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Project Merlin: The details

Robert Peston | 13:00 UK time, Wednesday, 9 February 2011

Here are the main details of the long-awaited Project Merlin deal between the government and the Treasury.

1) As expected, the four biggest British banks (RBS, HSBC. Lloyds and Barclays) plus Santander will commit to make available £190bn of credit to business in 2011, up from £179bn in 2010. On the question of whether the funds being made available for business will actually be lent, the Treasury points out that in 2010 RBS and Lloyds lent more than they promised to do - so the Treasury is hopeful that bankers will again exceed the targets.

2) Of this lending commitment, £76bn will be made available for smaller businesses, which represents an increase of £10bn or 15% in credit available to SMEs in 2010. This is probably the most important commitment in Merlin, in that it is small businesses that have been complaining of being starved of vital finance.

3) The Bank of England will monitor whether the funds are being made available to businesses and will publish quarterly assessments.

4) Among the performance targets used to determine bonuses of bank chief executives will be whether they are providing the promised credit to business (this in broad terms is already the case for Stephen Hester at RBS and Antonia Horta Orsorio at Lloyds).

5) The chairmen of banks' remuneration committees are writing to the chairman of the Financial Services Authority warranting that they are cutting the amount provided for bonuses in relation to 2010 performance as a direct consequence of their negotiations with ministers.

6) In their coming results, RBS, HSBC, Lloyds and Barclays (known as the Merlin banks) will publish the pay of their five highest paid executives below board level (but not the pay of traders who don't have management responsibility). The pay of board members already has to be disclosed.

7) The government will legislate so that from 2012 all big banks in the UK will be forced to publish the pay of their board members plus the eight highest paid executives below board level. This new disclosure requirement will apply to the UK operations of overseas banks such as Goldman Sachs and UBS. Goldman is unlikely to like this. On paper at least, the UK will have the most transparent regime for bankers' remuneration in the world.

8) The remuneration committees of big British banks will commit that they will henceforth sign off the pay of the ten highest paid individuals in each business division. This is designed to make it easier for shareholders to hold the banks to account for what they pay.

9) The banks are providing £200m of capital for David Cameron's cherished Big Society Bank, which is supposed to finance community projects.

10) The banks are providing £1bn of equity capital (or risk capital) over three years for small businesses in hard-pressed parts of the UK, on top of the £1.5bn of equity capital they have pledged over ten years (ministers insist this £1bn is additional capital; bankers in recent days have been less clear about that). This is supposed to help fill what is traditionally known as the "equity gap" for smaller growth businesses in the UK (Germany's competitive advantage over the UK has long been seen in terms of how its smaller businesses find it easier to obtain long term finance). And the equity capital will in theory be directed to the private sector in regions most hurt by public spending cuts.

Those are the main points of detail. In addition, we will also learn more about the pay and bonuses being awarded to senior people at the two banks where taxpayers have huge stakes, Lloyds and Royal Bank of Scotland. They will repeat their 2010 commitment that the cash element of any bonus won't exceed £2,000 (bonuses paid in shares will of course run to many millions of pounds in some cases).

Note that Santander has signed up only for the lending. It has not signed up for the other Merlin commitments.

PS. Just to confirm, the provision of credit to businesses big and small will be on commercial terms, and will be subject to demand. So, many small businesses will probably continue to complain that even when credit is offered, it is too expensive.

Update 13:08: George Osborne has formally ruled out imposing a bonus tax - rejecting demand from Labour for the previous government's bonus tax to be imposed again.

Update 14:19: Royal Bank of Scotland has confirmed that its chief executive, Stephen Hester, will receive a "new Share Bank scheme" award (RBS's name for a bonus) of £2.04m for his performance in 2010. It will be paid in shares, and he won't be able to get his hand on all of it for three years.

It means that Hester will receive a fraction of the sum likely to be awarded to his opposite number at Barclays, Bob Diamond (with some of the difference in their respective pay explained by the fact that RBS is more than 80% owned by taxpayers).

RBS also confirms that its investment bankers - employed by its GBM division - will share in bonuses totalling "less than £950m for 2010." That compares with the 2009 bonus pool of £1.3bn. A proportion of that drop in bonuses stems from the fact that GBM had a better year in 2009: not all of the fall represents pay restraint imposed by the board of RBS as a result of the Merlin talks.

As the FT recently pointed out, on the basis of this size of bonus pool, at least 200 RBS bankers are expected to receive bonuses in excess of £1m each.

Update 15:00: Is it a good day for banks to bury bad news? Like RBS, Lloyds has disclosed the bonus of its chief executive, Eric Daniels.

Mr Daniels (who is stepping down as chief executive) is to receive a 2010 bonus of £1.45m - which Lloyds says is "62.3 per cent of his potential opportunity" (ie the board could have awarded him more). I disclosed some weeks ago that Mr Daniels was on course to get a bonus.

Like Mr Hester, Mr Daniels waived his bonus in the previous year.

Mr Daniels' bonus is likely to prove more controversial than Mr Hester's - in that Mr Hester was appointed at RBS at the end of 2008 to clean up the mess created by his predecessors, whereas many would argue that Mr Daniels was to a large extent responsible for the mess at Lloyds, because he was the boss when Lloyds made its disastrous takeover of HBOS (also at the end of 2008).

Comments

Page 1 of 3

  • Comment number 1.

    Rearranging the deckchairs on The Titanic?

    The mega-banks:-
    -continue to control society, not society them
    -make up an oligopoly, between the members of which there is little or no genuine competition
    -continue to be the issuers of virtually all of our money, to their own enormous financial benefit
    -are still "too big to fail" and so are implicitly indemnified by the taxpayer against any adverse consequences of their actions
    -hence benefit from the better terms on which they can borrow as compared with what the cost of borrowing would be were they not so indemnified
    -continue to pay bonuses the money for which would not in their coffers were not the contribution to their profits made by this subsidy - meanwhile, the taxpayer (who gives it and thereby helps to swell the bonus-pool substantially, is him/herself being relentlessly squeezed by a combination of falling real incomes withdrawal or attenuation of public services to meet the governments deficit-reduction targets - neither of which cause any pain whatsoever to the recipients of the banks' bonuses.

    And we are expected to cheer?

  • Comment number 2.

  • Comment number 3.

    Er, excuse me for stating the 'bleedin obvoius', but 2010's lending figure of £179bn increased by one year's inflation is....

    £190bn for 2011 !

    So a great fanfair, but no real increase

  • Comment number 4.

    All the sorcery and trickery of Merlin himself - what another great way of pulling the wool over everyone's eyes.
    If only they knew why the recession began in the first place - then they wouldn't conjure up such a ridiculous and unworkable solution.
    The promise of lending "on commercial terms" is a joke, an SME overdraft rate is about 18 - 25%, totally unworkable for most small businesses. It wouldn't be so bad but the banks are borrowing (from each other) at less than 1%.

    This is a great way of giving the impression of 'doing something' when actually 'doing nothing'.....or rather not as it's as transparent as the sky is on this beautiful sunny today.

  • Comment number 5.

    if banks are forced to lend more but are still worried about balancing books and bolstering their own savings, does this mean that less will be leant to people looking for mortgages? Another housing crash while the economy creeps forward?

  • Comment number 6.

    In short then - a bit of rearranging of the furniture but otherwise it's basically business as usual.

    Oh, and by the way, corporate-led globalisation continues to drive humanity to the brink of climate chaos.

    And in case you're wondering about the relevance of such a comment on the BBC's business blog - perhaps we're supposed to regard all this stuff as totally divorced from the climate system.

  • Comment number 7.

    The missing piece in all the discussion about banker bonuses is how these compare to similar roles in other similarly large/profitable industries.
    I am not in a position to know - my experience is in the IT industry where a CEO might be on 150k with a 100% bonus for meeting bottom-line objectives. For all staff, if the company did not meet its objectives then, no matter how well the individual performed, there would be no bonus. :

  • Comment number 8.

    The best paid staff will still not have to reveal their pay meaning they are still unaccountable to shareholders

    Chancellor "From this year onwards, the four major banks have committed to disclose the pay details not just of their executive board members, but also of the top five highest paid executives not on the board."

    ie. if you are a trader and not an executive and get paid £10 million - the shareholders/owners of the company will have no knowledge of your pay

    and we say that this is transparent!!

