Bankrupt Banker

Investors ploughed cash into gold and treasury bonds as the gathering turmoil on global stock markets triggered a stampede towards the last remaining safe havens.

<a href="http://www.thisismoney.co.uk/money/investing/article-2027655/Invstors-safe-haven-stampede-amid-growing-market-turmoil.html"> </a>The price of gold reached an all-time high of more than $1829.70, adding credibility to suggestions by some City analysts that the precious metal could hit $2000 by the end of the year. It also means that had Gordon Brown not sold 400 tonnes of gold for £2.3billion in 1999, Britain would be £12billion richer if it sold the same amount today. Not so risky business: Investors ploughed cash into gold and treasury bonds as the gathering turmoil on global stock markets triggered a stampede towards the last remaining safe havens In an extraordinary signal of the mania for gold, President Hugo Chavez ordered the Venezuelan Central Bank to repatriate $11billion of reserves held outside the country including 99 tonnes in the vaults of the Bank of England. The hunt for a safe port in the economic storm boosted US Treasury bonds, seen as an island of safety despite signs the world’s largest economy is in increasingly poor health. Yields on ten-year US Treasury bonds fell below 2 per cent for the first time in 60 years, as investors fleeing equity markets settled for basement interest rates on loans to the US. The last time US government bond yields fell through the 2 per cent mark was when they hit an all-time low amid the Great Depression sparked by the Wall Street Crash of 1929. Yields on UK ten-year gilts hit record lows of 2.238 per cent, not far off the European benchmark safe haven of German bunds. Oil – the price of which corresponds with forecasts for global growth – inched down, with Brent crude losing more than $3 to $107.50. The fall hit Britain’s two oil supermajors, knocking 13p off BP’s share price to close at 400p, while Shell lost 64p to 1929.5p. A host of other commodities which also tend to track expectations for industrial demand slumped, hitting firms whose fortunes are tied up in the price of metals. Miners were some of the biggest fallers on the FTSE100, led down by Xstrata, which lost 110p to 972p. Commodities trader Glencore staggered down 39.55p to 355.45p.

Investors ploughed cash into gold and treasury bonds as the gathering turmoil on global stock markets triggered a stampede towards the last remaining safe havens.

The price of gold reached an all-time high of more than $1829.70, adding credibility to suggestions by some City analysts that the precious ...

Fears of a new credit crunch caused share prices to plummet on both sides of the Atlantic as fragile banks struggle to raise funds in financial markets.

<a href="http://www.guardian.co.uk/business/2011/aug/18/spectre-of-new-credit-crunch-haunts-frightened-markets"> </a>British banks were hit hard by the sell-off, with shares in state-controlled RBS plunging 11% to 21.95p, Barclays off 11.5% at 154p and Lloyds falling 9% to 29.8p. These were the lowest closing prices for all three banks since the first half of 2009, when Britain was in recession. Shareholders were rattled by the revelation that the European Central Bank had lent $500m to an undisclosed eurozone bank that was struggling to raise dollars. The news came amid heightened fears that banks are becoming nervous about lending to each other. The creditworthiness of European banks has become a major concern because of worries about their exposure to debt in countries such as Spain, Greece and Italy, which are struggling to contain a lack of international investor confidence. German chancellor Angela Merkel and France's president Nicolas Sarkozy met in Paris on Tuesday in an effort to calm the latest bout of market anxiety, but their promise of enhanced "economic governance" across the eurozone in the future has provided little comfort to financial markets looking for a quick solution. Five members of the eurozone, including Austria and the Netherlands, joined Finland today in demanding that Greece put up collateral against its latest bailout. This hardline approach increased fears among investors that the eurozone is unable to present a united response to its sovereign debt crisis. The spread between the yield on Greek bonds and safe, benchmark German bonds has risen sharply in recent days, hitting 36% – close to the high of 40% reached in July before a second financial rescue package for Greece was agreed. Italian and Spanish bond yields also increased. The US authorities are becoming increasingly alarmed that the eurozone crisis could trigger another credit squeeze: the Wall Street Journal said the Federal Reserve Bank of New York had asked for more information about whether the US bank units of big European lenders have reliable access to the funds they need. <img alt="" height="276" src="http://lh4.ggpht.com/-G1_MIpl-I14/Tk2N-gfcEAI/AAAAAAAABHg/HORSj42fH8M/%25255BUNSET%25255D.jpg" style="float: left;" width="460" />Unconfirmed reports said US subsidiaries of European banks have been repatriating dollars to beef up the operations of their parent groups in Europe. Nouriel Roubini, the New York economist renowned for predicting the financial crisis, added to the mood of crisis when he tweeted – only partly in jest – "when banks & deposits arent safe & govs are bankrupt time to buy canned food, spam, guns, ammo, gold bars & rush to your mountain log cabin". Mike Trippitt at Oriel Securities said: "Everyone knows banks use bonds as collateral to secure short-term lending." He suggested that some institutions may want more collateral where loans are secured against the bonds of heavily indebted countries such as Italy. Silvio Berlusconi's government was forced to announce a new package of austerity measures at the weekend after the ECB intervened in financial markets to prop up the price of its bonds. The New York Fed was reported as saying it was "very concerned" about European banks facing funding difficulties in the US, and that it was anxious not to see a repeat of the 2008 financial crisis, when international money markets seized up. Morgan Stanley banking analyst Huw van Steenis published a research note, saying: "Bank funding remains a key source of risk for bank earnings … and a drag on economic recovery. We remain concerned that … the risks of a credit crunch in southern Europe are rising." But he added a note of optimism, claiming Europe's leading banks have on average raised 90% of the long-term funds they need for 2011, helped by "resolute ECB commitment to support the system". Samuel Tombs at Capital Economics said a more general worry was that banks will be hammered by an economic slowdown and further sharp falls in consumer spending, forcing them to make higher bad debt provisions. Tombs said: "The pattern this summer has been for banks to be knocked hardest whenever equity prices take a tumble. Banks are in the eye of the storm." A rash of downbeat economic news from Europe, the US and the UK in recent days has underlined fears that the global economy is stuttering. Investors around the world deserted riskier assets and sought out safe havens for their cash as the sell-off intensified today, helping the gold price to hit another record high of $1,826 an ounce. Gold has now risen by more than a fifth since the start of July when the latest bout of risk aversion in world markets began. The price of oil fell sharply as investors began to bet on slowing demand from the US, the world's largest consumer of energy. A barrel of Brent crude was down more than $3 at $107, with the price of industrial metals such as copper and palladium also down. Worries about the US economy were also exacerbated by a much weaker than expected reading on the Philadelphia Federal Reserve's manufacturing index, a key gauge of the strength of American industry. The index plunged from +3.2 in July, signalling modest expansion, to -30.7, the lowest level since March 2009. Falling UK, US and German bond yields reflected not only their role as a safe investment, but also expectations of prolonged low growth and inflation in the western world, similar to Japan's experience since the late 1980s. Yields on Japanese government debt slipped below 2% in 1998, and have remained there ever since.

Fears of a new credit crunch caused share prices to plummet on both sides of the Atlantic as fragile banks struggle to raise funds in financial markets.

British banks were hit hard by the sell-off, with shares in state-controlled RBS plunging 11% to 21.95p, Barclays off 11.5% at 154p and Lloy...

