BBC BLOGS - Peston's Picks
« Previous | Main | Next »

Regulators agree 7% capital ratio for banks

Robert Peston | 09:02 UK time, Thursday, 9 September 2010

Central bank governors and senior regulators are set to ordain that banks must have a minimum core tier one capital ratio, including a new so-called "buffer" to protect against extreme economic conditions, of 7%, I can reveal.

This is considerably lower than was wanted by the "hawks", the US, UK and Switzerland. They wanted a core tier one capital ratio of 8 to 9% including buffer, which is what British banks currently have to maintain. In fact most British banks currently have a core tier one ratio of around 10%.

But the new 7% minimum has been agreed in the face of stiff resistance from a number of countries, led by Germany, many of whose banks typically have much lower stocks of core capital in the form of equity and retained earnings - and will have great difficulty meeting the new standard.

Basle, Switzerland

This new international minimum was negotiated by regulatory and central banking officials in a meeting of the Basel Committee on Banking Supervision earlier this week. It is expected to be approved by the governors and senior regulators when they meet in Basle on Sunday.

It will then be ratified in a final, supposedly irrevocable way by the heads of the G20 governments, at their summit in November.

The 7% minimum represents a dramatic increase on the current minimum of 2%. That 2% minimum is widely seen as far too low: banks' low levels of capital relative to their assets was a major contributor to the severity of the 2008 banking crisis, as investors lost confidence in their ability to survive losses.

As they approached collapse, the capital ratios of Northern Rock and Royal Bank of Scotland fell to dangerously low levels - which is why Northern Rock was nationalised and RBS was semi-nationalised.

The point of capital is to absorb losses when loans and investments turn bad.

Although this new 7% minimum ratio of core capital (in the form of equity and retained earnings) to assets (loans and investments) as measured on a risk-weighted basis represents a significant increase, some will argue that the ratio is still too low.

One reason for this is that the absolute minimum capital ratio, without buffer, will be around 4%, or double the previous minimum.

Under the new system, if a bank's capital ratio falls below 7% or would fall below 7% when the bank is tested for financial stresses, the bank will be forced by regulators to raise new capital. And if the ratio falls below 4%, the bank will be put into "resolution" - which means that it will be taken over by regulators and wound up.

It means that banks' core capital ratios must always be above 7% in normal economic and financial conditions. But regulators would tolerate those ratios falling below 7% for short periods during economic downturns.

A senior regulator has told me that many of the biggest banks - those "too-big-to-fail" banks whose collapse would cause ruptures to the financial system - will in practice be forced to hold more than the 7% minimum.

"There will be some kind of add-on for systemically important banks," he said. So the likes of Barclays, JP Morgan, Royal Bank of Scotland, UBS and so on will in practice have to maintain core capital ratios greater than 7%.

The major concern of banks about the imposition of the higher capital ratios is that it will constrain their ability to lend in the transition period, as they build up stocks of capital - and that could undermine the global economic recovery.

The point is that there are two ways for banks to raise capital ratios: they can persuade investors to buy new shares; or they can shrink their balance sheets relative to their existing stock of capital by lending and investing less.

Because of the threat to economic growth of rapid implementation of the new capital ratios, the regulators and central bank governors are expected to give banks several years to meet the new standards.

Comments

Page 1 of 3

  • Comment number 1.

    So the power of the private banks to create money is preserved.
    This is not progress.

  • Comment number 2.

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

  • Comment number 3.

    What is the point about percentages when the banks do not keep proper accounts!

    So long as off-balance sheet vehicles exist and clandestine transactions are permitted these percentages are totally meaningless.

    First we must insist on proper books of account. (full mark-to-market, full disclosure etc.) They we can talk about percentages!

    However 7% looks too high when so many of the banks are still nearly bust! And we are just about on the precipice of another step downwards in this economic crash/depression. It stinks of rearranging the deck chairs on the titanic - the real problem is that the fundamental assets upon which so much debt has been lavished are substantially overvalued and this overvaluation is not provided for in the books of the banks. [ If it is provide for - show us!] The necessary debt deflation in private debt is still to come and when it does, as it has to, all this rubbish about percentages will be seen to be what it is - a counter productive waste of time!

  • Comment number 4.

    > there are two ways for banks to raise capital ratios: they can
    > persuade investors to buy new shares; or they can shrink
    > their balance sheets relative to their existing stock of capital
    > by lending and investing less.

    You seem to have left out the third way to raise capital ratios - they could vastly reduce payroll costs. Some bankers earn more than the national average wage, which is outrageous considering the menial tasks they perform.

  • Comment number 5.

    "The major concern of banks about the imposition of the higher capital ratios is that it will constrain their ability to lend in the transition period, as they build up stocks of capital - and that could undermine the global economic recovery."
    The global economy is having to recover noy least because of capital ratios being too low.

  • Comment number 6.

    Just wait by lunch time there should be 100+ post complain about FRB and how this is all wrong.

    Tier 1 Capital should be 10%. Easy to understand. Of course next question will be what funny instruments are allowed to qualify as Tier 1 capital

  • Comment number 7.

    #maclad

    You are obviously unaware that Mr Peston has a speech impediment which results in the long pauses between words in some instances, and undue haste in others. Given that is the case, Mr Peston deserves our admiration in overcoming this problem and reaching such heights in his profession. He is renowned for his economic and political scoops. Please don't allow something so petty to spoil your enjoyment of his always excellent delivery of what is important in the economy.

  • Comment number 8.

    Of course if the high risk taking activities of the banks were properly supervised and obscene bonuses curtailed the capital ratio would not be such a crucial issue. One wonders if in a unstable and highly dynamic scenario whether information to the regulators would be subject to 'carelessness' or even neglect and a week is not a long time in banking! There should be the power to prosecute with custodial punishment for directors if they are guilty of not providing the regulators with timely and accurate information. Otherwise it is all presentation, smoke and mirrors.

  • Comment number 9.

    All the more reason then for the separation of retail banks from the investment casinos so that the taxpayer only guarantees the bits of the banking industry the taxpayer uses.

    The clear message is that those countries with megabanks are anxious about providing taxpayer guarantees for the gambling dens and off- course bookies which constitute most of the megabank business. The rest of the world isn't bothered that much as their economies are better structured and more balanced to handle financial crises.

    If a bank has insufficient reserves to cover its speculation then this should not be an issue for the taxpayer and the wider economy.

    The message to the political class in the UK is now clear: stop worrying about what the News of the World may or may not have done some years ago and reform the structure of banking now. Get of your backsides, get your hands out of your pockets and protect the taxpaying majority: now! DO IT NOW! NOW!

  • Comment number 10.

    Regulators and central bankers agreeing capital ratios

    Prior to the economic crisis the financial industry was regulated by the following:
    The Bank of England
    The Financial Services Authority
    The Financial Ombudsman
    The Treasury
    The Basel ll Agreement
    The European Union

    Now that’s an awful lot of people doing an awful lot of regulating.
    And let’s face it, it didn’t work did it.

    The creation of money in private corporate hands = Debt slavery for the majority.

    In any event, the plain truth is, if the state (which is us) does not control the creation of money, then the state (which is us) can only ever be at the mercy of those who do.

    We need a state bank, we need control of the creation of money.
    And to those who have read this before I apologise for repeating it.

  • Comment number 11.

    fully agree with John_from_Hendon: what's the point when we can't trust the banks not to cook the books?

  • Comment number 12.

    Robert Peston wrote:
    "Although this new 7% minimum ratio of core capital (in the form of equity and retained earnings) to assets (loans and investments) as measured on a risk-weighted basis represents a significant increase, some will argue that the ratio is still too low."

