Bankrupt Banker

Bogus pensions adviser jailed over £1.9m transfer fraud

bogus financial adviser who fraudulently manipulated his “clients’” pension funds to avoid paying tax of over £1.9m has been jailed at Hull Crown Court for three years. Colin Pearson (pictured), who previously worked for the Food Standards Agency and held a McDonalds franchise, claimed to be a financial adviser and persuaded his "clients" to release over ₤3.4m from their pension funds. Pearson completed UK pension transfer forms on behalf of his clients to falsely claim funds were going abroad to avoid paying tax due on the pension withdrawals, said HMRC. His fraudulent actions netted him commission payments of over £377,000. He provided fake documentation to register two overseas pension schemes before submitting the fake documents to ensure the funds were released without suspicion or delay to bank accounts he controlled. On occasions he even made telephone calls to the UK pension companies posing as the policy holder. On one call he disguised his voice with a Cypriot accent giving the impression he was calling from overseas. To add further legitimacy to the scam, he used articles from the internet to create a PowerPoint presentation to sell the scheme to unsuspecting UK clients, HMRC added. He then took a cut of the funds before passing the balance onto the pensioners. In total, Pearson persuaded over thirty UK pension holders to make unauthorised transfers of £3.4m to avoid paying tax of £1.9m. The value of the funds released was estimated as £3,440,143, of which £2,997,018 was returned to "clients". He also released his own pensions, valued at £74,619.08. In total approximately £377,608 was taken as commission. He used the proceeds of his scam to maintain a lavish lifestyle, driving expensive cars and owning luxury homes both in the UK and Cyprus. Bob Gaiger from HM Revenue & Customs said: "Whilst Pearson was living a life most people could only dream of, he left the individuals he conned out of pocket and without the pension funds they expected. "HMRC will not tolerate this type of blatant fraud and will investigate and prosecute those found to be involved in stealing from the public purse. If you have any information about tax fraud please contact our 24 hour hotline on 0800 50 5000". On sentencing Pearson, His Honour Judge Richardson QC, said: "You are branded a criminal, your life is utterly destroyed, and you are totally dishonest in your deceitful actions."

Bogus pensions adviser jailed over £1.9m transfer fraud

bogus financial adviser who fraudulently manipulated his “clients’” pension funds to avoid paying tax of over £1.9m has been jailed at Hul...

SFO probes banks over asset-backed security sales

The Serious Fraud Office is conducting an examination into banks and their offering of asset backed securities, as part of a ‘scoping exercise’ to see if products have been misrepresented to UK clients. The watchdog said it is consulting with relevant ‘people in the city’ as part of its broad-sweeping investigation into any potentially fraudulent sales of asset backed securities. A spokesperson for the SFO said: ‘We are conducting a scoping exercise into UK banks about all asset backed securities.’ Although the watchdog said this examination has been going on for ‘some time’, it would not clarify whether it was targeting any particular types of asset backed securities. After 2008, asset backed products such as collateralised debt obligations and mortgage backed securities came under fire for arguably sparking the financial crisis. As part of the exercise, the SFO is making inquiries into Goldman Sachs, including the ‘Timberwolf’ deal, a mortgage security underwritten by the bank in 2007, which has been scrutinised by lawyers in the US, according to the Financial Times. Earlier in the year, the SFO said it was looking into exchange-traded funds, as a 'potential threat' to market stability and as a form of asset-backed security which could follow the path of CDOs.

SFO probes banks over asset-backed security sales

The Serious Fraud Office is conducting an examination into banks and their offering of asset backed securities, as part of a ‘scoping exer...

Alistair Darling paints an incredible picture of a disfunctional government at a time of economic crisis, with Gordon Brown's attack dogs" unleashed and constant media briefing against him

