Banks given new rules on bonuses

Banks given new rules on bonuses
New rules on how financial institutions should determine pay and bonuses for staff have been set out by the Financial Services Authority (FSA).

It wants to see bankers' pay deals linked far more closely with the long-term profitability of the banks.

The FSA says that bonuses should not be guaranteed for more than a year, and that senior employees should have their bonuses spread over three years.

Many believe that big bonuses led to excessive risk-taking at banks.

The new code is designed specifically to discourage short-term risk-taking, which many argue was an important factor in triggering the financial crisis.

The FSA is determined that banks' remuneration policies should be consistent with, and promote, effective risk management Hector Sants, FSA chief executive

"The fundamental objective [of the rules] is to sustain market confidence and promote financial stability through removing the incentives for inappropriate risk taking by firms," the FSA said.

But it said that "inappropriate remuneration policies" were a "contributory, rather than a dominant factor" in the crisis.

'Right incentives'

Hector Sants, head of the FSA, said the regulator was "determined that banks' remuneration policies should be consistent with, and promote, effective risk management".

The FSA said there were two main objectives behind the code of practice.

First, to ensure that boards focus more closely on making sure that "the total amount [of pay and bonuses] distributed by a firm is consistent with good risk management and sustainability".

And second, to ensure that overall pay, including bonuses, "provides the right incentives".

To this end, a number of new principles have been added to the FSA's financial regulation handbook.

In particular, these make clear that bonuses should only be guaranteed for 12 months, and that senior employees will see two-thirds of their bonuses paid out over three years.

Mr Sants said the new rules would take effect from January 2010.

The FSA wants banks to submit their remuneration policies to it by the end of October. Firms that do not comply with the code "could face enforcement action", or be forced to hold more cash in reserve should they want to pursue risky strategies.

However, it conceded that the code "is not going to change the bonus culture overnight".

The FSA also reduced the number of banks affected by the code to 26, down from the 47 originally covered.

The Association of British Insurers described the new rules as "an important step forward."

"The new version [of the handbook] is much more likely to deliver the desired outcome without excessive compliance burdens," it added.

Nicholas Stretch at City law firm CMS Cameron McKenna said: "This is not the end of the rules for rewards for bank employees.

"There is still substantial political pressure for capping awards, greater public disclosure and naming and shaming in this sector, both in the UK and internationally, which is likely to continue for some time."

Relocation concerns

The FSA launched a consultation in February looking at measures to discourage excessive risk-taking, and published a draft version of the code in March.

Bankers expressed concerns that the proposed measures on bonuses, some of which have been included in the final code, would encourage institutions to relocate employees outside of the UK, to get round the new rules.

This could have serious implications for the City's position as the world's leading financial centre, and for the UK's tax take, bankers argue.

However, recently there have been concerns that large bonuses are returning amid a boom in profits from investment banking.

And there have been calls for stricter rules on pay from those who criticise what they see as excessive bonuses.

sourced from THE BBC

Should we pull the plug - Northern Rock makes hefty losses

"is it now time to let Northern Rock go, can we all continue to support the Bank with our own money. If this was a company then it would have gone into adminstration by know. Lets pull the plug on Northern Rock and let it close down - I know at lot of people will loss money but we can't afford to support the bank / share holders any longer"

by N Blakeley - recession 2009

 

Northern Rock has reported a loss of £724.2m for the first six months of 2009, compared with a loss of £585.4m in the first half of last year.

The nationalised bank said that 3.92% of its mortgage loans were more than three months in arrears, well above the national average of 2.39%.

It currently owes the government £10.9bn, but is waiting for European regulatory clearance for more funding.

Northern Rock was nationalised in February 2008

It had to be bailed out by taxpayers in 2007, when its model of borrowing short-term funds from wholesale markets to lend to mortgage borrowers was hit by the credit crunch.

It reported impairment losses from loans and advances of £602.2m for the first six months of the year, compared with £191.6m for the same period the year before.

Barclays profit up to almost £3bn

Profits at Barclays' investment banking arm doubled Barclays has announced an 8% rise in first-half profits, boosted by its investment banking division.