    Maybe I am ignorant but what is behind the phrase 'as measured on a risk-weighted basis'?

    Who measures and defines the risk?

    The general inability to assess risk correctly up to 2007 led us into this mess [at least in part]. So what has changed?

    OK the increase to 7% from 2% helps, but with FRB still in existence, the banks can still loan what they like. They may stay conservative for the time being, but without active constraints, I expect they will return to their old ways at some point.

    All these funds will be held by the banks in accounts with the BoE or government bonds, I assume. These will be interest bearing and where will the interest come from? The taxpayer I suppose.
    Why should this be so when the video on YouTube, the secret of Oz, shows that we can successfully have debt free money!

    So this is dealing with the symptoms of the 2007 problem, but not the root cause. It seems to me to perpetuate the public debt spiral - no solution here then .......

  • Comment number 13.

    This 'solution' just goes to show how moronic regulators really are.

    You could set capital ratios at 99% and you would still end up in crisis. The only difference a bigger capital ratio means is it will be longer between crises (as the captial ratio is used to buffer the surplus value being extracted from the system) - but that the crises would be much bigger and more violent and even less controllable than this one (if you can imagine such a thing)

    ....now someone bring me out a troll so I can give them a good kicking. I was a little busy yesterday evening and I see those trolls were all over the BP story last night professing the innocence of the oil giant and once again blaming everyone and everything for the failures rather than face facts - the oil industry either needs to be finished by us, or it will finish us.

    Still, I suppose moroninity is spreading everywhere as the solutions to the crisis continue to be rolled out with little or no effect and people reach for faith rather than reason as an exit from this depression.

  • Comment number 14.

    # 9

    The message to the political class in the UK is now clear: stop worrying about what the News of the World may or may not have done some years ago and reform the structure of banking now. Get of your backsides, get your hands out of your pockets and protect the taxpaying majority: now! DO IT NOW! NOW!
    -------------------------------------------------------------------------
    Can I suggest that you also take direct action, find yourself a Credit Union you may be able to use the ABCUL website to do this, if we all moved our accounts from the banks and used credit unions we wouldn't need the gov't to do anything.

    Minimum 7% isn't going to change the banks ethos or business practices, they will continue to abuse their customers shareholders and taxpayers alike, the next bail-out will happen, its just a case of when.

  • Comment number 15.

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

  • Comment number 16.

    It will be interesting to see what the rating agencies make of this. Presumably 10% will be a minimum requirement for AAA+, and 5% will be a C or lower. Or will they just give everybody who pays them enough money inflated ratings which are of limited value?

  • Comment number 17.

    3 John_from_Hendon 9.30

    I could not agree with you more!

    One wonders what scale of crisis is required to rouse these oafs from their torpor. They are clearly oblivious to what is happening in the real world.

    I suppose we'll just have to stand by and await the next episode of this 'doom loop'.

  • Comment number 18.

    #10 >>We need a state bank, we need control of the creation of money.
    And to those who have read this before I apologise for repeating it.

    FYI, we *HAVE* a state bank !!!! It's called the Bank of England !!! And "control of the creation of money" ??? Who do you think has been printing money like it's going out of fashion lately ??

    I would strongly suggest that a 7% tier one capital reserve for *NON*-investment banks and commercial banks *WITHOUT* investment banking arms !! And 20-25% reserve for all others !! Hopefully, this should put the skids under casino banking !!

    One other aspect that has hardly ever been mentioned despite it being a major culprit in the recent banking crisis - banks' gearing !! To wit, the great Northern Sponge, oops, I mean, Rock, went funny when it over-borrowed in short-term loans to lend out long-term !! When the market for short-term loans dried up, they could not roll over their debts and so they went under !! This practice must be stopped !!

  • Comment number 19.

    Correct me if I'm wrong, but weren't AAA rated mortgage back securities accepted as Tier 1 capital?

    As I understand it, the Basel "Regulations" allow the banks to self-assess the risk of default and classify the capital value accordingly.

    I nearly suggested that there should be some sort of independent rating agency capable of checking their figures - then I caught myself and laughed.

  • Comment number 20.

    With interest rates to us mortals running at between 10% and 33% (on credit cards) the banks are coining it in, milking us dry - meanwhile the fat cat at the top of Barclays is set to earn more in a month than most people do in a life time... Something is wrong with this picture.

  • Comment number 21.

    you can play around with the rules on tier 1 capital as much as you like, tier 2, tier 3 ....
    It's the tier 1, 2 and 3 gambling the banks undertake that is the problem, coupled with the blatant deception of investment vehicles to inflate profits and therefore the bonuses of these gods of the universe.
    Why not just make it illegal for banks to operate as bookies?

  • Comment number 22.

    If the Bank of England continues with its assets purchases programme (QE) by purchasing Government Bonds from Private banks will it in effect improve the cash reserves of those banks and therewith improve the ratios virtually over night. If it purchases corporate bonds from those banks will it in effect be lending to a private entity who in turn can buy government bonds which it can sell back to the bank at a profit??

    Many ways to skin a cat, prop the Fractional Reserve scam and re-interpret Maastricht

    Does anybody have an idea of what the Balance sheet of the BoE looks like especially the debtors book. It will also be wonderful to know what they are doing with all the interest income they receive.

    The BoE lending to banks is seemingly a bit different to the Government lending to Forgemasters. I presume that the BoE will not lend to Forgemasters or was this never a consideration.

    Last and most intriguing: Is the BoE allowed to purchases stock in private companies?? How about recapitalising the whole economy by lending every individual £10k at 0% interest and writing off the debt the next day.

  • Comment number 23.

    meanwhile, back in the REAL economy....

    http://www.bbc.co.uk/news/uk-11239708

    So they meja have finally noticed all the empty shops around - well this isn't any north / south divide - it's nationwide!

    Near to Liverpool street is located the oldest shop in the country - and guess what - it's vacant!
    Maybe the BBC reporters don't see much of London while they're being whisked from place to place by tax payer funded taxi's - but if they bothered to take a ride through Battersea then they would see it's looking more like Detroit every day.
    The city is almost as empty - but cleverly their towers hide their vacancies on floors that cannot be seen from the ground - thereby hiding the collapse of the commercial rental market.
    Even the Kings Road is now littered with empty shops - however, they have also cleverly disguised these by having giant murals in the window to make the shops look open (but of course a small sign offering the place for rent)
    Anyone who travels by SWT's will see the giant building vacancies in Vauxhall of up to 9000 square foot at £10 a sq foot (and the 9000 isn't the total, it's the largest size you can rent in one go) - so if you want to have a piece of London, just £10 will get you enough room to stand in.

    Maybe this is just central London, oh no, wait a minute, Hendon is also affected!
    http://www.commercialroute.com/properties-to-let/hendon-london/

    This is yet another effort at deception which will fail completely - nobody is talking about the commerical property market at all - because all the news is catastrophic.

    I'm just waiting for the companies to start failing, I reckon about 12 - 18 months is the length of time an average commercial property company can last in these conditions, and it's been going on for 6 months at least.

    With the 7% capital ratios at the bank - who's supposed to lend to these doomed companies to tied them over until a recovery comes?

    The Government and meja really think that by not talking about it that it will go away - well unfortunately this is the attitude children have to their problems and not adults.

    Face up - we're heading for commercial property meltdown and there's only 2 choices left - bailout or bust.

  • Comment number 24.

