm sure they believe they're negotiating from a position of strength, if they take down the real economy that everyone else lives in - which they will, if allowed to - they may find the truth is less one-sided.

  • Comment number 10.

    #4

    The full text is already on the Independent Banking Commission's website. Just google it.

  • Comment number 11.

    The additional costs of capital will need to be passed on.

    That will mean lower savings rates, higher mortgage rates and corporate and small businesses paying higher fees for their overdrafts.

    It will certainly be the end of free banking; so expect to pay for every deposit, withdrawal, cheque and direct debit like they do on the continent.

  • Comment number 12.

    You're right to highlight one very important area brought up by Vickers: the distorting tax regime. That's something that can be tackled straight away. Mind you, with pussycat Hartnet in charge they will comfortably manage any changes fat cat friendly Osborne comes up with.
    Regards, etc.

  • Comment number 13.

    And what about bank accounting regulations Robert?

    What will be done about the mark-to-fantasy rules that we currently have?

    The biggest conspiracy at the moment is that the establishment (with the collusion of the media) are covering up the fact that all UK banks are really insolvent.

    It's only due to the mark-to-fantasy accounting standards that are currently being applied that they are booking ridiculous profits and even more sickening bonuses.

    If something isn't done soon, it will all be too late.

  • Comment number 14.

    All very sensible ideas, but why does it take so long to come to a conclusion? You could have composed most of the speech from selective editing from this blog.

    In the end it will come down to political and public will to make/force any changes. The current banking industry will just lobby and procrastinate so that nothing changes. Will the government have to guts to take them on? I fear that they wont.

    As a consumer it is hard to make a difference. Are mutual building societies or the co-op that much better (less leveraged) than the big 4 banks? I'm slowly moving my personal and business banking away from the big 4, but I don't think they'll care much.

    For the first time ever I wrote to my MP last month about interest rates. I await a response from the Chancellor....

  • Comment number 15.

    @12 DebtJuggler wrote: "You're right to highlight one very important area brought up by Vickers: the distorting tax regime."

    I sometime think that we should just do a carrot and stick approach using corporation tax. Say we aim for a equity level of 20%. Any bank or building soc with equity level higher or above gets a lower tax rate. A lower equity level recieves a punatively higher tax rate. Positive reinforcement via the tax system.

    Similarly we need to agressively audit their accounts. Are they worth the paper they are written on? They don't appear to reflect reality.

  • Comment number 16.

    Yes, not bold enough -but probably far too bold for Cameron and Osborne who prefer solutions that will not upset business apple-carts.

  • Comment number 17.

    #5 it is only a shame that there is no evidence that universal banks are any more risky than simple banks.

    Northern Rock: simple bank failed
    RBS: universal bank failed
    Lloyds/HBOS: mostly simple, although had some equity plays: failed
    Barclays: universal bank - not failed
    Goldmans: not even a bank (until crash) pure trader: not failed

    I could go on and on. The point is you are barking up the wrong tree.

    As far as I am concerned the issues are:

    1. Basel II and III are incorrect. Anything which relies on bank's own risk models is flawed
    2. The bigger the bank the more capital cushion it should have because of system risk.
    3. Accounting rules on mark to market and provisioning need re-thought.

  • Comment number 18.

    It's perhaps time that the big banks just stopped their block-headed and bloody minded whinging.

    Oh dear, things might get a wee bit tough for them if they're required to raise more capital! Guess what? Things aren't all that great for a whole lot of your customers and investors and the British public in general. And, in many cases, things are getting worse rapidly.

    It's like these Councils moaning about the cost of pot-hole repairs. Oh but we can't afford it, there's so much pressure on us...... but you DARE to say you can't afford you Council Tax and they're goose-marching you off to Court at 90 miles an hour!

  • Comment number 19.

    Fourth, the more extreme versions of so-called narrow banking, in which banks that look after our deposits would be banned from lending our cash to businesses or individuals, would impose excessive costs on the economy.

    This will disappoint the campaigners for more radical banking reform, who are convinced that the current basic structure of banking - called fractional reserve banking, in which short term deposits are 'transformed' into long-term loans - is flawed.
    =========================
    I am glad to hear that that nonsense had been rejected and people and industry will still be able to borrow money when they need it.

  • Comment number 20.

    The initial cause of the credit-crunch was loss of information: some high-risk debt merged with much low-risk sold on as all low-risk, then the spiral. When banks realized they couldn't calculate their exposure they turned off the taps in panic; then other weaknesses were exposed. Couldn't reform look at the legality of losing information crucial to our well-being?

  • Comment number 21.

    2. At 15:12pm on 22nd Jan 2011, BankruptBanks wrote:

    BRILLIANT BOOK read with great interest knew of the problems associated with banks printing money without bank of england governance

    so its our money in the first place and we pay interest to private banks on our own money a pure scam!!!

  • Comment number 22.

    Thoughts to separate Investment Banking and Retail banking (a UK version of Glass-Steagall) surely miss the point. The 2007 financial crisis was as much to do with Commercial/Retail Banking failures (US House pricing bubble and over-leveraged debt) as it was Investment Banking (securitisation and counterparty risk). Whilst the Bear Stearns and Lehman Brothers collapse finally triggered the international catastrophic loss in confidence, in the UK, it was the commercial banking operations of HBOS (LBG) and Northern Rock that were more the problem. RBS's demise was the unfortunate timing and price of the take over of parts of ABN AMRO, predominantly a commercial banking decision. RBS's own investment banking arm and that of the former ABN AMRO investment banking operation appear to have performed pretty well in the crisis.
    We should also remember that the delay of the US Government to repeal the Glass-Steagall Act until 1999, was one of the major factors behind the growth of London as a major financial centre in the 1980s. The reverse could easily happen.

  • Comment number 23.

    Perhaps all that has been needed in terms of regaining strategic control of UK capital from the UK based banks is a very tough Chancellor to say to the banks:

    Irrespective of Basel/G20/EU etc ... Do the following by .... (date) or else we'll tax you out of existence ... and/or replace you with/introduce a smaller, new, ethical competitive bank funded direct by BOE ... for 'public protection.'

    Just threaten them like the Irish govt had to do with their own rogue Irish banks!

    Simples ... all that is needed sometimes is ... XXXXX

  • Comment number 24.

    There is real danger from trying to analyse the incomplete scrutiny of a very complex and consequential examination. It is fundamental that the result of the Independent Banking Commission is an improved state of affairs that makes banking as fair as is possible without destroying the substantial benefit that the British economy enjoys from playing host to some of the most important elements of global financial services. Public discussions is usually flawed when an very sophisticated and central part of any economy is being re-evaluated; and during the period when the appraisal is still in full swing it amounts to little more than a badly produced edition of the renowned Monty Python skit called “stake my prejudice”.

  • Comment number 25.

    # 4

    Telegraph

  • Comment number 26.

    How many times!

    Governments that represent their population do not 'negotiate' with corporations who hold us to ransom.

    We tell them what is going to happen. If those corporations don't like what we tell them, what our laws are, then it is merely a quick nip down the road to board a plane leaving from Heathrow.

    End of.

    I mean, are we going to wake up one day and find our government negotiating about how much they will allow a company to poison us, or leak radioactive gas into the air?

    It's ridiculous.

  • Comment number 27.

    # 17

    How many times we have to say it. Goldman had massive exposure to AIG.

    They got pay 100% on the deals.If USA via TARP did not bailed out AIG Goldman would be BUST.

  • Comment number 28.

    @17. At 16:51pm on 22nd Jan 2011, Justin150 wrote:
    "Barclays: universal bank - not failed"

    Barclays Capital borrowed some $400billion from the Fed between March-October 2008. Had they not, would they have failed, required a bailout from the BoE or would BarCap be quite solvent and Bob Diamond still be quite chippy with his £1.3million annual remuneration package?

    "We don't think for a second that any bank should be a burden on the taxpayer" (Bob Diamond to the Observer newspaper, Feb 2010) - really Bob? So it's okay to borrow obscene amounts of money from a private central bank (which itself obviously receives funding from the taxpayer via, er, taxes) to cherry pick and carve up the ashes of Lehman Bros?

    Still, as you pointed out Northern Crock went asunder and they were mere minnows. Perhaps if they'd had access to Term Auction Facilities they could've continued blissfully trotting along shoving not-very-good money after even worse money.

