Tag Archives: Barclays

“Sorry” seems to be the easiest word.

The head of Barclays investment bank, Rich Ricci is about to retire after having received an £18 MILLION bung from the company. The payment was announced on the last Budget day – probably to ensure that the news was well-and-truly “buried”, with the Chancellor taking on the role of  temporary Barclays shield.

Mr Ricci was at the helm when the LIBOR-rigging scandal broke but it would seem that a quiet gold-plated exit rather than recrimination, continues to be the favoured option for senior bankers.

No-one has suggested any “naughtiness” on Mr Ricci’s part  –  but at worst, the LIBOR stitch-up was a major breakdown in management – by him, by his boss (Bob Diamond) and the Barclays Board. That begs the inevitable questions:

What does a senior banker have to do to face sanction or prosecution? What exactly is the message which the Government and the Regulation Industry wish us all to hear?

It’s probably: “Screw the system, screw the clients, say sorry and piss off with a handful of wedge.”

Or are we missing something?

Here’s a Mirror assessment of Mr Ricci from two years ago: http://www.mirror.co.uk/news/uk-news/inside-the-life-of-barclays-banker-rich-115678

Barclays Bob

Some may be wondering about the timing of Bob Diamond’s decision to “walk” from what is the best-paid and most high-profile banking job in the UK. Some may believe that he was hounded out by the banking establishment.

I reckon that he walked in order to free himself-up ahead of the ridiculous inquisition by the Treasury Select Committee. I sincerely hope that they leave their briefcases on the table in front of them and remember to wear tin hats – because Barclays Bob is going to give them hell. They will be forced to listen to a few home truths about the conduct of not-only Barclays but the entire politico-banking establishment.

Believe me, Bob knows where ALL the bodies are buried and he’s the first guest at the Wake.

As usual, we’ve had the puerile Punch and Judy exchange between the Prime Minister and the Leader of the Opposition. Both have diminished themselves through their conduct over the last wee. (If that was at all possible)

Meanwhile, the media (and I include the Social Media) have seen an outpouring of hysteria by individuals who hadn’t heard of Libor before last Wednesday. Mob hysteria at its worst.

Mind you, that is so typical here in the UK. First we “denounce”, then the Inquisition, followed by the Inquiry and then it’s back to normal as we look for the next victim.

If there have been transactions which have inflated profits, I hope that in their haste, government Ministers have not forgotten that there may be billions in the Exchequer which will have to be repaid if tax has been generated on illicit transactions.  Inflated bonuses have also been subject to millions in taxation.

It’s not only the banks who are going to have a lot to unravel – but of course, these days no-one thinks before they act.

Starting with the baying politicians and media, a breathtaking lack of understanding of complex banking processes has clearly been demonstrated. The same lack of understanding which was exhibited by the Directors of Banks prior-to, during and certainly after the last bank crisis.

Make no mistake both the Bank of England as well as the Financial Services Authority have been complicit. Those pre-Lehmans LIBOR deals, probably saved the British Government from having to bail out Barclays and as other banks have also doubtless been guilty of the same misdemeanours, the Government will have saved billions on the 2008 bailouts.

(What I mean to say is that the banks were bailed out  – but they weren’t bailed out enough. The last four years of  “rebuilding balance sheets”, non-lending etc have clearly demonstrated that as usual, the government only did half of the job)

It is the Bank of England, the Financial Services Authority and the grubby British Bankers Association which should be standing shoulder-to-shoulder in the dock and hopefully after Bob Diamond has said what he really thinks and knows, they’ll be lined up and taken down.

Today, Mr Diamond, I’m on your side.

Show them Hell!

Barclays out of CONTROL?

A few years ago, I moved away from teaching and coaching the “soft” skills of management and have been concentrating much more on the “hard” skills.

One of the hard skills of management, which everyone running a department or process should know,  is one which appears to be missing in MOST businesses. It is the art of Business Control.

It is very straightforward: POPS.

POPS is a very simple but effective method of structured management thinking.

If the POLICY, ORGANISATION, PROCEDURES, SUPERVISION Business Controls had been applied to the Banking Industry, we would never have had a financial crisis.

“POLICY” is the high-level control and is the responsibility of the Board and Senior Management. They not-only put together the Policy but their duty is to ensure that everything which happens within the organisation is in keeping with Company Policy.

For instance, if  traders fiddle with interest rates and interest rates have been fiddled-with for years without anyone being brought to book – they may be forgiven for assuming that fiddling with interest rates is part of the bank’s Policy and culture.