There was, he says, a fundamental disagreement with Gordon Brown on how to deal with the economic crisis which "can be boiled down to investment in the economy versus the need to cut borrowing". Darling was excluded from the inner circle of decision-making, dominated by Brown's lieutenants Ed Balls and Ed Miliband. He says Brown had no strategy for being Prime Minister, there was a "permanent air of chaos and crisis", and perhaps most damningly he says this: "For any government to operate effectively there has to be complete unity at the top, especially between the Prime Minister and the Chancellor". In other words, the Bown government was not effective - although its supporters will point out that, despite the problems, they did save the banks and prevent a recession deepening into a depression. You might be reminded of the relationship between Tony Blair as PM and his Chancellor, Gordon Brown - spot the common denominator? The big question, though, is why didn't Alistair Darling do the honourable thing and resign - some are saying that waiting until a year or so later and releasing these memoirs is a cowardly way to behave. Mr Darling's own explanation is that he was ready to return to the backbenches, truning down alternative government positions, to make way for Brown's favourite Ed Balls to become Chancellor but events intervened: the sudden resignation of James Purnell from the Cabinet. Mr Darling believes that if he had resigned at that point, he might have ended Mr Brown's leadership, but he says he "was not prepared to do that". "I had supported his leadership. If I left the government, it would be to sit on the backbenches, not to forment his overthrow. Also, I feel deep loyalty to the Labour Party. I did not want to damage it any further." Needless to say, there are many in the Labour Party who believe that he would have served the party better if he had resigned and forced a change of leader, especially as he describes discussions with other ministers who believed that Labour could not win the next election under Gordon Brown, and the only issue was how to avert a Tory landslide.

Alistair Darling paints an incredible picture of a disfunctional government at a time of economic crisis, with Gordon Brown's attack dogs" unleashed and constant media briefing against him

There was, he says, a fundamental disagreement with Gordon Brown on how to deal with the economic crisis which "can be boiled down to i...

Police make new arrest in hacking probe

<img alt="" height="347" src="http://lh6.ggpht.com/-K-ZBRBA3UUE/TmIlerzFViI/AAAAAAAABIY/69SDLLaRoP4/%25255BUNSET%25255D.jpg" style="float: left;" width="512" />Police arrested a 30-year-old man on Friday in connection with the probe into phone hacking at the now-defunct Rupert Murdoch-owned tabloid the News of the World. The suspect was questioned on suspicions of phone hacking and perverting the course of justice after he reported to a London police station. Police did not identify the man, who is the 15th suspect detained on suspicion of phone hacking. "The man, aged 30, was arrested by appointment at a North London Police Station," a Scotland Yard spokesman said. He was released on bail until January. The arrest came days after the News of the World's former managing editor Stuart Kuttner was re-arrested as part of the long-running investigation. Murdoch shut the 168-year-old paper in July amid public outcry after it emerged that a private investigator working for the tabloid had hacked into the voicemail of Milly Dowler, a missing teenage girl who was later found dead. Questioned by a parliamentary committee the same month, Murdoch said he was "shocked, appalled and ashamed" when he heard about the case, but denied he was personally responsible. Police began investigating phone hacking in 2006, a probe which resulted in the jailing of a private detective and the News of the World's royal editor the following year. Despite a steady stream of new claims, police did not reopen the probe until January this year. A series of high-profile figures have been arrested, including former News International chief executive Rebekah Brooks and the News of the World's former editor Andy Coulson, who later became Prime Minister David Cameron's press chief.

Police make new arrest in hacking probe

Police arrested a 30-year-old man on Friday in connection with the probe into phone hacking at the now-defunct Rupert Murdoch-owned tabloid ...

Business leaders are four times more likely to be psychopaths than the general population,

Business leaders are four times more likely to be psychopaths than the general population, a study has found. One out of every 25 company hi...

FSA gets tough on financial product approval

The Financial Services Authority is poised to issue its first “health alerts” on financial products. The FSA’s enforcement director Margaret...

The likelihood of the UK taxpayer receiving back the money they put in to bail-out the Royal Bank of Scotland (RBS) and Lloyds by 2015 is extremely unlikely

The likelihood of the UK taxpayer receiving back the money they put in to bail-out the Royal Bank of Scotland (RBS) and Lloyds by 2015 is extremely unlikely, according to senior bankers closely involved. The Chancellor, George Osborne, had hoped to begin the sale next year, but the share price for both banks is so low compared to the value of the government stake, that it is very unlikely to increase to the levels required by the end of this parliament in 2015. =On Friday, RBS shares closed at 25p, compared with the average price of a government stake which was 50p. Similarly, Lloyds share price is at 36p, compared to the government’s average “in-price” of 74p. The news is a concern to Mr Osborne as well as taxpayers’ in the UK. Many economists and political commentators expected Mr Osborne to try and use some of the funds raised via a sell-off before the next election to fund election sweeteners such as tax cuts or spending increases. However, the euro-debt crisis, poor economic performance of the UK economy and concerns over the global economy has led to a big fall in the value of UK bank shares, meaning that the government needs to see a doubling in the share price of both banks before it can recover the £66 billion it used to bail-out the two banks. Most bankers believe that there is little chance of a rebound in value before the next election, scheduled for 2015. The outcome of the Independent Commission on Banking (ICB), which publishes its full report on September 12th and is expected to propose the separation of retail and investment arms of UK banking operations, could further complicate matters. Any proposals, if implemented, are likely to be delayed until 2015, though legislation could be passed during this parliament, implementation will be during the next parliament, possibly not until 2019. It is expected that when the sale of the RBS and Lloyds shares finally occurs, it will be treated as a financial transaction and the revenue will be used to reduce to reduce government borrowing.

