Tuesday, July 31, 2012

The Never Ending Story

Whilst the world sits "agog" watching the Olympics (apart from in India where their power system has crashed), Greece is just about to run out of money again!


Net Worth Update (July 2012) - $50k mark


Monday, July 30, 2012

Secret Bankers' Meeting

Apparently, last Tuesday, there was a secret meeting of the CEO's and Chairmen of some the UK's leading banks.

The purpose of the meeting was to address the reputational damage from the industry's ongoing spate of scandals.

Mark Kleinman of Sky News reports that the meeting at HSBC's head office discussed Liborgate, as well as the payment protection insurance and interest rate swaps mis-selling.

It is regrettable that it has taken the banks so long to start to try to address issues that have been in the public domain, and the source of much public contempt, for such a long period of time.

The meeting also discussed the appointment of a successor (an outsider) to Marcus Agius as chairman of the British Bankers' Association (BBA).

Given the BBA's dismal reputation it would be better that they simply shut it down and set a new organisation up.

Sunday, July 29, 2012

Next step: Sell commodities, Buy Biosensors

The first investment decision I made in my life was to invest $15,000 in a commodities fund back in 2007. It was a bad decision as I lacked investment knowledge and was unaware of the charges involved. My next step is to cut loss and sell the fund once its value reaches $13,000.

Also, Biosensors meets all the requirements stated in my previous post - Stockpiling Strategy by Phil Town. It is also about 40% below its sticker price, offering a substantial margin of safety. Biosensors seems undervalued with strong earnings growth and a healthy balance sheet. Current price is near its 52 week low and PE is much lower than industry and sector average. The company has low debt and flushed with cash. The recent price correction is due to pricing pressures in China and Japan and ASP drop in stent. One drawback of this stock is that it does not pay dividends. In my opinion, the potential capital gain outweighs the dividends and it might pay dividends in future as Biosensors is still in the expansion phase. I will monitor the next few days and probably buy 3 lots of Biosensors at a target price of $1.18. 

Friday, July 27, 2012

Bundesbank Shoots Draghi's Fox

Yesterday Mario Draghi, head of the ECB, was making all sorts of rash promises about the ECB doing whatever was needed to prop up the Euro etc.

I noted:
"Draghi then reverted to type, and promised that the ECB will "do whatever it takes to preserve the euro".

This of course is patently untrue
."
Today the Bundesbank has verified my conclusion, by stating that it remains opposed to further bond buying by the ECB.

Whatever Draghi might like to do, the Bundesbank won't allow him to do it; ie they have shot his fox.

Thursday, July 26, 2012

NatWest Online Crashed

NatWest online has just crashed, and apparently NatWest debit cards are not working either!

As per NatWest site:
"We're sorry but online banking is temporarily unavailable. Please try again later.

If you continue to experience this situation please contact the online banking helpdesk for further assistance.


For a list of helpdesk numbers, please see our page of contact numbers
"
They fail to mention that their debit cards don't work either!

Oddly enough, Nationwide are also experiencing problems.

Mario Draghi On Euro Break Up

Mario Draghi, the head of the ECB, has spoken about the possibility of a euro break-up
"When people talk about the fragility of the euro, very often non-euro members underestimate the political capital that has been invested."
Ironically, for once, he was speaking more or less truthfully. In the sense that because so many politicians have a vested interest in maintaining the Euro in its present form, they will fight tooth and nail to keep it.

Sadly, for countries such as Greece, this means that their economies, democracies and social order will be sacrificed to appease the politicains' vanity and egos.

Draghi then reverted to type, and promised that the ECB will "do whatever it takes to preserve the euro".

This of course is patently untrue.

Greece will exit, and the politicians will scramble to preserve the Euro in another form.

Wednesday, July 25, 2012

UK In Double Dip Recession

UK GDP has contracted by 0.7% in the second quarter of 2012, thus bringing the UK into a double dip recession.

However, this figure needs to be taken with a pinch of salt, ONS figures are out of date and are invariably wrong.

