Bankrupt Banker

Banks' value drops amid Spain fears

Britain's biggest banks lost £2 billion from their combined market value today as fears over Spain's creaking finances saw investors dump financial stocks. Lloyds Banking Group lost nearly 5% of its value, while Royal Bank of Scotland shed nearly 4% and Barclays fell by more than 1%. HSBC also dipped into the red. Traders were troubled by developments in Spain, where the Government's implied cost of borrowing is creeping higher towards unsustainable levels amid fears the struggling country will require a bailout from the European Union and its partners. Banks also fell out of favour after equity analysts at JP Morgan Cazenove downgraded the sector amid concerns over the impact rising funding costs will have on profits. Rupert Osbourne, futures dealer at IG Index, said: "Spain remains very much front and centre for global markets, as its borrowing costs remain near what many would consider unsustainable levels. "If there is one thing that we have learnt from the past couple of years of European debt, it is that these problems tend not to be resolved quickly and painlessly - and it does set the stage for potentially more volatility in the weeks ahead." The yield on Spain's 10-year government bonds hit 6.1%, moving closer to the 7% which forced Greece, Ireland and Portugal to seek financial help from the EU. The rate is at its highest level since the new conservative government took office in December. The government has implemented a tough austerity package of spending cuts, as well as labour and financial reforms, but investors are concerned by Spain's banks, which are battling with bad loans from a collapsed property market. The troubles in Spain were flagged by JP Morgan Cazenove as it downgraded the European banking sector from overweight to neutral. Mislav Matejka, analyst with European equity strategy at JP Morgan Cazenove, said Spanish deposits fell by six billion euro (£4.9 billion) in February and continue to show a negative trend. Mr Matejka said: "This is particularly worrying and shows that Spanish banks are becoming more and more vulnerable." He said the bank started the year with a bullish stance at the start of the year, encouraged by the liquidity injection provided by the European Central Bank (ECB). But he added: "However, most recently the costs have increased again, hurting the profitability outlook for the sector."

Banks' value drops amid Spain fears

Britain's biggest banks lost £2 billion from their combined market value today as fears over Spain's creaking finances saw investors...

That bus you boarded at Trafalgar Square is run by a German company. Boots fell to the Italians in 2007. Selfridges, Fortnum & Mason and the Savoy are owned by Canadians; Harrods has been bought by a firm based in Qatar; the Dorchester by one based in Brunei