“ORGANISATION” is about the people. Are the right people doing a particular job? Have they been trained? Have they been communicated with? Do they know what they can and cannot do? Is there a good Management Structure which can report up to Board level?

“PROCEDURES”  : For instance, is a trade or block of trades recorded and checked? Are there “snap” checks and audits designed to check that company Procedures are being adhered to.

SUPERVISION is a day-to-day control (so is the Procedures Control).  This control is the responsibility of the “one-up” manager. The one who is there not the one at meetings. Very often , things happen without day-to-day supervision. For instance, if a trader makes a few dodgy deals, a good manager’s responsibility is to (at least) make the trader know that he could be caught.

Here’s an example of how a thorough Management Audit which looks at specific Business Controls can unearth the REAL cause of an issue. It is also surprising how many breakdowns and corporate crises are the result of a bad or non-existent high-level POLICY control.

In 1987, the car-ferry, The Herald of Free Enterprise sank in Zeebrugge Harbour and 193 people died. There appeared to be a very simple explanation for the “accident”.   The loading doors at the front of the boat (through which cars entered the boat) had been left open.

However, a proper structured  investigation  designed to identify the Root Cause of the disaster was needed.

The doors were left open because one man was asleep when he should have pressed the button to close the doors. Therefore, the PROCEDURES control had broken down. The procedure was that when the boat was about to move, a button would be pressed on the bridge. That would trigger the man to press the button to close the doors.

The direct SUPERVISION control was  was non-existent because the man who should have pressed the button was managed by a senior man who was only in charge of ferry car-parking and not door-closing.

In addition, there was no PROCEDURE for anyone to confirm to the bridge whether the doors were closed or not. It was assumed that once the “close the doors”  button had been pressed, that the doors were closed.

The ORGANISATION control is about the people involved in the process. In this case, the organisation consisted of just ONE lowly manual worker who, on this occasion, was asleep. The  First Officer who pressed his button, immediately assumed that once he had pressed it, his job was over.

The last Control is the highest-level  – POLICY. This control is administered right at the top of an organisation –  by the Senior Management and the Board of Directors.

One may be forgiven for thinking that there is absolutely no way that such a high-level control could possibly have anything at all to do with someone forgetting to close the loading-doors on a ferry.

However, the Root Cause of the Herald Of Free Enterprise disaster WAS a breakdown in the POLICY control.

The Company’s POLICY was to turn the ferry around in 15 minutes.

Consequently, the man who should have pushed the button was tired because he had not slept properly for two days and was already asleep when the boat had docked.

As is often the case, the ultimate responsibility for the sinking belonged to the management.

Today, Barclays banks has a very similar situation in respect of its traders who are alleged to have manipulated LIBOR for purposes of profit!

Was there proper SUPERVISION? Were PROCEDURES in place to guard against improper behaviour? Was the ORGANISATION right? Were the traders only (as far as they understood) acting within Barclays’  POLICY? Did Barclays have a “SELL, SELL, SELL!!!” Policy which encouraged short-cuts and cheating?

A measured, thought-through approach is needed.

The reaction by the media and politicians already suggests that instead, there will be a free-for-all, accusatory, disorganised  non-process, preceded by the customary witch-hunt and a Lawyer Benefit in the shape of an inquiry.

What is REALLY NEEDED is a Management Audit delivered by a team of sceptics NOT PAID FOR by Barclays.

That is to say –NOT Pricewaterhouse Coopers and certainly NOT those Muppets at the Financial Services Authority.

Diamond is forever

” These stiffs earn £65K. Wooooo! I’m so scared!!”

Barclays boss, Bob Diamond,  was today “grilled” by the Treasury Select Committee  and once again showed that he is slicker than frozen catshit on wet ice.

He, of course was not the ideal banker to be interviewed on certain topics, especially as Barclays did not source any funds from the British government during the banking crisis. Instead, they borrowed cash primarily from the Qatar Investment Authority (QIA) which was an existing Barclays shareholder.  Barclays had also held talks with  the Libyan Investment Authority and Russia’s VTB and Sberbank banking groups.

At the inquiry Diamond said (quite rightly), “No bank should ever be a burden on the taxpayer.” As someone who had run  Barclays Capital for 14 years, prior to being given the reins to the Barclays Retail operation, he had known where to source money when times became tough for Barclays in 2008.  He’d done it without any UK-focused sentimentality, whereas the rest of the industry ran to the Treasury for handouts. His exact quote: “Banks should be allowed to fail…It’s not okay for taxpayers to have to bail out banks.”

He was quite right. If a bank failed, it would be bought by another bank. Hopefully one with a competent Board and management.