Tuesday, July 24, 2012

Updated Stock Watchlist

Common Stocks
Vicom Limited
Boustead Sp
ST Engineering
Biosensors
OCBC
Singtel

Reits
Ascendasreit
Capitamall Trust
SuntecReit

Monday, July 23, 2012

IMF Cuts Greece Adrift

Ahead of this week's visit to Greece by the Troika, the IMF has signalled that it will stop paying further rescue aid to Greece; ie they want Greece to leave the Euro, and have given the Europeans the opportunity to push Greece out if it does not go of its own accord.

Greece is due to make a Euro3.1BN bond payment in August, it is not clear how this can occur though.

The BBA Tries To Rewrite History

Zero Hedge have revealed that the hopeless, hapless and despised British Bankers' Association (BBA) has attempted to rewrite history, and is trying to pretend that it had no regulatory role wrt Libor.

Specifically, as per Zero Hedge, here is an extract of the BBA's current governance documentation:
"There is a named individual at each bank responsible for submitting the daily bbalibor rates to Thomson Reuters and this will be the person responsible for the bank's cash - usually their title is 'treasurer' or similar. There is written guidance on what information that person should take into account when calculating that day's rates for his or her bank. As all contributor banks are regulated, they are responsible to their regulators, rather than BBA LIBOR Ltd. or the FX&MM Committee, for maintaining appropriate procedures for contributing, including the maintenance of internal chinese walls."
This is the "same" paragraph a few weeks ago:
"BBA LIBOR Ltd. receives the fixings and underlying contributor data at the same time as all other live data recipients and monitors all submissions into the fixing process. Any anomalous rates are queried with the submitting bank, and a log of these queries is kept and given to the FX&MM Committee on a periodic basis, who may choose at their discretion to follow up these queries in line with established governance and scrutiny procedures."
Now that the arrest warrants are being prepared, the BBA is doing everything it can to distance itself from Liborgate.

Too little too late!

Sunday, July 22, 2012

Dividend Discount Model (DDM)

The Dividend Discount Model is suitable for:
- Companies that pay dividends consistently (Singpost?)
- Companies that have established a dividend policy (Starhub?)
- Seasoned companies that are profitable non-high growth companies (e.g Utilities)

Here's the formula for DDM:






P = Fair value of stock using DDM

D = Value of dividends
g = growth rate of dividends (can take growth of earnings as proxy)
r = investor's required return


Friday, July 20, 2012

Bank of England Releases Libor Emails

The Bank of England has released further information and correspondence in relation to the BBA Libor Review in 2008.

As per the Bank of England's website:
"At the hearing on Tuesday 17 July, the Treasury Committee requested papers relevant to the Bank of England’s interaction with the US Federal Reserve and with the British Bankers’ Association (BBA) Libor Review in 2008. To allow the Treasury Committee to see the full context, this submission contains all papers relevant to the BBA Review. It provides a brief commentary and timeline of the events around the BBA Review in 2008, together with the supporting documents.

In 2008, the Bank of England worked closely with the Federal Reserve Bank of New York (FRBNY) and the Financial Services Authority to input into the BBA Review of the Libor system.  The Bank of England and other central banks were concerned to influence the outcome of the BBA Review. 

Because the Libor system was, and is, a private sector arrangement and was not subject to financial regulation, it was not appropriate for the public authorities to endorse or determine the outcome of the BBA Review. When the amended proposals were adopted in December 2008, the Bank was not aware of any dissenting views expressed by the official or private sectors.

In reading these documents, it is important to distinguish between three issues. First, allegations of wrongful behaviour by Libor panel banks. Second, concerns about the operation of the Libor process in times of market stress. Third, the need for any system based on self-reporting to be alert to the possibility of “accidental or deliberate misreporting”, as referred to in the Geithner memorandum.

The Geithner memorandum contains no allegation of wrongful behaviour and relates to the second and third of these issues. At no point did the FRBNY draw the attention of the Bank to evidence of wrongdoing in the setting of BBA Libor. Indeed, with the exception of the memorandum sent by Mr Geithner to the Bank in early June 2008, none of the other documents published on 13 June 2012 by the FRBNY had been shared with the Bank.