We've been warned: the system is ready to blow

For the past two centuries and more, life in Britain has been governed by a simple concept: tomorrow will be better than today. Black August has given us a glimpse of a dystopia, one in which the financial markets buckle and the cities burn. Like Scrooge, we have been shown what might be to come unless we change our ways. There were glimmers of hope amid last week's despair. Neighbourhoods rallied round in the face of the looting. The Muslim community in Birmingham showed incredible dignity after three young men were mown down by a car and killed during the riots. It was chastening to see consumerism laid bare. We have seen the future and we know it sucks. All of which is cause for cautious optimism – provided the right lessons are drawn. Lesson number one is that the financial and social causes are linked. Lesson number two is that what links the City banker and the looter is the lack of restraint, the absence of boundaries to bad behaviour. Lesson number three is that we ignore this at our peril. To understand the mess we are in, it's important to know how we got here. Today marks the 40th anniversary of Richard Nixon's announcement that America was suspending the convertibility of the dollar into gold at $35 an ounce. Speculative attacks on the dollar had begun in the late 1960s as concerns mounted over America's rising trade deficit and the cost of the Vietnam war. Other countries were increasingly reluctant to take dollars in payment and demanded gold instead. Nixon called time on the Bretton Woods system of fixed but adjustable exchange rates, under which countries could use capital controls in order to stimulate their economies without fear of a run on their currency. It was also an era in which protectionist measures were used quite liberally: Nixon announced on 15 August 1971 that he was imposing a 10% tax on all imports into the US. Four decades on, it is hard not to feel nostalgia for the Bretton Woods system. Imperfect though it was, it acted as an anchor for the global economy for more than a quarter of a century, and allowed individual countries to pursue full employment policies. It was a period devoid of systemic financial crises. Utter mess There have been big structural changes in the way the global economy has been managed since 1971, none of them especially beneficial. The fixed exchange rate system has been replaced by a hybrid system in which some currencies are pegged and others float. The currencies in the eurozone, for example, are fixed against each other, but the euro floats against the dollar, the pound and the Swiss franc. The Hong Kong dollar is tied to the US dollar, while Beijing has operated a system under which the yuan is allowed to appreciate against the greenback but at a rate much slower than economic fundamentals would suggest. The system is an utter mess, particularly since almost every country in the world is now seeking to manipulate its currency downwards in order to make exports cheaper and imports dearer. This is clearly not possible. Sir Mervyn King noted last week that the solution to the crisis involved China and Germany reflating their economies so that debtor nations like the US and Britain could export more. Progress on that front has been painfully slow, and will remain so while the global currency system remains so dysfunctional. The solution is either a fully floating system under which countries stop manipulating their currencies or an attempt to recreate a new fixed exchange rate system using a basket of world currencies as its anchor. The break-up of the Bretton Woods system paved the way for the liberalisation of financial markets. This began in the 1970s and picked up speed in the 1980s. Exchange controls were lifted and formal restrictions on credit abandoned. Policymakers were left with only one blunt instrument to control the availability of credit: interest rates. For a while in the late 1980s, the easy availability of money provided the illusion of wealth but there was a shift from a debt-averse world where financial crises were virtually unknown to a debt-sodden world constantly teetering on the brink of banking armageddon. Currency markets lost their anchor in 1971 when the US suspended dollar convertibility. Over the years, financial markets have lost their moral anchor, engaging not just in reckless but fraudulent behaviour. According to the US economist James Galbraith, increased complexity was the cover for blatant and widespread wrongdoing. Looking back at the sub-prime mortgage scandal, in which millions of Americans were mis-sold home loans, Galbraith says there has been a complete breakdown in trust that is impairing the hopes of economic recovery. "There was a private vocabulary, well-known in the industry, covering these loans and related financial products: liars' loans, Ninja loans (the borrowers had no income, no job or assets), neutron loans (loans that would explode, destroying the people but leaving the buildings intact), toxic waste (the residue of the securitisation process). I suggest that this tells you that those who sold these products knew or suspected that their line of work was not 100% honest. Think of the restaurant where the staff refers to the food as scum, sludge and sewage." Finally, there has been a big change in the way that the spoils of economic success have been divvied up. Back when Nixon was berating the speculators attacking the dollar peg, there was an implicit social contract under which the individual was guaranteed a job and a decent wage that rose as the economy grew. The fruits of growth were shared with employers, and taxes were recycled into schools, health care and pensions. In return, individuals obeyed the law and encouraged their children to do the same. The assumption was that each generation would have a better life than the last. This implicit social contract has broken down. Growth is less rapid than it was 40 years ago, and the gains have disproportionately gone to companies and the very rich. In the UK, the professional middle classes, particularly in the southeast, are doing fine, but below them in the income scale are people who have become more dependent on debt as their real incomes have stagnated. Next are the people on minimum wage jobs, which have to be topped up by tax credits so they can make ends meet. At the very bottom of the pile are those who are without work, many of them second and third generation unemployed. Deep trouble A crisis that has been four decades in the making will not be solved overnight. It will be difficult to recast the global monetary system to ensure that the next few years see gradual recovery rather than depression. Wall Street and the City will resist all attempts at clipping their wings. There is strong ideological resistance to the policies that make decent wages in a full employment economy feasible: capital controls, allowing strong trade unions, wage subsidies, and protectionism. But this is a fork in the road. History suggests there is no iron law of progress and there have been periods when things have got worse not better. Together, the global imbalances, the manic-depressive behaviour of stock markets, the venality of the financial sector, the growing gulf between rich and poor, the high levels of unemployment, the naked consumerism and the riots are telling us something. This is a system in deep trouble and it is waiting to blow.

We've been warned: the system is ready to blow

For the past two centuries and more, life in Britain has been governed by a simple concept: tomorrow will be better than today. Black August...

Value of bailed out banks RBS and Lloyds drops by £30bn

Taxpayer losses on the stakes in Royal Bank of Scotland and Lloyds Banking Group widened to £30bn yesterday on a rollercoaster day for bank shares. As the huge stock market sell-off continued apace, RBS felt the heat after reporting a £794m first half loss, knocked by a a £733m hit on Greek bonds and an £850m provision for payment protection insurance compensation. Shares in the bailed-out bank, in which the taxpayer owns an 83% stake, fell to 24p as the market opened, before hitting a high of 30p and eventually ending 7% lower at 28p. The moves were so violent that between 8:06am and 8:53 they were suspended three times, for five minutes each time. The taxpayer breaks even when the shares hit 51p so at last night's close, the paper loss was almost £20bn Lloyds was also suspended twice, eventually closing 6% lower at 32.8p, implying a loss of almost £10bn to the taxpayer. Taxpayers have invested a combined £65bn in the shares of the two banks. Barclays was also suspended just as crucial US employment data was released. It closed 5% lower at 186p. As RBS rounded off the interim reporting season for the banking sector, the chief executive, Stephen Hester, conceded that the fall in the share price would make it more difficult for the government to extricate itself from its holding of 90.6bn shares as quickly as hoped. He has talked to investors around the world in preparation for a sale but admitted that the slowdown in the UK economy and the problems in the financial markets were likely to impede progress a little. "We're in an environment which is tougher and more worrying than anyone would have hoped for at this stage," Hester said. RBS moved into the black a year ago when it reported £1.1bn of pre-tax profits, and Hester conceded that about 2,000 jobs could be lost at the investment banking arm in the next 18 months. He blamed the downturn in the markets and the continuing integration of ABN Amro, the Dutch bank whose purchase crippled RBS during the last crisis. The share price is also being affected by the ongoing work of the independent commission on banking and Hester reiterated his opposition to the idea of ringfencing high street operations from "casino" investment banking arms. "We believe [ringfencing] might actually result in increased risk whilst costs to banks and the broader economy could be significant. The case for going further than the international reforms under way is unproven. "The economic and market backdrop also suggest that further change may be ill-timed," he said. Hester also had a message for the eurozone "to give confidence that its [member] governments will play their proper role in providing stability and liquidity to other governments."