Just for a moment, imagine being a tourist in search of the full British experience. Where would you start? Well, you might take a sight-seeing trip around London on a red double-decker bus.You’d possibly visit a quintessentially British store, such as Boots the chemist, Selfridges or Harrods, before having a proper English tea at the Savoy, Fortnum & Mason or the Dorchester.You’d almost certainly go home, via a British airport, thinking you’d seen a slice of the real Britain. But, in one sense at least, you’d be totally wrong.<div><img alt="British icon? Most London buses are run by a Spanish company" height="372" src="http://i.dailymail.co.uk/i/pix/2012/04/13/article-2129507-037EC6A00000044D-646_634x372.jpg" width="634" />British icon? Most London buses are run by a Spanish company</div>That bus you boarded at Trafalgar Square is run by a German company. Boots fell to the Italians in 2007. Selfridges, Fortnum & Mason and the Savoy are owned by Canadians; Harrods has been bought by a firm based in Qatar; the Dorchester by one based in Brunei. As for our airports, most of them are now run by a Spanish firm. Maybe a tourist wouldn’t care all that much, even if he knew. But should we? After all, does it make any real difference if a British company has a foreign master?For the past three decades, the UK has had a completely relaxed attitude about selling off its assets to companies based abroad. Indeed, most of the time, the swallowing up of yet another great British institution barely makes a headline.<div><img alt="Sell off: Boots is owned by Italians, and headquartered in Switzerland" height="399" src="http://i.dailymail.co.uk/i/pix/2012/04/13/article-2129507-033D91DB0000044D-786_634x399.jpg" width="634" />Sell off: Boots is owned by Italians, and headquartered in Switzerland</div>We may be a nation of homeowners, but we’ve lost our taste for ownership of our own economy and public services — from once-great manufacturers such as ICI to most of the companies that deliver our electricity, water and gas. Even this week, it became clear that the Government is happy to consider letting a Russian firm, the one behind the Chernobyl accident, run some of Britain’s next generation of nuclear power stations. In fact, to date, we’ve sold off more than half our assets to foreign owners.And the pace is escalating. In the face of political indifference, foreign companies acquired £30billion  worth of British enterprises in 2009. In 2010, that rose to a value of £54.5 billion. <div><img alt="Deregulation: Former Tory Chancellor Geoffrey Howe made it easier for foreigners to snap up British companies" height="423" src="http://i.dailymail.co.uk/i/pix/2012/04/13/article-2129507-00C62BE400000190-528_306x423.jpg" width="306" />Deregulation: Former Tory Chancellor Geoffrey Howe made it easier for foreigners to snap up British companies</div>Foreign corporations also currently control 39 per cent of UK patents. This is far more than the percentage of foreign-owned patents in the U.S. (11.8), Japan (3.7) or even the European Union as a whole (13.7). At this rate, it’s been said, it won’t be long before we’re all working for foreign companies. So how did we become so attractive to overseas predators? The answer is that it happened in stages, starting with the removal of regulations on overseas investment by former Tory Chancellor Geoffrey Howe in 1979.This was followed in 1986 by what’s known as the ‘Big Bang’, when a raft of restrictive old practices in the City of London were swept aside. Soon, foreign banks flooded into the City, gobbling up venerable British minnows such as SG Warburg, Robert Fleming and Schroders.Then came Tony Blair and Gordon Brown, who were so keen to keep in with big business that they refused to block any deals — even when the Russians eyed up British Gas. Indeed, anyone — like me — who dared question the great British sell-off was instantly labelled a xenophobe, out of touch with the reality of the modern globalised economy. What tipped the balance towards foreign takeovers in the late Nineties and 2000s were three key factors: the cheap cost of borrowing; liberal takeover rules; and the presence of global investment banks in the City, with ready access to the world’s capital. Throughout the boom years, these banks were allowed to write their own rules. What this meant, in essence, was that a bank which might once have considered it risky to lend ten times its share capital would now lend up to four times that amount. The result? Foreign companies took full advantage of all this cheap and easy credit to snap up increasing numbers of great British brands. Not only that, but our eccentric tax system actually made it more profitable for overseas owners to buy companies with borrowed money. For example, foreign firms who buy British companies using borrowed money are able to deduct the interest they have to pay on those loans from their tax bills.<div><img alt="Stripped: The private equity firms who bought Debenhams left the chain a shadow of its former self" height="286" src="http://i.dailymail.co.uk/i/pix/2012/04/13/article-2129507-0670E246000005DC-40_634x286.jpg" width="634" />Stripped: The private equity firms who bought Debenhams left the chain a shadow of its former self</div>And this had a direct effect on jobs in the UK. Weighed down with often massive debts, new owners were far less likely to invest in the future of the firm and were instead more likely to close down factories and plants, throwing thousands of Britons out of work.Some foreign firms even adopted the practice of making a fast buck by buying a company, stripping its assets and then selling for a quick profit. A classic case was that of the once-great department store, Debenhams, bought in 2003 by two U.S.-based private equity firms. Within three years, they’d stripped the firm of investment, loaded it with debt and sold it on at a big profit. By then, Debenhams was in such an enfeebled condition that it has taken years to recover.Worse still was what happened to the care homes provider Southern Cross, which came crashing down last spring. The company had been pieced together by a hard-headed U.S. equity firm called Blackstone, after it started buying up care homes across the country. <div id="ext-gen2823"> <div><div><div>  <h3>More from Alex Brummer...</h3><ul><li> <a href="http://www.dailymail.co.uk/money/news/article-2129010/ALEX-BRUMMER-The-dangers-fortress-pound.html">ALEX BRUMMER: The dangers of a fortress pound</a>12/04/12</li><li> <a href="http://www.dailymail.co.uk/debate/article-2128437/Meltdown-The-idea-entrusting-nuclear-future-firm-built-Chernobyl-parcel-Britains-bankrupt-energy-policy-real-danger-imploding.html">Meltdown: The idea of entrusting our nuclear future to the firm that built Chernobyl is part and parcel of Britain's bankrupt energy policy- which is now in very real danger of imploding</a>11/04/12</li><li> <a href="http://www.dailymail.co.uk/money/news/article-2128324/ALEX-BRUMMER-Spanish-meltdown-tragedy-recovering-banking-system.html">ALEX BRUMMER: Spanish meltdown would be a tragedy for our recovering banking system</a>11/04/12</li><li> <a href="http://www.dailymail.co.uk/money/markets/article-2127817/Facebook-lavishing-1bn-Instagram-astonishing-deal.html">ALEX BRUMMER: Facebook lavishing $1bn on picture-sharing application Instagram is astonishing deal</a>10/04/12</li><li> <a href="http://www.dailymail.co.uk/money/news/article-2125722/ALEX-BRUMMER-JP-Morgan-Cazenove-banker-Ian-Hannam-mines-friends.html">ALEX BRUMMER: JP Morgan Cazenove banker Ian Hannam mines his friends</a>05/04/12</li><li> <a href="http://www.dailymail.co.uk/money/news/article-2125274/ALEX-BRUMMER-Firing-growth-machine.html">ALEX BRUMMER: Firing up the growth machine</a>04/04/12</li><li> <a href="http://www.dailymail.co.uk/money/news/article-2124116/ALEX-BRUMMER-James-Murdoch-falls-earth-exiting-Sky.html">ALEX BRUMMER: James Murdoch falls to earth at Sky</a>02/04/12</li><li> <a href="http://www.dailymail.co.uk/money/news/article-2124087/ALEX-BRUMMER-Picking-scraps-rich-table-UK.html">ALEX BRUMMER: Picking at the scraps from UK's not very rich table</a>02/04/12</li><li> <a href="http://www.dailymail.co.uk/news/columnist-1001421/Alex-Brummer.html">VIEW FULL ARCHIVE</a></li></ul></div></div></div></div>Most of its income was guaranteed, as it came from local authorities. But Blackstone wasn’t prepared to be a long-term owner. Soon, it had hived off many of the freeholds of the buildings to another company, which then sold them off. Then Blackstone made a quick profit by floating Southern Cross on the stock market, collecting £600 million for itself and its wealthy investors. At the time, Blackstone said they believed that the care homes, with their guaranteed source of income, were capable of being self-financing. But the aftermath from the sale of Southern Cross was disastrous.When new landlords started putting up rents, local authorities were unable to meet the extra cost. A lack of investment and poor management combined to bring Southern Cross to the brink last year, placing its 750 homes at serious risk. Three thousand jobs had to be cut from the workforce, raising questions about the quality of care in the homes. Eventually, some of the landlords dropped their rents, some took over care homes themselves — and some have yet to come to an agreement with the company. Shockingly, as it turned out, this high-stakes financial game had been played at the expense of 31,000 elderly and vulnerable residents. Meanwhile, elsewhere in Britain, one great company after another was being blithely auctioned off — including Jaguar Rover (to India), Asda (to the U.S.), MG Rover (to China), P&O Ports (to Dubai), the British Airports Authority (to Spain), Corus (formerly British Steel, to India), British Energy (to France), and lottery operator Camelot (to Canada). It didn’t matter whether the buyer was a foreign company or a private-equity fund. If the price was good enough, shareholders and directors took the money and ran.As firms fell like ninepins around them, canny chief executives demanded new clauses in their contracts that guaranteed the equivalent of lottery wins if their firms were taken over. They did this by insisting that their share options — usually paid out only after a number of years — could instantly be converted to cash.<div><img alt="Apathy: No-one seemed to notice - or care - when ICI was snapped up by the Dutch" height="349" src="http://i.dailymail.co.uk/i/pix/2012/04/13/article-2129507-059411100000044D-957_634x349.jpg" width="634" />Apathy: No-one seemed to notice - or care - when ICI was snapped up by the Dutch</div>Ah, argued defenders of this system, but surely all these deals also brought much-needed injections of cash into the economy?And yes, of course, they did — in the short term.But no one was thinking any further ahead. No one had bothered to work out that if it was hard enough to collect taxes from a UK-based multinational, it might be even harder to do so from one based in Munich, Lucerne or Washington DC.<div><img alt="Paying the price: ICI's subsequent breakup resulted in the loss of thousands of jobs" height="423" src="http://i.dailymail.co.uk/i/pix/2012/04/13/article-2129507-0679F3AD000005DC-854_306x423.jpg" width="306" />Paying the price: ICI's subsequent breakup resulted in the loss of thousands of jobs</div>If that sounds highly theoretical, then consider what happened after Boots the chemist (Alliance Boots) was sold to the Italian pharmacy king Stefano Pessina and private-equity barons KKR in 2007 for £12 billion. Soon after the takeover, Boots — which had been based in Nottingham for 161 years — moved its headquarters to Zug in Switzerland. Why Zug? Well, certainly not for its climate. Before the takeover, Boots had paid £89 million in British tax in its final year as a quoted company on the London stock market. Now that it pays its tax in Zug, that figure has shrunk to just £9 million.So the financial rewards from all these foreign takeovers rarely swell government coffers for long. Hence, as more and more British companies vanish overseas, it’s the ordinary taxpayer who has to make up the difference — through higher VAT and other taxes.As well as tax revenue, what is even more worrying is that we’re rapidly losing the crucial skills we need to compete with the rest of the world. The real tragedy is that no one seems to care when a company like ICI, the great chemicals giant, disappears into the jaws of a foreign power — taking with it scientific and industrial expertise built up over many decades.The truth is that the 2008 Dutch takeover of ICI was, arguably, far more significant than the sell-off of Cadbury, which caused deep public unease. Chocolate, it seems, will always stir more sentiment than paint and chemicals.ICI was vulnerable to foreign interest for two reasons: the lack of Government interest in its possible future and the shareholders’ greed for cashing in — to the exclusion of other considerations. So no one gave much thought to what might happen next.The ICI integration into Holland’s AkzoNobel was far from painless. Within days of the merger, they were jettisoning some of ICI’s assets — such as its adhesives and electronic materials activities, which were sold to a German competitor. Some 29 factories, including several in the UK, were closed, eliminating 3,500 jobs. <div><img alt="Sentimental value: Cadbury's treatment at the hands of Kraft caused public outrage" height="277" src="http://i.dailymail.co.uk/i/pix/2012/04/13/article-2129507-01DF3FF0000004B0-614_634x277.jpg" width="634" />Sentimental value: Cadbury's treatment at the hands of Kraft caused public outrage</div>In early 2009, AkzoNobel revealed massive losses of £970 million, largely as a result of buying ICI. More job losses were projected, and a pay freeze was imposed on most of the company’s employees. In 2011, the group was still struggling.How ICI itself has fared financially, within AkzoNobel,  is now impossible to discern. But the most significant and worrying loss has been that of a guaranteed skills base.For decades, ICI’s reputation — and its profits — was founded on its ability to develop new products. But once ownership moved abroad, all bets as to the future of such research facilities was off.<div><img alt="'Global economy': David Cameron refuses to erect 'trade barriers'" height="423" src="http://i.dailymail.co.uk/i/pix/2012/04/13/article-2129507-11A7E7CD000005DC-40_306x423.jpg" width="306" />'Global economy': David Cameron refuses to erect 'trade barriers'</div>Indeed, if AkzoNobel sells off further parts of the company, the remaining research laboratories in Slough and Newcastle could well move abroad. After all, no foreign company owes any particular allegiance to Britain. This was vividly illustrated when Kraft Foods took over Cadbury in 2009, after promising to keep open the Somerdale factory near Bristol that made Wispa and other chocolate bars.Despite this pledge just one month after buying the confectioner, Kraft closed the factory — leading to the direct loss of 400 jobs, and the indirect loss of others in the supply chain. In addition, 160 skilled employees at the company’s Uxbridge headquarters were made redundant, and a further 150 posts are due to go at Cadbury’s historic Bournville factory in Birmingham this year. Surprising? Not really. When companies need to cut capacity, they tend to chop operations far from home first. Yet the Labour government made little effort to block this unpopular takeover. As for the Tories, David Cameron said at the time: ‘We are an open, global economy. We cannot start creating ownership barriers, trade barriers and protectionist barriers.’ As the economy dipped, Kraft lost no time in squeezing as much income as it could out of its new acquisition in order to pay down debt and please its American shareholders. In March 2010, for instance, Cadbury staff were told that pay would be frozen for three years unless they agreed to opt out of the firm’s expensive final-salary pension scheme.The arrogant American bosses of Kraft felt immune to criticism — even brushing off politicians’ criticism with disdain.For example, when asked to appear before a Commons select committee to explain the company’s failure to  honour its promises, Kraft chairman and CEO Irene Rosenfeld refused. ‘Appearing before the panel was not the best use of my personal time,’ she said.<div><img alt="Red lines: Former French President Jacques Chirac stood up for 'strategic' companies" height="423" src="http://i.dailymail.co.uk/i/pix/2012/04/13/article-2129507-0F2F74A600000578-641_306x423.jpg" width="306" />Red lines: Former French President Jacques Chirac stood up for 'strategic' companies</div>Is this the price that all nations have to pay for an increasingly globalised world? Not at all — in fact, Britain is unique in having such a supine attitude to selling off its crown jewels.Other countries adopt what’s come to be known as ‘economic patriotism,’ which involves putting tremendous obstacles in the path of foreign bids. Take France, for example, which argues that it’s in the national interest to prevent key technologies falling into foreign hands. Key technologies that extend all the way from nuclear power to yoghurt-making. There was uproar when the U.S. drinks giant PepsiCo was poised to bid for the French food firm Danone in 2005. In the end, the then President Jacques Chirac declared that the French yoghurt-maker was considered a ‘strategic’ company, so couldn’t be sold to a foreign firm. Similarly, Spain has worked hard to hold on to its energy companies — for example, thwarting a bid in 2006 by German energy group E.ON for Endesa. Yet a year later, because of less patriotic values in Britain, a Spanish company was easily able to buy our own Scottish Power.In Japan, selling a company over the heads of management is unthinkable. And while India has bought UK enterprises such as Jaguar Rover, it won’t allow British firms to take full control of its own companies.As for the U.S., the country which portrays itself as a ‘champion’ of free trade won’t permit foreigners to buy U.S. airlines or TV companies. Oil is also jealously guarded: China’s state-owned oil company, for instance, was prevented from purchasing struggling U.S. oil firm Unocal in 2005.No one is proposing that all foreign takeovers should be blocked. But we could easily put our own measures into place to limit further damage. There’s nothing wrong, for instance, with having a vetting process for foreign deals that would take into account matters of public and national economic interest. Or with making it illegal for foreign companies to break their promises about keeping jobs and research facilities in the UK. Or with forcing them to declare how much of their bid is based on debt. Directors of British companies could be banned from cashing in on a shares bonanza if a deal went through. <div><img alt="Upper hand: Barclays CEO Bob Diamond has threatened to move the bank's headquarters to New York" height="459" src="http://i.dailymail.co.uk/i/pix/2012/04/13/article-2129507-0E8E6F9D00000578-627_306x459.jpg" width="306" />Upper hand: Barclays CEO Bob Diamond has threatened to move the bank's headquarters to New York</div>In other words, a board would be judging a takeover bid on the basis of its merits, not on how rich it would make individual directors.Why, then, isn’t the Government considering any of this? Why do we cheerfully continue to auction off everything from nuclear power generators (to the French — and now possibly the Russians) to our most popular chocolate brand? The chief reason lies in our continuing love affair with banking and financial services, which still provide a large slice of our tax revenues. From the late Eighties onwards, governments have viewed these banks — which arrange and finance all these overseas deals — as a sort of universal economic panacea. At all costs, it seems, the banks need to be kept happy. And since much of their money comes from buying and selling companies to the rest of the world, the British sell-off seems destined to continue unabated. The banks know their power, too. American Bob Diamond, who took over Barclays in 2011, let it be known that he’d consider moving the bank’s highly profitable investment banking arm from Britain to New York if it became, as he saw it, over-regulated or over-taxed. And he’s by no means the only banker making veiled threats behind the scenes. As matters stand, trying to protect UK companies is like attempting to guard chickens in a coop to which foxes have been invited.In the real world, away from the gilded environs of the City, the tragedy is that tens of thousands of jobs have gone. Crucial skills have been lost — probably for good. And the strategic heart of British manufacturing has been ripped out, which affects our ability to climb out of recession.