The likelihood of the UK taxpayer receiving back the money they put in to bail-out the Royal Bank of Scotland (RBS) and Lloyds by 2015 is extremely unlikely

The likelihood of the UK taxpayer receiving back the money they put in to bail-out the Royal Bank of Scotland (RBS) and Lloyds by 2015 is ex...

Rupert Murdoch, the chairman and chief executive of News Corporation, received a $12.5m (£7.7m) cash bonus for the last financial year,

<img alt="" height="204" src="http://lh6.ggpht.com/-J_mXwBorcXs/TmIjPQ16YlI/AAAAAAAABIU/Ou7LzlAWp1c/%25255BUNSET%25255D.jpg" style="float: left;" width="300" />Rupert Murdoch, the chairman and chief executive of News Corporation, received a $12.5m (£7.7m) cash bonus for the last financial year, while his total remuneration rose 47% to $33m, according to the company's annual statement to shareholders. His son James Murdoch – who is deputy chief operating officer, with responsibility for News Corp's business in Europe and Asia – was awarded a $6m cash bonus as part of an $18m pay package – a 74% rise on his 2010 take-home pay. But in a statement on Friday night, James Murdoch said he would not be taking the bonus in "light of the current controversy" over phone hacking at the News of the World. "I feel that declining the bonus is the right thing to do," he said. The bonuses were for the year to the end of June, during which time News Corp became mired in the phone-hacking scandal that engulfed the News of the World. The affair only escalated into a full-blown corporate crisis – with the closure of the News of the World and several executive resignations – in July, shortly after the end of News Corp's financial year. Chase Carey, News Corp's chief operating officer and Murdoch's right-hand man, took home $30m in the year to 30 June, including a $10m bonus. Roger Ailes, who runs Fox News, received a slight increase in total compensation in 2011, up to $15.5m from $13.9m in 2010. Ailes received a $1.5m cash bonus. The Murdochs' remuneration was revealed in their report to shareholders. Elisabeth Murdoch, the chief executive of TV production company Shine, received a salary of $1.7m from News Corp last year, the report shows. She received $214m in cash after News Corp bought Shine earlier this year. Rupert's eldest son, Lachlan – who is acting chief executive of the Australian TV firm Ten Network – took home a total of $504,000 in 2011 for his work on the News Corp board. Charlotte Harris, the solicitor who represents several phone-hacking claimants, said: "The bonuses are not very humble given recent events." She was referring to a comment by Rupert Murdoch, who told MPs on the Commons culture, media and sport select committee when he appeared before them in July that it was "the most humble day of my life". News Corp also announced on Friday that two of its longest-serving directors were to leave. Ken Cowley, a trusted lieutenant for more than 50 years, will leave the News Corp board of directors he joined in 1979 when Murdoch established the global holding company for his media businesses. Thomas Perkins, a partner of investment firm Kleiner Perkins Caufield & Byers and member of the News Corp board since 1996, will also step down after the annual meeting next month. Jim Breyer, a Silicon Valley venture capitalist and one of the first investors in Facebook, will join the News Corp board in October.

Rupert Murdoch, the chairman and chief executive of News Corporation, received a $12.5m (£7.7m) cash bonus for the last financial year,

Rupert Murdoch, the chairman and chief executive of News Corporation, received a $12.5m (£7.7m) cash bonus for the last financial year, whil...

The Royal Bank of Scotland says it will vigorously defend itself against US government claims it misrepresented the quality of mortgages it sold.