    22. At 17:51pm on 22nd Jan 2011, Bridanock wrote:
    "RBS's own investment banking arm and that of the former ABN AMRO investment banking operation appear to have performed pretty well in the crisis."

    Because they borrowed more than $150billion between Feb 2008-Dec 2009 using the same facilities available to BarCap. Even Standard Chartered borrowed $25billion.

    For me these aren't the results of successful or responsible banks but milking the system for all it's worth to stave off any backlashes. Now it's easy to see why Barclays, HSBC, Standard Chartered want the UK taxpayer to get off its high horse - they haven't been ripping off the UK, they've been sponging off the Americans.

    What are the odds the BoE is going to publish its arrangements with banks during the crisis as the Fed was forced to do? It might lend some credence to the arguments on here, depending which side of the fence you're on.

  • Comment number 29.

    #10. Bob Curtis wrote:

    "#4

    The full text is already on the Independent Banking Commission's website. Just google it."

    Got it, ta. I had looked too early!

  • Comment number 30.

    Anything that doesn't seperate the casinos from the publics life savings falls far short. Tobin tax and reform of remunearion arrangements are also required.

    The points people are making that the banks that appeared to fail were retail Moses the point that the crisis was caused by the investment banks and ALL banks would have failed without the huge taxpayer bail outs.

    Without the seperation of retIl from casino there is still huge systemic risk.

  • Comment number 31.

    Some of the point should also be atonement and reparations to the rest of society as well as bing neutered and made safe so this never happens again.

  • Comment number 32.

    Your programme earloier this week showed the weakness in Basel III so a stronger response from the Banking Commission was to be expected.

    The fascinating thing about this speech is that it is members of the Establishment saying that there needs to be reform and furthermore there are strong arguments for fundamental reform. At least some folk are big enough to feel the hand of history on their shoulders.

    As others have already pointed out already; will the political class have the guts to carry these essential reforms through? I think given the cuts in spending, the inflation, the additional taxes currently being imposed on the British people make these reforms very necessary from a political perspective.

    The British people have been looking for a quid pro quo from the banking industry these past two years and all they have been given is two rude fingers and a pointed tongue. This is just not good enough. Since the banks are not going to reform themselves then they must be and, I trust, will be reformed.

    Of course, like all naughty boys caught with their fingers in the cookie jar there will be much screaming, weeping and wailing and cries of unfair. Well tough! They need a beating, have been asking for a beating and so must be given a very thorough thrashing.

    I trust there will be no negotiation with the banks for the simple reason they have made it clear they don't care what we think. Well I don't care what they think and it needs to be pointed out that we are many and they are few. Shelley lives!

    As for those who will argue that the banks provide us with the necessary funds to get by, I can only answer that I would rather go broke on my feet than live on my knees. We need to rebalance our economy anyway and this would be a good place and time to start.

    Also if a bank wants to leave the country, always assuming they can find another home so compliant to their every whim, then all permissions and licences to trade in the UK are immediately forfeit.

  • Comment number 33.

    As well as bailouts the casino/retail combos have had access to £5trillion that central banks have churned out through QE. As well as forcing baserates to .5% - a level that is crippling for savers in the normal economy

    don't even start saying investment banks didn't need bail outs and they are "safe"

  • Comment number 34.

    How outrageous us it that special advisers, treasury officials or Gideon himself are discussing the Chancellors political intentions with the banks?

    This is futher evidence of the lovely cosy relationship between our current government and their primary source of political funding, paid engagements and second careers

  • Comment number 35.

    The reason it is taking so long for Project Merlin to get off the ground is that although the banks could lend money to businesses at the moment if they felt like it, they know if they hold out for long enough the government will cave in and offer to pass any losses on those loans to us taxpayers.
    This is what is being discussed at the moment, the banks are laying out their terms and spelling out what they want, not the other way round.
    There will be a deal on lending in the next few weeks, but it will leave all of us exposed to the risks of these loans to the tune of tens billions in a way we are not at the moment. That is what the bank want and that is what they'll get.
    Why isn't there more reporting and debate about the lending side of Project Merlin in the media?
    Why does all the media coverage and speculation revolve solely around the bonus issue?
    As far as the media is concerned the scale of the ongoing commitment the government is signing us up for will be a side issue when the agreement is finally reached because all attention will be focused on some kind of limited gesture on bonuses.

    If we are not careful we will find ourselves in the situation where if a bank goes bust the taxpayer won't be on the hook for the losses...but banks won't go bust as most of the loans will by that time be guaranteed by the government and underwritten by the taxpayers.

  • Comment number 36.

    Why have we had to put the pressure on for three years to make this happen? I said at the start that this would occur, and only now, after a longggg delay, it is becoming obvious we were right, all the way down the line, and that the bankers (who pollute this blog with rubbish) are wrong.

    I'm not one to gloat, so now just hurry up and "let's do it", as Gary Gilmour said.

  • Comment number 37.

    give all the bankers 1 orange.

  • Comment number 38.

    36. At 19:11pm on 22nd Jan 2011, Jacques Cartier wrote

    Of course, why didn't people just listen to you three years ago? Do you have any other gems that will help us all? Perhaps next you can turn your attentions to the middle east and get that mess sorted out?

  • Comment number 39.

    Words merely words and any person could have said them. Actions speak louder than words so why wait until September.


    11. At 16:08pm on 22nd Jan 2011, thomas betham wrote:

    “The additional costs of capital will need to be passed on.

    That will mean lower savings rates, higher mortgage rates and corporate and small businesses paying higher fees for their overdrafts.

    It will certainly be the end of free banking; so expect to pay for every deposit, withdrawal, cheque and direct debit like they do on the continent.”

    Then we start being paid in cash again – for every negative there is a positive. Simples!



  • Comment number 40.

    i forgot to mention, all bankers should be given a maths test...1. what is the sq root of -1? if they get it wrong put them on a boat in the pacific without oars.

  • Comment number 41.

    Good to see the emphasis on putting protected retail deposits and related activity in a separate company from other banking activities, rather than a hugely damaging insistence on total breakup of banks that currently do both (which I believe is what a Glass-Steagall approach would involve). It is for the banks, if they don't like this, to explain why it would be such a problem for them. Other financial businesses, such as insurance companies that have both life and general insurance, manage to operate separate companies in this way without any great difficulty.

    I can see the argument for higher capital requirements than Basel III for the retail businesses thus established, but if the separation is effective, then why would it be necessary to impose higher capital ratios for the non-retail part? If it fails, then would not the proposals for co-cos and/or haircuts for lenders to such banks provide an alternative solution without taxpayer rescues? It would then be for such lenders to assess the risk they are taking and so for the market to price the risk/return involved. Banks would hold more capital if it made financial sense for them to do so. Or am I missing something?

    Finally, good to see explicit rejection of the flat-earthers' arguments against fractional reserve banking...let them use safety deposit boxes rather than banks if they don't like the status quo.

  • Comment number 42.

    #40 ronnieboy1

    They would all fail. It is well known that bankers have no imagination.

  • Comment number 43.

    #27 it is a shame it is not pantomime season because they correct response is "Oh not they did not" The problem is that people keep quoting the $20 billion as the total exposure and do not net off any collateral or hedges that Goldmans had. I suspect we will never know the accurate figure but best guess would somewhat less than $10b. A big number for sure but not enough to break Goldmans (the poor dears would have had to do without bonuses for a few quarters though).

    #28 The Fed made a profit on their lending to Barclays. Without TARP and similar schemes all banks would have failed because the wholesale lending market stopped. Banks such as RBS, HBOS, NR failed not because the wholesale market was closed but that when it was open it did not lend to them, in effect RBS could not borrow when Barclays could. Govts made TARP and similar schemes available to all banks and as it was the cheapest game in town most banks used it.

    Most banks have relied on the wholesale market to some extent for a very long time. The problem we had was that they became too heavily reliant and massively over-leveraged.


    Some of the more interesting comments have been about the tax situation. I do not agree that interest should never count as an expense - there are lots of examples where it clearly is (take out loan to buy a machine for example if you are a manufacturer). But maybe the thin capitalisation rules need to be looked at. The problem is of course that this will hit small companies who frequently have very low equity and fund working capital through bank borrowing. Maybe there should be some size limit (thin capital rules applying to anything with a turnover of £100m+ for example). Certainly something to look at closely

  • Comment number 44.