Value of bailed out banks RBS and Lloyds drops by £30bn

Taxpayer losses on the stakes in Royal Bank of Scotland and Lloyds Banking Group widened to £30bn yesterday on a rollercoaster day for bank ...

Banks bore the brunt of the sell-off, with Lloyds Banking Group, Royal Bank of Scotland and Barclays among the sharpest fallers

Banks bore the brunt of the sell-off, with Lloyds Banking Group, Royal Bank of Scotland and Barclays among the sharpest fallers as strategists at Goldman Sachs cut their stance on the banking sector to “neutral” from “overweight”. Although the banks rallied strongly last week after European leaders struck an agreement to prop up debt-laden Greece, Goldman pointed out that disquiet about the deal remained. “After the initial optimism (the package included some very important elements that were above market expectations), doubts have started to creep back into the market,” said the broker. “In particular these revolve around the scope for funding the new initiatives, particularly in relation to the upsized role of the European Financial Stability Facility.” Goldman pointed to other factors that could weigh on the banks, such as weak domestic demand throughout the periphery of Europe. “Concerns about capital raisings are also likely to remain high for some time, despite the relatively benign outcome of the stress tests,” it added.

Banks bore the brunt of the sell-off, with Lloyds Banking Group, Royal Bank of Scotland and Barclays among the sharpest fallers

Banks bore the brunt of the sell-off, with Lloyds Banking Group, Royal Bank of Scotland and Barclays among the sharpest fallers as strategis...

Standard and Poor's on Wednesday relegated Greek government bonds to the deeper end of junk status, cutting the debt-crippled country's credit rating by two notches to CC and saying a new downgrade is likely.

<a href="http://www.usatoday.com/money/world/2011-07-27-greece-credit-downgrade_n.htm"> </a>The international ratings agency said a proposed restructuring of Greece's debt load under a second international bailout deal worth —109 billion ($157 billion) would amount to a selective default — a rating that, while humiliating, is expected to have limited practical consequences. Both of the other major ratings agencies have said much the same. A Standard and Poor's statement also said the possibility of a future Greek default is likely to remain high. Under the debt relief deal struck in Brussels last week, banks and other private investors will contribute some —50 billion ($72 billion) to the rescue package until 2014 by voluntarily swapping Greek bonds that they hold for new ones with lower interest rates or slightly lower face value "Standard and Poor's has concluded that the proposed restructuring of Greek government debt would amount to a selective default under our rating methodology," the ratings agency said. "We view the proposed restructuring as a 'distressed exchange' because, based on public statements by European policymakers, it is likely to result in losses for commercial creditors." On Monday, Moody's ratings agency downgraded Greece by three notches and warned that it is almost inevitable the country will be considered to be in default following the new bailout package. There was no immediate comment from Athens. Responding to the Moody's downgrade, government spokesman Elias Mossialos had said it was of "no practical value," arguing that domestic lenders can now count on secure credit lines. He also suggested that Greece should cancel its subscriptions to international ratings agencies. Greece closely flirted with insolvency for more than a year, after profligate government overspending and a massive public debt drew an avalanche of credit downgrades, while the country's borrowing rates were driven so high that access to bond markets became impossible. But the bailouts have staved off a potentially catastrophic bankruptcy that could have stopped payment of pensions and public sector salaries. While a selective default rating will be a humbling first for a country using the euro, its immediate practical consequences for Greece should be limited. For weeks, the overriding fear was that, because of the bad rating, already struggling Greek banks would be frozen out of the European Central Bank's emergency liquidity operations. However, last week eurozone leaders found a way around that threat by promising to temporarily deposit —35 billion ($50 billion) with the ECB to boost the creditworthiness of defaulted bonds used as collateral by Greek banks, until the default rating has been lifted. Crucially for Greece and Europe as a whole, the International Swaps and Derivatives Association, a trade association, said the new rescue deal is not expected to trigger payment of bond insurance because private sector involvement is voluntary. Standard and Poor's said it understands that Greece's debt restructuring will start in September 2011 at the earliest. "Upon the announcement of the implementation of the restructuring, a downgrade to 'SD' (selective default) would likely occur," the agency said. "If the exchange involves multiple separate transactions over several weeks or months, we would assign our 'SD' sovereign credit rating to Greece on completion of the first repurchase." "Subsequently, all other things being equal, we would likely raise our sovereign credit rating as early as a few days after completion of the first repurchase." Despite strong opposition from trade unions and even some of its own lawmakers, Greece's Socialist government has implemented harsh austerity measures for more than a year, cutting pensions and public sector salaries while increasing taxes and retirement ages. Future measures include an ambitious —50 billion privatization program by 2015. Earlier Wednesday, Greece appointed BNP Paribas, Deutsche Bank and HSBC to act as dealer-managers for the voluntary private sector participation scheme. Cleary Gottlieb Steen and Hamilton LLP was also appointed international legal adviser, while Lazard Freres will be the financial adviser. International banking representatives will discuss the scheme Thursday during talks in Athens with finance ministry officials.

Standard and Poor's on Wednesday relegated Greek government bonds to the deeper end of junk status, cutting the debt-crippled country's credit rating by two notches to CC and saying a new downgrade is likely.

The international ratings agency said a proposed restructuring of Greece's debt load under a second international bailout deal worth —10...

Britain's biggest banks "rip off" their customers in order to make "excess profits",

The Business Secretary claimed bank branch staff were more interested in earning bonuses for selling products than helping customers and that lenders had allowed their relationships with small businesses to wither. "Competition is the best antidote to the rip-off culture which is ingrained in the banks… extracting excess profits from customers," said Mr Cable, speaking at a banking industry reform debate. "There is a cultural issue and there are two practical aspects to it. If you have people in branches who have a personal incentive to sell products that cuts across the traditional relationship. The other aspect of (that) culture, is most of the banks became very, very detached from local relationship banking and they do acknowledge that and some banks are trying to get back to that." Mr Cable also took a swipe at the Continental model of banking, and accused France and Germany of hiding problems in their own financial systems. "I am slightly nervous about the idea that we should regard the French and German banks as role models. One of the problems of the past few weeks has been the extreme reluctance of their governments, banks and the European Central Bank to face up to the need to take losses on their Greek debt and they still haven't faced up to the magnitude of the problem because they are worried about the vulnerability of the banking sector." Mr Cable's comments precede the September 12 publication of the Government-appointed Independent Commission on Banking's (ICB) report, which will recommend a series of reforms for the industry. The Business Secretary is a member of the Cabinet banking committee that will decide which of the ICB recommendations to enact and therefore his comments yesterday will worry those in the industry that fear radical changes. At one point, Mr Cable appeared to suggest the Commission's proposal to ring-fence the UK retail operations of banks could be used to effectively dismantle banks like Barclays and Royal Bank of Scotland that operate a model based on an integrated retail, commercial and investment banking model. "Will the ring-fence be high enough and the Chinese walls strong enough to ensure that nothing resembling a universal bank remains?" asked Mr Cable, as he set out the tests by which the Government would appraise the ICB's proposals.

Britain's biggest banks "rip off" their customers in order to make "excess profits",

The Business Secretary claimed bank branch staff were more interested in earning bonuses for selling products than helping customers and tha...