  • Comment number 9.

    Will I get funding for my new betting shop and bingo hall. I also want to to do a bit of online trading. My broker will loan me £800,000 at 1.4% if I present a deposit of £200,000. Can I apply for assistance in respect of the £200,000.

    I also want to enter the property market where I can make a sure profit on rental if I can secure a 100% mortgage at 2% fixed for 20years.

    I am willing to take bets on which option is most desirable to banks

  • Comment number 10.

    Fascists seek to organize a nation according to corporatist perspectives, values, and systems, including the political system and the economy - Wikipedia

  • Comment number 11.

    2) Of this lending commitment, £76bn will be made available for smaller businesses, which represents an increase of £10bn or 15% in credit available to SMEs in 2010. This is probably the most important commitment in Merlin, in that it is small businesses that have been complaining of being starved of vital finance.
    =====================================

    A 15% increase in substinence to someone who is starving is not really going to cut the mustard, is it?

  • Comment number 12.

    As expected much ado about nothing (well very little)
    1) In a growing economy what growth is to be expected in credit i this is a forecast not a commitment;
    2 Credit available on commercial terms (whatever that means) again growth of 15% is nothing extraordinary in a growing economy;
    3 BoE note monitor not do anything about poor performance;
    4 The devil/glory is in the detail. They can all talk a good performance;
    5) So what What will happen if the reduction is not there or too small;
    6) Big deal
    7) OK that's something - but more likely to make us even madder!
    8 Oh yes and of course the remuneration committees have been very effective in restraining the explosion in top salaries.
    9) In a brown paper envelope. Here Dave for your use thanks for the break;
    10) Not much to get excited about. Had GO referred the bank charges to the OFT it might have a more beneficial effect for SME's.

    Phew what a relief for Balls - he has plenty to lay into now.

  • Comment number 13.

    (but not the pay of traders who don't have management responsibility).

    Phew...

  • Comment number 14.

    Well it appears somewhat of a vague intention with very little meat on the bone. I heard very little about sanctions if the banks fail to deliver. The banks are saying the money is merely available and not all those small businesses will be able to take advantage of this new money. This money will also only be available to those small businesses who are deemed "credit worthy" which will preclude many from qualifying. Also this money will only be lent on commercial terms which many small businesses will find far too expensive to run the risk of taking advantage of. As i say a few questions answered but far too many remain. And it could have been so much more. An opportuinty missed.

  • Comment number 15.

    All this user's posts have been removed.Why?

  • Comment number 16.

    R.P. wrote:
    PS. Just to confirm, the provision of credit to businesses big and small will be on commercial terms, and will be subject to demand. So, many small businesses will probably continue to complain that even when credit is offered, it is too expensive.

    Commercial terms!
    Ruinous terms from what I’ve heard.

  • Comment number 17.

    It be nice if banks reported the lending by industry sector, region and business size so customers can see what they are lending and to who.

  • Comment number 18.

    #1 Torpare

    "The mega-banks make up an oligopoly, between the members of which there is little or no genuine competition"

    Any examples that can illustrate this point? When I read the best buy tables of retail products each weekend, I'd say there was competition on a price basis across products, with "prices" changing on a frequent basis.

    I'm thinking in terms of products on offer, not punative charges imposed (unless this is what you meant?)

  • Comment number 19.

    The competition issues have not been addressed at all: Equally Lloyds Bank Group and RBS to a lesser extent are still far too big, and I suspect their business book is still not out of the woods yet. In terms of pay have all loopholes been closed off? Such as commission?

  • Comment number 20.

    As if proof was needed as to the extend of the collusion between the Conservatives and the City... we have a derisory 'no more Mr nice guy' increase in the banking levy from Mr Osborne yesterday - which of course will be passed on to 'customers' - the day before a critical report outlining the extend of the City's financing of its old school chums to get to the real prize, which of course is the billions in tax savings being orchestrated for those deemed too big to fail. http://bit.ly/f0kDTj

    And all of this will now hopefully be washed over with the laughable - in name and design - Merlin Project, which the banks will politely ignore, just as they did the previous lending targets to small businesses which were ordered as a condition of their bail out, by citing poor take up of ludicrously priced loan terms.

    The concessions outlines in Project Merlin are frankly pathetic. Summed up, another empty promise to lend to small businesses (see 'subject to demand' provision cited in earlier failures to meet SME lending targets) though banks remain happy to finance large businesses in their purchase of assets from the administrators of small business for a fraction of their value. We'll also find out the price paid for eight more empty suits below board level and Dave's Big Society gets a £200 million capital injection 'gift' which the banks and their advisory firms will happily claw back in fees outlining just how daft the idea actually is.

    Oh, and the coup d'etat from Mr 'Osborne was ruling out imposing a bonus tax.

    Trebles all round.

    The banks are still enjoying a steady stream of additional subsidy from the taxpayer with their cartel right to borrow money at 0.5 per cent to then invest in Government Bonds with a rate of return of between 3 and 4 per cent and rising. http://bit.ly/6douGW

    For a bank, why bother investing in small business when the present subsidies provide little incentive to do so? Isn't that an ironic twist on the mounting criticism of the welfare state?

    WOTW is right on this one - we have walked blindly into a fascist state, and the dazzle of big TVs, cars and houses most could never actually afford is perpetuated in a concerted PR onslaught detailing the lives of others whose very existence is to sell the debt dream to us all.

    Sorry for the rant, but we are reaching a tipping point when people are going to say enough is enough. The sheer audacity of this laughable smokescreen should be obvious to all. Lets hope so at least.

    The fact the Liberal Democrats are sitting back and allowing themselves to be marginalised is a glaring indictment as to their willingness to put up with pretty much anything to maintain their position at the trough.

    This is all going to end badly. Rewarding yourself with an obscene bonus for kicking the debt can up the road for another year or two until 'confidence' in the ponzi scheme returns gives you some idea as to the delusional nature of the people in charge of the money and the creation of same.

    And if we legitimise the rewriting of accounting rules to allow banks to claim to have money which doesn't exist and price assets at a fantasy value rather than their true worth, then we have a long way to go yet before this sorry mess unwinds.

    In the meantime, here's a hint as to where the investment side of banking is making its money at the moment. Having destroyed the property market and made the stock market a playground in which machines manipulate price, they are now 'speculating' one thing they know we can't do without – food. http://www.bbc.co.uk/news/business-12402698
    Your bailout money, hard at work!

  • Comment number 21.

    Relieved to see that this deal actually doesn't amount to a great deal differnet from the status quo.

    The solution to our debt crisis is not more debt. Banks are already lending to businesses who are creditworthy - why would they not? A return to risky lending would be a disaster.

  • Comment number 22.

    "Project Merlin" - the details" is the title of Robert Peston's blog.

    On BBC Newsnight, it was reported that commercial and personal borrowing, in the UK, is over-priced - and the highest in Europe - and across the world.

    Banks are 'conveniently 'in' the UK, when they want to be, when subsidised by the UK tax-payer - yet these same banks are global at the same time?

    Certain institutions are taking the UK for a ride - and it is the UK taxpayer who are a laughing stock within them.

  • Comment number 23.

    Separation of retail banking from gambling divisions?

    Terms on which the tax payer underwrites the banks risk for free?

  • Comment number 24.

    re #1
    Is it not possible that GO & Co have just started? Got a little grip on the banks yesterday and today. Then perhaps a bit more next month.

    Then a little bit more in a few weeks time?

    I admit I am sceptical about this too, but we could be surprised what GO achieves.

    Time for more lobbying.

  • Comment number 25.

    So Robert,

    This is an agreement between politicians and bankers.

    I used to believe in Father Christmas, but I grew out of that.

    I feel the same way about these promises.

  • Comment number 26.

    All debts should get converted to equity stakes (not the paltry £1bn for risk capital).

    It's time that the banks put their money where their mouths are.

    If the banks and the Gvt puppets truly believe that our economy can grow and grow then they should take an equitable stake in it:

    "If the world were really on the cusp of future miracles in growth, then why wouldn’t the power elite take an equity stake in our future, such that they could share in the rewards? No, instead we are seeing the omnipresent spectre of debt, a modern Feudalism enacted through state sponsored loan sharking.

