Tag Archives: RBS

The UK Government is burying bad news by making Sir Fred’s pension the headline issue – and Peston is the Patsy

Posted on by

The row over Sir Fred Goodwin’s pension is the distraction the UK Government’s spin doctors literally ordered in the leaks they engineered yesterday. The real story is not Sir Fred’s £693 THOUSAND annual pension but the £24 BILLION annual loss that RBS declared yesterday (the biggest in UK corporate history), the £300 BILLION of toxic debt RBS insured yesterday with the taxpayer (us) and the £2 TRILLION national debt we now carry.

This was yesterday’s real story – and today’s – and for more tomorrows than we dare count.

But the Government threw Sir Fred into the road – a meaty bone the news media hounds seized on savagely, too blinkered in the rush for blood to see the real carrion, the carcase in the shadows – as the spin controllers knew they would. The carrier pigeon for news on the road-kill decoy was the government’s new trusty, the BBC financial journalist Robert Peston who makes John Redwood – aka The Vulcan – seem normal.

Peston blew the whistle on Goodwin’s pension on cue on Wednesday night’s 10.00pm news – in good time to lessen media interest in the profoundly bad financial news to be released the following day.

There are major issues of policy and principle around what we are learning of the way people in certain sectors are paid and rewarded but these are far less pressing than the genuinely frightening level of debt the UK is now committed to carrying.

Even Mervyn King, Governor of the Bank of England has now said that if Britain had not gone into this recession with the level of public borrowing it had already taken on under the Blair/Brown governments, the Treasury and the Bank would have had more scope for effective action to resist the economic slide. This criticism of Government performance by the head of the Bank of England is unprecedented and is a sign of the seriousness of the UK’s current position.

Sir Fred’s pension is not the issue. His unregulated actions on behalf of RBS are the issue. The UK Government decided to go for ‘regulation with a light touch’, which of course meant little or no regulation of the banks by the feeble FSA. This was a tacit invitation to the banks to go bald-headed for profit – which led to the current collapse of the banking system.

This collapse resulted in the government going in for panic-driven progressive borrowing, all caution thrown to the winds in the interests of political survival. And the presses of the Royal Mint are due to start rolling next week in the interests of ‘quantitative easing’.

So let’s keep Sir Fred in our sights for later on but let’s not take our eyes off the cosmic cloud of ordure that’s hovering above our heads.

And by the way, it’s  not over yet. The Lloyds Banking Group will only say that it is in discussions with the UK Government, which are progressing well. These discussions are thought to relate to the group’s wish to follow the RBS into insuring another welter of toxic assets with the taxpayer. And what they want to ‘insure’ (Alistair Darling’s term for this liberating manoevre – ‘asset protection’ – is even more laughable) is said to be around £250 billion of toxic debt.

£2 trillion of a national debt already looks like a very conservative estimate.

Stone of Destiny not proof against RBS – Ian Hamilton QC forced to abandon ‘negligence’ claim

Posted on by

At Oban Sheriff Court this morning (26th February) Sheriff Simon Pender upheld the plea by the Royal Bank of Scotland (RBS) that the case pursued against it in the Small Claims Court by retired QC Ian Hamilton (one of the gang of four students who liberated the Stone of Destiny from Westminster in 1950) would have to be heard in a higher court.

The bank’s argument was that the complexity of the case and of its potential consequences meant that it would need to be heard in a court higher than the Small Claims Court. Sheriff Pender agreed.

Mr Hamilton had made clear in advance that, if this decision went against him, he would have no option but to withdraw his case – and he has now done that. The Small Claims Court limits the amount that a losing litigant can be required to pay in respect of the costs of the other side. This is not the case in the Sheriff Court or any other higher court.

Mr Hamilton had initially taken his case to the Small Claims Court to claim against the RBS for negligence in raising a share issue without disclosing its financial position – and also as a way also of testing the ordinary person’s access to affordable justice.

It has been Mr Hamilton’s contention that the RBS move in arguing for the case to be heard in a higher court – where, should he lose, he would have no protection against the level of costs imposed – was intended to achieve just what has happened today. The case has been withdrawn.