The US Federal Housing Finance Agency (FHFA) has filed lawsuits against 17 banks, including RBS, Barclays and HSBC, over mortgage-based investments. Values plunged during the financial crisis and a bailout of mortgage firms cost US taxpayers billions of dollars. RBS says it has "substantial" legal and factual defences to the US claims. A spokesman said: "We believe we have substantial and credible legal and factual defences to these claims and will defend them vigorously." HSBC and Barclays declined to comment to the BBC on the legal action. 'Improper actions' Goldman Sachs, Bank of America, Deutsche Bank, Nomura, Citigroup, and Societe Generale are among the other banks facing legal action from the FHFA. BBC business correspondent Joe Lynam says it is believed the financial institutions are being sued for a sum in the tens of billions. The FHFA said in a statement that there had been "improper actions by the firms and individuals". Until a few years ago very poor Americans were sold home loans that they probably couldn't afford. Those home loans - or mortgages - were repackaged into bonds and they were traded around the world because they were given a risk-free triple-A rated status. That worked up until 2007 but then the people who had taken out these home loans couldn't afford to pay them any more - because they had been lured in under false premises. And then the market collapsed. "Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities," the statement said. The FHFA oversees mortgage giants Fannie Mae and Freddie Mac, which act as guarantor for most home loans in the US. The two firms lost more than $30bn (£18.5bn), partly because of their investments in sub-prime mortgages, and were bailed out by the US government. Since the rescues, US taxpayers have spent more than $140bn to keep the firms afloat. Alistair Heath of the financial newspaper City AM told the BBC the importance of the FHFA's lawsuits against the financial institutions should not be downplayed. "Regardless of the validity or otherwise of these allegations, a lot of these big banks are likely to end up paying billions of dollars in compensation to the US government. "So it'll be quite a costly settlement at best for these firms and it comes at quite a difficult time for the banking industry." Major banks are already negotiating with the attorneys general of all 50 states to settle mortgage abuse claims. The banks were looking for a comprehensive deal that would protect them from future litigation. But the FHFA's action may complicate attempts to reach a deal with the states.

The Royal Bank of Scotland says it will vigorously defend itself against US government claims it misrepresented the quality of mortgages it sold.

The US Federal Housing Finance Agency (FHFA) has filed lawsuits against 17 banks, including RBS, Barclays and HSBC, over mortgage-based inve...

The euro-region debt crisis may deepen as eastern European borrowers who took loans in a strengthening Swiss franc struggle to repay western European banks

The euro-region debt crisis may deepen as eastern European borrowers who took loans in a strengthening Swiss franc struggle to repay western European banks, UBS Wealth Management said. Lenders including Unicredit SpA (UCG), Erste Group Bank AG (EBS), Raiffeisen Bank International AG (RBI) and Bayerische Landesbank have 80 billion Swiss francs ($101 billion) of household debt in Hungary, Poland and Croatia, emerging-markets analyst Kilian Reber said. Borrowers there face higher payments after the franc gained 9.5 percent against the forint, 14 percent against the zloty and 9 percent against the kuna in the past three months. “Increased stress on Hungarian and also Polish and Croatian borrowers with Swiss-franc denominated mortgages and consumer loans could send shockwaves through the euro zone,” Reber said yesterday in a phone interview from Zurich. “This is not something that’s on the radar screen of most investors.” He assigns a 20 percent to 30 percent chance of a stronger franc triggering defaults in eastern Europe and fanning the euro-region debt crisis by forcing western European banks to seek new bailouts. The franc is this year’s best performing currency, even after the Swiss central bank cut interest rates Aug. 3 and pledged to stem further appreciation. Investors consider the currency a haven as the U.S. economy slows and Europe’s debt crisis pushes toward Italy and Spain. Franc Loans Rise Eastern European borrowers sought franc-denominated loans last decade to escape high interest rates in their local currencies. More than 60 percent of Hungary’s household debt is denominated in francs, equivalent to 16 percent of gross domestic product, according to UBS Wealth Management. That figure is about 10 percent in Poland and Croatia, it said. More than one in ten Swiss-franc loans is non-performing in Hungary, compared with 1.5 percent in Poland and 6 percent in Croatia, according to UBS Wealth Management. Under the wealth manager’s base case, damage to western European banks will be limited as the Swiss economy slows and the central bank works to halt the franc’s advance. It forecasts the franc, which touched a record high of 272 forint on Aug. 10, will weaken to 210 forint in 12 months. Western European lenders, which control three quarters of eastern Europe’s banking industry, have scaled back loans to each other as the debt crisis worsens and the global economy slows. Bank Stocks Banks deposited 128.7 billion euros ($185.7 billion) overnight with the European Central Bank Aug. 22, more than three times this year’s average, instead of lending the money to other companies. Banks also borrowed 555 million euros from the ECB’s overnight marginal lending facility, up from 90 million euros Aug. 21. European bank stocks have lost 20 percent as Royal Bank of Scotland Group Plc (RBS) and Societe Generale (GLE) SA declined 43 percent and 39 percent. The cost of insuring European bank debt against default reached a record yesterday, with the Markit iTraxx Financial Index of credit-default swaps linked to senior debt of 25 European banks and insurers rising to 252 basis points, compared with 149 after Lehman Brothers Holdings Inc. collapsed in 2008.

