BEWARE! THE BANKS ARE OUT TO GET YOU!

[Tizer]

Forgive me for being cynical but do I really believe Bob Diamond of Barclay's is being ethical? Or is there a loophole in there somewhere that he can exploit.

Yes, there is a benefit for him and his company. They were expecting the big shareholders to revolt at the annual meeting because the company is giving too much to its execs and not enough to shareholders. So Diamond's move came just before the meeting to try to scupper their protest..

It's what I referred to a few days ago in the above quote. Diamond tried to deflect the revolt but, with a bit of luck, he might not have succeeded. It's about time the big shareholders such as the pension funds made a move against the excessive salaries and bonuses - but then they get them too and they don't want to kill the golden goose! There may also be an attempt by shareholders to get rid of the non-exec director who heads the remuneration committee.

[Stanley]

I have long been suspicious of the 'impartiality' of the remuneration committees. How have they managed to suspend the old boy's network? Too incestuous by half.

[Stanley]

Paul Lewis yesterday examined the illegal way in which the majority of banks have ignored the regulations made in 2009 which allowed customers to unilaterally cancel Continuous Payment arrangements without reference to the service provider. The excuse of a spokesman for the banks was that many have not changed their terms and conditions ignoring the fact that these internal arrangements cannot trump a regulation made by the FSA. Incredible arrogance.

[Stanley]

Many people will find their mortgage payments rise from today as banks increase borrowing costs to compensate for what they say is a drop in income from mortgages. (LINK). Please can I increase my pension/wage because of hard times? Fat chance.....

[Stanley]

Mervyn makes another sensible speech. Good to tell he's about to retire! It's good that someone in authority is ramming home the truth as the banks wriggle on the hook and procrastinate about changes to their structures. They may think this is a good strategy but I'm convinced that in the end it will work against them as more and more people recognise the completely self-centred and arrogant attitudes that this policy betrays. All they are trying to do is keep the money pipeline to their personal accounts open as long as possible. The Gravy Train must be defended! As Mervyn points out, as long as this situation remains we are vulnerable to another bank crisis.

[Tardis]

Bit in the Lancashire telegraph today showing that the Lib Dem election leaflet about Yorkshire bank closing was currently a scare story

[Stanley]

None of the local branches are safe....
I see there was another shareholder revolt at Aviva. Is it spreading like a rash? (LINK)

[Big Kev]

I got a cheque from a credit card company yesterday. It was a refund of PPI payments made over a 6 year period. They had neglected to mention, in the T's&C's, that pre-existing medical conditions were not covered.

All it cost me was 2 stamps, one to the credit card company and one to the financial ombudsman. Much better than the 30% being charged by company's advertising to do it for you.

[Stanley]

Well done Kev. More should follow your example. I can't because I never had to take these things out, more luck than judgement.

[Tizer]

Kev, a perfect example of what the bank's were doing wrong (a cynical scam) and of how to get the compensation without using the PPI scammers (who are piggy backing their scam on the bank's scam - you couldn't make it up if you tried, could you?). Thanks for the example.

[Stanley]

The banks will be watching the EU very carefully. It could be that the days of protecting the banks may come to an end quicker than they thought. Imperative to get the firewall up between high street banking and the casinos.

[Tizer]

Oh Joy! The chief executive of the big insurance company Aviva has resigned because of a shareholder revolt where 59% of those present opposed the company's pay rises. This is the fourth big company in the last few weeks to face a shareholder revolt (but where have these shareholders been in recent years when they were needed? Patrick Hosking in The Times tore into Aviva with a scathing article on Saturday pointing out the hypocrisy - Aviva is one of the biggest shareholders in the UK, holding vast numbers of shares in its pension funds and investment funds. It's own staff have criticised some UK companies such as Barclays for excessive pay packages to executives and yet it's own execs have been paying themselves handsomely. We now wait with baited breath to hear the size of the CEO's severance package - there could be another Aviva shareholder revolt!

[Stanley]

I thought I'd heard that report but didn't believe it..... In PE Number Crunching this week: "£215,000 total paid by 'security solutions group G4S to families of employees killed or injured on the job last year. £13,685,000 total paid in shares and pension pot to G4S chief executive Nick Buckles in the same year". Some way to go yet!

[Tardis]

None of the local branches are safe....

isn't that an approximation of the "end of the world is nigh"? It might happen, but not necessarily within the near future

Maybe if there were more people in the town there would be more to use the banks?

I see the reason that the Yorkshire Bank is losing so many staff is because it was burnt in the commercial property sector, or so they say.

[Stanley]

"isn't that an approximation of the "end of the world is nigh"?"
No, it's a simple statement of fact.
I did something I haven't done for many years, I paid last month's credit card debt by sending a cheque in the post. I could have gone to the bank of course but decided I had better get used to the new 'branch-less banking' regime. That's progress for you.....