Pre-tax profits for the first six months came in at £2.98bn ($5bn), although this was slightly below analysts' forecasts.

Its investment bank Barclays Capital saw profits double to more than £1bn, having picked up some still-successful operations from Lehman Brothers.

But profits at Barclays' UK retail banking arm more than halved.

Profits at Barclays' investment banking arm doubled

Banking reform proposals outlined

Opposition parties are setting out details of how they would regulate banking, following the loss of billions of pounds in the credit crunch.

Lib Dem Treasury spokesman Vince Cable is expected to argue that large, failed UK banks are the "financial equivalent" of the Chernobyl nuclear disaster.

And taxpayer-owned Lloyds and Royal Bank of Scotland should be broken up.

Meanwhile, Shadow Chancellor George Osborne wants to give the Bank of England more regulation powers.

However, he also wants to curb the personal power of the governor of the Bank by vesting the responsibility for supervising financial institutions in a new financial policy committee. This would include independent appointees.

The Tories, in their 52-page "plan for sound banking", also propose a raft of measures to protect and empower consumers.

These would include transforming the rump of the current Financial Service Authority (FSA) into a consumer protection agency and also forcing banks to give the consumers more useful information on what they charge.

Treasury minister Lord Myners called the proposals "window dressing that ignore the failures that led to the global financial crisis".

"While George Osborne talks about who's in charge, we are focused on the lessons of the crisis, including greater scrutiny of the shadow banking sector and a crackdown on excessive City bonuses.

"The Tory proposals would abolish an independent, expert regulator, while diverting attention from banks that took excessive risks that led to this crisis."

'Not hostile'

Meanwhile, Mr Cable will use a speech later to argue major reform is needed to make banks a lesser threat to the UK economy.

He will tell the London Stock Exchange he believes there is a long-term role for state banking, and will argue the banks in which taxpayers have a stake should be broken up into smaller parts before being returned to private ownership.

Tory financial plans
Mr Cable will also call for highly-paid bankers to publish details of their pay and bonuses and will repeat his calls for the FSA to keep its role as banking regulator.

"Some aspects of the financial services industry are simply too big for the British economy to manage safely," he will say.

"The large, failed, British banks are the financial equivalent of Chernobyl. Like the former Soviet Union, the UK became over-reliant on dangerous financial reactors."

To prevent Britain from becoming the next Iceland, "radical safety measures" were needed, he will argue.

"My approach to the City is not one of hostility, or of obsequiousness. I recognise its importance.

"But it needs 'tough love', not the freedom to run amok."

Earlier this month, Chancellor Alistair Darling said banks would have to hold more capital and announced plans to strengthen regulation.

He intends to set up a new Council for Financial Stability, which would see the FSA, the Bank of England and the Treasury meeting regularly and reporting on the systemic risks to financial stability.

sourced from THE BBC

Ten US banks fail recession test

May 8 2009

US banks would need a total of £50 billion in additional funds to survive if the recession deepens, the results of government "stress tests" showed.

An assessment of the robustness of the sector found that 10 of the 19 largest banks would need to find extra capital to see them through the bad times.

Bank of America faces the largest potential shortfall of £23 billion.

It joined a list of institutions that also includes Citigroup and Wells Fargo.

The stress tests were designed to gauge whether America's 19 largest banks have enough capital to see them through a deepening of the recession.

After Bank of America, Wells Fargo was found to have the second largest shortfall of £9.1 billion, followed by GMAC with a potential £7.6 billion black hole.

Ten US banks fail recession test

May 8 2009

US banks would need a total of £50 billion in additional funds to survive if the recession deepens, the results of government "stress tests" showed.

An assessment of the robustness of the sector found that 10 of the 19 largest banks would need to find extra capital to see them through the bad times.

Bank of America faces the largest potential shortfall of £23 billion.

It joined a list of institutions that also includes Citigroup and Wells Fargo.

The stress tests were designed to gauge whether America's 19 largest banks have enough capital to see them through a deepening of the recession.

After Bank of America, Wells Fargo was found to have the second largest shortfall of £9.1 billion, followed by GMAC with a potential £7.6 billion black hole.