Fed Targets RBS Over Money-Laundering Compliance

—Royal Bank of Scotland Group PLC was hit with a cease-and-desist order by the U.S. Federal Reserve Board Wednesday over violations of federal money-laundering laws, the latest effort by U.S. regulators to crack down on foreign banks' compliance with U.S. law. The order follows similar moves aimed at banks such as HSBC Holdings PLC and Barclays PLC. At RBS, the order wasn't a response to a specific incident, but rather is intended to beef up defenses against customers attempting to launder money or send funds to countries under sanction by the U.S. It requires RBS to improve oversight of its U.S. operations. Specifically, it requires the bank's operations in the U.S. and the Netherlands to improve risk-management practices and compliance with laws relating to money laundering, bank secrecy and U.S. economic sanctions. The action gives RBS 60 days to provide written plans to federal and state regulators detailing how it will consolidate supervision of its U.S. unit, and the unit's compliance with laws relating to money laundering, financing of terrorism and U.S. sanctions. RBS has agreed to take such steps. It also includes an order to show how the bank will beef up technology to track its compliance, as well as a directive to undertake a comprehensive evaluation of the staff at its branches. In addition, the bank must submit a revamped risk-management plan for the U.S. and draw up a "customer due diligence program" to ensure that suspicious transactions by customers are identified and reported. RBS, based in Edinburgh, has substantial investment-banking operations in Stamford, Connecticut, as well as branches in the Northeast and Midwest through its retail bank subsidiary, the Rhode Island-based Citizens Financial Group. An RBS spokesman said that the bank has been cooperating with regulators throughout the investigation that led to the order and has already taken significant steps to correct deficiencies. "We set and expect higher standards than those that resulted in this order," RBS Chief Executive Officer Stephen Hester said in a statement released Wednesday. "RBS is well advanced in addressing the deficiencies noted by the U.S. banking authorities." The bank has already created a position of chief risk officer, overseeing the whole business and reporting directly to the chief executive; doubled the number of staff monitoring compliance with money-laundering laws in the bank's U.S. investment-banking business; and upgraded automated systems to flag potentially problematic activity, the RBS spokesman said. RBS is the latest foreign bank in the U.S. to be issued such an order, as U.S. regulators focus on possible breaches of money-laundering and bank-secrecy laws in response to the Sept. 11, 2001 terrorist attacks. In October, HSBC received a similar order from the Fed and the Office of the Comptroller of the Currency after an investigation found the banking giant's procedures violated U.S. banking laws. The probe had focused on HSBC's "correspondent" banking business, a unit that sends and receives funds from banks overseas, among other HSBC business areas. As a result of a similar investigation, London-based Barclays last year agreed to pay $298 million and admitted to processing payments to the U.S. from clients in Cuba, Sudan and other places that were under U.S. sanctions at the time. The U.K.'s Lloyds Banking Group PLC and Credit Suisse Group AG of Switzerland also agreed to settlements. They agreed to payments totaling $350 million and $536 million, respectively.

Fed Targets RBS Over Money-Laundering Compliance

—Royal Bank of Scotland Group PLC was hit with a cease-and-desist order by the U.S. Federal Reserve Board Wednesday over violations of feder...

the Federal Reserve provided more than $16 trillion in secret bailouts to banks and other companies around the world,

During a 2½ year period starting at the end of 2007, the Federal Reserve provided more than $16 trillion in secret bailouts to banks and other companies around the world, according to a government audit of some of the U.S. central bank’s operations. Much of the Fed's largesse was lavished on banks in Europe (such as Barclays, left)  and Asia, the audit revealed. More than $3 trillion, for example, went to financial institutions in just five European countries. Trillions more flowed toward some of the biggest banks in America. Institutions from Brazil and Mexico to South Korea and Canada also benefited. The 266-page report, produced by Congress’s non-partisan investigative service known as the Government Accountability Office (GAO), has already sparked intense outrage since its release on July 21. Fed apologists, however, have been quick to defend the actions, saying they were “necessary” to “save” the economy and justified under the Federal Reserve Act.   “The scale and nature of this assistance amounted to an unprecedented expansion of the Federal Reserve System’s traditional role as lender-of-last-resort to depository institutions,” the report stated. Beyond the secret bailouts — to put the figure in perspective, consider that the output of the entire U.S. economy last year was well under $15 trillion — problems with conflicts of interest and no-bid contracts also featured prominently in the audit report. One example highlighted by Sen. Bernie Sanders (I - Vt.) was the CEO of JP Morgan Chase serving on the board of the New York Fed even as his firm scooped up almost $500 billion from the central bank. The bank was simultaneously helping to administer the Fed’s secret bailouts. But JP Morgan Chase was hardly the only example. According to the analysis, more than 80 percent of the Fed’s largest contracts to manage the programs were awarded without bidding. Many of the companies that received the contracts were also being showered with central-bank bailouts at the same time. And more than a few insiders were granted “waivers” to hold investments in companies that were being rescued by the Fed. "As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," Sen. Sanders, a self-described socialist, said in a statement about the report. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else." The congressional investigation was triggered as part of the financial “reform” bill passed last year despite strong Fed opposition. After the original “audit the Fed” bill by Rep. Ron Paul (R-Texas) passed in the House and became extraordinarily popular with Americans, Sen. Sanders helped ensure that only a watered-down version made it out of the Senate. But even with what is known so far, critics are on the attack. Another report about the Fed is also due to be released in October of this year. And in recent months, other previously secret information about the Fed and its operations has come out following years of litigation. All of the disclosures have fueled a growing anti-Fed movement aiming to eventually abolish the central bank - essentially a sort of banking cartel with private shareholders but some veneer of government oversight. Sen. Sanders suggested in his public statement, however, that the institution should merely be “reformed” to serve "working families" and not just Wall Street CEOs. "No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," he noted in the statement, perhaps not realizing that the Fed, by its own admission, is not an agency of the government. "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed." The biggest single beneficiary of the Fed’s bailouts was Citigroup, which received about $2.5 trillion in assistance. Several other top banks in the United States, including Bank of America and Morgan Stanley also benefited to the tune of trillions of dollars. British bank Barclays PLC took close to $1 trillion. The GAO report suggested that the Fed should implement better policies to deal with conflicts of interest. Its policies on awarding contracts, record keeping and risk management should also be revised, the agency recommended. The Fed’s chief lawyer responded by saying that the central bank would “strongly consider” the advice. But for now — following bailouts to a bank owned by Libyan dictator Muammar Gaddafi, blatant and widespread market manipulation, wild money printing, and secret bailouts larger than the U.S. economy — analysts expect outrage to continue growing.

the Federal Reserve provided more than $16 trillion in secret bailouts to banks and other companies around the world,

During a 2½ year period starting at the end of 2007, the Federal Reserve provided more than $16 trillion in secret bailouts to banks and oth...