    Robert stated

    And if the ratio falls below 4%, the bank will be put into "resolution" - which means that it will be taken over by regulators and wound up.
    ----------------------------------------------------------------------
    The regulators are going to be busy people,no way, whats the betting the first bank to dip below the 4% will NOT be wound up. To big to fail? We don't have many banks left anyway.

  • Comment number 25.

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

  • Comment number 26.

    What actually counts as capital in these days of imaginative accounting?
    Shares in another financial organisation that is also 93% in debt when another shock comes and so will be valueless?
    Or perhaps insurance in companies who are cross insured with the market etc. so
    when another shock comes will be worthless?
    Or will it really be the taxpayer who bails them out again, and again...

    When will someone honest in finance take small course on the effects of feedback (electronics olevel or something) and realise that it is the allowing of effectively bankrupt organisations (try owing 14 times your assets and see how long you can stay out of court) that actually drives the boom bust cycles.
    This is patently not about generating wealth - merely grabbing other peoples and crying wolf about any attempts to stop it.

  • Comment number 27.

    #23 WOTW

    You could well be right, a part of this report;

    Empty shops were more commonplace further north. Some 30% of retail outlets were vacant in Altrincham, Cheshire,
    -----------------------------------------------------------------------
    Many of you may not be aware that although Altincham is described as being oop north, it is quite an affluent area, my mum used to work as a cleaner for some of the houseowners there. I used to go with her in the holidays- I must appologise to the owners for nicking some of their apples from the orchard in one of the gardens! and playing football on the grass tennis court.However I deny all knowledge of what went on with the daughter at one house and the mother at another.Happy days!

  • Comment number 28.

    25. At 11:08am on 09 Sep 2010, DebtJuggler wrote:

    "Ad hominem...go look it up."

    I get that too, it's a signal of defeat by your opponent.

    Well done Robert, they can't argue with your journalism so it's now become personal.
    Trolls should get back under the bridges where they belong.

  • Comment number 29.

    19. At 11:01am on 09 Sep 2010, tFoth wrote:
    "I nearly suggested that there should be some sort of independent rating agency capable of checking their figures - then I caught myself and laughed."
    ===========================
    funny but sadly all too true

    22. At 11:06am on 09 Sep 2010, Supersage64 wrote:
    .."Last and most intriguing: Is the BoE allowed to purchases stock in private companies?? How about recapitalising the whole economy by lending every individual £10k at 0% interest and writing off the debt the next day."
    ===========================
    b r i l l i a n t !


    23. At 11:06am on 09 Sep 2010, writingsonthewall wrote:
    meanwhile, back in the REAL economy....
    .."Face up - we're heading for commercial property meltdown and there's only 2 choices left - bailout or bust."

    its us, and China isn't it?...

  • Comment number 30.

    Roberts statement included this:

    It will then be ratified in a final, allegedly irrevocably way by the heads of the G20 governments, at their summit in November.

    Do the G20 know what irrevocable means?

  • Comment number 31.

    Hmm.... loving all these comments. In the UK, we have little manufacturing to speak of and the financial services sector has been one of the areas which has brought in considerable income in the last decade. why do we want to lose our status as a financial centre? do we want to be twiddling our thumbs and let frankfurt be europe's hub??? why don't we want to be at the forefront of things anymore?

  • Comment number 32.

    19. At 11:01am on 09 Sep 2010, tFoth wrote:

    Correct me if I'm wrong, but weren't AAA rated mortgage back securities accepted as Tier 1 capital?

    As I understand it, the Basel "Regulations" allow the banks to self-assess the risk of default and classify the capital value accordingly.

    I nearly suggested that there should be some sort of independent rating agency capable of checking their figures - then I caught myself and laughed.



    Hmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm

    HA HA HA HA HA HA HA HA HA HAHAHHAHAHAHAHAHAHAHAHAHAAAAAAAAAAAAAAAAAAAAAAAAAAAA


    Tier 1 now includes government gilts which as everone knows is sAAAfer than sAAAfe because future taxpayers are queuing up to part with it and if not then there is always the last line of defence the lAAAser printer .


    Money ....they make it up as they go along !


    Tier wongaaadosh capital is now a laser printer ,the ultimate doomsday weapon at the center of the planetarium of the AAApes financial system with its central tract..

    "If we go we will take everyone with us"



  • Comment number 33.

    Mad Tom wrote: "This is patently not about generating wealth - merely grabbing other peoples and crying wolf about any attempts to stop it."

    The thing that amazes me is that none of my banker friends (I use the term loosely - especially the one who gambles on futures) - where was I - Oh, yes - none of my banker friends seem to know or understand the difference between MONEY and WEALTH.... they don't seem to teach this any more - no wonder we're in a mess...

  • Comment number 34.

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

  • Comment number 35.

    #22. At 11:06am on 09 Sep 2010, Supersage64 wrote:
    "....Last and most intriguing: Is the BoE allowed to purchases stock in private companies?? How about recapitalising the whole economy by lending every individual £10k at 0% interest and writing off the debt the next day."

    A respected economist said at the start of the banking crisis that if the BoE furnished every household with £100K it would be used to clear debt and end up in banks coffers, those who were debt free would simply bank it anyway. It was very tongue in cheek but we're seeing the same downsides from QE as bunging Joe Public some dosh would have done, inflation, inflated asset values, public deficit etc. The banks would have suffered in terms of assets but they would have capital aplenty.

    I vote we push for this idea, I could do with £100k.

  • Comment number 36.

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

  • Comment number 37.

    27. At 11:26am on 09 Sep 2010, creditunionhero

    The only way that this Government will sit up and take notice is when the big strong northerners get fed up and come down to London and smash it up.

    It's sad that such extremes have to be gone to in order to get results - but as the poll tax riots demonstrated - this is the only thing which turns Government in times of crisis - when they see a real demonstration of power from the masses.

    Of course I do not condone such behaviour - but eventually you will be left with no choice.
    We'll see how the spending review goes down with the people shall we? Already even the most mild mannered of slaves who accept the cuts - are now expressing that when they say cuts are neccessary - they don't mean to things they need or use!

    Classic - even the self centred are going to object to the axe - it all seemed like a good idea when it was just words and a proposal - soon it will be real and the cat will be well and truly out of the bag.

  • Comment number 38.

    #31 anonymous wrote:
    Hmm.... loving all these comments. In the UK, we have little manufacturing to speak of and the financial services sector has been one of the areas which has brought in considerable income in the last decade. why do we want to lose our status as a financial centre? do we want to be twiddling our thumbs and let frankfurt be europe's hub??? why don't we want to be at the forefront of things anymore?
    -----------------------------------------------------------------------
    One of the reasons we have so little manufacturing is that banks were risk averse to lending to the sector, it preferred to lend to property developers, as they (the bankers) knew there was no risk as property prices were never going to fall???? and they would always get their money back plus of course the interest.

    But of course they were wrong..... again and again......

  • Comment number 39.

    29. At 11:33am on 09 Sep 2010, 24law wrote:

    "its us, and China isn't it?..."

    No - surely not, I mean aren;t China the 'powerhouse' that is going to bring 'worldwide recovery'?

    ...are you saying it's just another bubble? - What if they need to sell all those US treasuries to keep their bubble from popping?

    Whoops!

  • Comment number 40.

    # 14. At 10:44am on 09 Sep 2010, creditunionhero wrote:
    "# 9

    The message to the political class in the UK is now clear: stop worrying about what the News of the World may or may not have done some years ago and reform the structure of banking now. Get of your backsides, get your hands out of your pockets and protect the taxpaying majority: now! DO IT NOW! NOW!
    -------------------------------------------------------------------------
    Can I suggest that you also take direct action, find yourself a Credit Union you may be able to use the ABCUL website to do this, if we all moved our accounts from the banks and used credit unions we wouldn't need the gov't to do anything.