    It’s an asymmetric pay-off matrix. The debtor is taking all the risk with little scope for reward, whereas the creditor takes no risk, yet legal entitlement to all gains."

    http://golemxiv-credo.blogspot.com/2011/02/guest-post-by-hawkeye-sell-freedom-buy.html

  • Comment number 27.

    This is good news and long awaited but it will be interesting to see what criteria the banks use for this lending and how much of it will be allocated on a short term basis.
    My small business has been struggling for months because we got into debt when the banks failed and now with a poor credit history we can't get any form of lending even if the order book is full. The banks need to look at business owners on the basis of the business and not just their personal situation. Right now it's very much a situation of 'computer says no'.

  • Comment number 28.

    All this user's posts have been removed.Why?

  • Comment number 29.

    I'm curious about the name Merlin.

    I remember that he was a magical and mythical person, who tried to persuade King Arthur to do the right thing for England. Unfortunately he failed, and Arthur was doomed.

    In this case is this agreement 'magical' or 'mythical', and is the Chancellor doomed to failure?

  • Comment number 30.

    4) Among the performance targets used to determine bonuses of bank chief executives will be whether they are providing the promised credit to business

    ---------

    So the bonuses of CEOs are once again dependent on simply meeting a lending target, rather than generating real cash profits (or even fantasy asset bubble paper profits as in the good ol' days). If I were a CEO of one of these banks I'd be going to the branches and personally handing out loans to all and sundry, pocketing my easy bonus and then decamping to the Bahamas. Have they learnt nothing?

  • Comment number 31.

    "Banks - lend more"
    "Banks - recapitalise now"

    "Banks - incresing lending to SME's"
    "Banks - stop the reckless lending"

    "Government - people, borrow more"
    "Government - people, stop borrowing so much"

    "Government - Rich people, start borrowing"
    "Government - Poor people start paying it back"

    "Government - Consumer, spend more"
    "Government - Consumer increase savings"

    Contradiction....built on contradiction.......built on contradiction.......

    This is what happens when you ignore the contradictions of capitalism - they manifest themselves in various ways when crisis hits.

    If anyone can explain how you can achieve all of these contradictions - then there is a man in the treasury dying to hear from you - you could save him his job!

    This is the idiocy of the capitalist - you ignore the original contradcitions then you find you're having to make more and more ridiculous assumptions and leaps of faith - which border on the insane.....in an attempt to maintain the principles of capitalism.


    ...and as you can see - this job is impossible....

  • Comment number 32.

    18. At 14:03pm on 9th Feb 2011, north_view wrote:

    "Any examples that can illustrate this point? When I read the best buy tables of retail products each weekend, I'd say there was competition on a price basis across products, with "prices" changing on a frequent basis."

    ...and how many of these are anywhere near the LIBOR rate? I think that's a clear sign of stifled competition.

  • Comment number 33.

    3. At 13:43pm on 9th Feb 2011, TrustedFriend_Com wrote:

    "Er, excuse me for stating the 'bleedin obvoius', but 2010's lending figure of £179bn increased by one year's inflation is....

    £190bn for 2011 !

    So a great fanfair, but no real increase"

    Well spotted - this is the lending required by current lending in order to keep abreast of inflation (treading water).

    ...and the way inflations going, it might actually be a reduction in lending.

    lets hope a bright economic journalist comes along soon and reports it...

  • Comment number 34.

    There's no means by which compliance with the Merlin agreement can be verified.

    Banks can simply re-cycle existing loans, disqualify potential borrowers with spurious credit checks, and award bonuses to their top earners for their 'work in other countries'. There's no effective supervision of credit rating agencies whose carelessness was such an important foundation of the Wall Street crash.

    All types of banking are risky. Because lending money to anyone assumes a risk that their debt - or part of it - may not be re-paid. Much the same applies to Forex and other trades. Only Co-co Bonds attribute some degree of discipline onto some of the participants.

    Osborne is a mug if he believes his deal will hold. Or maybe he'll takes us for mugs if we believe it?

  • Comment number 35.

    10. At 13:53pm on 9th Feb 2011, 07kyal wrote:

    "Fascists seek to organize a nation according to corporatist perspectives, values, and systems, including the political system and the economy - Wikipedia"

    Superb - now we're waking up to reality.

    Have a read through the signs of fascism - and how many have we already 'accepted' as a society...

    http://www.informationclearinghouse.info/article4113.htm

    "Rampant cronyism and corruption.
    Those in business circles and close to the power elite often used their position to enrich themselves. This corruption worked both ways; the power elite would receive financial gifts and property from the economic elite, who in turn would gain the benefit of government favoritism. Members of the power elite were in a position to obtain vast wealth from other sources as well: for example, by stealing national resources. With the national security apparatus under control and the media muzzled, this corruption was largely unconstrained and not well understood by the general population"

    Sound familiar?

  • Comment number 36.

    Politician and bankers are so much out of touch with reality that they aren't even understanding that this will only incense Joe Public more, instead of calming him.
    I understand the reluctance to follow up in the US, where firearms are easily available.
    The day when some deranged people start shooting bankers may not be far.

    Looks so much like G20 announcements, doesn't it?

  • Comment number 37.

    WHERE'S THE PROFIT WE WERE PROMISED BY THE GOVERNMENT FOR OUR STAKES IN THE BANKS WE RESCUED?

    RBS 44.71
    LLOY 65.90

    Break even - Lloyds 74p, RBS - 50p

    Don't worry, I'll be here in 5 years time asking the same question. Remember the confidence of the capitalists in the early days? - not so confident now are they?

    We're miles from any sort of profit, don't forget with the march of time we have new problems hitting our profit - the value of 'money' has fallen by about 3-4% this year, moving the break even point further away!

    We're never going to get that money back, I said it on day 1 - and I stand by it now. The best the Government can hope for is either full nationalisation (which will sweep the problem under the carpet - the taxpayer will absorb the losses quietly) - or they hope they can sell at a loss (in real terms) after a bout of inflation and then convince the population that a profit has been made (because the absolute monetary value has risen - lets say 80p for Lloyds, but the public won't realise 80p in 5 years is worth tuppence in today's money)

    We're never getting it back - you hear me? - never.

  • Comment number 38.

    On the one hand the government says it wants to make the UK economy less dependent on debt. But on the other they introduce an austerity regime which will force many more people into debt and probably increase public debt because tax receipts will be reduced. Now to cap it all they twist the arms of bankers to lend more, on what they call "commercial terms", presumably to clients who they would not otherwise have regarded as credit worthy. Is there not some inconsistency here.

    The Chancellor also said that the government would make sure that the banks remained internationally competitive. Is this perhaps code for agreeing not to impose too strict regulation, even if McVicar were to recommend it?


  • Comment number 39.

    It's fascism Jim - but not as we know it.

  • Comment number 40.

    24. At 14:13pm on 9th Feb 2011, Up2snuff wrote:

    > Time for more lobbying.

    Yes - or bashing, as we call it.

  • Comment number 41.

    So, absolutely no change then.

    Nothing enforceable, nothing of substance, nothing changes.

    As they say "Move along people, nothing to see here."

    I'm going to rewrite the Monty Python "Spam" song to put the frighteners on a few bankers, simply the lyrics will be changed to -

    "Spain, Spain, Spain, Spain, Spain Spain, Spain, Spaaiiiiin, Spainitty, Spain, Spain, Spain.........."

  • Comment number 42.

    Remember the comparisons made about salaries in the public sector. "He's paid more than the prime minister" kind of thing?

    Well, this is a whole new seam to mine.

    Can we know how many and who are paid more than the Cabinet (the whole of it)?

    And who is paid more than the whole government (i.e. throw in the junior ministers etc)?

  • Comment number 43.

    I notice the banks haven't reeeled in poor hooked Georgie yet. Leave him wriggling at the end of the line until an even bigger bottom feeder comes along. They could be waiting forever for that to happen. The only thing muscular about Georgie is his head.

  • Comment number 44.

    29. At 14:18pm on 9th Feb 2011, EuroSider wrote:
    I'm curious about the name Merlin.

    I remember that he was a magical and mythical person, who tried to persuade King Arthur to do the right thing for England. Unfortunately he failed, and Arthur was doomed.

    In this case is this agreement 'magical' or 'mythical', and is the Chancellor doomed to failure?
    ----------------------------------------------------------------------------------

    Maybe they're referring to the aero engine that allowed the few win over the many by being victorious in the Battle of Britain then bombed millions of Germans into submission. Just a thought!!