Citigroup is being asked to raise an additional £3.3 billion to make it secure. Goldman Sachs, JP Morgan Chase and American Express were among the nine banks deemed not to need to raise additional funds.

The stress tests were designed to help regulators assess the ongoing financial stability of US banks.

They look at two models of the economy going forward - one in which unemployment reaches 8.8% next year and house prices drop a further 14%. In the second scenario, joblessness rises to 10.3% and property slips another 22%.

Banks facing a shortfall under the model will have to come up with a plan to raise additional capital by mid June.

 If they cannot do so independently, they may have to turn to the government's £466 billion financial bailout fund.

sourced from Runcorn and Widnes Weekly News

Indicators of economic depression ending-- Google searches vs. job losses

read the full article at examiner.com

Larry Summers, Obama's top economic advisor has summed up the state of the economy today in what Forbes online is calling "promising", but somewhat "obscure" signs of recovery.

 

The Job Impact of the American Recovery and Reinvestment Plan

• "Earlier this year traders were betting there was a one-in-six chance that the Dow would fall below 5,000, he said. Now they say it's one-in-a-hundred.


• The chances that corporate bonds will default has fallen by a third.


• And Google searches for 'economic depression,' which surged to quadruple their normal levels, have since returned to normal. (A growing number of economists do believe that the recession has ended or will end in coming months.)"

read the full article at  examiner.com

Indicators of economic depression ending-- Google searches vs. job losses

read the full article at examiner.com

Larry Summers, Obama's top economic advisor has summed up the state of the economy today in what Forbes online is calling "promising", but somewhat "obscure" signs of recovery.

 

The Job Impact of the American Recovery and Reinvestment Plan

• "Earlier this year traders were betting there was a one-in-six chance that the Dow would fall below 5,000, he said. Now they say it's one-in-a-hundred.


• The chances that corporate bonds will default has fallen by a third.


• And Google searches for 'economic depression,' which surged to quadruple their normal levels, have since returned to normal. (A growing number of economists do believe that the recession has ended or will end in coming months.)"

read the full article at  examiner.com

Theatre and the recession

Hi

I went to the theatre this week to the premier of ENRON, a theatrical production based on the actions and collapse of the giant sized company ENRON.

As I though some of your might find this quite interesting i have created a new page entitled ENRON. As I live in Britain the whole Enron thing back in 2001 didn't really mean much, but know we are in the economical problems that we are looking back at began is interesting.

please follow this link ENRON

Theatre and the recession

Hi

I went to the theatre this week to the premier of ENRON, a theatrical production based on the actions and collapse of the giant sized company ENRON.

As I though some of your might find this quite interesting i have created a new page entitled ENRON. As I live in Britain the whole Enron thing back in 2001 didn't really mean much, but know we are in the economical problems that we are looking back at began is interesting.

please follow this link ENRON

UK economy shrinking at fastest rate in more than 50 years

Downward revisions to official statistics show output fell 2.4% in the first three months of the year and the recession started three months earlier than thought

The recession facing Britain is even deeper than had been thought and started more than a year ago, it was revealed today.

National income fell in the first quarter of this year by 2.4%, the biggest drop since 1958, as the Office for National Statistics revised its initial estimate of 1.9%.

The figures are much worse than expected. Extended to the whole year, the drop in output in the January to March period is now equal to 4.9% – the worst since records began in 1948.

"We hope the recovery comes as soon as possible but sadly we now know this recession has been longer and deeper than we had thought," said shadow chancellor George Osborne.

"This also means that in the future unemployment will be higher and Labour's debt crisis will be even worse."

Although GDP fell 2.4% in the third quarter of 1979 and first quarter of 1974, statisticians said these were rounded from 2.36% or 2.37%. The figure for this year was exactly 2.4%.

The revision is one of the biggest ever made by the ONS and it said the reasons were changes to its estimate of the construction and services sectors.

The ONS also revised down its figure for the second quarter of last year to -0.1% from zero, meaning the recession started earlier than previously thought. And the fourth quarter of 2008 figure was revised down to a fall of 1.8%.