UK can ring-fence banks under new EU rules -Barnier

The UK will still be able to ring-fence its retail banks and impose extra capital limits on them under the European Union's proposed capital and liquidity rules, the bloc's financial services chief said. Michel Barnier, the EU's internal market commissioner, told the Financial Times on Friday he had split his proposal into two to give governments such as the UK and Spain more flexibility to impose additional demands on parts of their banking sector. The draft laws, unveiled on Wednesday, would make the EU the first jurisdiction to begin implementing the new global Basel III accord, which aims to make banks safer by making them hold more and better quality capital against unexpected losses. [ID:nL6E7IK1K6] The UK and other countries such as Sweden previously raised concerns that the draft EU laws would make it difficult for countries like Britain to tighten capital controls on banks beyond the levels which had been agreed internationally. [ID:nLDE75K1RQ] Some investors had also believed that Barnier's Capital Requirements Directive 4 would bar the UK's Independent Commission on Banking, chaired by John Vickers, from pursuing its bid to force banks to ring-fence their retail operations. "It seems (the Vickers Commission) may be proposing 10 percent for retail banks. That would be possible in my proposal. We think we have the flexibility we need," he told the FT. "We do think the (Vickers) proposals can be integrated into our framework." He also said that his proposal "foresees a much expanded use of the countercyclical buffers" that would allow countries like the UK to pile extra capital requirements on top of the 7 percent for "financial stability" reasons. "In the directive are all the issues relating to supervision where national flexibility is needed. There is flexibility for supervisors on the buffers," he said. Barnier added that he was confident that his proposal would eventually win the full support of the UK. "It becomes more credible if we have the UK on board, given the support of its financial sector," he said

UK can ring-fence banks under new EU rules -Barnier

The UK will still be able to ring-fence its retail banks and impose extra capital limits on them under the European Union's proposed cap...

Banks cheating children with paltry interest rates of just ONE per cent

Banks are leaving children out of pocket by offering miserable interest rates on their savings. The average rate paid on a child savings account is only 1.01 per cent, according to research published today by consumer watchdogs. Set against a CPI inflation rate of 4.2 per cent, this means millions of children are seeing their savings eroded week by week. Prudent parents who are putting substantial sums into these accounts to support youngsters through university and into adult life are also losing out. Research by Which? Money found that half of easy-access children’s savings accounts pay 1 per cent or less. The First Trust Bank’s Junior Saver account offered a return of 0.05 per cent. That is a mere 50p a year for every £1,000 saved and a tenth of the Bank of England base rate of 0.5 per cent. Richard Lloyd, Which? executive director, said: ‘It’s incredibly important that young people get into the habit of saving, but  banks and building societies are doing  little to encourage them by offering such paltry rates. 'The situation is set to get worse, as unless the Government allows transfers from Child Trust Funds to Junior Isas, a whole generation of young savers could be stranded on uncompetitive rates.’ Young football fans of some of the richest clubs in the world are among the victims of the miserly deals. Which? said children’s savings accounts affiliated to Manchester United and  Chelsea are paying only 0.25 per cent, while Derby County’s Junior Rams account pays 0.1 per cent. This compares with a far better return from Northern Rock’s Little Rock account, which pays 3 per cent, the research found. Among those paying 2 per cent are the Charity Bank Small Steps account, the Chelsea building society Ready Steady Save account, and the Chorley building society Young Chorleian account.

Banks cheating children with paltry interest rates of just ONE per cent

Banks are leaving children out of pocket by offering miserable interest rates on their savings. The average rate paid on a child savings acc...

Unions aghast as British bankers rake off billions in teeth of recession

BRITISH banks have failed to tackle the rampant financial sector bonus culture that helped trigger the financial crisis, say unions and anti-poverty campaigners, who pointed to official figures showing that the sector grabbed bonuses last year worth £14 billion. Britain's Office for National Statistics said banks and insurance companies paid 40per cent of all bonuses despite employing only 4 per cent of the workforce. The general secretary of the Trade Union Congress, Brendan Barber, said the Treasury's austerity message had failed to reach the City (Britain's financial sector). Mick McAteer, of the Financial Inclusion Centre, which campaigns for fairer access to finance, accused banks of ''getting back to business as usual'' after a series of huge bonus payments to bosses. But the Treasury, which is under pressure to keep City bonuses in check, pointed out payments were frozen in 2010-11 from the previous year at £14 billion and were down from £19 billion in 2007.

Unions aghast as British bankers rake off billions in teeth of recession

BRITISH banks have failed to tackle the rampant financial sector bonus culture that helped trigger the financial crisis, say unions and anti...

Eurozone leaders will meet on Thursday for a crunch summit to try to resolve the Greek debt crisis and prevent any further contagion to other so-called peripheral economies.

<a href="http://www.bbc.co.uk/news/business-14219976"> </a>Policymakers will discuss a range of measures, including a new loan package to Greece and the role of private investors in any debt restructuring. Reports suggest a new tax on banks will also be debated. But German Chancellor Angela Merkel has cautioned against over optimism. 'Very serious' Greece received its first aid package in May last year, but the debt crisis continues to undermine confidence in global financial markets, with some commentators suggesting it threatens the future of the euro itself. Politicians and investors are calling for decisive action to help bring the crisis to an end. "Nobody should be under any illusion; the situation is very serious," European Commission President Jose Manuel Barroso said on Wednesday. "It requires a response. Otherwise, the negative consequences will be felt in all corners of Europe and beyond." The Governor of the Bank of England, Sir Mervyn King, has said that the crisis in the eurozone posed the most serious and immediate risk to the UK's financial system. President Barack Obama has also weighed in, calling Mrs Merkel on Tuesday night to stress the importance of tackling the debt crisis in sustaining the global economic recovery. The International Monetary Fund has also called on European leaders to take swift and decisive action. Delaying such action further would be "very costly" for the world economy, it said. Spending cuts However, there are divisions among policymakers about the best way to resolve the crisis. There appears to be consensus on the need for a new loan agreement, analysts say, thought to be similar in size to the 110bn euro ($156bn; £97bn) package agreed last year. However, there is also a growing consensus that this will merely act a sticking plaster, and that the fundamental problem of Greece's indebtedness needs to be addressed. Athens has already implemented a raft of wide ranging austerity measures, including spending cuts and tax rises, and earlier this month agreed to further drastic action to cut its debt. Bank tax But there is a growing sense that these will not be enough. The only way to resolve the problem is to restructure Greece's debts, many observers argue. Germany has proposed allowing Athens more time to repay, effectively rolling over existing debts into new bonds. It wants private investors, largely banks, to participate in this restructuring. But the European Central Bank has strongly opposed this plan, arguing that such a rollover would constitute a default in the eyes of the international credit ratings agencies and, as such, would undermine investor confidence and the euro itself. An alternative way get private investors to contribute to any aid package would be to introduce a new bank tax. Reports suggest leaders will discuss precisely such a tax, even though this would prove hugely unpopular with the banks. It is these divisions that explain Mrs Merkel's attempts to dampen expectations ahead of the summit. The summit will take place in Brussels at 1300 local time.

Eurozone leaders will meet on Thursday for a crunch summit to try to resolve the Greek debt crisis and prevent any further contagion to other so-called peripheral economies.

Policymakers will discuss a range of measures, including a new loan package to Greece and the role of private investors in any debt restruct...

Swiss bank Credit Suisse is being investigated by the Department of Justice as part of a broader inquiry into banks suspected of helping Americans evade taxes.