  • Comment number 45.

    There is some good news here, but I have to say that if this is what the coalition were arguing about for months it is a bit pathetic. Overall politically I think this will do the coalition no favours.

    There are too many ifs and buts, not enough detail and too much wriggle room for banks to lend on unfavourable rates in the way they have been doing for the last 3 years. Osborne - tough on banks? more like a damp squib http://bit.ly/gMZ4DX

  • Comment number 46.

    What a joke.

    This is nothing but a feeble effort by George Osborne to con us into thinking his mates at the banks really are going to change their behaviour, and that he has actually achieved something concrete here.

    I don't believe it for a minute. He's achieved nothing at all. It's PR, it's just a sop to the people of the United Kingdom, to divert attention from the fact that he continues to deliver us into the hands of the rich bankers who:
    - can borrow money far more cheaply than the rest of society because they know they can't go bust
    - use our retail deposits to gamble, for their own personal upside but no personal downside
    - obtain subsidies from us taxpayers for one of their key products - loans to businesses, which are all tax deductible.

    Ordinary people in the UK are completely shafted and powerless to do anything about this. The system is totally rigged in favour of the money men, and absolutely nothing will be achieved until the banks are broken up.

    Does George Osborne not understand the following....

    We just do not trust the banks for a minute.

    That means we don't trust what they say, what they do, what their PR machines spin out, absolutely nothing about them!

    I'm getting very worried that Vince Cable and co really are going to get nothing out of this coalition.

  • Comment number 47.

    32. At 14:30pm on 9th Feb 2011, writingsonthewall wrote:
    18. At 14:03pm on 9th Feb 2011, north_view wrote:

    "Any examples that can illustrate this point? When I read the best buy tables of retail products each weekend, I'd say there was competition on a price basis across products, with "prices" changing on a frequent basis."

    ...and how many of these are anywhere near the LIBOR rate? I think that's a clear sign of stifled competition.

    -------------------------------------------------------------------------------

    Cartel.

  • Comment number 48.

    35. At 14:38pm on 9th Feb 2011, writingsonthewall wrote:

    "http://www.informationclearinghouse.info/article4113.htm

    "Rampant cronyism and corruption.
    Those in business circles and close to the power elite often used their position to enrich themselves. This corruption worked both ways; the power elite would receive financial gifts and property from the economic elite, who in turn would gain the benefit of government favoritism. Members of the power elite were in a position to obtain vast wealth from other sources as well: for example, by stealing national resources. With the national security apparatus under control and the media muzzled, this corruption was largely unconstrained and not well understood by the general population"

    Sound familiar?"


    Yes, it sounds like USSR was, Cuba is, China is, USA is, UK is, Albania was and probably still is judging from recent coverage, the EU is (and they are not even a government) etc etc. Oops, they weren't/aren't classed as facist are they

    Perhaps it is just human nature that the people in power control everything - a bit like the rest of the animal kingdom actually. :-)

  • Comment number 49.

    As a UK citizen, and non-banking expert, I have four observations about banking in the UK:
    First, there needs to be a lot more competition in the banking sector. If we saw the supermarkets paying such huge bonuses to senior staff, I suspect we would see more entrants to the market. Huge bonuses equals huge profits equals business opportunity for new entrants. Why are there no new entrants to banking (MetroBank excepted)? Banking seems to be a closed shop, so Government needs to think how to introduce much more competition.
    Second, the Government £50,000 depositor guarantee should only apply if you bank with vanilla retail only banks.
    Third, what banks pay their employees is no concern of Government.
    Four, Government should repurpose either RBS or Lloyds, to specifically channel funds to SMEs. If the banks don't see the SME market as an attractive business segment, then you can't make them.
    For banks such as HSBC, their greatest assest, and protection from real competition is their pervasiveness. They are simply too big, too powerful and too entrenched.
    I do not blame the banks for their greed, I blame supine, incompetent and ill-informed Government. In short, the UK banking market, as a market, is not working efficiently and is clearly skewed to the benefit of sellers at the cost of buyers.

  • Comment number 50.

    "3) The Bank of England will monitor whether the funds are being made available to businesses and will publish quarterly assessments."

    ---------------------------------------------------------------------------------

    Good trick if they can do it, worth waiting for. Merlin is that really you??

  • Comment number 51.

    I have recently made my first tiny contribution in the war against the banksters - I have closed my credit card account with BoS and will be closing my current account with HSBC as soon as my direct debits are transferred to my new account.

    I have changed to the Nationwide, not ideal I know but a damned sight better than the "too-big-to-fail" fraudsters.

  • Comment number 52.

    And if we add in the amount of the bonus that has been transfered to wages; how much would that make in total?

  • Comment number 53.

    In general these events and details were reasonably predictable. I see quite a few comments already wondering what good such a deal will do. I echo those and also wrote today about what it means for our economy as follows.

    Consider another economy which recently announced the following. It plans to try to set central targets for bank lending to the business sector called Project Merlin and has a minister trying to set targets for mortgage lending. You could call these diktats. It has in effect nationalised two of its main banks and some more minor ones. It is imposing a bank levy on its banking sector as a type of punishment on “evil” bankers and wants to restrict bank bonuses. This sounds like an attempt to impose a type of command economy and it is being operated by the UK. So who is the command economy and who is the capitalist one? http://t.co/DN8YLg4

  • Comment number 54.

    Couple of observations / clarification

    1) the great WOTW reckons that overdraft charges are 18-25% for SMEs? I presume this is a per annum rate he/she is quoting? Either way, its absolute cobblers. Proof that the average SME pays this kind of rate for an overdraft please - some corner shop teetering on the edge of existance doesn't count.

    2) There's alot of whining along the lines of "lending at commercial rates? - what a load of tosh, this means ruinous interest rates etc etc". Don't you realise there is nothing whatsoever stopping foreign banks from lending to these great credits at lower rates if it is more profitable. The fact is that most company's complaining about lack of credit are either unprepared to pay the going rate or are bad credits. These arguments are completely circular - people moan about the banks skimming money off the wider world but then expect them to lend money at a loss???? Either they make a loss or they make a profit - they can't do both. I thought even socialists understood that much.....

  • Comment number 55.

    There are about 40 million of us out here who work for "normal" money......many in vital or important industries and trades.
    Why do we have to witness the ugly spectre of vast rewards for those who work in "just another industry"....core finance?
    Every year....Why?
    Why does this industry operate in "Fairyland", while the rest of us operate in Great Britain?
    The public is sick of these characters shovelling the nations wealth into their pockets.
    Pay restraint?? Pay restraint???....but this is "Fairyland".....why should we work for "good salaries" when we can pocket millions?
    Does anyone know just what these people "do" to warrant their "pay".
    They are borrowing money at near-zero rates, lending it to us at between 5% and 25%, giving savers peanuts and putting gold bars in their own pockets.
    Governments are terrified of them....they've got all the money and can "go elsewhere" with it.
    How did we get into this ugly situation?......unless Wall St reforms, no-one is going to reform, or may make just "token" changes.
    The British Public.....the most "shafted" public in the world.
    Core-finance and the "establishment" are loving it....it's just like Victorian times.
    We all thought that we'd seen the last of that nasty "rich-poor" gap, after the Second World War......some bankers have got different ideas.
    And what do ordinary branch bank workers think of their "masters" rewards?
    They must be as sick of it as the rest of us.

  • Comment number 56.

    So how does any of this reduce the risk to public finances if a "Merlin" bank goes bust?

    Or have we just given up on that one.

    The bonuses are irritating but a complete side issue.

  • Comment number 57.

    13. At 13:56pm on 9th Feb 2011, Reticent_Trader wrote:

    "(but not the pay of traders who don't have management responsibility). "

    yes - because Nick Leeson, Jerome Kerviel, Yasuo Hamanaka, Toshihide Iguchi, John Rusnak and Chen Jiulin were all in 'management' and consequently why most of them brought their institutions down.....weren't they?

    We don't want to see how much 'wealth' is created by traders - I mean why would we want to, unless we wanted to compare the P&L over their time at the banks.

    ...but that would be like - an appraisal? - and that's a management task.

    Most of the board members already reveal their pay - so what benefit does this bring - other than allowing George to use the word 'transparency'.