    #2 et al.
    The James Robertson, creatingnewmoney.pdf seems to missing some very basic elements regarding the current system and the new proposed system.
    In the current system, regardless of how many loans the banks do and how much this notionally increases the M4 money supply, the actual amount of money in the system (M0/M1) is unchanged and this is incredibly important when relating to currency exchange rates.
    What the paper is proposing is that every 2 to 4 weeks the central bank issues new money into the economy - this will actually change the actual amount of money in the system and impact exchange rates against foreign currencies. Forecasts will be made for how much the latest issue of money is and any variation to forecast will cause FX swings. With all countries doing it exchange rates will go crazy.

    Secondly they say that they will control inflation by ensuring it is independent from the government. The BOE will decide how much will be created and the government decide what to do with it. This ignores the fact that what the government decide to do with it will be most important factor on inflation. Now imagine if the government of the day decides that home ownership is good for its popularity so all the money the BOE creates will be directed into providing mortgages for people....

    Funnily they also state this....

    “Third, although to some extent the creation of new money debt-free may
    be expected to reduce the amplitude of economic or business cycles and
    smooth out their peaks and troughs (see 4.5), those cycles will no doubt
    continue to occur. This means there will continue to be periods of
    comparatively lower prosperity and comparatively higher unemployment
    in which tax revenues will fall and recurrent public expenditure (e.g. on
    social benefits) will rise. There will also continue to be seasonal
    imbalances between inward flows of public revenue and outward flows of
    public expenditure. To meet the resulting revenue gaps, governments will
    continue to need to borrow short- and medium-term. The resulting loans
    should be repaid in subsequent periods of higher tax revenue and lower
    public expenditure. The important point is that, over an economic cycle
    as a whole, all government debt raised to finance recurrent public
    expenditure should be repaid and no increase in the National Debt
    should result. This reflects what has recently become known in the UK as
    ‘the golden rule’: “Over the economic cycle, the government will borrow
    only to invest and not to fund current spending””

    Funny because I thought this was supposed to happen already – when times are good debt is reduced. Didn’t Gordon Brown coin ‘the golden rule’. Must be failsafe then.

    I could go on but that is enough for now

  • Comment number 45.

    Those who have followed the debate/comments on Peston's blog for the last three years have read countless times an abundance of arguments for the need to change the exploitative, wretched, elitist and undemocratic strcutures of the current global financial system that enriches only a small oligarchy and empoverishes the average citizen. Think about tax havens (between 10 to 15 Trillion US Dollars fraudulently hidden away), mega bonuses for a small group of insiders, banks giving 0.5% interest rate for deposits and charging 15-20% interest rates for loans, etc, etc, etc.
    Please keep on posting, debating, and advocating for a fundamental change of the banking system and the larger global financial system.
    You can find more detailed arguments in a series of articles which I have posted here:
    http://globalinsights.wordpress.com/

  • Comment number 46.

    Which means that the Treasury isn't particularly upset - or so I am told - that it is taking a bit longer than expected for the banks to ensure that the deal isn't in breach of their responsibilities to shareholders.


    I had to laugh at that , they are worried about there share holders now ???? how they have never faced charges of dereliction of duty is beyond me anyhow.

    All Osbourne has to do is threaten to remove the tax payers guarantee, they will suddenly come up with a plan themselves to stave off the liquidation of their banks.

    on a slightly different but just as important note, how much longer are the BoE going to be allowed to miss their only target of 2% inflation by.Its now 13 consecutive months they have failed in applying any measures to control this, most people would be moved on if they continually failed to do their job for such a length of time.

  • Comment number 47.

    Let us try and look at the banking problem from a completely different angle. How about justice, honesty and trustworthiness. Is it just that $trllions are salted away in tax havens and Swiss Bank accounts. Are the bankers in these tax havens honest and trustworthy. Is it just that people who make money out of different countries economies, {e.g. U.K, USA and many more] don't pay tax in those countries. Isn't it time all the worlds nations got together and banned tax havens. Just watch the rich lobby scream that it will take away incentives for good business men- and the governments who are afraid of the banks, will sagely nod their heads and say we must not do that, it will stop growth. Come to think of it isn't it time we questioned the perceived wisdom that growth will cure all our problems, and the more growth the better. We need a big growth of new honest ideas, knowledge being the best form of wealth.

  • Comment number 48.

    Robert, why should any of the big banks be desperate to show they are doing their bit?? They value their independence above all else and don't give a toss whether anybody likes their bonuses or not. When will everyone learn that the banks are not your friend, they do not do social responsibility, they are not a charity and they not do freebies. Make a complaint against a bank and they will threaten to withdraw your credit unless you withdraw your complaint - got it now?

  • Comment number 49.

    How many banks had effectively been trading whilst they were knowingly insolvent when the crash happened? It is still a crime isn't it?
    How many individuals employed by the banks prior to the crisis, who were directly responsible for making irresponsible loans or purchasing unspecified bundles of property debt and equities are still employed by their banks and have just received a monstrous bonus payout?
    Why didn't the large accountancy groups identify these problems and take issue with the banks and refuse to sign off their accounts?
    The fact is that the 'Big City Pigs' all had their noses in the same troughs throughout this time and they are all culpable. How come governments are prepared to sanction acts of war against countries on the flimsiest of evidence and yet are not prepared to arrest and prosecute so-called professional financial people whose only concern is themselves and who have damaged our economy and well being with their financial terrorism? It's a disgrace.
    The total bonuses paid out by the UK banks would easily fund a new 'Big Society Bank' so why not hit the sector with a windfall tax equivalent to the bonus they have paid out on last years earnings.
    Actions speak louder than words. The banks understand money when it is their personal bonus at risk and yet they are suddenly in need of remedial support when it comes to appreciating the wider good of the country.
    Stop trying to be reasonable with these selfish, self-serving people. Hit them with a windfall tax now!


    Round a few of them up and lock them in a room with some of the owners of the perfectly viable small businesses who are unable to secure a business loan or who are being taken for a ride on loan rates and ask them to explain themselves.
    This is the background to all of the discussions about regulating

  • Comment number 50.

    47. At 21:08pm on 22nd Jan 2011, Michael Melville wrote:
    “Let us try and look at the banking problem from a completely different angle. How about justice, honesty and trustworthiness. Is it just that $trllions are salted away in tax havens and Swiss Bank accounts. Are the bankers in these tax havens honest and trustworthy. Is it just that people who make money out of different countries economies, {e.g. U.K, USA and many more] don't pay tax in those countries. Isn't it time all the worlds nations got together and banned tax havens.”

    The bankers in Switzerland are abiding by very strict Banking Secrecy laws. Who is more trustworthy someone who obeys the laws of a country or someone who doesn’t.
    The Banking Secrecy laws in Switzerland are what the people of Switzerland want and it is one of the most democratic countries in the world. Recently due to pressure from the US the Swiss Government drafted new legislation supported by the large banks to ease the Banking Secrecy laws to satisfy the US – the people of Switzerland rejected the new legislation in a vote. The Banking Secrecy laws a extremely important to the conservative and prudent Swiss people.
    In terms of Switzerland being a tax haven. Switzerland is unique in that the mandate for the government to collect tax is limited in the amount it can collect and for how long for. In 2020 the governments mandate to collect tax will expire and the voters will have to vote to renew the mandate. As with banking secrecy the level of taxation is determined by the people and Swiss people have democratically chosen low taxes.

  • Comment number 51.

    All very interesting. The problem is not with what the Commission will recommend it is in what the politicians (or bankers' catamites as they are known in the City) will have the courage to deliver. And they will need to deliver in the face of a massive campaign from the banks and threats of moving off-shore.

    I hope for the sake of our democracy Cameron, Clegg, Osbourne and Cable can deliver. If they do I promise I will give my second preference to the Tories - having never voted for them before.



  • Comment number 52.

    Re: 50. At 21:25pm on 22nd Jan 2011, spike1606 wrote.