Swiss bank Credit Suisse is being investigated by the Department of Justice as part of a broader inquiry into banks suspected of helping Americans evade taxes. The investigation concerns historical private banking services provided on a cross-border basis to people in the United States, Credit Suisse said on Friday, adding the bank had received a letter notifying it that it was being investigated on Thursday. In 2009, Credit Suisse's local rival UBS AG averted indictment over its undeclared offshore private banking services by agreeing to pay $780 million, admitting to criminal wrongdoing and turning over about 255 client names, later raised by the two sides to an additional 4,450. "Subject to our Swiss legal obligations, we will continue to cooperate with the U.S. authorities in an effort to resolve these matters," Credit Suisse said in a statement. The DoJ has been conducting a broad investigation into a number of Swiss banks, bankers, and third-party intermediaries to determine if they have helped wealthy American clients dodge taxes. Companies involved in that probe include Credit Suisse, the second-largest bank in Switzerland; HSBC, Europe's largest bank; Julius Baer, a private bank based in Zurich; and Basler Kantonalbank, a Swiss cantonal bank in Basel, Switzerland. At 0831 GMT, Credit Suisse shares were trading 1.6 percent lower, underperforming a 0.6 percent fall in the European banking sector. Julius Baer shares were trading 0.2 percent lower. A spokesman for Julius Baer said the bank had not been contacted by the DoJ so far. Basler Kantonalbank was not immediately available for comment. A spokesman for the Swiss finance department said the ministry had taken note of the investigation. Vontobel analyst Teresa Nielsen said Switzerland and the United States were likely to continue negotiations along with the DoJ investigation of Credit Suisse. "Currently it is difficult to say whether this will lead to a legal case and a fine against Credit Suisse," Nielsen said. Jay Rubinstein, Zurich based partner and head of U.S. Tax at law firm Withers said: "It is a shame the U.S. is focusing on the Swiss institutions, as the present trend in Switzerland is toward compliance and transparency. "But it is not surprising that the U.S. justice department is focusing its efforts on institution(s) with presence in the United States, given the leverage." At a June conference in Washington organized by the Organization for Economic Cooperation and Development (OECD), the U.S. Internal Revenue Service's Deputy Commissioner for Services and Enforcement Steven Miller said it planned to move against "one or more banks in the next month or so." [ID:nLDE7570X4] Credit Suisse said in the statement that as previously disclosed, it had been responding to requests for information, including subpoenas, from the DoJ. Switzerland and the United States have been in talks to try to reach a multibillion-dollar deal over Swiss banks helping Americans to shield their money from the U.S. taxman

Swiss bank Credit Suisse is being investigated by the Department of Justice as part of a broader inquiry into banks suspected of helping Americans evade taxes.

Swiss bank Credit Suisse is being investigated by the Department of Justice as part of a broader inquiry into banks suspected of helping Ame...

News Corp withdraws bid for BSkyB

Rupert Murdoch's News Corporation withdrew its BSkyB takeover bid today as David Cameron announced details of the independent inquiry in...

Fingleton fumes and feels misunderstood The reclusive former Irish Nationwide chief will soon have to face the public

Two golden retrievers were patrolling the gates of Michael Fingleton's south Dublin home this week, warding off callers with their piercing barks. In the driveway of the disgraced banker's detached residence in the coastal suburb of Shankill, his navy Jaguar shimmered in the midday sun, but uninvited guests met silence at the intercom. The former chief of basket-case building society Irish Nationwide, whose catastrophic lending spree saddled the taxpayer with a bailout bill of €5.4bn, has become an expert in the art of lying low. For a man whose mobile phone number was once on speed dial to every business journalist in the land and whose legendary lunches peppered the pages of social diaries, it's quite a turnaround. Since his toxic bank came crashing down more than two years ago, he has only spoken once in public and then it was under duress when he was cornered by RTé business reporter David Murphy in Dublin Airport last August. At the time, he breathlessly admitted to feeling remorse for what had happened to Ireland as a result of banks like his, but could not shed light on why he had refused to return a €1m 'performance' bonus taken by him before he left the society in 2009 and after the bank guarantee. But in the coming days, a subpoena will be served at his door compelling him to attend an employment appeals tribunal in September. There, he will be forced to answer allegations that he presided over disastrously lax lending practices at INBS and respond to damning claims by staff that he subjected them to 'a culture of fear'. The case against the INBS is being taken by one of the Sligo septuagenarian's branch managers, Brendan Beggan (48), a former Monaghan GAA star who was once part of Fingleton's golden circle but was dismissed in July 2009. Beggan, who is understood to have outstanding property loans with the society of €2m, is the partner of another former employee and whistleblower, Olivia Greene. Last year, she revealed Fingleton fast-tracked loans to Fianna Fáil politicians, including €1.6m for former European Commissioner Charlie McCreevy. For a man not used to being told what to do, Fingleton is unlikely to relish the prospect of the autumn imposition. This week, one friend who was willing to speak about his current frame of mind, says his dramatic downfall has left him "broken, miserable and distraught". He also feels completely misunderstood. "There are two sides to every story and we will wait and see what happens in September," says the close associate. "But even though he is a public hate-figure second only to Seanie Fitz, the whole thing has taken a massive toll on him. "I spoke to him a few weeks ago and he is as down as down could be. He is hurting very badly. His whole world has fallen down around him. 'Nobody sees him any more. He can barely go outside the door. I don't think he has played a game of golf since the whole thing happened. "He feels shocking hard done by. He thinks he did nothing wrong. "It's hard for the man in the street to understand this -- but think about it. "He worked seven days a week for almost 40 years building up that business. He gave his whole life to it. "He transformed it from a tiny firm with four people to an institution that was the envy of the financial world in Europe -- only to see it shredded to ribbons along with his career. "Yes, in hindsight some of the lending was very wrong, but the criteria were very loose at the time and he committed no crime. He feels he got hung, drawn and quartered for the Seanie Fitz loans." (Over eight years, the INBS provided short-term loans for tens of millions of euro to Sean FitzPatrick, enabling the former chairman of Anglo Irish Bank to conceal the extent of his own borrowings when the auditors were in town.) "He never signed off on those loans," his friend claims. "The truth is that the blame really lies at the feet of much bigger people than Michael Fingleton." This time last year, seething tax-payers were able to glean some fleeting satisfaction from the sight of FitzPatrick, who owes state-owned Anglo €110m, being declared bankrupt by the High Court. But with Fingleton, there is an impression that he has got away scot-free, greedily clinging on to the €1m bonus he promised to return and his privileged boom-time lifestyle. In April, he mingled with Prince Albert of Monaco at a private K Club dinner hosted by old friend Michael Smurfit, an outing that did little to alleviate that perception. But the reality is not so clear-cut. There's no denying the massive salary, the €27m pension pot, the fancy car and the holiday home in Marbella, but some who know the man who headed up Ireland's original subprime lender claim he was never driven by material wealth but used money purely as a measure of his success and power. There's evidence of that, for instance, in his choice of address for the last 40 years. Compared to the extravagant piles that litter nearby Killiney Hill, the Fingleton family home 'Liskillen' is distinctly modest, sandwiched between a Travellers' halting site, a major sewage works and one of the biggest council estates in south Dublin. His apparent lack of interest in the good life is also reflected in the frugal nature of the INBS offices. Fingleton's successor at the firm, Gerry McGinn, who has been left to clean up the multi-billion euro mess left by its ex-boss, was surprised to find only two meeting rooms for customers at head office on Dublin's Grand Parade. McGinn described this minimalist design as proof that only 'one guy made the decisions' in the firm, but even some of Fingleton's most outspoken critics accept they never saw the trappings of wealth around him. If anything, he was thrifty when it came to spending, they suggest. "To be fair, there was never any sign of a lavish lifestyle," says Brendan Burgess, founder of Askaboutmoney.ie and member of INBS who has led a decade-long campaign against its former boss. "He drives a good car and had lunch in a nice restaurant every Sunday but his office was rather spartan. He didn't tend to spend money. He used to boast about having the lowest costs for a bank in almost the whole world." One friend points back to Fingleton's early adulthood, which began in a seminary in Sligo and included a spell as an aid worker in Africa. "He is still very much that priest even though he didn't take his final vows. He's not interested in the flash things in life. During the good times, people would fill his office with bottles of whiskey and hampers but he never took so much as a matchbox from them. He just wasn't interested. "His sustenance came from the fact that he had built up that business from nothing. These days, when he wakes up, if he sleeps at all, I'd say he thinks the whole thing is an incredible nightmare." But sympathy is a scarce commodity in Fingleton's life today and, as he approaches his 80s, he is unlikely to ever see the day when he can walk down the street without being subjected to filthy looks and stinging insults. "It's hard to feel any pity for him," says Brendan Burgess. "Fair enough, he doesn't have much now. He was a man of great wealth at one stage but his original €27m pension fund has been affected by changes in stock values. "People keep harping on about the €1m bonus and why he hasn't given it back. I don't like the guy. I don't like what he's done but we need to move on. Irish Nationwide is a €5bn problem not a €1m one. "But Fingleton is getting what he gave to others. He was a predatory lender. He put people through the wringer. He went after them. He caused enormous damage to their lives. "What's the worst thing that can happen to him after all of this? It's not as if he will be out on the street."