    Minimum 7% isn't going to change the banks ethos or business practices, they will continue to abuse their customers shareholders and taxpayers alike, the next bail-out will happen, its just a case of when."


    I've researched credit unions as I'm totally p****d off with banks and all they stand for. Unfortunately due to my debt laden state it would be all take from me and no give so they're not really a viable option. Not exactly in secure employment either thanks to Gorgeous George. Pity - I like their style.

  • Comment number 41.

    31. At 11:36am on 09 Sep 2010, anonymous wrote:

    "Hmm.... loving all these comments. In the UK, we have little manufacturing to speak of and the financial services sector has been one of the areas which has brought in considerable income in the last decade. why do we want to lose our status as a financial centre?"

    Losing your status as a financial centre is like losing the leeches you picked up when swimming in that pool.

    It produces nothing, it's based on nothing and it's self destructive. How about we replace it with something of more substance?

  • Comment number 42.

    Tier one laser printers are now the basis of the fictional reserve banking [frb] perhaps Robert could explain to us about FRB between the gottles of geer


    The financial world looks like the famous fictional world of AAAll lies in wongAAAland.

  • Comment number 43.

    #30. At 11:36am on 09 Sep 2010, creditunionhero wrote:

    "Do the G20 know what irrevocable means?"

    irre-vo-cable

    Like the other Cable, "It's not for turnin'"

    What? It is, it can be turned by greed and power. Oh!!

  • Comment number 44.

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

  • Comment number 45.

    Moderator. I see that I have now been squashed, which is a pity, I didn't even get a chance to swear. These people take themselves so seriously.

    BUT I'm making an important point that will now not be allowed to see the light of day or in this case the BBC website. The voice of doom who holds sway over so much popular opinion (and can bring down banks)plays to the crowd just like every other media person. It's only a matter of time before Robert turns up on a celebrity dancing programme - and all these bloggers who currently take him so seriously will have to recalculate their sycophancy.

  • Comment number 46.

    @44 Sorry should be Rob Peston not Nick

  • Comment number 47.

    @ 41. At 11:58am on 09 Sep 2010, writingsonthewall wrote:


    > Losing your status as a financial centre is like losing the leeches
    > you picked up when swimming in that pool.

    You'd be surprised by the number of people who believe that you
    can generate wealth just by updating some computer records!

    I blame the education system for all these gullible people.

  • Comment number 48.

    This latest development only confirms that the concept of "Too big to fail" is no longer relevant - things have moved on.

    We must now get used to thinking in terms of "Too big to beat!"

    Like it or not, that is surely the new reality. If you doubt that assertion, just wait a little longer and see what the government's review of the banking sector comes up with.

    The re-introduction of Glass Steagall, or a derivative - (I can't believe I just typed that!) - is pure fantasy.

    The big banks have the UK over a barrel and all the frustrated bleating in the world is not going to change that one jot!

  • Comment number 49.

    10. At 10:11am on 09 Sep 2010, Dempster wrote:
    Regulators and central bankers agreeing capital ratios

    Prior to the economic crisis the financial industry was regulated by the following:
    The Bank of England
    The Financial Services Authority
    The Financial Ombudsman
    The Treasury
    The Basel ll Agreement
    The European Union

    Now that’s an awful lot of people doing an awful lot of regulating.
    And let’s face it, it didn’t work did it.

    The creation of money in private corporate hands = Debt slavery for the majority.

    In any event, the plain truth is, if the state (which is us) does not control the creation of money, then the state (which is us) can only ever be at the mercy of those who do.

    We need a state bank, we need control of the creation of money.
    And to those who have read this before I apologise for repeating it.
    ............
    No need to apologise, couldn't agree more. Its the same problem when dealing with children, you need to tell them again, and again and again. Only through crisis will acceptance come. The solution is monetary reform, anything less is merely a plaster on a broken leg.

  • Comment number 50.

    no13 WOTW

    "....now someone bring me out a troll so I can give them a good kicking. I was a little busy yesterday evening and I see those trolls were all over the BP story last night professing the innocence of the oil giant and once again blaming everyone and everything for the failures rather than face facts - the oil industry either needs to be finished by us, or it will finish us."

    for those unfamilar with internet slang a Troll is "someone who posts inflammatory, extraneous, or off-topic messages in an online community, such as an online discussion forum."

    If the cap fits!

    I know a "good kicking" does not have its literal meaning at the bank you work for but can you please find it in yourself to show some respect especially to the non violent members of the public which includes the elderly , women and children whose only "crime" is to express a different opinion to your own

  • Comment number 51.

    Well, let's hope that if the UK regulators feel the 7 percent figure is too low, then they will show the strengths of their argument and set some higher limit for British-based banks. I am a Eurpoean at heart but not ashamed to be British when the need arises!

  • Comment number 52.

    18. At 10:58am on 09 Sep 2010, ishkandar wrote:
    #10 >>We need a state bank, we need control of the creation of money.
    And to those who have read this before I apologise for repeating it.

    FYI, we *HAVE* a state bank !!!! It's called the Bank of England !!! And "control of the creation of money" ??? Who do you think has been printing money like it's going out of fashion lately ??

    ......
    Have a look at http://www.bankofenglandact.co.uk/ first and then you will have a fuller picture.

  • Comment number 53.

    Now only $5 off a new gold record. Confidence in currency, confidence in the economy, I think not.

  • Comment number 54.


    The % is near irrelevant - it's what is allowed to count as Capital and valuation basis that is important.

  • Comment number 55.

    Soory not to join this discussion earlier.

    1. John from Hendon is spot on about the irerelevancy of tier 1 capital. For investment bankers tier 1 capital rules are yet another opportunity to arbitrage between parties. Capital ratios only mean something if (a) the basis of measurement is standardised (under BaselII each bank does its own calculation of risk assets and the national regulator is supposed to audit it) and (b) there's a proper understanding of risk. The latter is particuilarly tricky as traditionally risk has been seen primarily as a function of the ability of borrowers to repay whereas historically the bigger threat is a liquidity squeeze;that's what sunk Northern Rock and Lehamans.
    2. Splitting investment banks from retail banks is not the answer. I would suggest that a simpler way forward would be for all banks worldwide to be required to take insurance from the state in respect of all deposits taken from outside the financial sector (ie excluding inter-bank lending). The insurance would pay out the depositors in the event of bank failure. The state would charge a premium on the value of the deposits. No bank would then be 'too big to fail' (this is just an excuse that politicians use to justify bailing out a bank so that the voters don't get very cross when their savings disappear)and banks would be more circumspect lending to each other with this knowledge. The state would earn a return for being a guarantor of the deposits.

    The real bgeauty of this approach is that it addresses the real area of risk, the liability side of the balance sheet.

  • Comment number 56.

    Of course it's really 7% PLUS all the taxpayers money that underwrites them free of charge. Vince Cable has this issue bang to rights.

    I see UK growth is down: 3 months to July = 1.3%, three months to August = 0.7%

    Not the only declining indicator.... NIESR: "Unfortunately, the rate of growth will continue to decelerate over the coming months."

    So they take billions of spending out of a floundering economy, with no tax cuts, and growth drops. Who would have predicted that?


    I thought the tories said that all their cuts were going to stimulate private sector growth?

  • Comment number 57.