Inevitably, that old chestnut, the banker bonus  reared its ugly head during rather tense exchanges but realistically, Diamond knows that he can earn what he damn-well pleases. Perhaps he wasn’t the ideal banker to defend bonuses. He has foregone his bonus for the last two years but there is little doubt that he can easily afford to do so. In 2007, he earned £21 million.

Barclays is not a government charity basket-case,  unlike the Royal Bank of Scotland whose CEO, Stephen Hester is set for a £2.5 million bonus. (As the government owns 83% of RBS shares, that will, in effect make Hester the UK’s highest paid Civil Servant).

Diamond expressed his belief in the Retail-Investment banking model, saying that the arrangement provided stability and was a “great starting position”. Many MPs believe that banks should be broken up  so that a clear distinction can be drawn between Retail (personal banking) and Investment (so-called Casino banking). In reality, they have always been separate operations and really only come together for accounting purposes.

It has taken the government a long time to come to the conclusion that they are totally impotent as far as banker bonuses are concerned and that they have effectively been told by the banks to “butt-out“.  As a concession though, the banks are expected to say that they are committed to lend more to small businesses. It remains to be seen whether this happens.

The banking industry claims that it is lending, whereas the business sector says that banks are not lending enough and when they do lend, it is at exorbitant interest rates with  borrowers having to jump through a series of bank-designed fiery hoops before banks do deign to lend.

However, Diamond said that demand for commercial loans had subsided.

Once again, Diamond demonstrated that our MPs, who are a motley crew of ex-lawyers, academics, union men and local councillors are no match for the denizens which swim the murky waters of the world’s banking system

PREVIOUS BOB DIAMOND

CHANCELLOR GEORGE OSBORNE’S VIEW ON BONUSES? BUSINESS AS USUAL

Vince Cable

Have you noticed how quiet Vince Cable is these days? He used to be the most vocal politician on the subject of both “Casino Banking” and the banker bonus. It seems that after being told never again to crap in the Coalition’s cosy little nest, he has had his wrist slapped and been muzzled.

Barclays rip-off?

 

London’s  Institute of Directors (IoD) has completed  a survey in order to see for themselves how the claim by the banking industry that it is lending freely, stacks up in the real world.  The Chancellor and Prime Minister have both asked the bankers to do us all a great favour and please lend money to commerce. The bankers all tell us that they are lending. So who is right?

The IoD’s figures tell us that as recently as 2001, 45% of its members financed their businesses through bank loans. Today, the figure is  28% and falling. There must therefore be a gap in the market  – so where are businesses going for this shortfall? Who is lending them badly-needed money? How are they keeping their businesses afloat – especially as all those recently surveyed are under the impression that 60% of them are being turned down by the banks?

Business and commerce must be going somewhere  in order to survive and to plug this fiscal vacuum. The sad  and surprising fact is that many businesses are relying on credit cards for unsecured finance. That is doubly worrying when you realise that, in spite of the bank rate being at an all-time low, the interest rates on credit cards are at a 12-year high!

So the banks are lending! Unfortunately, much of the lending is either on credit cards or at eye-watering bank interest rates! The zero-percent card-transfer deals which many businessman are taking advantage of will not be around for ever. Consequently, there are many businesses already time-stamped with pretty firm “sell-by” dates . The light at the end of the tunnel is the oncoming banking express tearing down the line for its money – and its heading straight for you, Mr Businessman!

There have been innumerable reported instances of sole-traders or company directors going to their banks with  business plans, projections, cashflows, forecasts and  order books; being grilled  and then told “we’ll get back to you.”  Many hear nothing and  those who do hear something are made to wait weeks or sometimes months for a decision.  Very often, the conditions attached to any proposed lending are so onerous  (rip-off interest rates, penalties, conditions, personal guarantees, charges on private property etc) that a back-street money lender or even a credit card presents an attractive alternative.

Whatever happened to bankers competing for our business?

We have now reached the stage in our so-called “economy” when the banks have ceased to be the service industry which used to feed funds to commerce. Banks  are now designed to leech money out of the econ0my like a parasitic growth which has embedded itself so deeply as to make itself inoperable because its removal would kill the already-dying patient.  Meanwhile, all that the patient can do is suffer while the parasite sucks the life out of it.

The present government has been reduced to the role of sympathetic but impotent bedside spectator holding a bag of grapes which it mistakenly feeds not to the patient but to the parasite.

Where is the Bank of England? What plans does it have to boot the system into some sort of useful activity? What are its initiatives to put the brakes on the excesses of this continuing banking obscenity?