The euro-region debt crisis may deepen as eastern European borrowers who took loans in a strengthening Swiss franc struggle to repay western European banks

The euro-region debt crisis may deepen as eastern European borrowers who took loans in a strengthening Swiss franc struggle to repay western...

Swiss banking firm UBS has become the latest bank to cut thousands of jobs around the world

Swiss banking firm UBS has become the latest bank to cut thousands of jobs around the world, although Britain will escape the brunt of the cuts. Zürich-based UBS, which employs 65,000 people worldwide, said on Tuesday it was cutting 3,500 jobs, with the investment banking and wealth management divisions bearing the burden. The cuts were less than the 5,000 initially feared when the bank hinted at reductions last month. The company employs 6,700 people in Britain. Most work in investment banking in London and it is thought this division will see about 300 job losses. UBS recently threatened to leave London if the Broadgate estate in the City, where it is building a £850m headquarters, was listed. Culture secretary Jeremy Hunt ignored a recommendation from English Heritage seeking to list the 1980s complex. Construction is due to start soon, and the bank is planning to move in 2016. The latest cuts bring total job cuts announced by the 50 largest banks around the world this year to almost 60,000, according to Bloomberg data. This is the worst wave of redundancies since the financial crisis started in 2008. Swiss rival Credit Suisse is laying off 2,000 people, or 4% of its workforce. In Britain, Royal Bank of Scotland has shed 2,000 staff, HSBC 30,000, Barclays 3,000 and Lloyds Banking Group 15,000. Investment banking will be worst affected by the UBS cuts, where 1,600 jobs will go worldwide. Another 1,200 jobs will be lost at its European wealth management arm, 350 in global asset management and 175 in its wealth management Americas division. The cuts, which will involve redundancies as well as natural attrition (not filling posts when people leave voluntarily), is expected to save 2bn Swiss francs (£1.5bn) by the end of 2013. Hit by the strong franc and the economic downturn, UBS is battling to stay profitable. The Swiss currency has been hitting record highs against the dollar and the euro in recent weeks as the eurozone debt crisis deepened. Chief executive Oswald Grübel has also blamed higher regulatory costs: the Basel III rules require banks to hold more capital. He has criticised George Osborne's bank levy, which could reduce the investment banking arm's profit by 100m francs in the second half. Global recession fears have led to increased risk aversion and lower client activity at UBS. The bank was forced to ditch its Sfr15bn profit target this year after reporting a big drop in second-quarter profits in July. "UBS realised that despite expansion after the credit crisis they lost market share everywhere, and in investment banking they won't get back to where they once were," Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets, told Bloomberg. "UBS will probably drop out from the bulge-bracket investment banks sooner or later." UBS already laid off 18,500 people during the credit crunch. It was one of the worst affected banks, taking more than £35bn of writedowns and credit losses and suffering the biggest loss in Swiss corporate history in 2008. "UBS will continue to be vigilant in managing its cost base while remaining committed to investing in growth areas," the bank said in a statement. It expects to book restructuring charges of 550m francs, including 450m francs in the second half of this year.

Swiss banking firm UBS has become the latest bank to cut thousands of jobs around the world

Swiss banking firm UBS has become the latest bank to cut thousands of jobs around the world, although Britain will escape the brunt of the c...

Barclays Bank is expecting complaints about loan insurance to continue rising after a 93% increase in the first half of the year.

The High Street bank said complaints about payment protection insurance (PPI) had soared after banks lost their legal challenge on PPI rules...

An email sent in error by a bungling office worker has revealed that RBS is paying contract banking staff £2,000 a day.

The document heaps fresh humiliation on the bank, which was given a £20billion handout in October, 2008 and is now 84 per cent owned by the ...