    Hang on ... I'm missing something here.

    A couple of weeks back, that woman (can't remember her name) who represents the banks in the UK was telling us that the reason for the huge increase in borrowing rates (and the huge spread between what banks pay for money; and what we then pay them in turn) is to allow them to repair their balance sheets. It would seem that at 10%, their balance sheets are (relatively) well repaired ... so can we now look forward to a subsequent fall in borrowing rates??? Not holding my breath on that one.

    Secondly, is this the best the BIS can do? We're now 2 years on from the meltdown ... and as far as I can see, very little has changed.
    1. Too many banks are still too big to fail.
    2. There is still the significant risk in the UK that the investment arms of the big 3 can pollute the retail side
    3. All the regulators seem stuck in a stand off ... waiting for someone else to move first for fear of imposing a regime that scares the global banks off into the arms of a less scrupulous regulator.

  • Comment number 58.

    51. At 12:29pm on 09 Sep 2010, Nick wrote:
    Well, let's hope that if the UK regulators feel the 7 percent figure is too low, then they will show the strengths of their argument and set some higher limit for British-based banks. I am a Eurpoean at heart but not ashamed to be British when the need arises!


    Continual high budget deficits will end up increasing banks' reserves anyway, especially if output is not growing. Where else can it go. A deficit is the difference between Govt spending and Taxation. Chicken before Egg or Egg before chicken.

    The deficit needs to be targeted to create employment and output. That was the orignal idea. We have to stop private banks dictating macro-economic policy for their own ends.

  • Comment number 59.

    They will be hoping they can keep going until they have their wish of a cashless society, then they can just be accountable to no one....

    I have no idea what the core ratio should be but they should be able to make good ALL deposits from within themselves.....

    what i want to hear from the government is as of *** date we as tax payers will no longer guarantee any deposits for any banks and if they fail they fail.

    As we can see from all that is being talked about , nothing is changing and the bankers are fighting damn hard to make sure they come out on top again.

    It appears there is no one in government who can control this monster that has been created, so perhaps we need to make sure we vote accordingly.....our present major representatives are just puppets of the banks and big industry , this if we all work together before it is too late can be changed, but with parachuted in central office hand picked candidates now becoming the norm we have to move quickly otherwise we will end up with no vote at all.

    I have said it before what is required is a system of accounting that requires a bank to show what its liabilities are and all guarantee's from tax payers removed.Will it happen ???

    Not likely, if the current situation was properly explained to everyone,banks would be being burned to the ground.

  • Comment number 60.

  • Comment number 61.

    Ultimately the private information that banks may disclose to the Basle Secret Police, and the calculations these insiders do as to whether they comply with their private set of rules - Basle I, Basle II, Basle III or Basle bloomin' MCDXXIII - could be complete mumbo-jumbo for all the good it is going to do the ordinary person in the UK.

    The bankers basically still have not got it.

    Which is that... we... just... don't... trust... them!

    Especially when they gather together in a place like Switzerland where we all know that secrecy is the name of the main game in town.

    The solution here is not for them to go away, gather yet another cabal of self-interested rich insiders together, and come back to tell us they now really do have the perfect 'formula', and really not to worry our pretty little heads about it any longer.

    We need our democratically elected government to put our own national monetary system back into the hands of the majority of people of the UK - not just the bankers - by enacting structural reform.

    Break the banks up, so the ordinary man in the street can understand what the different ones do, and so that any government guarantees to depositors can't be hijacked by the casino operators.

    Force all banks to disclose huge amounts more information into the public domain, so that they have to compete harder against each other to make the same money.

    And implement this minute transaction tax, which in one fell swoop would not only get rid of the ridiculous high frequency trading scams that help the the likes of the Giant Vampire Squid (the 'very big computer owners') conspire against the ordinary person, but also eliminate any further possible 'flash crash' events similar to that on May 6th 2010 - small tremors in the market that foretell of much larger explosions ahead if the environment is not stabilised soon.

  • Comment number 62.


    Couldn't agree more with posts 3 & 10.

    What exactly is the point in setting percentages when we have no idea of what the real accounts are for these huge companies? The first step in reforming the banks must be to ensure total transparency and proper book-keeping. Where are the auditors in all this? Oh yes, I remember now - They were owned and controlled by the finance industry.

    And;

    The second step in the banking reform must be to set a benchmark against which the private banks must attempt to compete. This can only be done by the creation of a state bank.

  • Comment number 63.

    @33
    "the difference between MONEY and WEALTH.... they don't seem to teach this any more."

    I had a rather naive bash at that the other day. (http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/09/has_the_casino_swallowed_barcl.html

    I guess in the "Business World" as reported by RP, only profit matters. And profit is measured in MONEY.
    ==================
    @ WOTW, your question had me thinking...if bankers don't generate wealth, can the same be said for train drivers?
    ==================
    @ RP...can you clear up something for my simple little mind?

    Does the magic figure of 7% mean that if we all went to the bank and asked for our savings, only 7% of us would get our money back? (Or else we would all get back 7% of what we were owed?)" Thanks.
    ==================================
    In a funny sort of way, that makes me think that perhaps it is the banks that are in unsustainable position, rather than the private individuals. Except, of course, that the sum of UK private-individual's net worth is probably negative, so if the banks foreclosed on everybody in order to survive a "run", they would only get back the "Capital Reserve" that we all hold. (i.e. Only what we already owe them.)

    When the US sub-prime went into negative equity, a lot of people handed back the keys and walked away rather than service debt on an asset which wasn't worth their efforts. Game theory (which the business world loves) says they were only acting rationally. Lets hope rationality doesn't take hold over here, eh?
    ----------------------------------------------
    @19. At 11:01am on 09 Sep 2010, tFoth wrote:

    Correct me if I'm wrong, but weren't AAA rated mortgage back securities accepted as Tier 1 capital?

    ----------------------------------------------
    Remind me again, someone, (anyone?) how a mortgaged property can be seen as Tier 1 capital? Isn't there anything about liquid assets (cash) in the magic 7%?

    Puzzled, as always, but happy to be enlightened.

  • Comment number 64.

    Another ineffective compromise from Basle. Good job we have Mervyn and the BoE in place.

  • Comment number 65.

    48. At 12:22pm on 09 Sep 2010, Tony

    Too big to beat? Really. Change the government. It isn't a law of physics for the UK to have a government run for and by neoliberals. We could be run by a party of daleks if we vote for them in enough numbers. Oh, we are already? So we are!

    http://www.newscientist.com/blogs/thesword/2010/09/time-to-stop-whining-and-act-f.html

  • Comment number 66.

    Robert,

    The issue isn't with the arbitrary percentage figure agreed. It could be 15%. Any 'dip' into this buffer merely hides a banks misdemeanours for a short while longer...

    More to the point - the buffer is merely a red herring.

    However, there seems to be a tantalising twist: Isn't the issue more to do with *who* has agreed it, and *why* it has been agreed it?

    I wonder if Rothschild would benefit more out of a 7% cap than 10%?

    On another matter, the vitriol which exists for bankers is certainly of legendary proportion. Plenty of anger exists with what they did, and consequently how little they know about what it is they are doing.

    My point: Is this not a political issue equally as much as an economic one? Definitely worth a chat with Laura Kuenssberg. David Cameron has (thus far) been completely inept as much as he seems to be utterly compliant with the wishes of bankers.

    Why isn't David Cameron leading to permanently safeguard UK plc from "too big to fail" monopolies?

    PS Don't ask Nick. I suspect he might not have the stomach for this one!

    --

  • Comment number 67.