[Stanley]

J P Morgan post a loss on derivative trading and shares have dropped. They admit it was self-inflicted. Why am I not devastated by this.....?
Later, after listening to some interesting US reactions to the J P Morgan news. It seems that JPM have suddenly discovered an $800million hole in their current quarter and this is what has triggered the revision of the projected annual figures. It looks as though the bank's risk assessment system has failed and allowed massive trading in derivatives which have gone belly up on them. No surprise to me after listening to my daughter's experience in this field. She said that when they flagged up dodgy algorithms in the system the management reaction was to base any preventative action on how profitable it was not how dangerous. This is a failure of culture and very difficult to legislate against. The commentators this morning were saying that the major effect of this defect is that whilst it wouldn't matter too much in a small hedge fund, it becomes serious when it happens in one of the mega-banks because it spreads alarm and confusion and affects other non-connected institutions. This is happening at the moment as a consequence of this mistake. This reinforces arguments for the reduction in size of these operations and goes directly against that section of the financial system which has been carrying on exactly as they did before, chasing profit at the expense of security. The ironic thing is that the dodgy trading happened in the hedging section of JPM's organisation which was supposed to make investments designed to alleviate potential losses in investments which were not up to scratch.
Janet once told me that the time bomb in the system was the fact that once dodgy algorithms were released into the system they acted like a virus in that it was almost impossible to eradicate them. She reckoned the only sure way was to destroy the operating system physically and start with clean data banks and memory but the systems were so large and complicated that this would not be done as it would mean enormous expense and ceasing trading while the new systems were installed and tested. It sounds to me like a very good argument for savage regulation of the size and activities of these leeches which produce no added value but are simply money-making mechanisms for the rich. But then I would say that wouldn't I.......
One more thing, the fact that operations like this are allowed to exist is the clearest evidence you could have that government is being controlled by these organisations because they are the source of much government funding. In effect they are paying the regulators to leave them alone. If this wasn't the case it would be a no-brainer to curb them and reduce the danger to the general economy. Remember this is what triggered the collapse in 2008.

[Tardis]

JP Morgan $2 billion loss currently cited as a rogue UK operative

Indirectly it means loss of last five years Corporation Tax to Treasury, and probably a few years hence too.

Interesting to note that it doesn't affect the bank's own liquidity

In other news Spain had to nationalise one of it's own banks, and told the rest to shore up their balance sheets. If Santander goes down the UK taxpayer is on the hook for the bail out

[Tizer]

I don't know about a `rogue UK operative' Tardis. JP's chief executive Jamie Dimon blamed it on “errors, sloppiness and bad judgement” and warned it “could get worse”. He said he accepted responsibility and apologised: “These were grievous mistakes, they were self inflicted, we were accountable and we happened to violate our own standards and principles by how we want to operate the company. This is not how we want to run a business.”

[Tardis]

I don't know about a `rogue UK operative' Tardis. JP's chief executive Jamie Dimon blamed it on “errors, sloppiness and bad judgement” and warned it “could get worse”. He said he accepted responsibility and apologised: “These were grievous mistakes, they were self inflicted, we were accountable and we happened to violate our own standards and principles by how we want to operate the company. This is not how we want to run a business.”

yes, one desk which ran outside normal operating proceedure. If it isn't rogue then the whole board needs to resign, today.

[Stanley]

Tiz is right, the evidence is that there is no single 'rogue trader'. The reason that one man has been named in the UK operating division is that the automatic trades governed by algorithms embedded in the security system malfunctioned in his department on his watch. The CEO is quite clear about this and this danger has been recognised for over thirty years. A major part of the bank's risk assessment department is concerned with monitoring this danger and it is evident that it has failed. The problem is that the bigger the volume of trading, the bigger the potential mistake. The bank sees it as a failure of vigilance, the regulators see it as evidence that these banks have been allowed to get too big. The only practical cure is to reduce the volume of trade in each department by splitting them into smaller units. The system can never be fool-proof and the object is to limit the damage when errors occur.

[Tardis]

The activity was exactly what Nick Leeson was jailed for when he brought down Barings

A man who was allowed to do what he wanted because the bank thought he was "doing a good job", when in fact the supervisors had no idea about the unravelling position, and the fact that this one trader was betting ever larger sums just to get his position back.

Will be very surprised if a flurry of P45's is not handed out, now that the FSA is in abeyance before the BoE takes over they might escape without a prosecution.

They will be a bit hard hit anyway as the share price dropped 9%, and that impacts on their own solvency

That is what he was doing, hedging potential losses elsewhere. Therefore I'm guessing the stuff he was hedging against are spectacularly successful for the bank.

[Stanley]

J P Morgan cock-up becomes clearer. Reports this morning (LINK) that Ina Drew, one of the most senior JPM partners has resigned after admitting that she gave the London Office instructions to make trades designed to protect JPM against potential losses in the European markets. This is not a Nick Leeson/rogue trader situation, Ina Drew was the third highest paid partner in JPM and her job was to initiate these sorts of strategic trading decisions designed to ensure that JPM hedged their bets and always ended with a positive balance. She decided the strategies and instructed departments to trade in certain markets. The trades backfired badly because in affect the strategy was wrong and instead of hedging the bets, made them even worse. What has happened here is that in an increasingly complicated market with trillions of dollars being moved on a daily basis the Risk Management model failed. This is where the fault lies and you can bet your last dollar that as well as the publicised resignations some very searching questions are being asked in the Risk Management department. My bet, based on what I know of this field, is that at some point it is quite possible that someone in the RM department questioned the strategy and was overruled. We shall never know this but a lot of banks will be taking notice. Interesting that this happened in one of the most respected and conservative of the merchant banks.

[Tardis]

FT reported at the weekend that head office was not told the full extent of the London dealings. Hidden by London management. Dealings went above and beyond what was approved. Hence fraudulent activity.

Resignations today, mean escort from the building with security, and might mean no imminent prosecutions.

JP Morgan now into news management and containment of the situation. I'm guessing they'll need someone pretty good to clean the fan.

[Tardis]

Also announced that Bankers Bonus this year now at 20% of their level in 2007/2008. Expected to fall again next year because of subdued banking activity through the inability to borrow any money to lend out.

So just wondering how much that Balls levy would actually raise if implemented now.

Either way, massive implications for the wider economy

[Tardis]

JP Morgan Chief Investment Officer just retired

The board is distinctly smalling a rat, wonder how many more P45's will be passed?