    That's not really a surprise that many people in Switzerland would vote for continung to benefit from the US Dollar Trillions sitting secretly in bank accounts in Switzerland. These Trillions have often been stolen or corruptly obtained and are often illegally untaxed in their countries of origin. Dear Spike1606, where is your moral compass?

  • Comment number 53.

    And the corporate governance argument is just City lawyers flim flam for advising the banks they can't do what others want them to do.

    If the banks really say there are corporate governanace restrictions that prevent them from reducing bonuses or increasing lending to SMEs I dare them to set out those arguments in public rather than behind closed doors. They wouldn't dare.

    It is a negotiating tactic. That is how you make money in the City - being able to defend something from a very weak position.

  • Comment number 54.

    At the very least there needs to be brought in a transaction only banking system where you can have your money in an account that the bank has no ability to use to hand out loans.

    That will mean you are not getting interest on that deposit and you will be charged but your money will be 100% safe. Now there is no reason that the charges levied to hold such an account should be more than £5 per month for all electronic transactions as they are just that bits of information floating around the ether.

    Unfortunately within our current system there is no way to opt out. You have to have a bank account to get paid for your labour but you have no ability to stop that money from being for any purpose the bank sees fit. With an introduction of a new system you will see new startups that recognise that it's merely a utility service and will provide transactional banking at a low cost.

    The banks are always banging on about free markets but it's time that the free market approach was actually applied to their own industry to bring costs down.

    This seperation of transaction and investment banking would be a pretty democratic way of structuring things as the amount available for investment banks to gamble with in the casino markets would be determined by the populace at large. If you don't want your money available to be made available for loan or dodgy investment vehicles to pay for this years bonus for the CEO then put it in the transactional account.

    Once this system is in place we can then start to address the issue of fractional reserve banking and debt based money.

    It's time for the BBC to start educating the public about how money is really created and how the debt based system is basically a private cartel.

  • Comment number 55.

    There is to my mind an aspect of Sir John Vickers paper that is missing and that is the proper consideration of the nature of the commodity in which banks trade - money.

    His analysis talks of depositors taking haircuts when events take an unfortunate turn, but what of the price of money in all this. For example consider taking a 10% haircut when deflation is running at more than 10% - this would leave the cut depositor quids in!

    What must be considered is the behaviour of the regulators and how this impacts on the banks, big and small. Although Sir John is a dyed in the wool Bank of England man he seems to have a singular blindness when he considers the impact of the banks actions on the private banking sector. As I see it there can be one of three explanations for this: first he thinks that the central bankers and regulators are entirely impotent, or second he thinks that the price of money has no impact on private banks, or third he knows that the 'Fools' are culpable and he and his mates want to make sure that their pensions are OK!

    There is a terrifyingly complacent and amazing line in his talk "The shock from the fall in property prices, even from their inflated levels of a few years ago, should not have caused havoc on anything like the scale experienced." This demonstrates just how much the Bank are either in denial or are so bereft of historic economic analysis that they are unaware of the destructive effects of property bubble (and the associated secured debt assets) on the whole economic structure of Capitalism. This is the nub of their incompetence. They seem to think that some classes of inflation are OK whilst others are not. This is of course absurd - but I think we must ask why the 'Fools' as so ignorant? This is the heart of the matter and this is why present policy pertaining to the price of money is wrong.

  • Comment number 56.

    The longer this farce goes on the more obvious it is that nothing is going to change. Banks are holding Governments to ransom so they get their own way, and if they don't they up sticks and leave.

    It would be better if the Government would set up a national retail only bank, using money it saves not supporting the others and employing all the staff the other parasites have laid off. The majority of the public moves their accounts to this new bank and hey presto, problem solved.

  • Comment number 57.

    if you loan us your money, we will give you say,4%. then we will lend the money out at say 8%, So let's all go down the pub and have a pint because everyone has earned money and everyone's needs have been sorted...... or am I just laying in the gutter looking at .......... a scowling peeler !




    .

  • Comment number 58.

    52. At 21:49pm on 22nd Jan 2011, invisiblehandadvisor wrote:

    “That's not really a surprise that many people in Switzerland would vote for continung to benefit from the US Dollar Trillions sitting secretly in bank accounts in Switzerland. These Trillions have often been stolen or corruptly obtained and are often illegally untaxed in their countries of origin. Dear Spike1606, where is your moral compass?”

    I’m fairly comfortable with my moral compass – for one I don’t make sweeping statements about a nation of people questioning their moral compass.

    How would you vote if our Government proposed paying an estimated compensation for what was taken India during our colonisation for example? After all the UKs living standard today was significantly influenced by our past exploitation.
    Or does a moral compass only object to those that are better off or more fortunate than ourselves?

    I also know that I was fortunate to be born into a developed nation with no concerns around clean water, education, law and order etc etc.. I work hard, provide for those I care about and have the good fortune to enjoy additional rewards that are not available to three quarters of the worlds population the same as the majority on this blog.
    I also recognise that life isn’t fair – I support sensible causes and more equality and fairness but I’m not hypocritical as true equality with the rest of the world would lead to a significant decrease in UK living standards and that is not in my self-interest.

  • Comment number 59.

    Thankfully John Vickers clearly gets it; since without any meaningful regulations to reduce systemic banking risk it won’t be a matter of “if” there’ll be another banking crisis, but “when”. Steve Keen wrote an excellent article in February 2009 about bankers on his DebtWatch website entitled “The Roving Cavaliers of Credit”. The title is taken from Marx’s description of Bankers given in Capital, Volume III, Chapter 33.

    Steve Keen argues that the Fractional Reserve Banking (FRB) Money Multiplier model does not give the correct relationships between debt, money and GDP, and that in reality we live in a pure credit economy with a bit of FRB tagged onto it. The failure of neoclassical economics to recognise this fact means current banking regulations and the actions of central banks to address the financial crisis are wholly inadequate, so on this basis John Vickers proposals need to be accepted. However, I shall not be holding my breath that his proposals will be adopted given the influence on the government of the banks in maintaining the current financial "business as usual" arrangements.

    http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/

  • Comment number 60.

    The argument re: what to do with Banks rages on.
    I notice just a handful of comments have tried to say that taxpayers will suffer the most if Banks were broken up. It needs shouting out that the Banks pay a huge amount of tax for us the taxpayers-even their bonuses get heavily taxed. When they have gone to other climes-and they will if broken up the taxpayer can look forward to paying even more tax to level the books. And when the retail bank is floated expect to pay for your banking -cheques,standing orders the lot. Clearly there are problems to sort out with Banks but it might be sensible to reach a mutually acceptable solution. Destruction might be popular but it is very misguided and certainly not the solution. Consequences follow which will be very painful for the every UK taxpayer.

  • Comment number 61.

    tm123@60 - your world view is exactly how Britain used to deal with the radical union leaders - we better give them what they want or the country will suffer.

    Is there anything you would not give the bankers if they said they wanted it?

  • Comment number 62.

    Nobody can see what the future holds and very few people actually saw the credit crisis coming despite how wrong things seemed in hindsight. We can blame banks for being reckless, they were, but anyone who

    1. took out a big/high LTV mortgage 
    2. had credit card debts
    3.  shopped around for better rates of interest on their savings thus encouraging fund managers to take more risk to generate more return  

    can be regarded as equally culpable in their recklessness. I for one am guilty of the above. It's a function of being human and it's called greed.  

    It's clear now that substantial banking reform is necessary. However, the global economy which affects us all, is predicated on a functioning banking system. Consequently, banks must be allowed time to raise additional capital. If they are rushed they will be left with no choice but to reduce lending to small and medium sized enterprises. This will have a negative knock on effect on the economy at a time when it can least afford it. Banks should be made to hold more capital but the decision of how much, how and when is a very delicate balancing act and almost certainly not a decision that should be made with political point scoring in mind. In an environment where political points are thin on the ground and banks less than popular I fear a botched job on the cards.

  • Comment number 63.

    @60 tm123
    I don't know where you live or what social circles you move in and you may not have noticed the suffering that is already going on and is set to get a lot lot worse.

    Any changes will be beneficial in the long run and if we are going to suffer we might as well do it on our own terms not those of the people that got us into this mess.

    The status quo in not an option and the tactic of trying to scare people is increasingly being seen through. The banks are trying to call people's bluff and they are obviously used to play these games in their everyday lives. Unfortunatley for them the wider populace do not like being threatened and condescended to. They increasingly tend to look not as smart as they like to think they are.