    As touched upon by some previous comments. The percentage is irrelevant, because Banks can hold all sorts of assets as capital without applying a haircut. Some banks held PIIG govt debt as part of their capital, how did that fair out for them? Your capital should be your rock solid go-to asset in times of economic stress, hardly the sub-prime govt debt and AAA rated mortgage securities the banks were holding a few years ago.

    Lets see what the next oversold and overhyped bubble asset that makes its way into banks capital ratios will be.

  • Comment number 68.

    #50. Kudospeter wrote:

    for those unfamilar with internet slang a Troll is "someone who posts inflammatory, extraneous, or off-topic messages in an online community, such as an online discussion forum."

    Although on this forum the term is generally used to mean "someone who dares express a view or opinion that differs from that held by WritingsOnTheWall".

    No matter; give him his moment. He still believes his revolution is coming (as long as someone else starts it).

  • Comment number 69.

    What a surprise!

    www.bbc.co.uk/news/business-11243948

  • Comment number 70.

    Interesting trends - now the banker apologists are now demanding that the regular posters on here shut up because they are boring, or pleading that Robert Peston talks about someting else, or they're mocking his mannerisms, or they're suggesting the people who disagree with them are Peston sycophants (eh?), or they're even carrying on that nonsense that the whole crisis is his fault for breaking the Northern Rock story in the first place and he's nothing but a show-boater. (Of course THEY all KNEW about the Crock but no need to rock the boat eh?)

    In other words - Anything other than answer the basic point - the banks don't create wealth they take a cut of everyone elses whenever it moves or people try to use it. Lately that has meant a huge cut of the hundreds billions of pound of QE pumped in by the governments of the world to prop up a tottering edifice built on a colossal number of failed bets, and failed bets on failed bets, that the banks pretended were real money.

    The banks have been predating on UK industry so long we're left with a diminished wealth creation capacity and whole swathes of UK industry have closed or been bought by foreign companies, often with their own money in a hostile takeover financed through the City

    - I live and work in the North East (after decades in London) and people here rightly draw the contrast between the governments refusal to pay peanuts to keep good shipyards like Swann Hunter going in tough periods and their willingness to shovel trillions into the bankers pockets.

    I can't see the rest of the world having such a high opinion of the UK financial services industry in future so calling it a world-beating success we must cherish is a scary nonsense even ignoring the unprecedentedly vast bail-out - its obvious they don't know what they are doing. They've poured our pensions into crap - like Dubai - rather than the future. They attack our sources of wealth creation. They've been subsidised to a really fantastic amount and they're very likely to do it all over again.

    Time to wave goodbye before they beggar us all.

    NOTHING to do with left/right politics. I expect a sneer about living in the north east rather than an answer mind

  • Comment number 71.

    39. At 11:55am on 09 Sep 2010, writingsonthewall wrote:
    29. At 11:33am on 09 Sep 2010, 24law wrote:

    "its us, and China isn't it?..."

    No - surely not, I mean aren;t China the 'powerhouse' that is going to bring 'worldwide recovery'?

    ...are you saying it's just another bubble? - What if they need to sell all those US treasuries to keep their bubble from popping?

    Whoops!

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

    I'm betting that China will be one of the first to crumble. Their exposure to the limp, lifeless and almost extinct US economy is sealed. Their vast amount of treasury holdings only compound the problem.

  • Comment number 72.

    48. At 12:22pm on 09 Sep 2010, Tony wrote:

    "This latest development only confirms that the concept of "Too big to fail" is no longer relevant - things have moved on."

    ...and conformation that 3 banks now dominate the UK mortgage market means we've gone from too big to fail, to too massive to fail.

    "The re-introduction of Glass Steagall, or a derivative - (I can't believe I just typed that!) - is pure fantasy.

    The big banks have the UK over a barrel and all the frustrated bleating in the world is not going to change that one jot!"

    if you saw Vince Cable on Channel 4 news last night you will know that Glass Steagall is dead in the water. Good old Tories will alway ensure their banking friends are not impededed in their 'important business' of 'wealth generation' aka wealth extraction. As a result Vince has been pushed aside with his 'radical' ideas about regulation (I mean what a crazy idea, take the casino out of banking - how will the bankers buy porsches than?)

    I did always say that it will be a good thing to have a Tory Government, because unlike Labour who betrayed us all (that's us lot, the working class) - we already knew they were the enemy, making things much simpler.

    BTW anyone reading and confused thinking you're not working class, if you've considered you might lose your job" - then you're working class. It doesn't matter if you think you own your own house, go on holiday to the maldives, have 2 cars or think that Phillip Schofield is a nice chap or even live in Hendon - unless you're able to ride this one out in bermuda or monaco - you're an enemy of the system now, the only escapse is to fightback.

  • Comment number 73.

    59. At 12:58pm on 09 Sep 2010, AqualungCumbria wrote:
    .....our present major representatives are just puppets of the banks and big industry


    Agreed. A cabinet of millionaries hardly represents the general public.

    Didn't Cleggers mention something about the expenses scandal being nowhere near the end of it because there is the lobbying scandal waiting to be uncovered! No sign of it now he as a comfy seat next to Boy George et al.

  • Comment number 74.

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

  • Comment number 75.

    67. At 1:19pm on 09 Sep 2010, RiskAnalyst wrote:
    As touched upon by some previous comments. The percentage is irrelevant, because Banks can hold all sorts of assets as capital without applying a haircut. Some banks held PIIG govt debt as part of their capital, how did that fair out for them? Your capital should be your rock solid go-to asset in times of economic stress, hardly the sub-prime govt debt and AAA rated mortgage securities the banks were holding a few years ago.

    Lets see what the next oversold and overhyped bubble asset that makes its way into banks capital ratios will be.
    ----------------------------------------------------------------------
    Seem to recall that before when I was a lad, banks' reserve requirements were matched to the risk of particular aspects of their operations and the reserve was weighted in ratio.

    Going back to my £10 which is earning zip all interest for me despite the bank lending it to entrepreneurial BobRocket, I might suddenly decide to take it back. The Bank has to cover that. But Countryshire local authority which has a constant cashflow of CT into its account with Bettabigga Bank, might need a shorterm loan to cover the period 31 December to 31 March when that CT cashflow dips severely. They are (or were) a bit of a gold chip risk, so the Bank might not need to worry or reserve so much.

    It may be a good thing for the BoE to revisit that form of control and adapt it for the 21st century-high-credit scosiety we have to live in. Can't think why they haven't done it or, if they have, told us about their findings and decision. Perhaps its fallen down the cracks between London, Brussels, Strasbourg and Frankfurt? Bit too quiet in Thread St, Old Lady, for my liking.

    How's me tenner doin' Bob?

  • Comment number 76.

    If the system itself is bust then the 10% is just an incrimental step towards the 100% lend what you only have model.

    Sensible savings rates, sensible interest rates and sensibly priced assets based on affordability instead of fixing.

    So bring it on and await their fate is what I say

  • Comment number 77.

    60. At 1:01pm on 09 Sep 2010, Averagejoe wrote:

    "WOTW, I'm surprised you have not posted on http://www.bbc.co.uk/blogs/daveharvey/2010/09/scrap_public_pensions_says_pen.html"

    Man who runs top private pension firm says public pensions should be binned? - are we surprised really?