Fingleton fumes and feels misunderstood The reclusive former Irish Nationwide chief will soon have to face the public

Two golden retrievers were patrolling the gates of Michael Fingleton's south Dublin home this week, warding off callers with their pierc...

Bank linked to fraud probe fails to meet another payback deadline

An investment bank embroiled in a potential fraud investigation that counts former England football manager Sven-Göran Eriksson among its victims has missed another self-imposed deadline to return millions of pounds to shareholders. First London Group, the holding company of former London-listed First London, wrote to shareholders in May saying they would be able to cash in their investments by 30 June, the latest in a series of expired deadlines. Shareholders were first promised a £173m payout in October 2009 when First London Group announced that the bank's assets had been sold to a mysterious company called Swiss Commodity Holding (SCH). Investors have still to receive a penny. One disgruntled investor said: "It seems to have all gone quiet. We've heard nothing more. It's just rubbish. They're just buying time continually. Maybe they think that people will get fed up and go away." First London, which was listed on junior stock market Plus, is now in administration. It attained a high profile in 2009 after supposedly guaranteeing a £5m investment by a consortium of anonymous Middle Eastern businessmen who appeared to have bought Notts County FC. In a move that astonished the sporting world, County installed Eriksson as its director of football with a contract gifting him €11m (£10m) of SCH shares. It soon became clear that there was no money and the deal collapsed. It later emerged that Russell King, a convicted fraudster who fronted the football deal as well as SCH, had taken control of 49% of First London by claiming he was managing billions of dollars for the Bahraini royal family. First London was later referred to the Serious Fraud Office by the Financial Services Authority, which stated: "The acquisition of control occurred without the FSA having been given the prior notice which the law requires." Despite that transaction being reversed, the SFO is still understood to be looking at the conduct of First London, its directors and influential shareholders, with a view to launching a full investigation. Meanwhile, a report by administrator AG Associates, filed with Companies House, said Notts County had lodged a claim for the £5m investment. The document also raises questions over the legitimacy of a charge on First London Group, lodged by a company called Monmay, which is linked to former First London representatives. "I do not believe this is a valid floating charge," wrote AG Associates' Hasan Mirza. First London Group director Andy Turner did not return calls. Previously, the bank claimed it had been duped by King.

Bank linked to fraud probe fails to meet another payback deadline

An investment bank embroiled in a potential fraud investigation that counts former England football manager Sven-Göran Eriksson among its vi...

FORMER TV star and radio jockey Tich Mataz has appeared in court charged with fraud

FORMER TV star and radio jockey Tich Mataz has appeared in court charged with fraud – his latest run-in with the law after facing similar charges in 2007. Mataz, real name Tichafa Matambanadzo, is accused of swindling a Harare man of US$5,000 in an alleged con which has already seen two others, including a former top commander of the Air Force of Zimbabwe, charged. The former Coca-Cola On The Beat star, deported from South Africa in 1998 over identity fraud, was not asked to plead in a brief appearance before Harare magistrate Shane Kubonera. He was freed on US$100 bail. Prosecutors say Mataz, working with Air Commodore Kennedy Remigio Zimondi and a Harare woman, Edith Chinyangare, defrauded one Jimmy Makurumbandi of US$5,000. It is alleged that they misrepresented to Makurumbandi that they had organised a trip to Geneva, Switzerland, on government business. The arrangement was that Makurumbandi would go on the trip with Matambanadzo and Chinyangare in place of Zimondi whom they alleged was under a travel ban. The trio, it is further alleged, told Makurumbandi that the trip was “self-sponsored”, but undertook to refund him upon their return. Makurumbandi was allegedly shown a "travel confirmation” which was only a booking. The trip never materialised.   Zimondi, 56, and Chinyangare appeared in court last week and were freed on bail. Zimondi, meanwhile, faces another charge of defrauding a Harare man, Muboko Zvitei , of R235,000 in connivance with two other men, Jackson Makate, 29, and Blessing July, 26. Mataz was arrested in 2007 over allegations of defrauding the Reserve Bank of Zimbabwe’s Basic Commodities Supply Intervention Side (Bacossi) programme. The matter is yet to go to trial. He was a radio high flyer on South Africa’s 5FM before being kicked out of the country after it was established he was using fake immigration documents.

FORMER TV star and radio jockey Tich Mataz has appeared in court charged with fraud

FORMER TV star and radio jockey Tich Mataz has appeared in court charged with fraud – his latest run-in with the law after facing similar ch...