Well, we are happy to report that Mervyn Kng, the Governor of the BoE has…..“expressed concern”.  He has said that  the economic recovery “could be jeopardised if businesses are starved of funds”. No flies on Mervyn then. With such astuteness, he seems to be  punching way above his pay grade.

The next bit of Mervyn’s pronouncement carries no irony or wit – Mervyn  is not renowned for his “stand-up” skills. He says that “struggling banks are rebuilding their balance sheets.” Do we have any idea how long this construction project is likely to take? Does it have anything to do with bank bonuses or profits measured in billions? What exactly is “rebuilding balance sheets”?

The banks will tell you that we are confusing the Retail Banking arm (the one that you see on the High Street and which should be lending money to small businesses) and the Investment Banking  arm  ( the one which is plundering Stock Markets for profit and the one where most huge bonuses are paid). Yes, we are a bit befuddled, so here’s an idea: Use the Investment Bank to subsidise the Retail Bank and instead of declaring poo-inducing profits, the Investment Bank can help the poor Retail Bank to “rebuild” its balance sheet. Is that too simple? Or is it easier to plead Retail Bank poverty (and an inability to lend at reasonable rates) but at the same time continue to generate those largely illusory Investment Bank profits?

We are all used to the Chancellor’s, the Prime Minister’s and most of all, Mervyn King’s mealy-mouthed reactions, so let us put it into plain English. If the banking system continues this unchecked rape of the economy, there will be no economic recovery.

It is in this context that we herald the dawn of the banking industry’s profit reporting season by congratulating Barclays Bank on its  excellent  annual pre-tax profit of  £11.6 billion.

 

 

Piggy Bankers

Here’s the story so far. A bank lends money to anyone who can steam up a mirror, the Chief Executive is sacked but manages to hold onto a huge pay-off and an eye-watering pension. The government then raids the Bank of England every couple of months and continues to scoop-up more and more money which it tips into the bank by the BILLION.

The Investment bankers then take this free money and use it to gamble on the Stock Exchange which is heading upwards  because the government is also tipping  money into other banks and into the economy itself. Regrettably, the government’s munificence leaves it with huge debts but it has vowed to do ANYTHING for the banks because the banks USED to be an important part of the United Kingdom’s economy.

Unsurprisingly, the bankers’ “gambles” earn the bank some dodgy money. Unfortunately, they forget that in a rising market, any muppet can make a profit but nevertheless they demand huge rewards for their cleverness – in the shape of bonuses.

The unelected Lord Myners who is masquerading under the soubriquet of “City Minister” announces that at least 5,000 bankers in the United Kingdom will earn more that £1 million EACH. That’s a total of £5 BILLION. One would be forgiven for assuming that even if they’re on a 10% commission, they should have produced profits of at least £50 billion. However, in reality, £50 billion represents just one quarter of the £200 billion “quantitative easing” bail-out money handed over to them in the few months by a government paralysed  by the fear of upsetting the banks. The total that has been pumped into the banks since October 2008 is £850 billion!!

Taking the Royal Bank of Scotland as an example, their investment banking division made £6 billion this year and they intend to pay 25% of that in bonuses. That is an outrageous figure and should be stopped. Especially as the rise in commodity prices, which has fuelled most of their profits, had absolutely NOTHING to do with them.

The unelected Lord Mandelson calls for restraint.

The Royal Bank of Scotland will be paying a total of £2 billion in bonuses to its staff. There is an unsubstantiated rumour that the government is being blackmailed by the RBS board who say that they will resign if the government somehow manages to block the bonuses. They are all forgetting that they are the same people who were around when the bank was run into the ground. A year ago, they faced the real prospect of spending   Christmas 2009  paying for their children’s Christmas presents out of their Jobseekers Allowance. That is how close it was.

Unfortunately, they were saved by the government, so they never actually managed to set foot in the real world. Hopefully they will –  just after the next banking crisis.

VInce Cable has said that the government should call the bankers’ bluff. If they want to resign – let them resign.

The directors’ duty is to the shareholders which means that they have to listen-to and obey the shareholders. The majority shareholder at RBS is the United Kingdom Government. The Government should step in today and sack the lot of them. The bankers are playing a very high-risk game. Mind you, that’s what they do for a living – but with taxpayers ‘ money, supported by a taxpayers’ guarantee that if they lose their stake money, the taxpayer will provide them with more. 

The newly-anointed Chief Executive of RBS, Stephen Hester was considered to be a “government man” – a steady hand on the tiller. However, even he is showing dissent by saying that the bank will lose “valuable staff” if it is unable to pay bonuses with lots of noughts.

The argument that bonuses need to be paid in order to attract and retain “talent” is exactly the same fatuous argument which is bankrupting most football clubs.