    Do you know why there is such resistance to open wage information? - because when you find out how much is earnt, you'll then start asking questions like "but what do they do for it"....and once pandora's box is opened...there is no turning back.

    I would have no problem with my wages being published - hey I'll even run a 1 day a week 'college' to line up my 'cheaper and younger replacement' - because unlike most working people I relish the challenge of fair competition - I don't need to 'cheat' and 'deceive' in order to maintain my position - which is unusual in all corporations.

    You see most bankers preach free and fair competition - but not when it comes to their jobs.

    All earnings should be made public - then we of the 'well paid' will have to justify our salaries. Those who have done no wrong...have nothing to fear. However the lazy 'elite' have a lot to hide...

  • Comment number 58.

    Interesting that the previous blog, highlighting the Tory Party's 51% funding by the financial sector, should conveniently crash to be replaced by this non-statement concerning the magical non-commitment by the same financial sector to rebuild some of the damage it created in the first place by its previous excesses.

    Gasp for breath.

    As widely prognosticated by Mr Peston on the TV, it appears that we are to return to the good old days of 2007, where banks will make huge profits (up to 25% interest charged on a 1% cost charge) thus paying themselves huge bonuses again (the bulk of which will be in share issues that will waterdown any return to the taxpayer once RBS and Lloyds are sold to repay the lifesaver so generously given). While any tax return from this gluttony will be removed with the future removal of the 50% tax rate and the non-taxation of bonuses.

    It appears that Tory (New Labour) governments are determined to give free reign to the financial institutions, merely making slight comments concerning the obesety of the system while relying on the glutton to introduce the new diet. A bit like their use of McDonalds/Coca Cola to advise on healthy eating. When will the voting public wake up and realise the PR man Cameron has sold them a pup - that the system is getting corrupter by every second this Tory-led coalition is in existence.

  • Comment number 59.

    It's good to hear banks are providing £1bn of equity capital (or risk capital) over three years for small businesses in hard-pressed parts of the UK.

    However, the question I have is who exactly will manage this fund or funds. If its the banks themselves then don't expect them to actually use it because there are few if any banking types that understand either markets or technology.

  • Comment number 60.

    #8. At 13:52pm on 9th Feb 2011, danj180 wrote:
    The best paid staff will still not have to reveal their pay meaning they are still unaccountable to shareholders

    ----------------------------------------------------------------------------------

    Stooges lined up. "Taking one for the company."

  • Comment number 61.

    I think a solution to bank bonuses is that bankers are forced to pay turn their bonus into a special bank bond over a fixed length of time (3, 4 or 5 years). In this way banker risk is mitigated - would they take risks knowing that their bonus will reduce in value. Colleagues would help to self regulate - would you be happy with your colleague taking big risks with your bonus. The bond interest would be set to BoE base rate. If the bankers help to change the UK economy with better practise then they are rewarded through a better interest rate. The bond is subject to CGT when paid out at the end of the term. The bond remains with the bank the banker worked for even if the banker changes employer. This would improve employee loyalty or reduce risk takers who move job once the bonus is paid.

    The bankers have been profiting since 2007 from the money UK plc has put in (ie you and me). We will only profit once the banks return the capital. The issue for me is that a banker / trader does not bet their own capital but the banks or the tax payers. If there is a vested interest then this problem must reduce. If this had been in place before the 2007 crash and bankers had also lost personal amounts due to risky performance, i think the public would have been more sympathetic.

    If we arent to impose strict regulations on bankers (and the fact we want our capital back would limit regulation), then we must make banks self regulate at the most granular level. id even apply this principle to other financial institutions. Pension providers should be forced to use the pensions they manage. Poorly performing pensions would affect the manager in that poor decisions are reflected in his / her own pension.

  • Comment number 62.

    "Project Merlin" - how much is it costing - and who is paying for it?

  • Comment number 63.

    #39. At 14:49pm on 9th Feb 2011, writingsonthewall wrote:
    It's fascism Jim - but not as we know it.
    ---------------------------------------------------------------------------

    "There's fascists on the bank board now, bank board now, bank board now......."

    Sorry - I'll get me coat.

  • Comment number 64.

    They're at it again!

    http://www.bbc.co.uk/news/business-12402698

    Off-topic (sorry about that). But not completely.

    Not so long ago it was wheat futures, and the question as to whether *people* were to have any future, who were too poor to afford the price to which their daily bread was being driven as a direct consequence of rapacious profit-seeking by Wall Street banks.

    Now it's sugar.

    Overall, world food prices have been driven up and are likely to go on being driven up. The people who have caused this to happen meanwhile wallow in their pretentious conspicuous-consumption life-style, being paid more in a year than many of their hapless victims could earn in several (foreshortened) lifetimes, and congratulate themselves on how clever they are.

    They do after all have the comfort of knowing that as bankers they're "doing God's work": they've had Lloyd Blankfein's personal assurance as to that and, as CEO of GS, he ought to know.

    In his excellently-written article "The Food Bubble" (google it) Frederick Kaufman explains how traditionally (and this goes back to antiquity) speculators in commodities supplied an indispensable hedge for growers and merchants against the vagaries of the climate and consequent fluctuations in the market. Of course they took their cut - it was after all how they made their living; but they provided a valued service in return, both social and economic, and they personally bore the risks. They put their own money on the line.

    Enter: Goldman Sachs - plus computerised trading, soft-touch regulation (= a licence to engage in conscienceless predation), quants (= clever mathematicians who ought properly to be contributing something useful to society but who instead have been corrupted by the prospect of limitless amounts of easy money) - the whole witches brew of late-20th-century neo-liberal-driven greed for gain. What a contrast! (Read the article to see what resulted).

    The reason I'd argue this isn't completely off-topic is that what we see in the pantomime we're watching at the moment is the latest round in the battle by the bankers to win respectability in the eyes of the public and thus be left alone to get on quietly with doing what they do best - making piles of lovely money for themselves - without anyone looking over their shoulders and demanding to know what they're getting up to. What they hate most is the spotlight, their natural element is the dark. It was ever thus; bankers have always cloaked their operations in secrecy, like others engaged in nefarious activities.

    It follows that it is in the public's interest *not* to allow them and the politicians to succeed in that aim. The latest shenanigans in commodities (sugar) warns us yet again that it is positively dangerous not to keep ourselves closely-informed about what bankers get up to behind closed doors.

  • Comment number 65.

    Robert

    Now we know why they called it 'Project Merlin'

    "In their coming results, RBS, HSBC, Lloyds and Barclays (known as the Merlin banks)"

    Yeah, real magic, they made billions of tax payers money disappear up their sleeves.

  • Comment number 66.

    Given that the banks owe US, the tax payer, Billions of pounds, when will we see this money?
    Failing them paying ot back, which they seem loathe top do, by out the last few shareholders, run as treasuery banks, and ALL profits into the Treasurey.
    Yeah, as if that will happen.
    Different words, same problem.

  • Comment number 67.

    47. At 15:16pm on 9th Feb 2011, NorthSeaHalibut wrote:
    32. At 14:30pm on 9th Feb 2011, writingsonthewall wrote:
    18. At 14:03pm on 9th Feb 2011, north_view wrote:

    "Any examples that can illustrate this point? When I read the best buy tables of retail products each weekend, I'd say there was competition on a price basis across products, with "prices" changing on a frequent basis."

    ...and how many of these are anywhere near the LIBOR rate? I think that's a clear sign of stifled competition.

    -------------------------------------------------------------------------------

    Cartel.

    --------------------------------------------------------------------------------

    Taking mortgages as a simple example, since the loss rates on these will be lower than on loans and credit cards at the moment, I believe the average profit margin is somewhere around 1.5 - 2% for the major banks.

    How does that compare to other industries?

  • Comment number 68.

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

  • Comment number 69.

    #54

    Part of my open challenge to anyone and everyone.

    Let's have a debate about what the banks actually do and how they make their "profits".

    Here is my accusation that the banks profiteer by mis-pricing risk and transfering the downside to the Gvt (a.k.a. Taxpayer):

    http://forensicstatistician.wordpress.com/2010/11/19/is-modern-banking-fundamentally-flawed/

    Click on the pdf link. It was published by the ICB two weeks ago.

    I'd welcome any sensible critique.

  • Comment number 70.