That bus you boarded at Trafalgar Square is run by a German company. Boots fell to the Italians in 2007. Selfridges, Fortnum & Mason and the Savoy are owned by Canadians; Harrods has been bought by a firm based in Qatar; the Dorchester by one based in Brunei

Just for a moment, imagine being a tourist in search of the full British experience. Where would you start? Well, you might take a sight-see...

Laser attacks on planes are surging, warn aviation officials

The Civil Aviation Authority (CAA) is warning of a global surge in laser attacks on planes after almost 2,000 incidents were reported in the UK last year. There were 153 incidents at Heathrow in 2011 involving lasers being shone towards aircraft. The second most affected airport was Manchester with 148 incidents, while Birmingham had 143 and Glasgow 107. Liverpool's John Lennon airport had 90 incidents. Throughout the UK last year, the CAA said there were a total of 1,909 incidents, whereas in 2005 there were just 20. At John Lennon airport, a crew member was temporarily blinded as the plane landed following a laser being shone into the aircraft. In October last year, a jumbo jet whose pilot was trying to correct an error after dropping to 300 metres (1,000ft) had a laser shone at it. Incidents in Liverpool peaked during a five-week period last summer, when there were 30 separate laser reports made by pilots who were passing over residential areas as they prepared to land. A CAA spokesman said: "We are currently seeing a global surge in incidents of lasers being deliberately shone at aircraft on final approach to airports. "The aviation industry and the police are doing everything possible to combat the problem and we strongly urge anyone who sees a laser being shone in the night sky near an airport to contact the police immediately." He added: "It's a serious problem and has been getting worse over the last three years. Largely due to the availability of lasers on the internet and the relatively cheap price." Since 2010, shining a laser or light at an aircraft in flight has been a specific criminal offence. The CAA said it needed the public's help to stop the potentially dangerous attacks and urged anyone to contact the police if they witnessed lasers being pointed at planes. The CAA said UK aviation enjoyed an "excellent" safety record because of an open culture of reporting incidents. A spokesman for John Lennon airport said incidents involving flights were few and far between. He said: "JLA is extremely proud of its safety record, which for the period 2007-2011 includes almost 400,000 aircraft movements, accommodating in excess of 25 million fare-paying passengers. "The report from the CAA relating to Liverpool John Lennon airport needs to be put into context as it will include all manner of incidents, many far less serious than others, as well as including incidents occurring away from the airport, but relating to aircraft that originated from here or heading to Liverpool." Ryanair and easyJet flights were targeted as they came in to land at Liverpool at altitudes as low as 150 metres (500ft). One pilot described how the laser "lit up the cockpit" and had a "significant impact" on the flight crew's night vision. An Airbus jet was targeted twice with the first officer's vision "impaired" by the strength of the beam. The captain of another flight needed a medical checkup after "a direct strike to the right eye". In February 2010, a 16-year-old was fined £250 after admitting to shining a laser pen, purchased on eBay for £8, into the cockpit of an easyJet flight from Belfast to Liverpool.

