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LynchGerry

Listed below are comments made by LynchGerry between Monday, 20th October 2008 and Wednesday, 21st October 2009.

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Bank reform: The radical way 7:19pm on 21 Oct 2009 I am sure my analysis of the problem is too simplistic and would be grateful if someone could correct me if it is wrong.

Anyway as I see it, the problem is that the financial services industry worldwide has shown itself incapable of managing risk. This has occurred for a variety of reasons, remuneration systems that favour short-term performance, complicated products that only a few (if anyone) really understand etc. In a normal commercial environment this would not be a problem, incompetent management end up with insolvent companies. However certain parts of the Financial Services industry, particularly deposit-taking and domestic/ commercial lending banks, are too important to permit to fail.

Two solutions have been identified. Firstly the politicians and the FSA want to micro-manage the way financial companies manage their affairs. This would cover remuneration, products, reserves etc. The BOE take a different view, they want to split the "too important to fail bits" from the rest. The former would then be micro-managed but the latter would be permitted to continue with the current competition, going to the wall if they are either incompetent or unlucky.
Should students pay our bills? 9:03pm on 21 Sep 2009 I was a Training Manager in the electronics industry nearly 30 years ago. At that time we had the Engineering Industry Training Board (EITB). Companies had a choice, they either spent a fixed percentage of turnover on training and development or they paid a levy at that level. Unfortunately Maggie Thatcher stopped it, apart from construction.

Whilst that structure was primarily focused on internal training (apprentices, graduates and management) it also covered graduate sponsorship. A wider application of such a system across the whole range of industries could be used to increase student sponsorship in those areas of most use to commerce.

But I suppose in this crazy world all that is far too logical.
Charging for online news 5:35pm on 06 Aug 2009 "Rival media organisations may club together to form online consortia of news services"

Sounds like a cartel to me, for once hopefully the EU will intervene.
Bank of England wins victory - but for what? 7:54pm on 06 Jul 2009 The danger is the banks convince the policy makers this is all too difficult. The following suggestion is not perfect but lets at least start from simple beginnings:

In the same way the MPC has a 2% figure for inflation why set a target for the ratio between leverage and return on assets for the UK banking sector. Don't create another committee, just give the MPC responsibility to monitor this figure and report to the Chancellor if it is significantly exceeded.

The only tricky question is what powers to give the MPC to control leverage? Firstly create an MPC Leverage Sub-committee consisting of the Chairman of all UK-operating banks, which would meet monthly in advance of the MPC meeting. It would be compulsory for all Chairman to attend each meeting. At that meeting members would individually report their leverage figures and targets.

Control mechanism? Easy. Continue with the current practice of the minutes of MPC meetings (now including the Leverage Sub-committee) being fully public. Not one of the banks would dare exceed the stated leverage target.
Not so stressed 6:26pm on 07 May 2009 Whilst news of the increasing strengths of British banks is welcome, one wonders how much they have really learnt from the past 12 months.

Recently I went into Lloyds to pay a cheque in for my son. The paying-in was fine, but once the transaction was completed the cashier told me that a message had flashed upon her screen offering him the chance to take out a loan "at very advantageous rates" and also did he need a credit card in addition to his debit card.

They do still seem to be up to their old tricks.
Gilts and guilt 4:01pm on 25 Mar 2009 This is probably just a glitch in the borrowing cycle, but should reinforce yesterday's warning from Mervyn King. With an election due in 2010, whatever party was in power, this years budget should be a give-away. Mervyn King told us yesterday that we cannot afford that. I would respect Gordon Brown far more if he now went for prudence.
Fred Goodwin to receive £650,000 for life 10:56pm on 25 Feb 2009 The simple answer to these excesses is to legislate to prevent company directors' receiving indirect rewards such as this. They should only be permitted to receive direct salary payments, at whatever level the shareholders approve. If shares are part of the remuneration they should be purchased in trust from the salary awarded.
Obama biffs bonuses 6:52pm on 04 Feb 2009 The bonus culture started in the UK in the early 1990's when the big American banks increased their presence. There was no justification for the escalation in salaries or bonuses, companies just shopped around for remuneration consultants who could give them data that justified ever-larger increases.

In the UK the additional scandal was the misuse of final salary pension schemes by finance executives. Additional years service were granted and 'executive' factors introduced which paid out huge pensions with no regard to the true cost. That plus beneficial share option arrangements.

If the UK Govt want to cap salaries they should also introduce one additional simple measure. Directors should only be permitted to be rewarded by direct salary payments. This would at least make the true cost of rewards clear to shareholders.
Why Barclays prefers Abu Dhabi to GB 08:26am on 31 Oct 2008 But in effect Barclays is using its tax payer guarantees to underwrite the Abu Dhabi loan. I very much doubt the loan would be on offer without the tax payer guarantees.

Me thinks the government loan offers to these fortunate companies should come with more strings attached.
Crisis is business as normal 09:19am on 20 Oct 2008 Accepted that ING is too big to fail, but I had worries them a few weeks ago and checked its credit rating - AA. A matter of days later it needs a huge government bailout.

If confidence is the key to banking then the credit rating agencies need to be reformed to provide accurate information.

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