The cost of insuring the junior debt of Royal Bank of Scotland has hit an all-time high as credit market investors have become increasingly nervous about the funding of major Western banks

Credit default swaps on RBS subordinated debt yesterday closed at a new high of 662 basis points, meaning that to buy protection against the possibility of the state-backed lender missing an interest payment would cost £662,000 a year on a £10m holding of the bonds. The previous high in RBS CDS was in February 2009 when it reached 649 basis points at the height of the financial crisis that only months before had forced the British government to take an 83pc stake in the bank as it stood on the brink of collapse. The rise in the perceived risk of RBS has been dramatic and only a month ago the cost of insuring the lender’s junior debt against default stood at 385 basis points. CDS quoted on the subordinated debt of other several other major UK banks is currently running at 12-month highs, with Barclays at 445 basis points, HSBC at 192.81 basis points, and even Standard Chartered, which had been relatively immune to the fears, at 243 basis points. “The CDS is essentially an insurance contract used by investors for hedging, so it tends to be much more volatile than the actual interest cost a bank pays on its debt,” said Jon Peace, the London-based head of European banks research at Nomura.

The cost of insuring the junior debt of Royal Bank of Scotland has hit an all-time high as credit market investors have become increasingly nervous about the funding of major Western banks

Credit default swaps on RBS subordinated debt yesterday closed at a new high of 662 basis points, meaning that to buy protection against the...

Rivals snap up RBS chiefs’ shares

CHIEF executive Stephen Hester and his fellow executives at RBS have been heavily offloading their bank’s shares in the past year while exec...

£40bn lost on the bailed-out banks, costing every family £1,500 after plunge in shares

Taxpayers were last night sitting on losses of nearly £40billion in Britain’s basket case banks. It is a bitter blow to Chancellor George Osborne who planned to offload shares in Royal Bank of Scotland and Lloyds Banking Group for a profit before the next general election. The one-time banking giants were saved from collapse during the financial crisis with £65.8billion of public money. It was hoped the stakes would be sold for a healthy profit but shares in both banks have been hammered in the stock market turmoil of recent weeks. They are now worth just £26.6billion – meaning UK taxpayers are nursing a loss of £39.2billion, or £1,500 per household. That is more than the amount Britain spent on the Army, Navy and RAF last year and is more than half the nation’s entire education budget. One leading City analyst said it could be ten years before the Government can sell the banks for a profit. The windfall from an early sale could have been used to pay down the deficit and fund a series of vote-winning tax cuts before polling day in 2015.   More... FTSE endures another day of volatility after plunging 2.5% as fears for global growth spark panic on the markets Public sector borrowing drops to just £20m in July (from £3.5bn in the same month last year) ‘It will be a long haul to profitability to enable repayment to the taxpayer,’ said David Buik, a veteran market commentator at BGC Partners. ‘It could be at least ten years.’ The scale of the paper losses held by the taxpayer will cause fresh anger over the role of multi-millionaire bankers in the build up to the crisis. Sir Fred Goodwin, the disgraced former chief executive of RBS, took the bank to the brink of collapse but still left with a pension worth more than £700,000 a year, which was later reduced. Eric Daniels, the former boss of Lloyds, is still being paid nearly £100,000 a month by the bank for doing nothing. With Gordon Brown, the 59-year-old American was one of the key architects of the controversial takeover of HBOS which plunged the bank into crisis. Losses: Shares in RBS and Lloyds are now worth just £26.6billion Just a year ago the taxpayer was sitting on small gains in RBS and Lloyds. However, Britain spurned its chance to pocket a profit – unlike the U.S. Washington spent hundreds of billions of dollars propping up the American banking system following the collapse of Lehman Brothers in autumn 2008. But it off-loaded its huge investments at a profit as soon as possible, with officials insisting the state should not own the country’s banks. Shares in RBS, 81 per cent owned by the taxpayer, fell another 5.4 per cent yesterday to 20.77p. Lloyds, 41 per cent in taxpayer hands, dropped 4.8 per cent to 28.38p. They have lost more than half their value this year and are now at their lowest levels for two years. The latest sell-off came as the FTSE 100 index dropped another 1 per cent, or 51.47 points, to 5040.76. It followed a near-240 points sell off the previous day. The carnage in the financial markets has also cast doubt over the planned sale of Northern Rock, which was fully nationalised after a run on the bank in 2007. Mr Osborne outlined plans to return the lender to the private sector in his Mansion House speech this year. But it is now feared the banking system and the markets are too brittle. Treasury sources said it is up to UKFI, the company set up by the Government to manage the taxpayer’s stakes, to advise when to sell shares in RBS and Lloyds.

£40bn lost on the bailed-out banks, costing every family £1,500 after plunge in shares

Taxpayers were last night sitting on losses of nearly £40billion in Britain’s basket case banks. It is a bitter blow to Chancellor George Os...

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 ...

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