Laser attacks on planes are surging, warn aviation officials

The Civil Aviation Authority (CAA) is warning of a global surge in laser attacks on planes after almost 2,000 incidents were reported in t...

Crisis-hit Greece rents police for €30 per hour

Greece is offering a ‘cop-for-hire’ service, renting out policemen for €30 per hour, plus €10 if you want a police car too. It triggered fears that security of people who cannot afford a policeman for hire may be affected in favor of those who can. This new way for the cash-strapped Greek state to raise money will "pay for the cost of using police materials and infrastructure, and allow to modernize them", the Ministry of Citizen Protection said in a statement. The Police services on offer were previously used in "exceptional cases" – escorting the transportation of dangerous material or art works and were free of charge. Now, Police services have a price-tag. If you need something special the hourly fee for patrol boats is €200, and €1500 for helicopters, according to the Proto Thema newspaper. Even though the ministry said it would only accept such hires if they do not affect the security forces' operational capacity, only those with the cash will benefit from the initiative. The newspaper says the less wealthy will be left to deal with crime by themselves. The financial crisis left Greece with rising unemployment, a fast-growing crime rate and a surge in illegal immigration. Security has substantially deteriorated in the Greek capital in recent years, with previously safe and calm neighborhoods of the city becoming literally off limits after nightfall.

Crisis-hit Greece rents police for €30 per hour

Greece is offering a ‘cop-for-hire’ service, renting out policemen for €30 per hour, plus €10 if you want a police car too. It triggered fea...

Can One Bank's Leasing Program Boost the Economy?

Bank of America recently rolled out a "Mortgage-to-Lease" program to help financially struggling homeowners. Instead of foreclosing on delinquent mortgagees, BOA will now allow them to transfer ownership to the bank, have all mortgage debt forgiven, and rent their home for up to three years at the market rate. Mortgage-to-Lease is currently being trialed to 1,000 borrowers in three cities. Leasing — as opposed to foreclosure — can benefit the housing market as well as our economy. Why? Ultimately, it's mostly about pricing. A big downside of widespread foreclosures is the housing market becomes flooded with a larger supply. What would happen if a wave of houses were suddenly put up for sale in your neighborhood by sellers who were more interested in unloading their properties than getting the highest prices? Prices would drop, perhaps precipitously. Leasing, however, doesn't increase supply and as a result, prices remain stable or even increase. The key benefit of higher home prices is the effect on new construction. Enticed by the profit opportunities brought about by higher prices, new construction will ramp up. Since the home building industry is a fundamental driver of our economy, this would be a welcome jump start. As new housing construction employs more people and stimulates demand for related products (appliances, etc.), unemployment recedes — which leads to increased consumer spending. With more people opening their wallets, other businesses benefit too...and the economic cycle accelerates. Another benefit of leasing versus foreclosure is a decrease in personal bankruptcies. Fewer bankruptcies result in higher consumer spending and minimize the depressive pall that can shake overall consumer confidence. One drawback of Mortgage-to-Lease is the moral hazard it creates. After purchasing a home, knowing that banks won't foreclose, buyers have less of an incentive to be financially responsible. This potential moral hazard can be minimized by making Mortgage-to-Lease applicable only to those who hold mortgages today. Granted, banks aren't in the leasing business. Over time, they're going to want to sell off these houses, too. However, as most of us have had to do because of the financial crisis, perhaps they should be open to change. Mortgage-to-Lease isn't going to make banks and homeowners "whole" again. The upside of this pricing strategy is a boost to the economy- which ultimately benefits everyone including banks (higher prices for the houses they own, better business conditions). So what do you think? Can a simple pricing strategy - leasing instead of foreclosing - help resuscitate our economy? While Bank of America's program is extremely limited, should the U.S. Government make this pricing strategy normal operating procedure for all banks until our economy is firing on all cylinders?

Can One Bank's Leasing Program Boost the Economy?

Bank of America recently rolled out a "Mortgage-to-Lease" program to help financially struggling homeowners. Instead of foreclosin...

New info about statin safety affects millions

U.S. Food and Drug Administration issued new safety information about these cholesterol-lowering drugs that are prescribed to millions of Americans to lower the risk of heart disease. If you're among them, you should understand what the FDA's new guidance means for your health. "Before anyone gets too concerned, you should know that statins are so widely used because they have a long track record of safety and effectiveness," says Dr. Mark Taber, a cardiologist with SSM Heart Institute at St. Joseph Health Center. "All in all, statins have a very high benefit to risk ratio.Â The widespread use of the drugs, when indicated, probably accounts to a significant degree for the improvement in life expectancy in this country." The FDA called attention to the threat of liver damage as a rare side effect of statins and advised that regular liver enzyme testing is no longer considered useful in predicting or preventing liver injury. "Actually, in general they liberalized the follow up needed for liver function tests on patients taking statins, due to the very low incidence of true liver issues," Taber says. The main warnings related to a slightly higher incidence of developing diabetes while on statins, and a poorly substantiated claim that statins could result in cognitive impairment. Taber points out that cognitive problems, such as confusion or memory problems, were not documented in clinical studies, only by patient reports to the FDA website. "By stating these concerns, the FDA is raising awareness about the potential side effects of statins, but cardiologists already know that there are inherent risks, and we monitor patients appropriately to help ensure that side effects do not occur or are dealt with quickly," Taber notes. "If there is any evidence of a side effect that could be problematic, we can change the medication. But the fact remains that it's important to decrease risk of heart disease, and for many people statins are needed when diet and exercise alone don't result in acceptable cholesterol levels." Whenever a new prescription medication is started, you should look over the package insert to learn about potential side effects. Signs of liver damage, for instance, include fatigue, loss of appetite, right upper abdominal pain, dark urine and jaundice. Any of these symptoms should be reported to your doctor for evaluation. It is important to remember that you should not stop taking a medication without consulting your doctor first. Discontinuing use of a prescribed drug can be far more dangerous than the side effect you're worried about. "All the side effects listed by the FDA are rare, and the risk of heart attack is far more concerning," Taber says. "Some patients may need extra monitoring or may need to try more than one statin before we find the optimal choice, but in general statins are very well tolerated and don't cause problems for the people who take them." The advice above is universal when it comes to your health. Concerns should be discussed with your doctor, and decisions should always be made as part of a team approach to creating a healthy life.

New info about statin safety affects millions

U.S. Food and Drug Administration issued new safety information about these cholesterol-lowering drugs that are prescribed to millions of Am...

Why don't GPS warn you that statins can harm your memory?

