Clearing up after the storm

TomTom

Bank Shareholders have been shafted. HBOS shareholders lost c. 100% and Lloyds TSB shareholders 90% capital. Meanwhile Barclays Shareholders put up £51 billion in Equity and get less in Dividends than is paid out in Bonuses.

Just who do these banks serve ? They are screwing customers with 0.2% on deposits and 29.9% on credit cards simply to service Executive Bonuses.

They do not pay taxes thanks to Tax Loss Carryforwards, and they do not keep the economy moving through directing credit to speculative activities - with Barcap heavy into commodity speculation.

How they are going to meet Basle III and have an Equity Cushion when they have raped shareholders is unclear. Obviously they will all have to be nationalised at some stage.

The mess that Brown & Co created in 2008 capped off a disastrous run since 1997 aided and abetted by Mr Senility Greenspan, character witness to Charles Keating.

The Banking Model is defunct. All banks are technically insolvent and debasing currencies to prop up junk bonds held by banks is driving countries to political collapse

aristeides

Banking is pretty much a utility like a mobile, telephone, gas, electricity or tv entertainment service. How many of these have more than five major players in the market?

This report appears to be misguided. You can get tons of choice by going to the money section of any Sunday paper, let alone the internet. In fact, apart from the glut before (and which brought on) the credit crisis, there has never been more choice. If people can't be bothered to change to Metrobank, ICICI or whoever, that is a different problem. The idea that we should be attacking the profitability of the banks that we all now own a major part of is absurd and will hit us in the backside in the long run.

AlanL

@ TomTom

Of course RBS and HBOS shareholders have been "shafted". In a free market, the owners of shares should pay the price for allowing their companies to become insolvent.

Protecting the shareholders just makes people ignore their responsibilities as owners of the companies. Bad companies should be allowed to go bust, and the shareholders (as the most junior investors) should be the first to take the pain.

That's what a free market means. You are responsible for the organisations you part-own.

Shareholders in better run banks, such as Standard Chartered, have done well.

roger slade

The mergers which took place in the 70's, since when we have rarely had more than four big players in the market, totally destroyed competition between banks. This, together with Gordon Brown and the incompetence of the Bank of England failing to order the banks to maintain their liquidity ratios which, historically used to be between 25% and 30% as opposed to some 5% now, have left us in the mess we find ourselves. There are other factors involved of course such as the stupidity of giving 130% mortgages based on seven times self-certified income when the old yardstick of three times income had been established over generations. I am a Chartered Accountant and it was always the case that those who failed their accountancy exams went into banking. Need I say more?

In2minds

@TomTom

"Bank Shareholders have been shafted".

In my case I don't care. Going way back I had a Lloyds account and another with the TSB. When they became one I was given some shares in the new company. Over the years I had some profit and now I've, just about, lost the lot. But then in the same period owning a car has cost me far more.

"Obviously they (the banks) will all have to be nationalised at some stage".

Oh dear! Must we do this? The UK car industry was, sort of, nationalised and has sunk without trace. Can't we just leave the banks alone, give them no more state help and let the weakest fail?

TomTOm

"Of course RBS and HBOS shareholders have been "shafted". In a free market, the owners of shares should pay the price for allowing their companies to become insolvent."

That is absolute twaddle. Even as a major shareholder I was overshadowed by City Funds. Even as I voted AGAINST merger City Fund Managers voted FOR. MOtto: NEVER invest in British Equities.

The Prospectuses were FALSE with material information missing such as £61,000,000,000 missing from the document.

Your Caveat Emptor Doctrine shows why London is a dodgy jurisdiction and should be avoided. The Greatest Insider Trading Scandal of ALL.

You are clearly NOT a shareholder or you would know that REMUNERATION votes are purely Advisory. Shareholders cannot veto pay deals.

TomTOm

"Protecting the shareholders just makes people ignore their responsibilities as owners of the companies"

That is a truly stupid comment AlanL. You do not know that Companies Acts are passed to ensure Shareholders have legal rights, but they do not go far enough. Company Directors must be made personally liable to lose their homes and family assets to make up shareholder losees.

We need to have Directors in jail for 10-20 years for acts of malfeasance, but with the FSA as a co-conspirator we can see why they have FAILED to publish any report into RBS or HBOS.

I think institutionalised fraud is a reason not to invest in any British Securities or to entrust funds to any City organisation

TomTom

"the owners of shares should pay the price for allowing their companies to become insolvent."

So the British Government will get to enjoy its Shareholdings because NOONE will ever buy shares in British banks again. They cannot pay Bonuses and Dividends and without Dividends the share prices will be too low to fund Equity required under Basle III.

So there will never be any lending to the housing market or business and the economy will contract for decades. Standard Chartered will fold once the cross-defaults go into action.