The issue may not have gone to court but Mr Hamilton has made two notable scores.

  • The publicity accorded to the case – and, ironically, to the RBS’s now successful attempt to have it transferred to a higher court – has meant that Mr Hamilton’s perception of the bank’s actions are now widely known and largely accepted.
  • The lack of any judicial protection for the ordinary person to take legal action against an opponent with deep pockets has been laid bare.

David may not have felled Goliath but he has left his mark.

RBS restructuring may lose 20,000 jobs as Brown prepares to print money and insure toxic debt

Posted on by

Stephen Hester, the new CEO of the Royal Bank of Scotland is dividing the bank into two main elements – today’s core business which is profitable and will carry on; and a peripheral cluster of ‘assets’ which will be sold as soon as buyers can be found. These ‘assets’ are the £300 billion debts – mostly toxic – acquired during the disastrous investment banking adventures that have brought the bank low.

Hester needs to show his shareholders that the heart of the RBS can succeed. Splitting the structure in this way means that he can point to one and try progressively to dispose of the other.

The identification of assets to be put up in a fire sale will inevitably mean job losses and industry experts are predicting that these may run to 20,000.

This news comes as Gordon Brown announces a plan to spend £500 billion in insuring the so-called toxic debt acquired by UK banks while at the same time pumping £15 billion, much of it new money, into the mortgage market by 2011 via Northern Rock. This is being done in an attempt to reverse the movement of the economy towards a settled recession.

Experts predixct that this move will itself create a twin track mortgage market, even within Northern Rock itself. Current mortage holders will continue to face repossession while new mortgagees will see much more favourable terms under the proposed injection of ‘new Government money’.

The national debt is now at a frightening level. Last week it was independently estimated by the Office of National Statistics at £2 trillion, when the value of the banks’ toxic debts are included.

Brown’s latest gamble – in insuring these debts and in going for what is called ‘quantitative easing’ – or printing money, as it is less ambiguously known to most of us – is also frightening. It may be too little too late.

On the one hand the UK is borrowing on an unimaginable scale and one which will bring real and widespread pain in the repaying.

On the other hand, Brown’s response pattern from the start of the collapse of the banking system has been to do as little as possible and to leave that until he had no alternative.

This means that none of the moves to date – however much they have cost us – have achieved the necessary stabilisation of the economy. From the reluctant, progressive upgrading of the bank guarantees to savers onwards, each move has been too small, too late and too indecisive. In effect, it has largely been wasted money.

Since early last Autumn when the financial industry began to unravel, there has been an argument that Brown’s best strategy was to make an early, large and bold move. But that is not his character.

The real nightmare is that the current massive debt will be our long term burden without achieving anything significant. It has been accumulated progressively, in fire-fighting dribs and drabs, each of which has vanished without impact.

However mad it seems, printing money might work in hands other than Brown’s but, with his track record throughout this crisis, hope that he might get this right would fly in the face of the evidence.

Brown has also set his face openly against a course recommended by many experts – dividing banking into two functions: the normal high-street retail banking and the high risk investment banking sector. The decision to carry on with the current twin-function banks will leave the taxpayer, now the owner of so much of the UK’s banking stock, liable for the risk-taking sector which could otherwise be hived off as purely private sector ventures.

And the Hamilton v RBS case reaches cartoon celebration

Posted on by

There is a hilarious cartoon strip this morning (19th February) making the most of the David and Goliath aspect of the case of 83 year-old Ian Hamilton QC holding the banking giant, Royal Bank of Scotland, to account in the Oban Small Claims Court (reported below).

No surprises that the cartoon has fun taking a few well aimed digs at fat-cat bankers and lawyers.  Here are a few samples:

  • Small but perfectly formed chalk-striped banker lounges in big chair behind executive desk, on the phone from Edinburgh saying: ‘He’s suing for £1,400… ‘ His colleague at the London end replies: ‘That’s hardly a decent lunch’.
  • Then the London banker asks: ‘Is Oban offshore? What’s the exchange rate?’
  • And then, in puzzlement, he asks another question: ‘What’s a small claim?’
  • RBS phones the Faculty of Advocates to arrange representation – and the response is: ‘RBS? We’ll need cash up front’.
  • Two bigwigs from Brodies, the high-end Edinburgh legal firm retained by RBS are gleefully saying to each other: ‘On top of the fee, we get a £5million bonus if we lose and £10million if we win’.