John Holliday had been on a higher 40mg dose of cholesterol pills for only a few weeks when he started to lose his concentration. ‘I’d be watching TV and suddenly find myself unable to follow the plot of a drama,’ says John, 52, a telecoms project manager who lives in Southend-on-Sea, Essex, with his wife Jill, 51, and their two children Adam, 20, and Emma, 16. ‘I’d have to read the same page of a book over and over because I couldn’t take any information in. ‘I’d always been known for my amazing memory — I was great on trivia and had total recall of events that happened 20 years ago, but suddenly I couldn’t remember things and my brain felt fuzzy.’ Just like up to seven million other people in Britain, John had been prescribed a statin to lower his blood cholesterol levels. The drugs are credited by the British Heart Foundation as contributing towards the dramatic 50 per cent fall in deaths from heart attacks in the past ten years. But while there is consensus that statins are lifesavers for people who have previously had a heart attack, concern is growing over their debilitating side-effects. They include muscle weakness, depression, sleep disturbance, sexual dysfunction, muscle pain and damage, gastro-intestinal problems, headaches, joint pains and nausea. Now, official bodies here and in the U.S. have ordered that the drugs must carry warnings for cognitive problems, too. Worryingly, it’s claimed GPs are failing to warn patients of the effect statins can have on the mind — meaning they may mistake them for signs of ageing or Alzheimer’s. ‘When I went back to my doctor after six weeks for a blood test, I told him how dreadful I was feeling,’ says John. ‘But he just said all drugs had side-effects and didn’t mention reducing the dose.’ It's claimed GPs are failing to warn patients of the effect statins can have on the mind - meaning they may mistake them for signs of ageing or Alzheimer's Things came to a head when a friend showed John an electrical circuit he’d built for his car. ‘I’d worked with circuits since I was 16 but it made no sense,’ he says. So John insisted on seeing his doctor again and repeated his concerns about his rapidly declining memory. This time the GP told him he could start on another type of statin when he felt well enough, and so John stopped taking the drugs immediately. ‘It took a few months, but gradually my memory returned and I’ve got my concentration back. I can’t say for sure statins caused these problems, but it seems like too much of a coincidence.’ Earlier this year, the Food and Drug Administration (FDA) in the U.S. ordered statins must carry warnings that some users have reported cognitive problems including memory loss, forgetfulness and confusion. This followed a decision by the UK’s Medicines Healthcare Regulatory Agency (MHRA) to add memory problems to the list of  possible statin side-effects in late 2009. The FDA said reports about the symptoms were from across all statin products and age groups. Those affected reported feeling fuzzy or unfocused in their thought process — though these were found to be rare and reversible. The FDA also warned, following U.S. research, that patients on statins had a small excess risk of developing Type 2 diabetes — but stressed that the benefits of taking a statin still outweigh this. The MHRA had 2,675 reports for adverse drug reactions connected with statins between 2007 and 2011. Officially, side-effects are rare —affecting only 1 per cent of people on the pills — but some doctors say they are under-reported. Dr Malcolm Kendrick, a GP and author of The Great Cholesterol Con, says he frequently sees patients suffering from mental confusion in his job in hospital intermediary care for the elderly. ‘Many of the patients I see will have been admitted to hospital after a fall or similar crisis,’ he says. ‘If they appear confused I’ll often advise taking them off statins to see if it has any effect — in my experience, about 10 to 15 per cent of people who appeared to have memory problems experienced an improvement in their memory symptoms after being taken off the drug. ‘I had one dramatic case where a lady was admitted to hospital on 40mg a day of simvastatin with such poor memory function her family asked me about power of attorney. 'I suggested taking her off statins and within a week her memory had returned to normal. She went home a fit and independent 83-year-old.’ Dr Kendrick says cholesterol is the main constituent of synapses (structures that allow signals to pass between brain cells and to create new memories) and is essential for brain function. ‘It is still not proven that statins have a significant effect on mortality — it has been calculated that a man who has had a heart attack who took a statin for five years would extend his life by only 14 days. 'Too many statins are being given to people at low risk. ‘Even in the highest risk group you need to treat 200 people a year with statins to delay just one death. 'One day the harm these drugs are doing is going to be obvious — the benefits are being over-hyped and the risks swept under the carpet.’ While Dr Kendrick’s controversial view is in the minority, one large review of 14 studies by the London School of Hygiene and Tropical Medicine, published by the highly respected Cochrane Library last year, concluded there was ‘little evidence’ cholesterol-lowering drugs protect people who are not at risk of heart disease. This review has been criticised by other doctors who say side-effects are rare and that there are still benefits even for people at lower risk who do not have established heart disease. These defenders of statins include Professor Colin Baigent of the Clinical Trial Service at Oxford University, who published research in 2010 showing statins reduced deaths from all causes by 10 per cent over five years. ‘There is relatively little evidence of cognitive impairment — what evidence there is all comes from observational studies.  ‘People read about side-effects and then put two and two together and blame the statins for their muscle pain or other health problems — it’s just not reliable evidence. ‘If you look at the best-quality randomised controlled trial where patients don’t know if they are taking a statin or placebo, there is no evidence of memory problems. 'Even the FDA says the risks of cognitive problems are very small and go away when statins are discontinued. ‘We’re in danger of forgetting just how effective these drugs are.’ Dr Dermot Neely of the charity Heart UK, and lead consultant at the Lipid and Metabolic Clinic at the Royal Victoria Infirmary in Newcastle, agrees side-effects with statins are rare. ‘I’ve been dealing with patients on statins since 1987 and I can count on the fingers of one hand the number whose memory symptoms turned out to be caused by statins.’ However, he said he often saw patients who had not been told about side-effects. ‘It’s important GPs are clear about the drugs statins can interact with, such as certain antibiotics, as this can get overlooked. ‘If a patient notices an adverse effect after starting statins, they should discuss this with their GP —but not stop their drugs suddenly because this can be dangerous.’ Sonya Porter, 73, decided to stop taking statins after her memory problems became so bad that she walked away from a cashpoint leaving her money behind. ‘I was permanently fuzzy-headed and just couldn’t seem to concentrate,’ says Sonya, a retired PA from Woking, Surrey. Then I started to get scared I might have Alzheimer’s. After reading about memory problems associated with statins, I thought it was at least a possibility. I decided to come off the pills to see if it made any difference. ‘I didn’t ask my GP, I just did it — I’d rather die of a heart attack than Alzheimer’s disease. Within a month I felt normal again and didn’t have any problems with memory. ‘I’m terrified that I could have been misdiagnosed with Alzheimer’s.’ John Holliday is also reluctant to go back on statins. ‘I wouldn’t rule it out completely — my latest test showed my cholesterol levels have gone up,’ he says. ‘But on balance, I’d rather take my chances with heart disease than feel as confused as that again. It’s all very well living slightly longer — but it’s about quality of life, too.’

Why don't GPS warn you that statins can harm your memory?

John Holliday had been on a higher 40mg dose of cholesterol pills for only a few weeks when he started to lose his concentration. ‘I’d be w...

James Murdoch to resign as BSkyB chairman

James Murdoch is to step down as chairman of UK satellite broadcaster BSkyB, but will remain on the board. He is the son of News Corporation founder Rupert, whose company had to drop its bid for BSkyB after the phone-hacking scandal. In February, James Murdoch stepped down as chairman of News International, which publishes the Sun and the Times in the UK. He said then he had moved to New York to work on News Corp's pay-TV business. News Corp owns almost 40% of BSkyB and had wanted to buy the whole of the firm. But it withdrew its bid as political pressure mounted due to allegations of improper conduct at News International's News of the World Sunday title, which was shut down last July. Sources told Robert Peston, the BBC's business editor, that it was James Murdoch's decision to leave and he did so in an attempt to pre-empt further criticism as investigations continue into phone hacking. James Murdoch has repeatedly denied knowing about phone hacking at the News of the World. Nicholas Ferguson will take over as chairman.