    From the details that you have provided, let me say: What a waste of Governmental time!
    1) 2010 RBS and Lloyds lent more than they promised to - so the Treasury is hopeful that bankers will again exceed the targets: Does this mean lending to SMES, or just lending because per "2" below not much was made available to SMEs?
    2) It is highly noteworthy that SMEs are still complaining "of being starved of vital finance". The assumption: banks are not lending enough under the right conditions. This includes interest rates that are too high.
    3) The Bank of England will monitor whether the funds are being made available to businesses and will publish quarterly assessments. Okay, then what? Do guilty banks get fined, publically admonished, or what?
    4) Among the performance targets used to determine bonuses of bank chief executives will be whether they are providing the promised credit to business. Careful here. If bonuses are tied to making SME loans, you could easily get a sub-prime fiasco.
    5) The chairmen of banks' remuneration committees are writing to the chairman of the Financial Services Authority warranting that they are cutting the amount provided for bonuses in relation to 2010 performance as a direct consequence of their negotiations with ministers.
    What the heck does this mean? I thought I just read that performance targets (SME loans) will be used to determine bonuses of bank chief executives.
    6) RBS, HSBC, Lloyds and Barclays (known as the Merlin banks) will publish the pay of their five highest paid executives below board level (but not the pay of traders who don't have management responsibility). The pay of board members already has to be disclosed.
    So what have we gained in this Merlin clause? And what qualifies as "pay"? Where is the definition?
    7) On paper at least, the UK will have the most transparent regime for bankers' remuneration in the world, but we still will not be able to assess "real" pay, just what the banks chose to include as remuneration. Has the Government carefully defined what is remuneration and what is not remuneration? You can't have transparency without this definition.
    8) The remuneration committees of big British banks will commit that they will henceforth sign off the pay of the ten highest paid individuals in each business division. This is designed to make it easier for shareholders to hold the banks to account for what they pay. See item "7" directly above.
    9) £200m for David Cameron's cherished Big Society Bank is not very much money. This will be more like David Cameron's Lilliputian Society Bank.
    10) Ministers insist this £1bn is additional capital; bankers in recent days have been less clear about that. And the equity capital will in theory be directed to the private sector in regions most hurt by public spending cuts.
    This had better be better regulated by something stronger than "theory".
    If these are the main points in detail, let me repeat: What a monumental waste of Governmental time!
    As for bonuses: the cash element of any bonus won't exceed £2,000 (bonuses paid in shares will OF COURSE RUN TO MANY MILLIONS MORE).
    I note as you conclude, that you are still P.S.'ing and updating.
    Update 13:08: George Osborne has formally ruled out imposing a bonus tax. Why? Is a bonus not part of taxable remuneration?
    Update 14:19: Royal Bank of Scotland has confirmed that its chief executive, Stephen Hester, will receive a "new Share Bank scheme" award (RBS's name for a bonus) of £2.04m for his performance in 2010. The FT recently pointed out, on the basis of this size of bonus pool, at least 200 RBS bankers are expected to receive bonuses in excess of £1m each.
    Well, there you go: Shows you how effective Merlin will be at least at tackling the bonuses.
    Merlin might as well disappear for all the good it will do; it seems to me almost like a Coalition Government make work project that cannot define the ultimate goal, set rules for the ultimate goal, or even effectively monitor progress towards the ultimate goal. Further it seems to me that The Coalition Government is pussy-footing around some really important financial issues! Is the Coalition Government afraid of huge investment banks - so afraid that it will not act for the good of the people?

  • Comment number 71.

    Merlin Banks?

    What's reason for this name? Is it Disneys version? A cute, cuddly, slightly eccentric, but ultimately loveable, character? With the intention to subliminally paint these swindlers in a kinder light?

    Sauron would have been more apt.

  • Comment number 72.

    48. At 15:17pm on 9th Feb 2011, yam yzf wrote:

    "Yes, it sounds like USSR was, Cuba is, China is, USA is, UK is, Albania was and probably still is judging from recent coverage, the EU is (and they are not even a government) etc etc. Oops, they weren't/aren't classed as facist are they"

    ...so I point out that we're heading in fascism, and you point out some past regimes which you now realise were totalitarian? - I have said for a long time that Stalinist Russia wasn't communist - now I think you're trying to tell me the same thing (and to be totally accurate the Chinese are in fact working for the PARTY, not corporations - it's a big difference - but clearly not big enough for you to spot)

    "Perhaps it is just human nature that the people in power control everything - a bit like the rest of the animal kingdom actually. :-)"

    Well if you want to compare yourself to animals for your 'standards' - then you go ahead. I think opposable thumbs and the ability to pass knowledge from one generation to the next, and not to have to rely on instinct sets us apart from the beasts.

    ...and that nature - it's not human nature, it's capitalist nature. Tell me, how do you think people survived in the harsh early days of man if it was all 'kill or be killed' - surely man would have dies out as the dominant male ate all his family at the first harsh winter they encountered.

    ...and yet we're all here today - testament to the fact that you talk a lot of rubbish. Man only acts in a selfish manner when he is taught to do so - when the chips are down and we're in crisis we all work together to ensure the common goal is achieved (communism)

    ...that is why in this respect I am an optimist and you are a pessimist. Too busy kicking others off the ladder below you to notice that you're not actually achieving very much (i.e. climbing), whereas assisting those below you always has an overall beneficial effect and helps you all reach the common goal quicker.

    How sad is the life of a capitalist - assuming everyone is as self centred as yourself, not realising that most people are actually very reasonable and sensible - although perhaps not all of the time.

    From the majority of comments on this blog I'd say most people are reasonable and sensible. Clearly you think they're all just 'lefties' - labelling being another important facet of capitalist belief.

  • Comment number 73.

    49. At 15:17pm on 9th Feb 2011, UptheArs wrote:
    As a UK citizen, and non-banking expert, I have four observations about banking in the UK:
    First, there needs to be a lot more competition in the banking sector. If we saw the supermarkets paying such huge bonuses to senior staff, I suspect we would see more entrants to the market. Huge bonuses equals huge profits equals business opportunity for new entrants. Why are there no new entrants to banking (MetroBank excepted)? Banking seems to be a closed shop, so Government needs to think how to introduce much more competition.
    Second, the Government £50,000 depositor guarantee should only apply if you bank with vanilla retail only banks.
    Third, what banks pay their employees is no concern of Government.
    Four, Government should repurpose either RBS or Lloyds, to specifically channel funds to SMEs. If the banks don't see the SME market as an attractive business segment, then you can't make them.
    For banks such as HSBC, their greatest assest, and protection from real competition is their pervasiveness. They are simply too big, too powerful and too entrenched.
    I do not blame the banks for their greed, I blame supine, incompetent and ill-informed Government. In short, the UK banking market, as a market, is not working efficiently and is clearly skewed to the benefit of sellers at the cost of buyers.

    ======================================

    First: True

    Second: Agreed

    Third: Disgree. The government, backed by us as taxpayers, has stepped in to maintain the integrity of financial system because of its central importance to the economy. However paying bonuses is what drives the system. The moral hazard, the assymetry of payoff (Heads I win, Tails you lose), the extraction of "rents", the aggressive commision-based selling and reselling of debt, the lack of adequate capital cover for losses, overleveraging and rash expansion of credit. ALL of this comes from the bonus system. And since the government has taken the unfortunate step of underwriting this system then yes it should be of concern to government and taxpayers what the banks pay their employees.

    Four: True

    And why do you think successive governments have been so supine in the face of finance? Democracy isn't really working at the moment is it?

  • Comment number 74.

    This is all very symbolic, the real problems are not being addressed at all.

    1) Retails and Commercial banking is too concentrated in the UK. The banks are "too big to fail" and thus bankers can run huge risks safe in the knowledge that if all goes right they get huge bonuses and if it it goes wrong then the UK taxpayer will allways save them, since letting such massive banks fail would have massive negative side effects to the UK economy (case in point: RBS and Lloyds). To add insult to injury, since banking in the UK is so concentrated, competition is almost non-existent and banks can happily fleece their customers for as much as possible.

    2) How exactly is it good for the UK economy that Retail and Commercial banks that have "state protection" against failure have high-risk investment banking divisions (which, if you might notice, are where most of the bonuses go to). Thanks to their state insurance, those banks get loans from the money markets and turn around and gamble them in high risk punts such as derivatives, emerging markets and junk bonds instead of lending that money to British businesses (and why should they, when things go right returns on these "investments" are much bigger that on loans to businesses - so bonuses all around - and when they go wrong the taxman will pay for it). Why exactly do the likes of RBS have an investment banking division?