  • Comment number 64.

    Many thanks to Robert for this post.

    Run your search engine down the Parliamentary Conservative Party - how many of them are, were or will be involved in the financial services industry, personally or via their families &friends?

    MOST OF THEM.

    Agreeing to the reforms would be turkeys voting for Christmas - we have the Bankers' Party in charge of the country - they are not going to allow these reforms to happen, or their gravy train will leave for good.

    Separating retail banking and making it insure against large loses and increasing its core capital should make it possible to allow retail banks to have a much lower risk of going bust and if they do, we let them go to the wall whilst protecting depositors.

    The rest need to be told that they are on their own and that if they get into difficulties they will be left to swing in the wind.

    I agree with the point that many banks must have been trading when knowingly insolvent - indeed the Irish property meltdown must have left some pretty close again.

    In ancient cultures the punishments for financial crimes were dire because the damage to society was so profound. We need to beef up the punishments and the penalties for financial crimes.

    A start could be made with the likes of RBS previous management - I find it hard to accept that there is no case to answer for insolvent trading - it's not too late to start an inquiry...

  • Comment number 65.

    #64 wrote "A start could be made with the likes of RBS previous management - I find it hard to accept that there is no case to answer for insolvent trading"

    I think this gets raised regularly and the answer is always the same. There are two different sections in the Insolvency Act, fraudulent trading and wrongful trading.

    Fraudulent trading is very rare in the courts because it is too difficult to prove - essentially you have to prove that directors traded with the deliberate aim of increasing losses and benefiting themselves.

    Normally wrongful trading is alleged against directors but that only applies if the company has gone into liquidation. Even if RBS were liquidated there is absolutely no chance of the directors being convicted of wrongful trading (which is a civil not a criminal offence) because they negotiated a bail out from govt.

  • Comment number 66.

    Project Merlin is so problematic because it is trying to get the banks to be supposedly better for society by extending further credit to small businesses, which they would do anyway if it was commercially attractive, whilst also trying to get backs to be more conservative by carrying larger equity reserves and not recklessly lend.

    A simpler way for the Government to address liquidity in the SME sector would be be to allow deferment of VAT payments (expansion of the existing 'Time to Pay Scheme') for the SME sector but with a charged rate of interest greater than the cost of borrowing for government such that, subject to the rate of default, the scheme does not add to the deficit. This would generate the liquidity in the SME sector to power the growth to replace the contraction in the public sector.......Seems pretty simple to me -- am I missing something?

  • Comment number 67.

    11. At 16:08pm on 22nd Jan 2011, thomas betham wrote:
    The additional costs of capital will need to be passed on.

    That will mean lower savings rates, higher mortgage rates and corporate and small businesses paying higher fees for their overdrafts.

    It will certainly be the end of free banking; so expect to pay for every deposit, withdrawal, cheque and direct debit like they do on the continent.
    ************

    You are probably right, but why should it be this way? Surely, the banks should just lower their profit expectations, in light of the current financial sitiuation, rather than pass the costs onto their customers. This is what all the smaller businesses have to do.


    Of course if they are actually determining how the market works, because they are too dominant in the market, then perhaps they need their power decimated to ensure proper competition.

  • Comment number 68.

    Here's a problem in determining if a SME is a viable business:

    If you supply a non essential product, then suprise, your sales will have dropped. Becuase you can't increase the price of your goods, and can't reduce your costs, your profit will drop.

    If your profit drops, you will be seen by the banks as a problem, becuase do you have enough excess profit to pay the extra loan money, at the high rate of interest they will charge you.

    So if in the boom years, you made 20% profit on sales, you only need a drop of 20% sales in a recession to make no profit and become a "non viable" business.

    Of course if you fleeced your customers in the good times, and made say a 50% profit then you an still be considered a "viable" business.

    Bit like a bank really.

  • Comment number 69.

    Re 66:

    My favourite is to actually stop the VAT circle. Despite me being a 100% exporter, I have to find 20% extra cashflow to fund the VAT for 3 months on all the parts I buy, before the vatman repays me all this VAT at the end of my VAT accounting quarter.

    How much simpler and cheaper if B2B sales weren't charged VAT, but B2C and a few exemptions are charged VAT. This scheme would be similar to how exporters deal with their EU customers on EC sales lists. Roughly the same level of paperwork, but without the cashflow issues.

    Sure it's open to abuse, but so are all VAT schemes. At least it could improve my cashflow by 20%.

  • Comment number 70.

    Robert,

    Come on chap, this isn't a decision between Basel tinkering around the edges versus full on narrow banking, there is middle way.... and it worked PERFECTLY FINE for most of the 20th Century.

    It is called "Originate and Hold" bank lending, i.e. NO SECURITISATION! The arguments for restoring this are compelling:

    http://forensicstatistician.wordpress.com/2010/12/12/securitise-this/

    Banks have always been able to control the money supply. They create credit through loan origination. However this always used to be a private arrangement. A bad extension of credit would come back to haunt the bank that created it.

    Securitisation now enables this to become monetised, and therefore a public problem. Banks are able to take the upside profit, but then leg it on the downside, leaving society to pick up the pieces.

    The only viable solution is, quite simply, to END SECURITISATION.

  • Comment number 71.

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

  • Comment number 72.

    #42

    I think you got it wrong. Bankers DO have an imagination. Dare I say fantasy?

    It is all about risk taking. Every bank is involved in risk taking - whenever you decide to loan some money you are taking a risk. When you put some of your savings into a bank you are making them a loan. Any financial adviser would tell you that the most sensible thing for savers is to put a certain amount into safe investments (you may not make much, but you won't lose much either) and gamble seeking riskier higher returns with that sum which you can afford to lose. So my concern with Basel III was that there has been a level of relative liquid and secure assets which the banks have to hold. The problem is that all of the rest can be spent at the casino. Why not have a second level of say 10% which can be held in slightly less, but by no means seriously risky investments ie SMEs?

    Just want to investigate the repeated mantra of the high priestess of the Banking Sector, Angela Knight. She always goes on about the threat to the banking sector affecting a sector that employs a million people. True (if she says so). But aren't lots of these counter staff at banks and building societies, people in the collection and claims departments of insurance companies, staff dealing with credit cards, store cards etc - none of these would be affected if HSBC decided to move its headquarters to to Singapore or Hong Kong. So how many jobs are at risk? Probably those of the highly bonussed risk takers - never been convinced by their alleged talent. The lesson of the casino is that however successful you are, you will lose a lot as well. So why have a system that elevates those who are on a winning streak and protects them when they lose. If I employ a tipster to place bets for me on horse races and let him keep half of the winnings he has made for me, would I say, "Never mind, have some more stake money," when he loses, because I don't want him to go off?

  • Comment number 73.

    38. At 19:28pm on 22nd Jan 2011, sacallaghan wrote:

    > why didn't people just listen to you three years ago?

    Who knows why such obvious solutions were unused until now. Maybe it's because we have so many irresponsible idiots in the financial sector?

    > you can turn your attentions to the middle east

    Thanks for your admiration, but this is the business section.

  • Comment number 74.

    @ 60. At 22:43pm on 22nd Jan 2011, tm123 wrote:

    > Then we start being paid in cash again – for every negative
    > there is a positive. Simples!

    I've already started that at the bank of Jacques Cartier - cash is king!

  • Comment number 75.

    Boilerbill - really good post.

    Your first paragraph I mostly agree with - the only problem I sIee is how you classify the different levels of risk for the various activities. Pre-crisis I'm sure mortgage lending would have been seen as low-risk.

    Your second paragraph - you're quite correct a significant number of the jobs are in the service sector part of the banks and would be more or less unaffected.
    The jobs at risk are not just the high bonused risk takers as you describe them. In fact here I assume you are referring to the traders. Quickly as an aside - these traders who do earn high bonuses are not huge risk takers. Behind these guys there are large risk departments who set strict controls on how these guys trade and how much risk they take. Traders do not have the power to make company threatening losses for their banks unless
    a) they act against policies (and probably illegally) such as Nick Leeson and there is tight monitoring in place to ensure it doesn’t happen
    b) the Risk Management controls are in inadequate in which case the trader would surely be sacked but the fault would lie with Risk Management.
    Don’t forget the financial crisis at its root was just simple bad lending on residential and commercial mortages – nothing to do with trading
    Secondly there is a huge amount more to the Banks than trading. Corporate finance, mergers and acquisition, advisory businesses etc etc. People on here might not like them but in the current system they are necessary. These businesses create no risk, yet employ a lot of people, the highly paid ‘bankers’ plus the support staff. These functions bring a large amount of revenue into the UK, some of which ends up with the taxman through corporation tax, income tax and VAT on the spend.
    Under too much pressure this will move to other cities and it will be a loss to the UK economy

  • Comment number 76.