Tesco Bank's big apology won't stop saver exodus

For the 2,500 savers who couldn't get at their cash – and those who are still struggling in vain – it may be a case of too little, too late. But over the weekend, Tesco Bank wheeled out its top brass to apologise for an almighty IT cock-up that's angered customers beyond repair. Chief executive Benny Higgins admitted the bank had 'failed' its savers and apologised unreservedly. The bank also offered to refund any savers who suffered 'financial losses' in last week's four-day online savings account lock-out. Our inbox (editor@thisismoney.co.uk) is stuffed full of emails from readers, with a worrying number still unable to pay bills or cover direct debits thanks to log-in problems. Charges for failing to meet payments are often harsh - £12 on late credit card payments and 30% on overdrawn current accounts, for example. It's good that they'll receive some sort of compensation. But it remains to be seen whether Tesco's definition of 'financial loss' will include the 7p a minute phone calls made to its helpline in customers' battle to get things sorted. Some customers spent hours and hours waiting on hold. Based on anecdotal evidence, I reckon we're talking thousands of customers who spent around £10 on phone calls before Tesco switched from an 0845 number to an 0800 replacement late last week. They all deserve to get that cash back. Unfortunately, Tesco was non-committal when I asked about this and stressed its 'case by case' policy. (By the way, anyone who still has problems should use 0800 015 3198 – hopefully you’ll get through sooner rather than later at this stage, but it appears lines are still busy). Tesco's web crash was a real disaster as far as internet banking goes. Some 22million of us use online account facilities in Britain, and we’ve become fairly reliant. Sure, we often hear reports of online banking suffering temporary time-outs – this is technology we're talking about after all, and it's not perfect. But Tesco's attempt to migrate some 600,000 savings and loan customers to a new computer system took things to a new level. One of the major problems was that Tesco doesn't have a High Street presence. Its stores stick out like a sore thumb in city centres but, as yet, you can't just walk in and sort your savings. That left panicked customers reaching for the phone as the only remaining option. When lines got jammed with a barrage of calls, they were left in a horrible limbo. The latest apology on Tesco's website (click for popout) When This is Money broke the story of the chaos last week, we also alerted Tesco Bank to a serious problem with Microsoft's Internet Explorer browser which was stopping almost every IE9 user logging in. To be honest, we were a little shocked Tesco wasn't aware of this major issue. Staff investigated and, in conjunction with This is Money, put together a guide to help solve the problem. But we've received a barrage of angry emails from customers who still can't get online banking to work, whatever they try. Many of them, like Ted Shoot, just want to get at their accounts so they can close them down. During the shut-down last week, Mr Shoot had to get an emergency loan from his daughter to pay for a holiday booking. Understandably, he doesn't think that's acceptable and is leaving. If the comments on our stories are anything to go by, a significant number of other savers are preparing to up sticks and say goodbye to Tesco Bank. Here are a few of the gripes we recived over the weekend: - Nigel Jenkins: 'After 77 minutes of waiting, someone eventually came on the line. They were talking to someone else, could not hear me and then hung up and my call went dead. Even bigger shambles.' - Ray Newell: 'The Tesco website states that my wife needs a Temporary PIN and to contact the Online Helpdesk. But it is impossible to get through to the Helpdesk.' - Charles Arnold: 'Impossible to obtain access to Tesco account, after numerous fruitless phone calls eventually got through[55 mins later] to be told I would be called back. No such call happened.' - Veronica Perrin: 'I am using Internet Explorer 9 and have followed Tesco's instructions to enable 'compatibility view' but to no avail. 'This allows me only to get to the second log-in page which then states that I am not using my regular computer and instructs me to enter several digits of my pin so that they can send a one-time access code to my mobile. This doesn't work as the boxes are non-functional. 'I have also upgraded to Google Chrome and Mozilla Firefox as recommended by other users. Neither of these actions have made any difference. After a week of not being able to access my finances to pay urgent bills, etc., my situation is getting serious.' - David Baldwin: 'Tesco are telling lies over this problem and it is going to rebound on them. I, for one, will be closing my account, the moment this mess is sorted out, and I advise all Tesco Bank customers to take the same action.' Have no fear that Tesco bosses will be looking at this nightmarish scenario aghast. Within the business there has been a concerted push to compete with the 'Big Five' banks - Lloyds, RBS, Santander, HSBC, and Barclays. The reason is that banking can be far more lucrative than retail if you've got the right brand. Just look at the stats: Tesco made £3.5bn in profit last year but had to turn over £60bn to get it. It already has an incredibly strong brand within the retail space, and was hoping to use it to dominate financial services. This disastrous internet banking fiasco and the lingering stench of negative PR could put the dampeners on its banking dream for a while at least. My issue with Tesco's lock-out is not a technical one – as I say, these things do happen, particularly with big migrations like Santander’s Alliance & Leicester switchover this time last summer. The real problem here was Tesco's response. Customers needed clear information on the website and it was not forthcoming. It took several days to write a guide explaining how to solve the problems with Internet Explorer 9. And customers were left without cash while racking up huge telephone bills, getting passed pillar-to-post without clear answers. Either you get the technology right or you offer great service to make up for unforeseen mishaps. Tesco did neither. - Dan Hyde, This is Money *This is Money would like to apologise for typo in an earlier version of this article. The correct figure of 2,500 savers known to be affected by the lock-out was announced by Benny Higgins on BBC Moneybox on Saturday 25 June.

Tesco Bank's big apology won't stop saver exodus

For the 2,500 savers who couldn't get at their cash – and those who are still struggling in vain – it may be a case of too little, too l...

Bank bribes: more arrests imminent

AUSTRALIA'S first foreign bribery prosecution will accuse two Reserve Bank currency firms and six of their former senior managers of funnelling multi-million-dollar bribes to high-ranking government officials in Indonesia, Malaysia and Vietnam to win bank-note deals. Police in Australia, Asia and Europe expect to lay further criminal charges and expose corrupt foreign politicians after yesterday charging with bribery Securency and Note Printing Australia, plastic-banknote design and printing firms that are respectively half and fully owned and overseen by the Reserve. An international corruption taskforce led by the federal police is still working to uncover up to $25 million more in suspected bribes paid by the Reserve firms in Asia and Africa since 1999 and as recently as 18 months ago. The federal police inquiry began after a report in the Herald in May 2009 revealed Securency's multimillion-dollar payments to shady middlemen. The Greens leader, Bob Brown, has called for the corporate watchdog to examine the conduct of the former boards of both companies - including former Reserve bosses and several corporate heavyweights - and Austrade, the federal trade agency, is likely to come under scrutiny over its involvement. Those charged yesterday with bribery offences that carry penalties of up to 10 years' jail include the former Securency chief executive Myles Curtis, and the former Note Printing Australia chief executive John Leckenby. The charges relate to up to $10 million in bribes allegedly paid between 1999 and 2005. The alleged kickback recipients include the former Indonesian central bank currency chief Herman Joseph Susmanto and the former Vietnam State Bank governor Le Duc Thuy, whom Securency allegedly bribed in 2003 by paying for his son's fees at Durham University in Britain. A former assistant governor of the Malaysian central bank, Mohamed Daud Dol Moin, faces up to 20 years' jail after he was charged for taking kickbacks in late 2004 and early 2005. The federal police commander, Chris McDevitt, warned of more arrests. Mr Curtis, Securency's chief executive between 1996 and 2010, faces three conspiracy-to-bribe charges in relation to deals in Indonesia, Vietnam and Malaysia. Mr Leckenby faces two charges in relation to alleged kickbacks in Indonesia and Malaysia. A former chief financial officer at Securency, Mitchell Anderson, faces two counts of bribery. Those facing a single charge are the former chief financial officer of Note Printing Peter Hutchinson, a former Securency Asian sales chief, Ron Marchant, and a former NPA sales manager, Barry Brady. Those named as co-conspirators but not yet charged are a former NPA sales executive, Christian Boillot, Securency's international marketing boss, Hugh Brown and its Asian middlemen Radius Christanto and Abdul Kayum. Commander McDevitt said the charging of the companies was based on allegations the firm's ''mind and will'' was directed towards bribery and that the firms corruptly obtained contracts. Between 1999 and 2005, both Reserve firms were chaired by the former deputy governor of the Reserve Graeme Thompson, who is also a former chief of the corporate watchdog Australian Prudential Regulation Authority. Commander McDevitt said there was no evidence to suggest individual board members were aware of or involved in the alleged bribes. He would not be drawn on whether the directors of Securency and NPA had appropriately fulfilled their duties to supervise the companies. The directors beneath Mr Thompson on the NPA board in this time were the former Reserve assistant governor Leslie Austin, the corporate heavyweight and federal government adviser Dick Warburton, who is also a former Reserve board member, and a former Liberal Party treasurer, Mark Bethwaite. Mr Thompson, Mr Austin - who resigned from the board last month - and the British businessman Bill Lowther are among the directors who oversaw Securency during the period of the alleged offences. The Reserve governor, Glenn Stevens, yesterday said the operations of both accused firms had been reformed and expressed regret at the central bank's failure to detect the allegedly corrupt practices. ''The Reserve Bank deeply regrets that the governance arrangements and processes in the companies at that time were not able to prevent or detect the alleged behaviour that has led to today's charges,'' he said.

Bank bribes: more arrests imminent

AUSTRALIA'S first foreign bribery prosecution will accuse two Reserve Bank currency firms and six of their former senior managers of fun...

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