    I'm still waiting for the Government to restore real competition to banking in the UK by breaking up the banks into "small enough to fail" banks (let the worst sink while the best survive - isn't that real capitalism!???) and separate the gambling divisions which provide little or no value to the UK economy (and are a constant source of shock thanks to the bonuses they pay) from the bits that keep our economy going: Retail and Comercial banking.

  • Comment number 75.

    50. At 15:17pm on 9th Feb 2011, NorthSeaHalibut wrote:

    "3) The Bank of England will monitor whether the funds are being made available to businesses and will publish quarterly assessments."

    ..what like the quarterly inflation reports they are currently ignoring?

  • Comment number 76.

    51. At 15:19pm on 9th Feb 2011, pharmaboy wrote:

    "I have recently made my first tiny contribution in the war against the banksters - I have closed my credit card account with BoS and will be closing my current account with HSBC as soon as my direct debits are transferred to my new account."

    Congratulations - a blow against fascism for which your country will be proud.

    "I have changed to the Nationwide, not ideal I know but a damned sight better than the "too-big-to-fail" fraudsters."

    Don't worry, a start is as good as anything, I'm sure others will criticise - but moving away from the major players is the first steps in a very long campaign.

  • Comment number 77.

    Allowing the current big banks to have a oligopoly of credit provision also allows them to levy a private tax on the economy. It's time to excise this cancer and do things in a different way:

    http://www.positivemoney.org.uk/2011/02/scandal-in-the-city/

    Also Robert, the Monbiot article from the Grauniad won't go away. Nor should it until we get answers:

    http://www.guardian.co.uk/commentisfree/2011/feb/07/tax-city-heist-of-century

  • Comment number 78.

    62. At 15:31pm on 9th Feb 2011, corum-populo-2010 wrote:
    "Project Merlin" - how much is it costing - and who is paying for it?


    If I told you would say it's political corectness gone mad, no doubt.

  • Comment number 79.

    So banks are a cooperative now.

    When did we give these guys the power to set their own pay?

    Wake up shareholders, It is your bank!

  • Comment number 80.

    Let's be frank - we're all armchair economists. We read an article such as this and can't wait to pound the keyboard. It's too easy to forget that we are reacting to limited information - snippets that have leaked into the public domain.

    Oh, I could probably compose a critical entry pouring scorn on this announcement. It might make me feel better, but I know it would be a naive reaction to a situation that I do not fully comprehend. I don't know what the actual plight of the banking sector is. How precarious is the state of the UK economy? What other serious economic problems are heading our way? Given the fragile state of market sentiment, would revelation prove curtains for any hope of recovery?

    So, with gritted teeth, I'll grant Mr Osborne the benefit of the doubt. He's got all the information - I haven't. He also has the economic record of the last lot to guide him.

    In the meantime, I can at least make a token protest against our banking friends. I have converted my meagre savings into gold. Leveraged up, it's absence might reduce one leech's bonus by a few pence. I'll settle for that.

  • Comment number 81.

    Why doesn't the core financial industry build a monorail system that, 50 feet up in the air, that runs over the Buckinghamshire, Berksire, Surrey and Kent countryside, and on to Canary Wharf and the City.
    It can pick them up at home and run them into work....they won't have to mingle with "ordinary people" and can look down their noses at all those "poor unfortunates" beneath them as they travel to work.
    Those "poor unfortunates" include police officers, soldiers, electricity and gas supply workers, food supply workers, medical workers, water supply workers, heavy industry workers, high-tech workers etc etc....all VITAL to the country and the economy....all enduring cuts and loss of jobs. (All just as vital as the financial industry.)
    Something stinks in the financial industry.....we can now all see it for what it is.....greed.
    Those at the centre of the money-handling system need a "Fairyland Express" to transport their egos, their self-esteem and their cash.

  • Comment number 82.

    When are politicians going to learn: targeted lending is utterly barmy.

    Targeted lending was the cause of the sub-prime mortgage catastrophe in America.
    Targeted lending almost brought the old Midland Bank to it's knees after it bought the failing Crocker Bank in America, utlimately making it an excellent deal for HSBC.

    Targeting getting the money back is a different matter entirely.

    It's good for the banks though - when things go wrong they can blame Osborne and his cronies and justify even bigger fees to recover their losses.

    And, listening to some of the commentators on various newscasts, how long will it take politicians to learn that NO national government can control the workings of a multinational bank? Osborne thinks he has a deal but he's blinded by his own naivety.

    The upper echelons of multinational corporations and their big shareholders live in a world different from Osborne, politicians and you and I. Naturally Osborne etc wants the best for the UK but he's up against extremely shrewd and wealthy businesspeople.

  • Comment number 83.

    69. At 15:57pm on 9th Feb 2011, Hawkeye_Pierce wrote:
    #54

    Part of my open challenge to anyone and everyone.

    =====================================

    http://forensicstatistician.files.wordpress.com/2010/11/icb-submission-nov-2010.pdf

    It is an interesting paper and I agree with most of its issues from my own experience. Worth reading for anyone interested in how the banking system operates.

  • Comment number 84.

    54. At 15:22pm on 9th Feb 2011, a_sensible_comment wrote:


    "1) the great WOTW reckons that overdraft charges are 18-25% for SMEs? I presume this is a per annum rate he/she is quoting? Either way, its absolute cobblers. Proof that the average SME pays this kind of rate for an overdraft please - some corner shop teetering on the edge of existance doesn't count."

    Who said average? and of course it's per annum, they are banks not loan sharks! - a Tool hire company in Shropshire - family run business, going for more than 50 years. Suffered a burgulary before the credit crunch, offered an overdraft to 'assist with the re-stocking', all quite reasonable, then the crunch came and the rate shot up - I believe it was 25% but has been reduced to 19%. A business with small overheads and low staff costs (it's family run) - in the end they managed to scrape the money together and clear the overdraft - although that will have an impact on consumption because they took it from their personal savings.
    If you're ever in Shropshire I can take you to meet the owner if you like.

    "2) There's alot of whining along the lines of "lending at commercial rates? - what a load of tosh, this means ruinous interest rates etc etc". Don't you realise there is nothing whatsoever stopping foreign banks from lending to these great credits at lower rates if it is more profitable. The fact is that most company's complaining about lack of credit are either unprepared to pay the going rate or are bad credits. "

    ...or the banks take a harsh view because of the ECONOMIC CLIMATE - we're not all living in a bubble you know. The biggest frustration of SME's is money they were loaned pre-2007 without question is now being questioned and refused. I think it's a complaint of consistency more than anything. Still, the facts of the matter are that even a SECURED LOAN (a mortgage) cannot be achieved for less than 300 basis points above LIBOR is a clear demonstration of the problem (because pre-credit crunch secured loans were about 100 basis points about LIBOR....sometimes a lot less)

    "These arguments are completely circular - people moan about the banks skimming money off the wider world but then expect them to lend money at a loss???? Either they make a loss or they make a profit - they can't do both. I thought even socialists understood that much....."

    ...it's called a contradiction - it's deep within the system and this is a symptom of that - I don't expect capitalists to understand contradictions, they just keep making more and more ridiculous justifications for those contradictions. Of course it's a circular argument - it's because it's contradictory!

    P.s. - you can drop the 'GREAT' in front of my name, I'm not one for adoring fans, it merely shows their defficiencies and not my strengths.

    ...something the adorers of the wealthy show all too often....

    ...and here's some rates for you to look at - check out that unauthorised borrowing rate of 26%!

    http://www.lloydstsbbusiness.com/ratesandcharges/finance/lending_rates.asp

    The standard rate is over 10% - what was LIBOR again? - just remind us please....

  • Comment number 85.

    Can someone explain how setting lending targets helps anybody. Was it not reckless lending which caused this mess? If a loan is viable / profitable (ie the loan can be repaid) why would any bank turn you down?