    What about this from the TUC - whilst all your pensions (and mine if I had one) have been destroyed by the crisis - it seems executives are now even better off!
    http://www.ftadviser.com/FTAdviser/Pensions/Group/CompanyPensions/News/article/20100909/6a7d612c-bbf7-11df-8f56-00144f2af8e8/TUC-exposes-cost-of-boardroom-pensions.jsp

    You know when the CEO's say 'Final salary pensions are no longer affordable' - they're talking about yours, not theirs.

    My god Britain WAKE UP - first you've been mugged for £850 BILLION by the bankers, then your pensions have been destroyed in order to keep your boss in the manner to which he is accustomed - and then the Government is going to ask you to pay for it with your jobs!

    If you're not seething by now - then you must already be 6ft under. This is robbery and there's no two ways about it.

    Don't be a victim all your life.

  • Comment number 78.

    6. At 09:42am on 09 Sep 2010, Justin150 wrote:
    Just wait by lunch time there should be 100+ post complain about FRB and how this is all wrong.

    Tier 1 Capital should be 10%. Easy to understand. Of course next question will be what funny instruments are allowed to qualify as Tier 1 capital

    -----------------------------------------------------------------------
    Nah! Gold standard is due for a comeback, I think ...

  • Comment number 79.

    # 70 Faux Geordie

    A sensible comment, a shame that our so called leaders and our banking guru's who MUST be paid millions of £'s to retain their services arn't capable of making common sense decisions.Barclays is supposed to be a world class business yet my own credit union beats them hands down on savings and loans, perhaps RP could do a comparrison between the two. I'd be happy to prove to Bob Diamond that you don't need to be paid millions to run a financial organisation and still retain an ethos of social justice.

  • Comment number 80.

    63. At 1:10pm on 09 Sep 2010, PuzzledMushroom wrote:

    Remind me again, someone, (anyone?) how a mortgaged property can be seen as Tier 1 capital? Isn't there anything about liquid assets (cash) in the magic 7%?

    Puzzled, as always, but happy to be enlightened.
    -----------------------------------------------------------------------
    With ya there ... and in the dark ... and in the ...

  • Comment number 81.

    #45 >>It's only a matter of time before Robert turns up on a celebrity dancing programme -

    Does he dance ?? I didn't know that !!

  • Comment number 82.

    Goodness me, this blog really has turned into 6th form Marxist fantasy land. I can't be bothered rebutting some of the more ludicrous flights of fancy, but thought a few points might be helpful as you continue to plot you're socialist utopia (btw would you mind giving me a month's notice before the revolution so I can move me and my assets to Honkers):

    1) Those misguided regulators which you so enjoy poking fun at are genuinely trying to reduce the risk of a repeat of the crisis - they're actually doing something as opposed to talking about it. I am quite sure that the BoE will insist on stronger capital ratios for the UK banks but it is surely important for trying to avoid another near-collapse of the banking system that the world's major economies agree on some banking basics. Some of the other areas you may wish to learn about are the BoE's work on living wills and creditor bail-ins to try and ensure depositors can be assured their deposits are always safe while reducing the risk of needing a taxpayer funded bail-out in the future. Sensible yet complex works in progress they may be, but they at least point again to the regulators trying to ensure that the taxpayer is not faced with the bill if bank's get themselves in trouble again.

    2) To those who wish to poke fun at a ratings based risk assessment of banks's assets, firstly, they have to start somewhere and none of you can come up with a more sensible alternative and secondly, with the exception of CDOs, where there have been a handful, and mainly synthetic CDS transactions that were linked to Lehman, there has not been a single AAA European security that has ever defaulted. That's a fact by the way.

    3) The risible stuff about a commercial real estate collapse in the UK - I also believe there are rumours that the Pope has a balcony......Who cares, unless you're long commercial real estate - the price of real estate in this country is too high and needs to come down - which in tjurn will bring rents down. At the right price, new investors will move in and new tenants will move in. That's how a market works. I know you lot disdain capitalism, but a market that goes down as well as up is the very essence of it. Its just that you lot keep voting in lefties who like to regulate against the down bit, which when you think about it, in nonsense.

    Anyway, back to work, I'll leave you to your revolution, Must create more money, not wealth mind.....price of real estate in Asia's going crazy......

  • Comment number 83.

    #64 sam from la la land

    Another ineffective compromise from Basle. Good job we have Mervyn and the BoE in place.
    -------------------------------------------------------------------------

    Oh thats all right then, no need to worry...............not

  • Comment number 84.

    63. At 1:10pm on 09 Sep 2010, PuzzledMushroom wrote:

    "@ WOTW, your question had me thinking...if bankers don't generate wealth, can the same be said for train drivers?"

    A train driver employs physical labour to transport goods or passengers from A to B - a banker does not, they don't even employ mental effort anymore as the computer does it for them.
    Also the function of train driver has alternatives, if you don't like the train drivers offer of work at the price you can pay - then you will look for an alternative, another train driver - or another form of transport.

    Banks hold all the capital - for which there is no alternative. If the train driver used all his wages to buy up all the tracks and then ensured he could charge whatever he likes - then he would be more like a banker - but wage competition ensures he cannot - also there are no barriers to entry in train driving, but there are in banking.
    A computer can do a bankers job as well, if not better than he can. This is not true for trains (yet). Mathing lenders to borrowers is not a task that needs huge rewards, it's only because of the skimming of the productive value that big bonuses can be paid.

    Finally, if all the banks went belly up tomorrow - you wouldn't notice a great change in your life - debts would be written off, savings would be lost, but businesses could still operate. If all the train drivers disappeared - then you would. This is because one employee is there through a genuine demand, the other is merely there through engineered scarcity. There is no demand for bankers - the state could just as eaily replace them.

  • Comment number 85.

    71. At 1:33pm on 09 Sep 2010, RiskAnalyst

    Wasn't Obama suffering when he didn't/couldn't give the Chinese a bit of a political kicking around the time the Chinese hosted the Olympics - no more talk of human rights etc. Makes me wonder who has the power?

  • Comment number 86.

    68. At 1:25pm on 09 Sep 2010, rbs_temp wrote:

    "Although on this forum the term is generally used to mean "someone who dares express a view or opinion that differs from that held by WritingsOnTheWall"."

    Oh that's just sour grapes - you haven't been around much since I outed you as a fraud for claiming to paid off your mortgage with your speculative RBS 'punt' - which you have never come back to comment on.

    "No matter; give him his moment. He still believes his revolution is coming (as long as someone else starts it)."

    You're just sore because nobody told you the revolution had already started.
    You can remind me there's no crisis and this is "just a recession" (although to keep interest rates at a record 0.5% for 18 months doesn't really indicate this is 'just a recession' now does it?

    I've noticed that your posts have become less and less frequent lately - is this because the longer the crisis goes on the harder you're finding it to claim this is some sort of mild problem we have in our economy?

    Unlike other I have long memories - and although a few have tried to find contradictions in what I say, considering the amount I've written, these are few and far between (well nobody's perfect). On the other hand people who defend Capitalism will find it much harder because they are defending a giant contradiction - which even the best debaters will fail with.

    Don't get down - it's just a depression!

  • Comment number 87.

    70. At 1:31pm on 09 Sep 2010, FauxGeordie

    A frank and truthful explanation of where we currently stand. Clearly the northerners know a robbery when they see one. Only the self interested try to befriend the robbers in the hope they will receive a cut, the rest of us plan how we're going to catch them and reset the country's morality.

  • Comment number 88.

  • Comment number 89.

    60 Avereagejoe

    Thanks for the link

    I have nothing to add to some of the excellent posts on here today but enjoyed giving my thoughts on the other subject.

  • Comment number 90.