Stone of Destiny QC must wait a week to hear which court will hear Hamilton v RBS

Posted on by

Ian Hamilton QC, whose name will forever be associated with the deed of derring-do on Christmas day 1950 when he and three fellow students repatriated the Stone of Destiny from Westminster – albeit initially in two halves. They managed to break it while they and it went into hiding together.

Anyway, as we have reported recently, Mr Hamilton was in court yesterday (18th February) – specifically in the Small Claims Court in Oban in Argyll. He was beginning his case against the Royal Bank of Scotland (RBS) for compensation for a share issue the bank persuaded him and others to buy into in June 2008. Mr Hamilton, who is representing himself, argues that the bank was insolvent and concealed its financial situation at the time of this share issue.

The amount at stake is small and is within the limits that the Small Claims Court is empowered to deal with. The problem for the bank is that if Mr Hamilton wins, other larger shareholders will be encouraged to pursue legal action for compensation on their own account.

The RBS has therefore been arguing that the case should be heard by a higher court – perhaps the Oban Sheriff Court. This move is being resisted by Mr Hamiton because if he lost he would required to pay the RBS legal costs which in the Small Claims Court are limited to £150. In the Sheriff Court the costs applied could bankrupt him.

At the age of 83, Ian Hamilton is naturally unprepared to risk this financial wipeout and has said that if the decision of the Oban Small Claims Court is to pass the case to the Sheriff Court, he will have no choice but to withdrawn his case.

At heart, Mr Hamilton’s action is about making the point that the large and the powerful must be accountable without draconian cost to the ordinary citizen who may well have right on her or his side. He said in court that people were said to live in a democracy but that: ‘If this is so, there must exist a court in which the members of that democracy can defend their little pieces of property against the big beasts which prowl about in our society’.

At the start of the case in Oban yesterday, Mr Hamilton withdrew an allegation of fraud against the RBS which had previously been contained in the writ.

The RBS’s Solicitor advocate, Joyce Cullen, said that, with the bank denying all the claims made by Mr Hamilton, the action would include ‘detailed pleadings’ and there was no provision for this in the small claims court. She argued that the complexity of the case therefore indicated that it be heard in a higher court.

Both Mr Hamilton and the RBS will have to wait for Sheriff Simon Pender’s ruling on the issue which he will give next week.

Argyll-resident QC of ‘Stone of Destiny Four’ in legal challenge to RBS on Wednesday in Oban

Posted on by

Ian Hamilton QC, from North Connel in Argyll, is engaged in a legal dispute with the Royal Bank of Scotland. Mr Hamilton has taken a case against the bank at Oban Small Claims Court. He aims to recover the £1,282 cost of RBS shares that he bought in June – a time when he says the bank was technically insolvent. His case therefore rests on the presumption that RBS ‘fraudulently’ sold him the shares by concealing its insolvency.

In June 2008 RBS invited its shareholders to invest in a rights issue. Mr Hamilton’s wife received the invitation and he, on her behalf, bought around 640 shares at £2 each. they currently stand at 21.8 pence per share.

Mr Hamilton claims that RBS induced him make this investment ‘by concealing the true state of their finances’. In an alternative claim, he alleges the bank was ‘negligent in representing themselves as solvent at all material times when in fact they were insolvent’.

Were Mr Hamilton to win this case it would not set a precedent but it would offer encouragement and hope to other small shareholders to take the same route to recover their failed investment.

This has led RBS to take a legal step designed to frighten Mr Hamilton into dropping his case. It has written to Sherrif Court Clerk in Oban, asking that Mr Hamilton’s case be moved from the Small Claims Court to the higher Sherriff Court. The bank’s strategy is based on the Small Claims Court’s limit of £200 on costs payable. This limit does not apply to cases heard in the higher court.