    The real problem is that we currently have an overpriced housing market which nobody want's corrected due to the huge loans taken out on the houses. Till this is sorted either quickly (unlikely) or over a long period no one knows what the real situation is - were left with miss-information. The best option would be to let whoever is broke go under (including banks) this will wash away all the debt and then we can concentrate on rebuilding our economy. It may be painful in the short term but will work wonders over the long term. Don't listen to those who say "it's to big to fail" or "look at us we saved the world with bailouts", Iceland let their banks fail and they are now reaping the rewards of their actions. But don't hold your breath on this, no-one will want to be responsible for causing people to loose their homes - it may be the right/difficult action but voters would never forgive!

  • Comment number 86.

    63. At 15:34pm on 9th Feb 2011, NorthSeaHalibut wrote:

    "Sorry - I'll get me coat."

    Fascist banking...across the universe, only going further because our Government is perverse!

    ...I'll join you outside...

  • Comment number 87.

    Pitiful really. Throw the peasants a few crumbs and hope they'll go away.

    Not this time, and never again.

    The bashing stops when the cartel is dead and the system that fed it is wiped away forever. Not one second before.


  • Comment number 88.

    Hey Robert a Question;- Why is everyone so surprised that, of the two oldest professions, one lot know that it's possible to make a shedload of dosh without the remotest chance of ever, ever, being screwed ?

  • Comment number 89.

    The "money-handling" industry is still "handling" far too much money "into its own pockets".

  • Comment number 90.

    Lending to small and medium sized businesses in the post 2007 era cannot be the same as before. Before 2007 it was risk-managed by a central office of box tickers whom had little concern about bad debts so long as you could maintain some cash flow (same as how credit card holders could borrow more and more so long as they kept paying back something, even if it meant they would never ever pay everything back in a lifetime).

    How can Britain do this? Are the "BANKS" going to reinstate shop-floor local bank managers who get to know the borrower and the industry that they are in, and whom judge risk not just by some preset box-ticking system, but by their understanding of the economy?

    The fact is, the reason why Britain's Global Banks had concentrated on lending to Global Businesses, was because of economies of scale. Having achieved economies of scale, our government and society only now recognizes that economies of scale have been achieved at the expense of small business risk-management systems. I suppose we will be subjected to some TV substitute for what used to exist, in the form of an upgraded Dragon's Den - maybe it can be called Dinosaur's Den?

    In order to restore Britain's trading and industrial balance by restoring small to medium entrepreneurial industry, somebody will have to restore the Island Economy, I would think....

  • Comment number 91.

    So what is the outcome of all this? Business-as-Usual.

    Let's have a look at this BAU:

    The ICB Issues Paper (Box 1) lists seven important factors that contributed to the financial crisis. Of these seven, five have been addressed directly by this paper and are within the direct control and jurisdiction of UK regulatory powers:
    · Light touch regulation
    · Declining underwriting standards
    · Widespread mis-pricing of risk
    · A vast expansion of bank balance sheets
    · Rapid growth in securitised assets

    These are not distinct aspects but instead a confluence of mutually reinforcing risks, which if to be properly addressed needs a holistic approach of remedial action. The Treasury select committee (2007) accepts that under the “Originate and distribute” regime there has been a confusion of risk responsibility, yet at the same time dismisses the very premise of “financial liberalisation” as part of the problem7. This is in spite of the following:
    1) A wealth of historical evidence that regulatory liberalisation is at the heart of the problem
    2) The fundamental conflicts (issues) inherent in the structure of banking, such as moral hazard & risk transfers
    3) Specific evidence of poor loan performance.

    The reliance on markets to be a reliable determiner of credit risk has been shown to be theoretically and empirically false.

    The current situation is a heady cocktail of perverse incentives, lax supervision and bewildering complexity. Ripe conditions for fraudulent conduct and ambiguous larceny.

    http://forensicstatistician.files.wordpress.com/2010/11/icb-submission-nov-2010.pdf

  • Comment number 92.

    "I would have no problem with my wages being published"

    Well, lets see the number then...

  • Comment number 93.

    Is this another case of smoke and mirrors. I suspect it is. Remember the old adage "You can take a horse to water"----------

  • Comment number 94.

    72. At 16:06pm on 9th Feb 2011, writingsonthewall wrote:
    48. At 15:17pm on 9th Feb 2011, yam yzf wrote:

    "Yes, it sounds like USSR was, Cuba is, China is, USA is, UK is, Albania was and probably still is judging from recent coverage, the EU is (and they are not even a government) etc etc. Oops, they weren't/aren't classed as facist are they"

    "and to be totally accurate the Chinese are in fact working for the PARTY, not corporations - it's a big difference - but clearly not big enough for you to spot"

    Please tell me that you only believe that in jest and not truly believe that. The PARTY (sic) is run by the elite and it is their members that run the companies, cities etc. And try protesting against the PARTY (sic) and having independent thought. And try living on a plot of land for generations only to be told that a new dam is being built, you have no choice about it and your house and farm land is going to be flooded

    And I never mentioned communism. WhatI demonstrated was that almost any and every government in the world could be shown as fascist. Probably all, but I do not know every government and therefore would not be so bold.

    We are animals and it is foolish to think otherwise and to deny this is not overcoming this and is sweeping this important understanding under the carpet so it would never be addressed. You show the traits yourself in that you think your ideas are the only ones and everyone who does not agree with them is inferior and stupid - sounds very much like trying to be dominant to me :-)



  • Comment number 95.

    67. At 15:47pm on 9th Feb 2011, smith_cw wrote:

    "Taking mortgages as a simple example, since the loss rates on these will be lower than on loans and credit cards at the moment, I believe the average profit margin is somewhere around 1.5 - 2% for the major banks."

    What do you base that on?

    The best rate is over 4% and nearly 5% - don't be fooled by those 2.99% rates - they are for 60% LTV - that means you have nearly paid for half the house in your deposit. The risk of the housing market falling by 40% is remote to say the least - there is no risk involved for the bank, if you don't pay then they sell your house.

    I meet people everyday who were eligible for mortgages in 2007 but now are no longer so. Their financial status hasn’t changed – it’s the banks outlook which has.

    If you want a 'normal' mortgage of 90% LTV then you're looking at over 5% - especially when you take into account the fees (which most people don’t, they can add about 0.3% over the fixed period) or they conjure up an endemnity fee because of some spurious concern they have.

    It's all smoke and mirrors - designed to catch people out. I paid an endemnity on my current place - never again, the reasons for it were unfounded and not consistent and in effect it was a 'private mortgage tax' applied by the bank.

  • Comment number 96.

    79. At 16:13pm on 9th Feb 2011, onebadmouse wrote:
    So banks are a cooperative now.

    When did we give these guys the power to set their own pay?

    Wake up shareholders, It is your bank!
    ==================================

    Yes the pen-pushers at Fidelity, BlackRock, F&C, Aviva, Evolution, Jupiter AM, Standard Life, etc. are rising up in lividity.

  • Comment number 97.

    68. At 15:54pm on 9th Feb 2011, DebtJuggler2 wrote:

    "They even cancelled my BBC account over posting the Monbiot story on several key blogs."

    So we shall keep posting it then....

    http://www.guardian.co.uk/commentisfree/2011/feb/07/tax-city-heist-of-century

  • Comment number 98.

    80. At 16:21pm on 9th Feb 2011, TonyH wrote:

    "Let's be frank - we're all armchair economists."

    Speak for yourself! - I get paid for my opinions and analysis in economics - 'technically' that makes me a professional!

    "So, with gritted teeth, I'll grant Mr Osborne the benefit of the doubt. He's got all the information - I haven't. He also has the economic record of the last lot to guide him."

    That is the definition of 'desperation'.

    have you seen this article by Monbiot?
    http://www.guardian.co.uk/commentisfree/2011/feb/07/tax-city-heist-of-century

  • Comment number 99.

    78. At 16:13pm on 9th Feb 2011, Reticent_Trader wrote:

    "If I told you would say it's political corectness gone mad, no doubt."

    i haven't forgotten - it's still brilliant the prediction you made - are you sure you didn't set it up?

    Have you read the monbiot article?
    http://www.guardian.co.uk/commentisfree/2011/feb/07/tax-city-heist-of-century

  • Comment number 100.

    Merlin? Mmmmmmmm........ as Paul Daniels night say "That's Magic!", when in reality we know it's a trick or most probably slight of hand.

    The banks don't seem too upset, so I would say it's a wallpapering over the cracks exercise. Now, if the banks had been really cross about this, I'd say we might have been getting somewhere.

 

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