    One general problem with UK legislation will be a disparity with the US Dodd-Frank Act allowing banks to effectively arbitrage legislation across the pond. How big will the gaps be between the two regimes?


    Preston: “Fourth, the more extreme versions of so-called narrow banking, in which banks that look after our deposits would be banned from lending our cash to businesses or individuals, would impose excessive costs on the economy.”

    There is another side to that:

    If banks were forbidden to lend deposit money then depositors could not be paid any interest, as there would be no risk investment mechanism to earn interest. Depositors would then likely face costs for banks to hold their money and there would be no point in separate Current v Deposit accounts.

    I do feel the public asks for the impossible though when it insists on 100% safety for its money and also interest payments. The two are mutually incompatible, as one has to accept risk to lend money in order to earn profits to pay interest. Those banking with Northern Rock should have received less government protection than say those banking with Barclays, as the interest paid was unequal.

    Politicians seem to want to force banks to offer 100% safety, credit and interest, a triangle it is just not possible to perfectly square.

  • Comment number 77.

    69. At 00:08am on 23rd Jan 2011, Crookwood wrote:
    Are you sure that you cannot submit your return and get the refund monthly?

  • Comment number 78.

    "Fourth, the more extreme versions of so-called narrow banking, in which banks that look after our deposits would be banned from lending our cash to businesses or individuals, would impose excessive costs on the economy."
    = = = = =

    So, what's being said is that depositors can expect NO interest on their deposits (which arises because a bank lends deposits at a higher rate). Worse, depositors might be charged by the bank for acting custodian for their money.

    I mean, if that's the size of the thinking of this banking commission jamboree we might as well give up altogether!

    They have barely thought the problem through. There are hundreds of potential unintended consequences that could threaten our economy, the take take, our position in the financial world, etc.

    Let's face it - if these banking commission prattlers were any good at banking they'd be banking, not polishing the seats of their pants on the benches of Westminster.

  • Comment number 79.

    #77
    I thought so: if you go to http://www.hmrc.gov.uk/vat/managing/payments/refunds.htm and search for 'monthly' you will see that you need to speak to thir help line and they will arrange monthly refunds.

  • Comment number 80.

    With regards to the 'boring' retail banks its time to take them out of the loop. These institutions believe they have a divine right to take money off people (call it profit if you wish) and the problem resides in the fact that everyone who works in this country is told they have to have a bank account if they work. Naturally, they do the easiest thing which is to go to a high street bank, choosing these institutions because they are told to so (in adverts all day every day on television and elsewhere). It seems natural, normal, to have an account with a high street bank. Its habit, but an increasingly bad one.
    For instance its possible to have an overdraft for which you pay 25% interest AND deposits which are 100x that overdraft amount with the same bank, yet still end up "out of pocket" despite the fact that the bank is the debtor and you (overall) are the creditor. Obviously people who are educated with regards to personal money management would attempt to avoid this and more and more of them will. The banks are guaranteed rewards for this completely comically one-sided "service".
    There are enough entrepreneurs out there who will take advantage of this cosy set up and the banks are going to find they will gradually be undercut by an increasingly savvy internet generation. There are several alternatives to traditional banks and they are growing in popularity.

    The retail banks are non-competitive and like most cartels they succeed because of the illusion that what they do is "normal". As soon as any one of their number breaks ranks and breaks the spell then the game is up. That time is coming sooner than the banks think.

    Their current money-grabbing phase in which they snatch a profit, impose a charge whilst paying niggardly rewards is doing a lot more damage than they think.

    As individuals there is no benefit to having anything to do with banks whatsoever.

    As for small companies, I wouldn't be surprised if varied corporations start funding them so that they can avoid the banks punishing terms.

  • Comment number 81.

    Robert quoted: "This would be a good opportunity to remind Balls that he designed the tripartite (regulatory) system that failed so badly and ended up with us owning these banks."

    True, Mr Osborne, but why hasn't your new regime scrapped the system and sacked the jobsworths who so crippled the country? (PS Fire Mervyn King NOW!)

    George Osborne is even more worthy of blame as we now know how damaging the old system was and he has done nothing about it! David Cameron should fire George Osborne as he has failed to get to grips with the situation. Do we have to wait until he too suffers from personal family problems before we get someone who will do something?

  • Comment number 82.

    If having a banking system is so important to our economy (and I believe it is) then its quite simple we need a national bank - like we have a national health service, a national schools service and a national army. There are certain functions in our society that we believe are vital.

    There is still room for private banks (as there is for private medicine and education) and if you choose to go private you take the risk that the enterprise may fail. That is how it works.

    Its not rocket science it seems blatantly obvious to me, we have existing working models. Given that we already own Northern Rock I suggest we start there. How about on Monday?

  • Comment number 83.

    I am very surprised that Robert Peston says that he doesn't know what "company governance" means. Let me explain to the BBC's Business Editor that under section 172 of the Companies Act 2006 directors have a "duty to promote the success of the company for the benefit of members as a whole". Under section 174 of the same act the directors have a "duty to exercise reasonable care, skill and diligence." So if the directors of the banks are pressurised into agreeing targets to lend to small businesses, then as we know from bitter experience, lending criteria has to be relaxed and the likelihood of bad debts resulting from that forced lending policy is inevitable. The bank directors, in agreeing to such a lending scheme, could well be considered as breaching these duties as directors under the most recent company legislation.

    So, Robert, its not "a bit odd" that the banks are cautious about "doing their bit" to help small businesses. The banks are not charities, and the directors, like all other company directors, have duties under company law. Perhaps you could also let Vince Cable know about this curiously ignored aspect of bank lending.

  • Comment number 84.

    @83 daiviv
    'So, Robert, its not "a bit odd" that the banks are cautious about "doing their bit" to help small businesses. The banks are not charities, and the directors, like all other company directors, have duties under company law. Perhaps you could also let Vince Cable know about this curiously ignored aspect of bank lending.'

    But the thing is that the banks control the money supply and they have proven that they are incompetent in doing this responsibly. This is what creates booms and busts and they are perfectly aware of this despite their "what me guv?" attitude.
    Why private institutions should be doing this is beyond me as it is plainly obvious that it is being done purely in their own interests and not in the interests of the economy. Banking was set up to aid the economy not to bring it to its knees. deciding this


  • Comment number 85.

    Daiviv as this is your first post I was not sure if you were intending to be funny.

    Are you suggesting that:

    - in the lead up to the bust and bailout the bank directors (who authorised billions in dodgy loans and transactions) were at all times acting in accordance with sections 172 and 174 of the Companies Act;

    BUT

    - in agreeing to increase lending to SME's the bank directors would not be acting in accordance with sections 172 and 174 of the Companies Act.

    If you are being serious can you appreciate just what a weak argument that is on behalf of the banks?







  • Comment number 86.

    77. At 08:51am on 23rd Jan 2011, AnotherEngineer wrote:
    69. At 00:08am on 23rd Jan 2011, Crookwood wrote:
    Are you sure that you cannot submit your return and get the refund monthly?

    ********

    In essense this is true, however, HMRC normally reserve this for larger customers, as it costs them more to process it. I've never tried it, but I reckon I'd have to argue hard. Also in order for you to be able to reconcile your accounts, you submit your return for the previous month at the end of the following month. They then settle about 7 days later.

    This is a worst case 67 day payment cycle ( best 37 days), which is beyond most 30 day trade terms ( gives you a bad trade record). If you buy parts from abroad ( which I do to get the best pricing), these are all paid in cash because it's difficult to get a trade account where you are not in the same country as the supplier.