    Is this what recovery looks like?

    http://www.reuters.com/article/idUSLDE6880UZ20100909

    What about this?

    http://www.cnplus.co.uk/news/business/indebted-redrow-making-cash-again/8605724.article

    Hardly inspiring is it?
    What about this - is this a sign of recovery?

    http://www.telegraph.co.uk/finance/newsbysector/epic/rbs/7978529/RBS-horror-story-as-UK-job-cuts-top-20000.html

    What about this? - is this how recovery starts?

    http://www.discountvouchers.co.uk/news/40893535.html

    Is this how you stimulate the Economy ito growth?

    http://www.getreading.co.uk/news/s/2077845_protest_over_600_rbh_job_cuts_that_wont_heal

    Is this the long road to recovery?

    http://www.birminghampost.net/news/west-midlands-news/2010/09/08/more-job-cuts-expected-in-west-midlands-after-spending-review-65233-27222134/

    Come on Capitalists - I know we don't "understand the complications of Economics" - but please can you explain how you get growth with rising unemployment, falling aggregate demand, rising prices and the only 'growth' seen is a slight one in GDP which coincidently occurred right when billions was thrown at the Economy by the Government?

    Let us in on your secrets - how can you generate wealth from nothing productive going on in the country?

    If the banks are so good at generating wealth - then why haven't they done so?

    It seems their 'wealth creation' is totally reliant on working businesses - funny that because I thought creation meant you produced out of nothing - not merely skimmed off someone else and call it your own!

  • Comment number 91.

    82. At 2:20pm on 09 Sep 2010, a_sensible_comment wrote:
    they're actually doing something as opposed to talking about it


    Well that is a start. I thought they were paid to serve wine!

    2) To those who wish to poke fun at a ratings based risk assessment of banks's assets, firstly, they have to start somewhere

    Oh, do you mean those AAAs handed out to all those little packets of sub-prime loans?


    3) The risible stuff about a commercial real estate collapse in the UK - I also believe there are rumours that the Pope has a balcony......Who cares, unless you're long commercial real estate - the price of real estate in this country is too high and needs to come down - which in tjurn will bring rents down. At the right price, new investors will move in and new tenants will move in. That's how a market works. I know you lot disdain capitalism, but a market that goes down as well as up is the very essence of it. Its just that you lot keep voting in lefties who like to regulate against the down bit, which when you think about it, in nonsense.

    There are people in the north who have been depending on that market showing up since the 1980s! I think you may find that since that is how the market works, that market has been rejected.

    It is about as useful as a bikini in the arctic winter.



  • Comment number 92.

    Mervyn King is the problem NOT part of the solution....
    (Rebalancing for the purposes of sanity and reiterating the facts as they seem to have been forgotten - you can't re-write history!)

    Mervyn King is the office boy in-charge of managing the interet rates to meet the cpi and NOTHING else - at least that what he writes when challenged. At other times he makes out he is economically omnipotent - in fact he was the cause the bubble economy that caused the crash. His deliberate blindness to the totally unsustainable increase in credit, of which he was well aware, substantially worsened the bubble that gave rise to the crash that broke Northern Rock, HBOS and part of RBS and severely challenged the whole banking sector here and around the World. Along with his economically blind fellow traveller (and study buddy at Harvard) Ben Bernanke he let the bubble grow and even encouraged it. They were both warned, but they ignored the warnings and their stupidity is why we are where we are today.

    Fire Mervyn King and his cronies as they knew, were in-charge and did not prevent the bubble that led to the the inevitable crash and still they are not taking the critically vital remedial action. He is personally responsible for the collapse of British Society (Big or otherwise). He is personally responsible for houses in London still costing 12 times average incomes. He is personally responsible for the age for first time buyers being 52 for men, and 59 for women. There are no excuses he MUST go!

  • Comment number 93.

    6. At 09:42am on 09 Sep 2010, Justin150 wrote:

    Just wait by lunch time there should be 100+ post complain about FRB and how this is all wrong.

    Tier 1 Capital should be 10%. Easy to understand. Of course next question will be what funny instruments are allowed to qualify as Tier 1 capital





    Hmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm



    I am sure the banks orchestrators have plenty bent fiddles for tier 1

    Then theres clAAAy left over from Adam now making a comeback after the oversuply at the time of the last indulgence.

    Last but not least their full deck of get out of jail free cards and jokers has to count for something if not all the Fictional Reserve Banking requirements..

  • Comment number 94.

    So the Irish find out the bailout there didn't do any good;

    "Whatever the total call on the Irish taxpayer is going to be, it's as big today as it was yesterday. There's no relief for the taxpayer."

    The bombs still ticking guys........

  • Comment number 95.

    The method by which the government creates money I believe to be critical in the economic survival of the country.

    If the government continues on the path of creating money as debt, and by so doing uses ever increasing amounts of tax revenue to pay interest on the debt, the country will in the end face economic collapse.

    Those free services which we are used to, such as the NHS and education, are gradually being changed to pay per use as ever increasing amounts of tax revenue is used to pay interest on our escalating debt.

    Specific examples of which are dental care and higher education. As time passes others will follow, perhaps refuse collection, perhaps road use.

    The issue of the creation of money, isn't an economics issue, it's a civil rights issue.

    The people of this and other countries are quietly walking into debt slavery, and 99% of them don’t even know it.

  • Comment number 96.

    # 82 stated

    Its just that you lot keep voting in lefties who like to regulate against the down bit, which when you think about it, in nonsense.
    ------------------------------------------------------------------

    Its the UP bit that has caused the problem, You also state the the price of real estate is too high if so , why has the free market not already brought the price down?

    The world "agreed" on the banking basics that got us into this mess.
    So i suppose the gov't won't then need to g'tee the fist £50k of deposits in future either.

  • Comment number 97.

    90. At 2:59pm on 09 Sep 2010, writingsonthewall

    Careful you don't wind up the wacky right. Will make for hilarity in the posts!

    Their take on the world is different to those on the normal right, centre, or left. Play nice!

  • Comment number 98.

    The blame it on the investment bank bonus culture argument is too facile. Northern Rock had no investment bank, neither did Bradford and Bingley or any of the building societies that went bust. HSBC has a 'casino' bank attached. Yes investment bankers get paid too much but the jealousy and disgust that is associated with that has muddied the issue.

    Look at the regulatory proposals together: the net stable funding ratio will inhibit short-term wholesale borrowing; the leverage ratio should inhibit banks growing too big relative to their asset base in conjunction with the core tier one ratio referred to in the blog; regulators and the accounting boards have already made strides on what can be taken 'off-balance sheet'.

    I'll wager that 99% of posters are relatively wealthy savers of a certain age. The world has changed. You may not like it but it has. Deal with it.

  • Comment number 99.

    Cleggers is being reported as saying there is no need to panic about the cuts. Great. All those people worrying about jobs, worrying about the services they need needn't.

    http://uk.news.yahoo.com/22/20100909/tuk-uk-britain-economy-clegg-fa6b408.html
    That's alright then.

    Issue with brain processing judging by his inability to differentiate between anger and panic!

    Dad's Army in the House!

  • Comment number 100.

    we associate 'bankers' all being six or seven figure earners. the reality is that the average salary in these places is around 40k. this may be 10-20k above the average salary in the UK but it really doesn't mean that all these people are driving around in Mercedes. all that will happen if those people lose their jobs and end up on the dole is that the rest of us will have to start shelling out for them. I for one think it's best that we have as many thriving businesses as we can sustain rather than become Aztecs - a one time great nation that became nothing. is this what we want for the UK?

 

Page 1 of 3

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.