Mr Hamilton says that, should the court agree to the RBS request and should he lose his case at that level, the RBS costs which he would then be required to pay would bankrupt him.

Oban Sheriff Court will, this Wednesday (18th February), hear Mr Hamilton and the RBS present their respective arguments on which court should hear the case.

Mr Hamilton was one of the now legendary gang of four students – along with Gavin Vernon, Kay Matheson, and Alan Stuart – whose ingenuity saw them seize the Stone of Destiny from Westminister Abbey on Christmas Day 1950. Mr Hamilton has written on the matter: No Stone Unturned: The Story of the Stone of Destiny (published in 1952 by Victor Gollancz and by Funk and Wagnalls; and The Taking of the Stone of Destiny (a modern reprint by Seven Hills Book Distributors pubished in 1992)

RBS to delay repossessions for 6 months – as London Scottish Bank allowed to fail

Posted on by

The Royal Bank of Scotland, in which the state is now a majority shareholder with a stake of 57.9%, has offered to delay home repossessions for six months. Other banks, even those who have also been rescued by the recent bail-out, are offering no more than a three month respite. This was the agreed period announced by Chancellor Alistair Darling among the already largely discredited measures in his and Gordon Brown’s Pre-Budget Report.

Craig Donaldson, Managing Director of RBS’s retail banking says: ‘We fully understand that one of the biggest worries facing homeowners in financial difficulty is the thought of losing their home, and this is especially true given the current economic climate’. He also made it clear that RBS will ensure that customers have the opportunity to get independent advice before the bank starts any legal action to repossess.

Citizens Advice and Crisis, both organisations supporting homeowners struggling with arrears, have welcomed the RBS position.

The BBC’s Business Editor, Robert Peston, has a rather different take on it. He says: ‘The positive side of what Royal Bank has done is that it gives those who lose their jobs in the looming wave of redundancies a better chance of getting a new source of income in time to prevent the bank seizing the family property’.

He sees another side to the story – that ‘the disposal of repossessed property has become a vital source of income for many estate agents, at a time when property sales have collapsed by well over half and many agents are on the verge of collapse’. He quotes a figure of 10,000 members of the National Association of Estate Agents and rightly points out that the number of people employed by these member companies is ‘a multiple of that’.

With the single and honourable exception of RBS, the other banks rescued at such great cost to the taxpayer are showing no great eagerness to play their part in returning the British economy to positive activity. RBS again has been the only one to make it clear that it would maintain credit support for businesses at acceptable rates during this difficult time.

The Government is becoming increasingly frustrated at its own impotence in the matter. It owns or has a majority shareholding in many of the banks. To give the banks commercial freedom, the Government has chosen to stay at arms’ length from the control to which its holdings would normally bring entitlement. Instead it has transferred the holdings to the equivalent of a blind trust, UK Financial Investments Ltd (UKFI), under the Chairmanship of Sir Philip Hampton.

Last night (30th November 2008), with no sign of willingness on the part of the banks to contribute to economic recovery as the public feel they should, the UK Government was said to be considering ‘forcing’ the banks to lend on mortgages and business credit. This is a stance born of rage rather than reason – which does not mean that an enforcement attempt may not be made. If it is, it will be interesting to see quite how they frame the criteria to guide the banks’ decisions. One man’s backable entrepreneur is another’s unacceptable risk. And risk is easier to demonstrate objectively.

At least RBS is showing a constructive combination of responsibility and penance.

While this has been going on, London Scottish Bank has gone into administration under Ernst & Young, after the Financial Services Authority (FSA) stopped it from taking any more deposits. The name of the small Manchester-based bank, with no more than 10,000 savers, disguises the fact that it has little connection either with London or Scotland.

The Treasury has issued a statement saying that all retail depositors will get their money back, even where such deposits exceed the UK guarantee limit of £50,000.

Reblog this post [with Zemanta]

Cairndow’s Here We Are Centre strikes gold again with proposed local hydro scheme for Our Power

Posted on by

Cairndow’s Our Power, affiliated to the Here We Are Centre (HWA) has already been hitting the headlines for its success with its first renewable energy scheme, a community-owner biomass energy generation scheme.