There are two months left before the bonuses are supposed to be paid. Let us hope that everyone concerned uses the intervening time wisely.

(Barclays is about to increase the pay of 22,000 investment bankers by 150% – in lieu of the proposed cut in bonuses. Clever!)

FTSE Okey Cokey

There is a   lack of economic data or much corporate news from The United Kingdom or or the United States, so the uncertainty in the market is likely to continue but trading will probably be quite volatile. Current volumes will continue to be low although they may pick up when trading begins in the U.S this afternoon. Just a hint of more bad news such as that from  Dubai yesterday will be enough to further depress prices.

The biggest underlying fear is that Dubai’s problems could reignite the financial turmoil of the credit crisis. That would lower global demand for a whole range of commodities, including oil.  Yesterday, state-owned Dubai World said that it would delay repaying some of its debt.  Dubai World has a debt of $36 billion which is a significant percentage of Dubai’s total debt of $80 billion.

The debt delay plea has led to major credit ratings agencies downgrading a number of state-backed Dubai companies. Some credit agencies are suggesting that Dubai’s inability to make next month’s payment of $3.6 billion is tantamount to a default.

Dubai is a part of the United Arab Emirates (UAE) and its business model appears to be entirely based on building and development. Its long-term prognosis looks reasonable and Dubai will probably look towards its cash-rich neighbour Abu Dhabi for a bail-out. Currently it seems that borrowings were made against vastly-inflated property prices so in spite of Dubai being surrounded by oil-cash, there is still a likelihood that Dubai World will not repay all of its debt and there may have to be further write-downs within the banking industry.  SEE HERE.

In early London trading today, it looked as if the banks and the miners would regain some of yesterday’s losses, although the market opened down by about 1%. However, in early trading, the market eased back and by mid-morning the FTSE 100 was nudging 5200.

There has been a leak from within the Treasury which suggests that  Chancellor Alistair Darling will downgrade the 2009 economic outlook when he presents his December pre-budget report . However, he will still make bullish noises and predict that  economic  growth is set to resume  at the turn of the year.

Did you call me a Banker?

 

Over the last week-or-so, there has been a slight upswing in the markets as investors  focus on economies rather than on the global banking crisis. 

The sad fact however is that the banking sector is still having a vastly negative effect on the economy:

1. The banks are not lending.

2. They are “upping” interest rates to businesses as well as personal borrowers – in spite of prevailing downward pressures on rates.

One could argue that banks have behaved fraudulently over the last few years. The mere act of keeping dodgy investments “off balance sheet” (hidden) means that these loss-making institutions have been declaring fictitious profits which have enabled them to pay executive bonuses.

Barclays has gone to the Middle East for a cash injection. Why? Would their books not stand up to detailed government scrutiny and would government money have strings attached? Such as parachute-free executive resignations?

Barclays was already after a £5 billion cash injection in May 2008 and now  appears to have secured £6.5 billion jointly from the Quatar and Libyan Investment Authorities. It’ll cost them and let’s hope that when the time comes, they are able to repay the loans to their new masters.

Barclays is currently behaving like a teacher’s pet and will be the first bank to participate in the European Investment Bank’s £4billion scheme to provide cheap loans for small businesses.

In the States, the screens were placed round Goldman Sachs with almost indecent haste. Why? Did they have an unacceptable exposure to SIVs and SIV-lites? We’ll never know – unless of course the new Washington administration is in a surgical mood and decides to take a scalpel to its own banking system.

Sadly, the banks seem managerially-unequipped to deal with the current business chaos and if they need “cash in” , they simply jack-up rates and withdraw credit in the vain hope of temporarily tarting up their balance sheets, prior to the inevitable write-offs 12 months later. 

They should take their own business advice and nurture the businesses who will provide them with future cash-flow. One of the great banking paradoxes is that when a client is in trouble, the bank’s tendency is to increase his loan-and-overdraft rates. That’s banking logic – if someone cannot afford £1000 per month, increase it to £1100, sit back and watch them choke but give them lots of advice.

The other paradox is that of bankers providing “business advice”. The individuals who need  banking as a career are diametrically opposed to their clients who have chosen the risky route of creating wealth through entrepreneurship. 

Yet, it is the entrepreneurs who have to sit and nod as their bank’s “business advisor” or “consultant” tells them how to run a business. Bankrupt banks providing advice through the medium of bankrupt ideas and penniless platitudes – priceless!

One more thought: did the government complete a detailed audit of the banks prior to agreeing to support them with taxpayers’ funds? Or did they accept their word as gentlemen?