James Murdoch to resign as BSkyB chairman

James Murdoch is to step down as chairman of UK satellite broadcaster BSkyB, but will remain on the board. He is the son of News Corporatio...

CFTC accuses Royal Bank of Canada of sham trades

U.S. regulators are accusing one of Canada's largest banks of engaging in hundreds of millions of dollars in illegal futures trades to reap tax benefits on its holdings of company stocks. The Commodity Futures Trading Commission filed civil charges Monday against Royal Bank of Canada, saying the bank made the sham trades with itself. The agency said it is the largest case it has brought against so-called wash trades, which cancel each other out. Royal Bank of Canada engaged in "a wash-trading scheme of massive proportion," the CFTC said. In addition, the agency alleged that the bank concealed the true nature of the trades and made false statements to a futures trading exchange, OneChicago. The CFTC alleged that Royal Bank of Canada made the trades in stock futures contracts from June 2007 to May 2010 at non-competitive prices with two foreign subsidiaries. The transactions weren't "at arm's length," as required by law, and as reported by the bank to the exchange, the agency said. An arm's length transaction either is one in which the buyer and seller aren't directly related or one done at a price that would prevail if they were unrelated. The federal rules allow futures trades between companies and subsidiaries, but only if they are done on an arm's length basis. Toronto-based Royal Bank of Canada called the CFTC's allegations "baseless" and said it will contest them in court. The bank said the trades had been vetted in advance by the CFTC and futures exchanges back in 2005 with no objections being lodged against them, and they were monitored for several years. The CFTC is seeking a permanent injunction against the bank committing further violations of the federal commodities laws and rules, and unspecified monetary penalties in its civil lawsuit filed in federal court in Manhattan. The CFTC said the bank's trading strategy was devised to gain Canadian tax credits on its holdings of U.S. and Canadian company stocks. The strategy was created and carried out by a group of executives at the bank. However, the agency's suit didn't name any individuals. "Today's action should make clear that the CFTC will not hesitate to bring charges against even the most sophisticated market participants who unlawfully exploit the futures markets for their own gain," SEC Enforcement Director David Meister said in a statement. Meister, questioned by reporters, wouldn't say whether related suits could be filed against individuals in the future or if the alleged misconduct by Royal Bank of Canada also occurred at other banks. The buyer or seller of a futures contract commits to purchase or sell something at a specified date and price. There were two types of futures trades the bank engaged in that corresponded to two different Canadian tax benefits, the CFTC said. One benefit allows Canadian companies that hold U.S. stocks that pay dividends to get a tax credit for the U.S. dividend tax they pay. The bank bought stocks in U.S. companies that it expected to pay dividends on certain dates. As a hedge against risk, the CFTC said, the bank also sold single-stock futures contracts at the same time to a foreign subsidiary. The subsidiary sold the stock short, meaning it bet against the stock — borrowing shares, selling them and then buying them when the stock price falls and returning them to the lender, while pocketing the difference. The net effect was a "wash," but the bank got a tax credit as a result, the CFTC said. Another Canadian tax benefit allows Canadian companies that hold shares of other Canadian companies for more than a year to receive dividends tax-free for a year. In that case, Royal Bank of Canada bought baskets of Canadian stocks that it held for more than a year and also sold stock-index futures contracts as a hedge to another foreign subsidiary, the CFTC said. "Before we made a single trade, we proactively contacted the exchange to seek its guidance," Royal Bank of Canada said in a statement. "These trades were fully documented, transparent and reviewed by both the CFTC and the exchanges, and for the next several years were monitored by them. RBC's trading was permissible in 2005, and it is permissible today under the CFTC's published guidance." The bank said that since there was no objection in 2005, it is "absurd" for the CFTC to claim now that the trades were fictitious or wash sales. The trades were engaged in by independent RBC entities with the intention of taking genuine market positions, in accordance with CFTC guidelines, the bank said. "They were executed at competitive market pricing and no market participants suffered any negative impact."

CFTC accuses Royal Bank of Canada of sham trades

U.S. regulators are accusing one of Canada's largest banks of engaging in hundreds of millions of dollars in illegal futures trades to r...

Visa, MasterCard alert banks to security breach

Security blogger Brian Krebs this morning broke a story that Visa and MasterCard have begun sending alerts to banks about a major breach at an unnamed payment card processing firm. By Mark Lennihan, AP A sign for MasterCard in New York on March 19, 2012. Enlarge By Mark Lennihan, AP A sign for MasterCard in New York on March 19, 2012. Ads by Google Global EMBA at INSEAD Learn & work in synergy Global, yet convenient format global.emba.insead.edu Experian® ID Protection Get Powerful Identity Protection For £6.99 Per Month. Join Today! www.protectmyid.co.uk/id_theft Rise Visa Credit Card No Interest Charges, Affordable. Simple Monthly Fee, Credit to £300. www.risecredit.co.uk Visa and MasterCard have acknowledged the breach, and The Wall Street Journal is now reporting that the processor is Atlanta-based Global Payments. Krebs told Technology Live that Global Payments is expected to issue a statement today. "Law enforcement asked everyone to keep it quiet so as not to disturb investigations," Krebs says. " I'm hearing now from two sources that investigators suspect Dominican street gangs may be involved and that the fraud is focusing mostly on commercial credit and debit card accounts." Credit card processors have been breached before. Heartland Payment Systems lost 130 million payment card records generated by 250,000 merchants and restaurants in 2008. But the stakes are much higher this time around, especially for retailers. Some 46 states have now enacted data breach disclosure laws that require merchants and payment card issuing banks and credit unions to notify customers whose card numbers are stolen. Many of these data loss disclosure laws impose stiff fines if notifications are not done in a timely manner. Massachusetts recently showed that such fines can generate much-needed revenue, while also championing consumer privacy and security, says Ted Julian, of Co3, a Cambridge, Mass.-based start-up that helps retailers manage the repercussions of credit card theft. Depending on the scale of the Global Payments breach, which has not been disclosed, states could see a windfall in fines levied against merchants and card-issuing banks and credit unions who are slow to notify consumers that their credit or debit card number is in criminals' hands. Co3 has just sent out analysis conveying the hypothetical case of one merchant losing the payment card numbers of 1 million customers dispersed in 10 states. If that company failed to meet all 10 disclosure requirements, it would face $1.6 million in fines, Julian says. "Merchants are definitely on the hook for these state disclosures, because they are the ones who have the consumer relationship," Julian says. Gartner banking security analyst Avivah Litan says her sources "are seeing signs of this breach mushrooming. From what I hear, the breach involves a taxi and parking garage company in the New York City area, so if you've paid a NYC cab in the last few months with your credit or debit card be sure to check your card statements for possible fraud." Litan also is hearing about a Central American connection. Unverified reports, she says, point to a "Central American gang that broke into the company's system by answering the application's knowledge-based authentication questions correctly. Looks like the hackers took over an administrative account that was not protected sufficiently."

Visa, MasterCard alert banks to security breach

Security blogger Brian Krebs this morning broke a story that Visa and MasterCard have begun sending alerts to banks about a major breach a...