It has now had more success, winning the Royal Bank of Scotland (RBS) prize of £5,000 at Social Enterprise Network Scotland’s (Senscot) ceilidh earlier this month. The event had a ‘Dragon’s Den‘ format and the Our Power presentation was agreed to have been so good that it carried the day – or the night – without question.

While £5,000 is little more than a start on the road to the proposal local hydro project, it’s an important start, recognising the worth of the project to the comunity – and it’s great for morale.

HWA is in the midst of a feasibility study for hte project. Around £25,000′s worth of work has already been done o on the feasibility of the chosen site for the hydro-technology proposal. The intention is to set up a partnership with Energy Scotland, the Argyll-based hydro-company, to secure the funding for this stage of development. The project hopes to be operational in 4-5 year’s time.

Reblog this post [with Zemanta]

UK Government to own majority of RBS

Posted on by

As part of its recapitalisation programme, RBS issued a new shares offer to existing shareholders. Current shareholders in RBS have bought only 0.24% of this new share issued.

A small response had been expected because the offer price for the shares at 65.5p was 10p higher than the shares’ trading price. The UK Government will now buy up the unsold shares, as part of the bail-out agreement. It will pay about £15bn, taking a majority stake of 57.9% in the bank and will also buy £5bn of preference shares in RBS.

Based on yesterday’s (27th November 2008) closing share price, this gap between offer price and current share trading price immediately created a paper loss for the taxpayer of £2.3bn.

As For Argyll has reported earlier, the Government has set up a hands-off holding company to manage its total holdings in UK banks. Its RBS shares will be held by that company – UK Financial Investments Ltd, under the chairmanship of former finance director of Lloyds TSB, Phiip Hampton, who is also Chairman of Sainsburys.  The company’s job is to maximise value for taxpayers from these national shareholdings in UK banks. Its role also – nominally anyway, distances politicians from the banks’ business decisions.

Related articles by Zemanta
Reblog this post [with Zemanta]

Former chiefs of HBOS and RBS support HBOS independence and offer to take over as interim management – now rejected

Posted on by

Sir Peter Burt, former chief of the Bank of Scotland credited with creating HBOS and Sir George Mathewson, credited with transforming the Royal Bank of Scotland to a world power in banking, have entered the debate on the future of HBOS.

They say that HBOS and its shareholders would be better off if the bank were to remain independent rather than entering into the proposed, almost done-deal, of the £12.2 billion takeover by Lloyds TSB.

They have written to HBOS demanding the resignation of both its CEO, Andy Hornby and Chair Sir Dennis Stevenson, neither of whom have been adopted into the proposed management structure of the new superbank, if the takeover goes ahead.

The two men argue that, with the government and Bank of England offering vital funds to replace those that could be withdrawn by money managers and other creditors, there is no longer any need for HBOS to be taken over by Lloyds TSB.

Their letter, sent to Sir Dennis Stevenson, says: ‘It is our intention to create a detailed alternative plan that we believe will represent better value for both the HBOS shareholders and stakeholders alike by keeping HBOS as an independent bank’.

Given the individual and combined experience of the men in question, the HBOS board will not find it easy to ignore such a proposal. Their call for the resignation of the CEO and Chair of the bank will also find a response in the public anger with those who have brought the bank to its present predicament.

Their proposal to the HBOS board is that they would step in and stay in post until the bank is on a stable footing as an independent, recruiting credible top management to replace them. The scenario put forward is that Sir George Mathewson would become the new Chair of the bank and Sir Peter Burt would be its CEO.

They intend to canvas shareholders to requisition an emergency meeting to have Stevenson and Hornby removed, if they refuse to choose to resign.

9th November Story Update: The HBOS Board have unanimously rejected this approach but Sir Peter and Sir George say they still intend to call for an extraordinary general meeting for HBOS shareholders to express their views. Sir Peter Burt has confirmed that he has had a letter from Chancellor Alastair Darling confirming that the funds available to support HBOS in the Lloyds takeover will equally be available to an independent HBOS.

As For Argyll has pointed out before, the Fat Lady is still her dressing room.