"The recession, which now begins in the second quarter of 2008 rather than the third, is now thought to be quite a bit deeper than previously thought, and is looking ominously like the early 1980s vintage," said Danny Gabay of Fathom Consulting.

Critics of the Bank of England who called for big interest rate cuts in the first half of last year, will feel justified by the data, since the Bank's monetary policy committee argued into last autumn that there was little likelihood of a recession occurring and delayed rate cuts until October. In fact, the economy had entered one last spring.

Separately, the Trades Union Congress said that while there were signs of "green shoots" in the economy, this was more to do with an easing of the pace of the fall in output rather than that a big recovery was under way.

"This recession is already worse than the 1990s one and is likely to be worse than that of the 1980s," said Richard Excel, TUC labour market expert. "It has been very severe and we are probably only half way through. It will be quite some time until employment and growth return to pre-recession levels."

Paul Gregg, labour market expert from Bristol University, noted that unemployment had started rising earlier in this recession than in previous ones and was "encouraged" that monthly rises in the claimant count appeared to be slowing down.

sourced from The Guardian

UK economy shrinking at fastest rate in more than 50 years

Downward revisions to official statistics show output fell 2.4% in the first three months of the year and the recession started three months earlier than thought

The recession facing Britain is even deeper than had been thought and started more than a year ago, it was revealed today.

National income fell in the first quarter of this year by 2.4%, the biggest drop since 1958, as the Office for National Statistics revised its initial estimate of 1.9%.

The figures are much worse than expected. Extended to the whole year, the drop in output in the January to March period is now equal to 4.9% – the worst since records began in 1948.

"We hope the recovery comes as soon as possible but sadly we now know this recession has been longer and deeper than we had thought," said shadow chancellor George Osborne.

"This also means that in the future unemployment will be higher and Labour's debt crisis will be even worse."

Although GDP fell 2.4% in the third quarter of 1979 and first quarter of 1974, statisticians said these were rounded from 2.36% or 2.37%. The figure for this year was exactly 2.4%.

The revision is one of the biggest ever made by the ONS and it said the reasons were changes to its estimate of the construction and services sectors.

The ONS also revised down its figure for the second quarter of last year to -0.1% from zero, meaning the recession started earlier than previously thought. And the fourth quarter of 2008 figure was revised down to a fall of 1.8%.

"The recession, which now begins in the second quarter of 2008 rather than the third, is now thought to be quite a bit deeper than previously thought, and is looking ominously like the early 1980s vintage," said Danny Gabay of Fathom Consulting.

Critics of the Bank of England who called for big interest rate cuts in the first half of last year, will feel justified by the data, since the Bank's monetary policy committee argued into last autumn that there was little likelihood of a recession occurring and delayed rate cuts until October. In fact, the economy had entered one last spring.

Separately, the Trades Union Congress said that while there were signs of "green shoots" in the economy, this was more to do with an easing of the pace of the fall in output rather than that a big recovery was under way.

"This recession is already worse than the 1990s one and is likely to be worse than that of the 1980s," said Richard Excel, TUC labour market expert. "It has been very severe and we are probably only half way through. It will be quite some time until employment and growth return to pre-recession levels."

Paul Gregg, labour market expert from Bristol University, noted that unemployment had started rising earlier in this recession than in previous ones and was "encouraged" that monthly rises in the claimant count appeared to be slowing down.

sourced from The Guardian

NEW blog in development

[caption id="attachment_571" align="aligncenter" width="310" caption="allaboutgrub"][/caption]

Hi all, I have been developing a new blog please come and visit it

allaboutgrub.wordpress.com

 - this blog is all about food, ingredients and where to buy good quality food from - add a marker to my allaboutgrub map to tell others about great places to eat out or places to buy great food from -

"go on share your food experiences with others" 

NEW blog in development

[caption id="attachment_571" align="aligncenter" width="310" caption="allaboutgrub"][/caption]

Hi all, I have been developing a new blog please come and visit it

allaboutgrub.wordpress.com

 - this blog is all about food, ingredients and where to buy good quality food from - add a marker to my allaboutgrub map to tell others about great places to eat out or places to buy great food from -

"go on share your food experiences with others" 

Lloyds Bank chairman to step down

Sir Victor Blank is to step down as chairman of Lloyds Banking Group by June 2010.