Baggage handlers to strike at Easter

Baggage handlers at Stansted Airport are to strike over Easter in a row over pay, the GMB union announced today. The move follows an overwhelming vote in favour of industrial action by 150 GMB members employed by Swissport after the union claimed that shift changes would lead to wage cuts of up to £1,000. The GMB said strikes will be held on Good Friday, Easter Saturday and Easter Monday, threatening disruption to passengers flying on holiday for the holiday break. GMB official Gary Pearce said: "GMB members have voted overwhelmingly for strike action and for action short of a strike. "Up to now the company has been intent on imposing these changes without agreement and this is completely unacceptable, as this vote shows. "GMB has offered several alternative shift patterns and working arrangements but the company refuses to listen so far. "I have notified Swissport of the ballot result and I have asked them for more talks to try to avert action over these pay cuts. "GMB members consider that Swissport is attempting to make savings at their expense and they are not willing to agree to this. "Unless there is urgent talks and a settlement, this vote for action this will result in disruption over the Easter Bank Holiday weekend. "The travelling public need to be aware that it has been this aggressive move by Swissport to cut our members pay at a time of high inflation that has led to this strike vote. "If the strike goes ahead, Swissport is entirely to blame for the disruption."

Baggage handlers to strike at Easter

Baggage handlers at Stansted Airport are to strike over Easter in a row over pay, the GMB union announced today. The move follows an over...

Lloyd's of London posts $820-million loss in 2011

Lloyd's of London on Wednesday reported a big loss for 2011, which proved to be the second-costliest year ever in terms of natural catastrophe claims for the global insurance industry. Lloyd's, a society of corporate underwriters and wealthy individuals that make insurance transactions through 88 syndicates, said it lost £516-million ($820-million) on net claims of £12.9-billion. The claims included £4.6-billion for catastrophes, the largest amount in that category in Lloyd's 324-year history. Total claims from natural catastrophes for the global insurance industry in 2011 were $107-billion, second only to $120-billion in 2005, the year of Hurricane Katrina in the United States, Lloyd's said. Major catastrophe claims followed flooding in Australia in January, the second earthquake in New Zealand in February, the Japanese earthquake and tsunami in March, a deadly series of tornadoes in the U.S. in April and May, and the floods in Thailand from July. John Nelson, chairman of Lloyd's, said the market's capital position was unchanged and it recorded a profit in the second half of the year. “We know that market conditions are likely to remain tough in 2012,” Mr. Nelson said. Lloyd's said fears of a double-dip recession had made investors very cautious, particularly in Europe, and the euro zone crisis has slowed insurance growth in the region. However, Lloyd's said demand for insurance was growing in Asia and Latin America. Lloyd's said it was confident of meeting the European Union's Solvency II regulations on the insurance industry in 2013. Uncertainty about the cost of the new regulations has led one major British insurer, Prudential, to say it was examining the possibility of moving its headquarters out of London.

Lloyd's of London posts $820-million loss in 2011

Lloyd's of London on Wednesday reported a big loss for 2011, which proved to be the second-costliest year ever in terms of natural cat...

UK facing an interest only crisis

a million and a half UK homeowners could be facing an interest only crisis. New figures have revealed that of the 11.2 million households in the UK with a mortgage, a sizeable one in seven – the equivalent of 1.6 million homes – are simply paying off the interest on their home loans each month. The scenario of well over 1.5 million homes only paying interest each month and not repaying capital or putting anything towards their overall mortgage debt has been described as a 'ticking timebomb'. Even more worrying is that almost a third of this group (32%) are either in or coming up to retirement age (55+) while more than half are between the ages of 35 and 55 (53%). "Many will be forced to downsize or continue to pay large mortgages well into retirement, when income is tighter than ever," said Karen Barrett, chief executive at unbiased.co.uk. "The goal of becoming 'mortgage free' is becoming ever more elusive for some." In addition, with lenders now clamping down on interest only mortgages, and slashing loan-to-value requirements to around 50% - 60%, many people currently on interest only deals could easily find that no similar options will be available to them when they come to remortgage in the future. In recent weeks Santander, Halifax and Nationwide have been amongst the providers to change their interest only deals. It means that hundreds of thousands of people could well struggle to boost their payments when their interest only period comes to an end. On some mortgage deals, when homeowners revert back to repaying capital they also have to make up the funds lost during their interest only period. It means that their new payments could become unaffordable, leaving them in danger of having their homes repossessed. "With incomes squeezed, it's not surprising that many people are trying to save money by sticking to interest only mortgages, but this is a potential ticking time bomb," said Ms Barrett.

UK facing an interest only crisis

a million and a half UK homeowners could be facing an interest only crisis. New figures have revealed that of the 11.2 million households...

Bank complaints reach an all-time high as more than £2bn is handed back to customers in just six months

Banks have had to hand back more than £2billion to wronged customers in just six months as complaints against financial institutions have ...

Watchdog slaps ban on former Cattles’ directors

GOVERNMENT watchdog has fined and banned two former directors of Yorkshire sub-prime lender Cattles for publishing misleading information to investors and “acting without integrity in discharging their responsibilities”. The Financial Services Authority has also publicly censured Batley-based Cattles and its subsidiary Welcome Financial Services. The group lent money to cash-strapped households. It was brought to its knees by a long-running accountancy scandal, which saw its proportion of bad debts understated for years. James Corr, Cattles’ finance director, has been fined £400,000 and Peter Miller, Welcome’s finance director has been fined £200,000, and both have been banned from performing any functions in areas the FSA regulates. The authority has also banned John Blake, Welcome’s managing director, and fined him £100,000. He has referred his case to the Upper Tribunal. The FSA said all three fines had been reduced “on account of the directors’ current personal financial circumstances”. Cattles was a member of the FTSE 250 but delisted last year. Most of its business was conducted through its subsidiary, Welcome. According to the FSA, Cattles’ 2007 annual report contained “highly misleading arrears, impairment and profit figures”. It stated that only £900,000 of Welcome’s approximately £3bn loan book was in arrears, when if, accounting standards had been properly applied, the figure would have been around £1.5bn. Cattles also announced a pre-tax profit of £165.2m for 2007, but if the correct accounting standards had been used, Cattles would have suffered a pre-tax loss of £96.5m. The FSA continued: “The misleading figures from the annual report were also included in a rights issue prospectus that Cattles released to potential investors in April 2008. It gave misleading impressions of the firm’s financial health. It is likely that investors would have regarded this as highly material when subscribing under the rights issue. The rights issue was subsequently fully subscribed and raised £200m. When the true state of Cattles’ loan book emerged in 2009, trading in Cattles’ shares was suspended.” In March 2011 Cattles announced a scheme of arrangement under which its shareholders would receive only 1p for each share, compared with a rights issue price of £1.28. In a statement, Mr Corr said he was “deeply disappointed that the FSA, concluding there was no dishonesty or deliberate wrongdoing on my part, has nevertheless decided to take action against me. “I firmly believe that criticisms levelled against me remain unfair, specifically the challenge to my integrity. This is particularly the case where any shortcomings found by the FSA in relation to Cattles’ financial statements were not found to be the result of any deliberate misconduct on my part and were not identified by others in Cattles’ senior team or its internal or external auditors.” Mr Corr said he cooperated fully with the FSA investigation at all times. He added: “As a result of the regulatory decision committee’s consideration of the matter, the FSA’s proposed fine in relation to me was materially reduced, and a further reduction was then made to take into account the severe financial hardship that a significant fine would cause me. “I remain deeply saddened by the impact that Cattles’ financial problems have had on the various stakeholders in the Cattles’ business.” A Cattles spokesman said: “Cattles’ questioning played a significant role in bringing the impairment issue to light in February 2009 and it immediately informed the market and the regulator. Since then, the companies have cooperated fully with the FSA’s investigation, and we are pleased that the FSA has expressly acknowledged this in its own press release. Over the last three years, new management teams have been put in place at both Cattles and Welcome, to stabilise the companies and restructure their operations and finances.” The spokesman said Nottingham-based Welcome was continuing to collect out its loan book. While Cattles is no longer trading, its Shopacheck and TLG businesses continue to be developed. Shopacheck is based in Batley, while TLG’s head office is in Cleckheaton. Welcome, Shopacheck and TLG employ 1,700 staff altogether.