Barclays and UBS are under investigation in the US for rigging the LIBOR market and seizing up interbank lending in 2008 causing some of the crisis, but you AlanL no doubt think Voters should deal with that since they had an election in 2005.

You certainly make the argument for nationalising all the banks as Ireland is doing. Lloyds used to be the 6th safest bank on earth, now no British bank makes the top 20

Simon Stephenson.

AlanL : 12.21pm

"That's what a free market means. You are responsible for the organisations you part-own."

Mmmmm. No, I don't think so. This is the argument of socialists who are seeking to deny us the advantages to wealth-creation of individual genius and entrepreneurship by either:-

1. Failing to regulate against the equally human traits of selfishness and dishonesty, thereby allowing a bubbling pot of creativity to be turned into a cauldron of poison.

or

2. Insisting that individual humans are too dangerous to be allowed to develop ideas of their own, and that therefore everything constructive which society decides to do must be initiated and/or approved by a committee of 24 worthies at the centre. A committee which, for safety's sake, must consider nepotism to be the most important feature of its appointment policy. So that the bubbling pot of creativity becomes similarly poisonous, with the bonus attraction of ceasing to bubble, as well.

The inability of nation-states to control the economic power-holders in a globalised world - this is the overriding political challenge that faces us.

justathought

Everyone knows the banks are too big to fail and this has created a moral hazard. Ordinary savers are being used as a human shield by the banks so that they can carry on privatizing the profits and socializing the losses.

I am all for a successful banking sector but if they need the implicit guarantee from the taxpayers against collapse then they should change their model of operating. No other industry would expect to put the country at risk of insolvency and not face urgent reform.

Rather than using more taxpayers revenue to re-capitalize the banks surely debt for equity would be better.

The urban myth that any of the major banks would move abroad if they could not longer have their failure backstopped by HMG is nonsense as no other major financial center would entertain such folly.

RKing

Is it a case of no one is prepared to reveal the truth over the state of the banks for fear of disaster?
Lets all go on pretending and paying big bonuses and with fingers crossed it might turn out OK in the end. Meanwhile we will continue to create fear in the minds of the masses that if the bankers go the country will be in a complete mess.
After all Joe Public will foot the bill again.

The deception is wearing thin I think!!!!

TomTom

"Over the years I had some profit and now I've, just about, lost the lot. But then in the same period owning a car has cost me far more. "

In2minds, you are completely mad. You think a piffling few hundred shares you got by virtue of being with TSB equates to hundreds of thousands of pounds of losses. If owning a car has cost you more you obviously had peanuts invested.....but when people lose £100,000 or £300,000 or more they are not inclined to risk investing in British institutions again.

So just who is going to buy shares in british banks that pay more in Cash Bonuses to Bankers than in Dividends to Shareholders ? Put bluntly, why do Employees get more than the people who fund the business ? And is this model sustainable ?

If not, Britain is headed for a very rude awakening when it gets out of its narcoleptic trance.

TomTom

"surely debt for equity would be better."

Fascinating. A bank with ZERO Equity. That should be a novelty for the Basle III regulators. The era of Zero Equity Banks will be a fascinating exercise in Credit Creation.

Does anyone here have any financial nous ?

Martyn

But, for all the moaning, the retail side cannot survive without the big money brought in by the investment side. You may moan about share price. Lloyds UK (Mortgages and Retail) won't even be in the FTSE 100. What keeps the share price up is the profits made by the investment operation.

If you want a bank that doesn't do "casino", go to the Post Office and stop complaining.

Ben WELLS

How should competition work? Well, in a properly market-regulated enterprise, any player making an excessive profit should reinvest that as reduced costs in order to increase market-share. This happens all the time between supermarkets, say.

It does not happen between investment banks, because the self-interest in claiming a share of profits as a bonus puts the personal interest of the partner / employee way beyond the corporate interest of the client / society.

The banks themselves resist this question being addressed globally by pointing out that unilateral action in one territory can easily undercut collective action being proposed in others; but UNESCO actually provides a very effective forum in which members (all of the world's real nations!) have to "put upor shut up" in this topic!

So let's bring some real capitalism to bear on the most capitalist of activities...

PayDirt

SS: inability to control the economic power-holders in a globalised world is the overriding political challenge, yes agree: but I do not see any political party even so much as discussing this. The best hope is that the US will lead the way in bringing market forces to bear on the runaway banks... but nobody appears to be making much progress. I heard some useful stuff about "limited purpose banking" but I guess the politicians are too scared of the wheels in finance to actually do anything... yet.

justathought

@ TomTom

The 'debt for equity' is about removing the debt from the banks balance sheets, in particular the bonds and converting them to shares. Think about it and if you don't understand then try google. It is a proposal put forward by Nouriel Roubini.