Sir Victor has been chairman of Lloyds since 2006

Following a meeting with the board, Sir Victor said it was "the right time for the Group to appoint a new chairman".

Lord Leitch, who has been appointed deputy chairman, said the board was "very sad" at the decision.

Sir Victor and Lloyds' chief executive, Eric Daniels, have faced criticism for their decision last year to buy HBOS, the troubled owner of Halifax.

The UK Treasury owns 43% of Lloyds.

Sir Victor confirmed he was stepping down just before he went inside Lloyds' headquarters in the City of London on Sunday.

Sir Victor has jumped before he was pushed Robert Peston, BBC business editor Read Robert Peston's blog Lloyds sees HBOS loss of £10..

He told BBC business correspondent Joe Lynam that he "still had lots to do" and denied he was being forced to resign under pressure from shareholders.

In a statement released after the meeting, he said he would continue working until a successor was appointed "to ensure the successful integration of the two banks".

"This remains - in the medium term - a unique value-enhancing opportunity," he added.

Mr Daniels said Sir Victor had played a very important role "during a period of significant change for our company and at a time when there has been unprecedented volatility in the markets".

HBOS losses HBOS made a loss in 2008 of almost £11bn. But Lloyds TSB, as it was called, made a profit of £807m last year, albeit an 80% drop on the previous year.

The two banks together are expected to be in loss this year.

The government earlier this year agreed to insure £260bn of the bank's toxic loans, and to potentially raise its stake in the bank to 65% following the HBOS losses.

The deal was part of the Treasury's taxpayer-backed Asset Protection Scheme to insure banks' riskiest assets against further losses resulting from the credit crisis.

Lloyds' directors do not believe that Sir Victor would have been ousted by shareholders at the forthcoming annual meeting, according to the BBC's business editor, Robert Peston.

However, he believes that UK Financial Investments (UKFI), which manages the government's stake in financial institutions such as Lloyds and the Royal Bank of Scotland, was "acutely aware" of other shareholders' convictions that there had to be a change at the top of Lloyds.

"I am now persuaded that UKFI would have voted its 43% (that's taxpayers' 43%) against him staying on," Mr Peston said.

 'First-class chairman' Lord Leitch said the board "was unanimous in wanting Sir Victor Blank to seek re-election as chairman for another three years".

LLOYDS' TOXIC ASSETS 83% of the £260bn toxic assets came from HBOS 17% come from the books of Lloyds TSB Of the toxic assets, £151bn are in corporate and commercial loans £74bn comes from residential mortgages "We are very sad about Sir Victor's personal decision to retire, although we respect and understand his reasons for it," he said in a statement.

"Sir Victor is a first-class chairman and we are delighted that he will continue with us to ensure an orderly succession and the continued integration.

" Lloyds last month announced it is to cut 985 jobs at a business offering car finance over the next two years, the first major job losses from the merger.

 The government backed the Lloyds takeover of HBOS last September, bypassing normal competition rules to avoid the collapse of the Halifax owner.

Shares in the bank have dropped by 27% so far this year, closing at 89 pence on Friday.

Lloyds controls about 25% of British customers' personal bank accounts and about 28% of the mortgage market.

sourced from The BBC

Lloyds Bank chairman to step down

Sir Victor Blank is to step down as chairman of Lloyds Banking Group by June 2010.

Sir Victor has been chairman of Lloyds since 2006

Following a meeting with the board, Sir Victor said it was "the right time for the Group to appoint a new chairman".

Lord Leitch, who has been appointed deputy chairman, said the board was "very sad" at the decision.

Sir Victor and Lloyds' chief executive, Eric Daniels, have faced criticism for their decision last year to buy HBOS, the troubled owner of Halifax.

The UK Treasury owns 43% of Lloyds.

Sir Victor confirmed he was stepping down just before he went inside Lloyds' headquarters in the City of London on Sunday.

Sir Victor has jumped before he was pushed Robert Peston, BBC business editor Read Robert Peston's blog Lloyds sees HBOS loss of £10..