    Finally as I'm an exporter, this still affects my cash flow, having to find 20% of all sales upfront. Even if you sell into the UK, if you're a manufacturer with a large parts bill, that needs processing, before you can bill, unless you have a steady business ( recession anybody?) you'll have cash flow problems.

    Unless you remove B2B VAT transfers.

  • Comment number 87.

    The Two leading BRIC countries China and India are already BASEL 3 compliant in terms of capital reserves. The UK and the US banks are woefully short and they have 10 years to comply.

    Goldman Sachs internal research predicts that China will account for one half of all world GDP growth in ten years.
    http://www2.goldmansachs.com/ideas/brics/brics-decade-doc.pdf

    My concern is that the taxpayer will underwrite the banks for the next ten years for them to relocate anyhow.

    Where will our banks be in 10 years time? Answers on a postcard please!!!!

    Perhaps now broadcasters will stop trotting out the reportage of "Gordon Brown Ate My Hampster" and be more grown up about the causes and the solutions of the crisis.

    In terms of Casino Versus Retail Banking. The splicing of these activities occurred in the US in 1999. Many broadcasters try to hang the blame on Clinton as he was in Office but not in power on account of fighting of an impeachment witchhunt. Both the Senate and Congress were controlled by the REPUBLICANS and the powerful banking lobby. But dont let facts get in the way of a good story.

    Have a look at the clip of Democratic Senator Byron Dorgan arguing against the bill. It is eery.

    http://www.bergenjerseyforeclosures.com/blog/info/entry/repeal_of_glass_steagall_act#comments

    In the UK the split occured earlier as a result of TORY party's 1986 act which Margaret Thatcher drove through under the euphemism "Big Bang". This allowed provincial banks to attain global status with two now having balance sheets bigger than the whole of the UK GDP. Again nobody in the media acknowledges this and it is left for Citizen Journalism to give the journos their own big bang to cure their convenient amnesia.

    For readers not familiar with big bang here is a report on 20 years of celebration.
    http://news.bbc.co.uk/1/hi/business/6081314.stm

    Finally one area two areas which BASEL 3 does not address is:
    1. The cheek to jowel relationship of politicians and bankers. With Tories, Labour and Lib Dems having potential conflicts of interest, it will be difficult to address this issue. Perhaps this could be the reason why Ed miliband is distancing himself from New Labour as Blair is now on JP Morgan's Payroll and Ruth Kelly is on HSBC's payroll.

    2. Shadow Banking

  • Comment number 88.

    I see that a politician is suggesting that small traders (plumbers etc.) who are not VAT registered but who charge the same price as a VAT registered company should be jailed, if they cause the customer to believe this is because of VAT. (Not fined, etc. mark you).

    I doubt if that many plumbers are public-school educated, but if so then like bankers they would have been utterly immune from this sort of recommendation I'd expect.

  • Comment number 89.

    83. At 10:34am on 23rd Jan 2011, daiviv wrote:

    "The banks are not charities, and the directors, like all other company directors, have duties under company law."

    Whilst this may be true Daiviv, banks have a unique privelige on many levels and i will list some:

    1. Banks have a monopoly on creating credit (money) through fractional reserve banking. Therefore the bank creates the money on behalf of the government then charges them interest on top.

    2. Banks deposits are underwritten by the taxpayer. So called strong banks were given secret emergency liquidity loans to remain solvent. No other industry in the free market would be given this safety net.

    3. Any government spending is filtered through the banks so the banks get turnover. Is it any surprise that the bankers do not want the ridiculous bonus reward formula changing.

    4. They have the taxpayer over a barrel because our economy is so dependant on financial services. Germany is less reliant and hence them getting tougher with the banks.

    5. "company" governance is about doing business in the interests of their stakeholders (not just shareholders). So even with the banks that the taxpayer doesnt have a stake in, the banks have benefitted from the surge in government spending over the last 3 years.

    6. In 2007 the Uk debt as % of GDP was lower than all G7 countries excluding Canada. It was also lower than the last conservative government at around 40% (43% in 1996). It has shot up to around 70% since 2007 due to bailouts, more public spending because the private sector siezed up, QE, loans, etc. Many of the other G7 countries still have higher debt than us but still the media trot out "Gordon Brown Ate My Hampster" reportage but the electorate is no longer buying it.

    But apart from that you are right they are private companies.

  • Comment number 90.

    I think the power of the Banks is overestimated. They, like the Govt. don't have any money, it all belongs to taxpayers and electors and if it came to the crunch it would be possible to make the Chief executives and boards accountable in court and Nationalise the banks. The Banks now represent an unacceptable risk to the taxpayer-they have become more nuisance than help and if the tax payers in the UK were presented with another Blackmail note by the Banks- Your money or your Economy- I think the people would go ballistic and make the student riots look like a Sunday School Outing and probably there would not be a bank building in the UK that hadn't been trashed and in my estimation Senior Bankers lives would be at risk. The Banks and financial institutions have left a trail of lost homes lost jobs and ruined lives behind them and now they are taking bonuses that in my view are bought at the price of someone else's misery. The Banks are probably the most hated organisations in the world. Everybody in the UK knows someone who got ripped off and the people are incensed and don't trust the Banks any further then they can spit. Never mind all the small talk about the technicalities and whether campaigners will be disappointed; the People will be incensed and enraged and the Govt. needs to take some very firm action soon because the people feel their taxes have been stolen, with the connivance of the establishment and politicians. Should the Govt. threaten the Banks? YES.

  • Comment number 91.

    Its quite pathetic.

    Lehman Brothers had a ratio of equity capital to assets of around 10% which is GREATER than this PATHETIC Basel 7%.

    MANY experts suggest a level of around 25%.

    Basel is basically WORKING FOR BANKERS.

    With them coming up with 7%, anything above that is apparantly regarded as harsh, hence even if the ratio of equity capital to assets was put up to 10% or 11% it would seem in ignorant Joe publics eyes as being better than the paltry 7%, its basically MIS-SELLING which is what got us into this mess with mis-sold fraudulent Sub Primes & derivetives.

    Its basically a DECEITFUL/PRETENTIOUS/MANIPULATIVE CON.

    What I personally would write into new regulation is-

    1. In the event of a run or collapse of banks, the value of assets gained by top management over a 10 year period in banking sector are instantly frozen and available for confiscation, which includes all assets/wealth transfered into other peoples names and to other countrys.

    2. ALL bonuses paid out for deals/contracts which have not come to fruition/reached the end of term/conclusion of contract, should also be levied at 100% of value to be maintained in a seperate account at the bank/establishment and only released upon the end of term/conclusion of contract of which the bonus was paid. The said account to be available for very low risk short term investment so as to maintain its value with inflation and rise upto 2% above inflation.

    3. All bonuses and renumeration packages to senior management and any renumeration packages and bonuses which total over £1,000,000 should be liable to clear traceability for a 15 year period and the said people should be personally liable provide clear and consise information as to any transfers/expenditure.

    4. In the event of any future run/collapse of any bank, that bank will be liable to nationalisation at a price/cost equivelent to 0.5% of value of assets at the time of government interjection or 0.5% of value of assets at the lowest point of market value/worth resultant over the period of turmoil and financial adversity and the 100% value of any/all shares received or still held by senior management over the preceeding 10 year period are liable to instant confiscation from who-ever the moneys names/businesses/countrys have been transfered into.

  • Comment number 92.

    I hope the Commission and the government, do not believe the banks' claim that they would move to an easier climate, if they are obliged to look after their clients money more carefully. Would the majority of customers be willing to leave their accounts with a bank which had done so?

    Those who transfered cash to Icelandic banks, in order to take advantage of the higher interest rates paid by these banks, where lucky to have been bailed out by UK taxpayers, when the Icelandic government were unable to do so. UK taxpayers could not be expected to bail out customers of banks which had deliberately moved out of UK jurisdiction.

    Bank customers assume that if money is left in a current account or any other instant access account, they will always be able to draw on it. When banks use this money for risky lending, they are guilty of false description. The Trade Descriptions Act should apply to banks.

    The recycling of loans when they are redeposited somewhere in the system is an essential part of the mechanism which allows banks to lend many times their own capital. If this were banned, tighter regulations requiring higher reserve ratios would hardly be necessary.