Watchdog slaps ban on former Cattles’ directors

GOVERNMENT watchdog has fined and banned two former directors of Yorkshire sub-prime lender Cattles for publishing misleading information ...

RBS is a 'disgrace', says 'swap victim' London & Westcountry Estates

London & Westcountry Estates (LWE), a family-owned operator of 28 business parks in southern England, blamed its collapse on a complex derivative RBS sold it in July 2008 – just before rates were cut to historic lows. As administrators from Ernst & Young were on Tuesday sent to LWE's Plymouth offices, the company's chairman, Michael Hockin, branded state-backed RBS a "disgrace". He claimed the lender's 10-year swap against a £57m three-year loan had cost his business at least £5m in extra payments over the past three years. "We were given 24 hours to sign and told interest rates were about to shoot up, only for them to collapse," he said. "It's absolutely disgraceful what RBS has done to our business." He said when he bought the product he was under the impression the swap could be terminated after three years through a break clause. However, last year he was informed the clause only allowed RBS to cancel the product – and not the other way round. Gary Streeter MP, who has been following the case, said he had been shocked by the behaviour of the bank, which is 82pc owned by the taxpayer. "They have been utterly inflexible and are accountable to no one. This should not have been allowed to happen to what was a good and profitable business," he said. Mr Streeter called for a parliamentary debate on banks' alleged mis-selling of interest swaps. He has written to Chancellor George Osborne and Business Secretary Vince Cable to ask them to look into the matter. Andrew Tyrie, chairman of the Treasury Select Committee, has already called on the Financial Services Authority (FSA) to investigate claims, after a Telegraph investigation, that thousands of small businesses could have been sold inappropriate interest rate swap products. Speaking on Tuesday he said: "This appears to be just the sort of case the FSA should be getting its teeth into." Administrators to LWE were appointed by US private equity firm Blackstone, which last year signed a joint venture deal with RBS to manage a £1.4bn property portfolio. RBS sold the portfolio, including LWE's debt, for about £975m, with the bank retaining a 75pc stake and Blackstone taking a 25pc holding and acting as the asset manager. A spokesman for RBS said the bank had spent a "considerable amount of time and effort" to reach an agreement with LWE and that the administration process was the only "viable option remaining". RBS has always denied allegations that it mis-sold interest-rate swaps. Blackstone said its attempts to reach a constructive solution had been "rebuffed" and the administration was necessary to "safeguard our investors' interests and indeed those of LWE's tenants". Barclays has apologised to "a small number" of business customers for telling them to keep their loan and interest rate swap complaints secret from the FSA. Acting after a Telegraph investigation of mis-selling complaints, Barclays' head of compliance Mike Walters wrote: "Nothing in this letter shall prevent the parties discussing the complaint, the settlement or any other related matter with the Financial Services Authority [or any relevant regulator] or their professional advisors."

RBS is a 'disgrace', says 'swap victim' London & Westcountry Estates

London & Westcountry Estates (LWE), a family-owned operator of 28 business parks in southern England, blamed its collapse on a complex...

George Soros 'offers ex-girlfriend Adriana Ferreyr $250k to drop $50m lawsuit'

Billionaire George Soros has offered his Brazilian soap star ex-girlfriend $250,000 to 'persuade her' to drop a $50million lawsuit...

Russian banker shot six times had testified over murder plot

The banker was left for dead by a lone gunman as he returned to his home in Canary Wharf on Tuesday evening. Scotland Yard detectives are in...

Russian banker shooting: 'It looks like a contract hit'

A former Russian banker is in a critical condition in hospital after he was shot several times in east London. German Gorbuntsov was shot b...

Spain may be euro zone's next source of contagion

Spain risks triggering a fresh eruption of the euro zone debt crisis if it fails to match Italy's success in winning investors' confidence in its reform drive. An injection of European Central Bank funds into the bloc's banking system eased financial stress late last year after Italy's bond yields surged above 7 percent, beyond which debt costs are widely deemed unaffordable. Early in 2012, Spanish and Italian borrowing costs fell steadily, with investors flush with ECB cash and increasingly confident new governments in both countries would enact reforms to tackle their financial problems. But Spain shocked markets last month when it said it had missed its 2011 budget deficit target and a few days later set itself a softer goal for 2012. Investors seeking the high yields on offer in the euro zone periphery have since been ditching Spanish bonds for Italian, in a sign that the epicentre of the crisis is shifting. "The whole Spanish situation has just deteriorated so quickly. We're pretty much looking at Spain as the next point of stress, the next point of weakness," said Peter Allwright, head of absolute rates and currency at RWC Partners, which manages assets worth $4 billion. If investors keep selling Spanish debt, contagion to the rest of the euro zone risks being more damaging than that triggered recently by Greece and Portugal, economies much smaller than Spain. Italian yields could re-test last year's highs as a result, Allwright said. Spanish 10-year bonds yield about 5.4 percent, 40 basis points more than their Italian counterparts , and 80 bps above last month's lows. In November, before the ECB's first massive cash injection, they yielded almost 2 percentage points less than Italy at 6.7 percent. While Italy's outperformance reflects the country's perceived willingness to reform under technocrat Prime Minister Mario Monti, the renewed pressure on Spain shows investors are impatient for results. Spanish unemployment is at a record high, the private sector is trying to cut its debts and domestic banks' exposure to bad loans is at its highest since August 1994. These problems could push Spain even deeper into recession, making the 2012 budget deficit target of 5.3 percent of output agreed with the European Union even harder to achieve. Madrid will present its detailed budget plans by the end of the month and their credibility will be crucial to fending off selling pressure in bond markets. Worries the EU's rigid stance on austerity is making it more difficult for Spain to grow have raised doubts about the recently signed fiscal pact, which was intended to fix one of euro zone's major flaws - a lack of fiscal unity - and boosted investors' confidence in efforts to tackle the crisis. That could speed up contagion, analysts said. "If they (the EU) make too many concessions they lose credibility, if they are too straight with Spain they will stop growth so they don't want one or the other and this is what's been weighing on Spain," said Viola Stork, fixed income analyst at Helaba Landesbank Hesse-Thueringen. MAKE-OR-BREAK The surge in Italian yields above 7 percent last year was widely seen as a make-or-break moment for the euro zone, given Italy's size and banks' widespread exposure to its debt. The sell-off was triggered by former Prime Minister Silvio Berlusconi's reluctance to reform. Even though he was replaced by the more credible Monti, it took ECB cash to calm markets. Spain is also seen as "too big to fail" and if its reform efforts are deemed insufficient, the risk is that the euro zone institutions would again need to step in. "The ECB actions show that there was a lot at stake, there is a lot at stake and a lot will be done to avoid another make-or-break moment," said Michiel de Bruin, who manages 25 billion euros as head of euro government bonds at F&C Netherlands. "Reforms have to kick in" for the euro zone to avoid another such moment, he said. Some investors say even the glut of ECB cash may not be enough to prevent Italian or Spanish yields reaching new highs. The fact that domestic banks used the money they borrowed from the ECB to increase their exposure to Italian and Spanish debt could result in a negative feedback loop if those bonds come under selling pressure again. "If we see another spike in yields it will be much harsher than it was last year," RWC Partners' Allwright said.

Spain may be euro zone's next source of contagion

Spain risks triggering a fresh eruption of the euro zone debt crisis if it fails to match Italy's success in winning investors' conf...

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