He told BBC business correspondent Joe Lynam that he "still had lots to do" and denied he was being forced to resign under pressure from shareholders.

In a statement released after the meeting, he said he would continue working until a successor was appointed "to ensure the successful integration of the two banks".

"This remains - in the medium term - a unique value-enhancing opportunity," he added.

Mr Daniels said Sir Victor had played a very important role "during a period of significant change for our company and at a time when there has been unprecedented volatility in the markets".

HBOS losses HBOS made a loss in 2008 of almost £11bn. But Lloyds TSB, as it was called, made a profit of £807m last year, albeit an 80% drop on the previous year.

The two banks together are expected to be in loss this year.

The government earlier this year agreed to insure £260bn of the bank's toxic loans, and to potentially raise its stake in the bank to 65% following the HBOS losses.

The deal was part of the Treasury's taxpayer-backed Asset Protection Scheme to insure banks' riskiest assets against further losses resulting from the credit crisis.

Lloyds' directors do not believe that Sir Victor would have been ousted by shareholders at the forthcoming annual meeting, according to the BBC's business editor, Robert Peston.

However, he believes that UK Financial Investments (UKFI), which manages the government's stake in financial institutions such as Lloyds and the Royal Bank of Scotland, was "acutely aware" of other shareholders' convictions that there had to be a change at the top of Lloyds.

"I am now persuaded that UKFI would have voted its 43% (that's taxpayers' 43%) against him staying on," Mr Peston said.

 'First-class chairman' Lord Leitch said the board "was unanimous in wanting Sir Victor Blank to seek re-election as chairman for another three years".

LLOYDS' TOXIC ASSETS 83% of the £260bn toxic assets came from HBOS 17% come from the books of Lloyds TSB Of the toxic assets, £151bn are in corporate and commercial loans £74bn comes from residential mortgages "We are very sad about Sir Victor's personal decision to retire, although we respect and understand his reasons for it," he said in a statement.

"Sir Victor is a first-class chairman and we are delighted that he will continue with us to ensure an orderly succession and the continued integration.

" Lloyds last month announced it is to cut 985 jobs at a business offering car finance over the next two years, the first major job losses from the merger.

 The government backed the Lloyds takeover of HBOS last September, bypassing normal competition rules to avoid the collapse of the Halifax owner.

Shares in the bank have dropped by 27% so far this year, closing at 89 pence on Friday.

Lloyds controls about 25% of British customers' personal bank accounts and about 28% of the mortgage market.

sourced from The BBC

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US House passes Obama's economic stimulus bill

House votes 246-183 to pass Obama $787bn (£547bn) plan to resuscitate the economy

The US House of Representatives has passed a $787bn (£547bn) plan to resuscitate the economy, handing President Barack Obama a big victory.

The measure passed 246-183, with no Republican votes. It will now go to the Senate, where a vote is expected later today.

The eight-inch-thick stimulus bill combines tax cuts for individuals and businesses with half a trillion dollars in government spending for infrastructure, health care and help for cash-starved state governments. Older Americans would get a $250 bonus social security check.

Seven Democrats voted against the bill.

Obama claims that the plan will save or create 3.5m jobs. But Republicans said it will not work because it has too little in tax cuts and spreads too much money around to everyday projects like computer upgrades for federal agencies.

Sourced from The Guardian

Brown under siege as Congress caps bankers' bonuses

A dramatic vote on Capitol Hill is set to bring major change to Wall Street's risk culture as cash incentives for executives, brokers and traders are limited to a third of their salaries. Gaby Hinsliff, Zoe Wood and Paul Harris report on the implications for Britain.

Gordon Brown was under rising pressure to clamp down on the City's bonus culture last night after the US Congress agreed to drastic curbs capping senior bankers' bonuses at a third of their salary.

The measures, which are expected to be signed into law by President Barack Obama (Barack Obama page on the Guardin website) this week, would apply to dozens of staff at American banks bailed out by the taxpayer and could cost Wall Street's wealthiest millions. Cash bonuses would be banned in favour of long-term share options, with the restrictions extending beyond a handful of top executives to senior brokers and traders.

read full article from The Gardian