    The BoE would have to generate more credit to replace the credit that banks could no longer provide. The profits made by the publicly owned BoE, as a result of doing this, would more than compensate the Treasury for the loss of tax revenue on private bank profits.

  • Comment number 93.

    59. At 22:43pm on 22nd Jan 2011, Richard wrote:
    http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/
    -----------------------------------------------------------------------------------
    Good link, thanks for posting it.

    So if:

    The hopelessly indebted will borrow till the cows come home, but can’t pay it back.
    The modestly indebted could borrow, but are nervous of their economic future.
    The prudent won’t borrow per-se because they see it as the road to ruin.

    What's the answer?





  • Comment number 94.

    Am I being ignorant here. What options were there when the crisis hit. As far as I can see, two.

    1. bail out the B!!!!!s, then we all take responsibility to rebuild

    2. Let the banks fail, the financial system collapses, anarchy ensues. Bankers would not get bonuses, there would be no banks to pay them, they would be unemployed like a lot of us.

    So the reality is on the back of us ordinary guys, city guys are like alcholics given a second chance with a liver transplant, only for them to binge drink again but not with beer with champagne.

    The bankers had better start to get real, there is already squealing amongst the ordinary folk as VAT, petrol, transport fares, fuel are only going in one direction.

    Maybe the answer to getting the bankers to see sense is this. Any Director of a bank that fails is charged with high treason against the state.

    Wont happen of course because at the end of the day the politicians and the money men are in the same bed but they should remember that they live in the same country as the plebs. Push the plebs too far, as history shows, revolution of one sort or another follows.

  • Comment number 95.

    I have to say, direct hostilities between Osborne and Balls - as and when they start for real - should be quite a spectator sport.


    oooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo

    Labour is just pretending to be be up front with its Balls at the risk of public castigation ,of course there is a first time for everything however their sinurges will never make one plus one equal more than two.

  • Comment number 96.

    83. At 10:34am on 23rd Jan 2011, daiviv wrote:
    "The banks are not charities, and the directors, like all other company directors, have duties under company law."

    I couldn't agree more. The banks have a responsibility to make money for their shareholders and safeguard their shareholders assets. If the government wants banks to be "socially responsible", by lending to people and businesses who don't actually qualify for loans under the bank's own guidelines, is it also prepared to squander taxpayers money by indemnifying the bank against any future losses that then occur?

    For those of us from whom the bank borrows, we are free agents. We don't have to lend our money to the banks. Even if we are required to have a bank account by our employers, there's nothing to stop us taking out all our pay on the day it is paid in. And government gaurantees mean that for the vast majority of us, inflation is a greater risk to the value of our money than any misuse of funds by the banks.

    For those of us who choose to borrow from the banks, the same thing applies. No one has to spend beyond their means, be they private individuals or in business. We're not forced to borrow. Even in the worst case scenario of little or no privately generated income, other taxpayers foot the bill for basic living and not so basic accommodation costs. And that, by the way, goes for the self employed as well as those working for other people.

    Even if banks agree to targets to lend to small businesses, surely the government doesn't expect them to lend to businesses or individuals that they judge to likely be unable to afford to pay them back at some point in the future? The government seems to be expecting the banks to fund the expansion of businesses, or even start up costs, without the borrower providing adequate security and at interest rates too low to reflect the actual cost plus risk to the bank of providing those funds. That would hardly be a commercially responsible position to take by the banks, nor one that most of the shareholders would be likely to support.

  • Comment number 97.

    2. At 15:12pm on 22nd Jan 2011, BankruptBanks wrote:

    Good point although this idea goes back a long time further...

    I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. Thomas Jefferson 1743 - 1826 (attr)

    14. At 16:36pm on 22nd Jan 2011, dynamoagm wrote:

    Absolutely... off to the Co-op this week to open an account there... only way forward is to starve the big banks of their retail base.

    19. At 17:31pm on 22nd Jan 2011, AnotherEngineer wrote: "I am glad to hear that that nonsense had been rejected and people and industry will still be able to borrow money when they need it."..... erm, they can't, that's the problem... http://www.bbc.co.uk/news/business-12260742, the banking industry is hoarding its cash as they can see that the outlook is unnerving.

    50/58. At 21:25pm on 22nd Jan 2011, spike1606 wrote: Swiss Banking Secrecy Laws... the Gnomes should be removed from any business with the rest of Europe. How do you feel about the holocaust wealth secreted away to Swiss bank accounts during the war? Are you an apologist for that also? Switzerland's 'healthy democracy' is based upon the misery and exploitation of others and the generosity of the rest of Europe who really should have broken it up after the Second World War. UBS and CSFB were essentially threatened with the removal of their business from the US if they did not play ball... so it will be interesting to see how that pans out. Long may the leaks from their private client business continue... Switzerland should be forced into Europe or all business linkage (especially foreign banking) made illegal... Boycott Switzerland! It relies on the greed of others (and mountains and snow) for its survival. Referencing a colonial past is all well and good, we could talk about Papal mercenaries for example, however it is here and now where we stand and the future which we are hoping to shape. Your 'neutrality' means you have no opinion and you should wait for others to decide what to do with you.... unless you want to do something beneficial for everyone and not continue to line your pockets.

    72. At 08:03am on 23rd Jan 2011, Boilerbill wrote: Angela Knight... good to see her name appear on a blog. I would say she is an excellent organ for the Banking Industry and does her job with aplomb. Whether her rhetoric stands chronological scrutiny is another matter however, as is the question as to whether her soul is intact.... if one repeats the mantra long enough, then it must be true n'est-ce pas?
    'We are successful, our model works".... all together now. I have worked (>15 years) with some of these talented individuals and it is fair to say that in the arena of unabashed client entertaining, "drinking", 'deal-making' and greasing they are indeed some of the finest I have seen.


    83. At 10:34am on 23rd Jan 2011, daiviv wrote:
    Hahhahaha. You have to be joking! Using the Companies Act statute on "skill, care and diligence" (paraphrase) to defend Banking Director's actions of not lending to business after they have been rescued by the taxpayer, have largely been unaffected and insist they are still worth bonuses... the Chutzpah award today is yours. Boards and directors of financial institutions should have been macerated already by their shareholders... the chummy nature of the finance industry is evident because this hasn't happened... de facto, those with half a brain cotton on that corporate 'democracy' is an illusion, which removes a cornerstone of post-modern capitalism.

    And if anyone is in any doubt, having worked in this poisonous industry, I would advocate the complete break up. I would also remove commodities trading from banking business altogether to stop the next bubble (licenses for small 'commodity' industries - Warburtons and the like, with such a high tier one capital for commodity trading houses as to exclude them) and an auction of new banking licenses in the UK. Anyone talking about regulatory arbitrage to be left to depart (here it would neatly dovetail into Switzerland above) and a tax loopholes closed to ensure that anyone doing business within the borders of the UK, pays tax on the profits from the UK TO THE UK!!!! No business to be done in the UK otherwise... I know, just crazy huh? I am absolutely capitalist but one always needs to pay one’s way in the world.


  • Comment number 98.

    Take a day off Robert.

    You've been working very hard lately.

    Sterling work though btw.

  • Comment number 99.

    Well, it's one way to pump short-term cash into the UK. Break the banks into nice bight size pieces and wait for 'foreign investors' to buy them and close them. Can't we just restrict ourselves to the more important task of ensuring they do their jobs properly and honestly and pay themselves fairly?

    I hate the banks and feel they need a good kicking. But does no UKGov never learn from history. Every time they've ever tried to re-organise an industry, they've killed it.

  • Comment number 100.

    60. At 22:43pm on 22nd Jan 2011, tm123 wrote:
    The argument re: what to do with Banks rages on.
    I notice just a handful of comments have tried to say that taxpayers will suffer the most if Banks were broken up. It needs shouting out that the Banks pay a huge amount of tax for us the taxpayers-even their bonuses get heavily taxed. When they have gone to other climes-and they will if broken up the taxpayer can look forward to paying even more tax to level the books. And when the retail bank is floated expect to pay for your banking -cheques,standing orders the lot. Clearly there are problems to sort out with Banks but it might be sensible to reach a mutually acceptable solution. Destruction might be popular but it is very misguided and certainly not the solution. Consequences follow which will be very painful for the every UK taxpayer.

    -------------
    Isn't Blackmail a crime?

 

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