The attached timeline gives a detailed account of the interaction between the Bank and the Federal Reserve and the BBA.  The broad outline of events is as follows:
  • From May 2008, the Bank of England encourages the BBA to conduct a global review of Libor and banks to engage with the review at a sufficiently senior level.  It also begins to discuss these issues with the FRBNY.
  • The Bank considers the points in the Geithner memorandum and ensures that those points are taken on by the BBA.
  •  The Bank and the Federal Reserve work closely together behind the scenes to influence the consultation paper issued by the BBA on 10 June 2008.
  • The Bank also continues to work on influencing the outcomes after the consultation paper is published until the BBA publishes its final report on 18 December 2008." 

The relevant documents can be viewed here.

Greece Spiralling Downwards

Costas Mitropoulos, the chief executive of Greece's privatisation agency, resigned on July 19.
 
In an open letter to Finance Minister Yannis Stournaras he notes that the new government has not given him/the agency the support needed:
"In order to accelerate privatization and to carry out the projected result, the government must provide full support for the administration of the Hellenic Republic Asset Development Fund (HRADF), facilitate all actions, and promote privatization as planned. This will give a message of reliability, professionalism and commitment to those looking to invest in Greece. The newly elected government has not given the support needed... 

Instead, they have indirectly yet systematically reduced the prestige and credibility in the eyes of potential investors. 

Furthermore, no set date has been given to the Chairman of the Board to resume meetings and indeed accelerate the privatization program. 

In these conditions I can no longer work professionally and effectively in my role as CEO entrusted by the state in July 2011."
Given that privatisation is key rebuilding the Greek economy and to ensuring that it honours its bailout commitments, the lack of progress indicates that Greece will not meet its commitments and that the economy will continue to spiral downwards.

Thursday, July 19, 2012

Cameron's 2020 Vision - Austerity Until 2020



It appears that the world will be mired in recession until 2020.

That at least is the view of David Cameron, who says that he now expects the crisis in the eurozone to drag on for years.

When asked by The Telegraph as to whether the austerity programme would now last a decade until 2020, the Prime Minister replied:
I think it’s going to be...this is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts. I can’t see any time soon when…the pressure will be off. 
I don’t see a time when difficult spending choices are going to go away.”
That kind of talk will not help the economy, as consumer economies are underpinned by hope/expectations of growth and prosperity.

Tuesday, July 17, 2012

Stockpiling strategy by Phil Town

Requirements:
1) 5 or 10 year average return on Invested Capital (ROIC) > 10%
2) 5 or 10 year average equity growth rate (Book value per share) > 10%
*Check current BV per share by dividing Total Equity by Total Shares Outstanding
3) 5 or 10 year average Sales growth rate > 10% 
4) 5 or 10 year average earnings growth (EPS) > 10%
5) 5 or 10 year average growth rate of cash from operating activities > 10%
6) Total long term debt/Total income < 3
7) Payback time < 10 years
- Find market capitalization of company
- Find ttm earnings
- Grow it forward at 5/10 year average earnings growth rate until the cumulative earnings exceeds market capitalization. 

Find the sticker price:
Sticker price of a business is determined by the kind of surplus cash it can produce for its owners in the future.
1) Earnings per Share (EPS) for the last twelve months(ttm)
2) EPS growth rate for the next ten years
- Use the 5 or 10 year average earnings growth rate
- Retrieve from analyst reports
3) Price to earnings (PE) ratio in ten years
- Find 10 year average PE ratio
- Double the estimated future earnings growth rate (Use analysts' average estimate of future growth of earnings or use 5 to 10 year average earnings growth rate)
- Use the lower figure of the two methods above
4) Minimum Acceptable Rate of Return (MARR) = 15%
5) Run the numbers through calculator on paybacktime.com

Find the Margin of Safety Price
50% of sticker price calculated above

Capital Allocation
Capital Number of businesses % of capital allocated to each initial buy
$1,000 - $20,000 1 25%
$20,000 - $40,000 2 25%
$40,000 - $70,000 3 25%
$70,000 - $100,000 4 25%
$100,000 - $100,000,000 5 25%

Note: Time purchases with the help of technical analysis using Floor and Ceilings.
*A price move of over 3 percent above the Ceiling or below the Floor, accompanied by 150% of the average volume, is a significant sign of a breakout that will last

King Denies Fed Warning

In the understatement of the decade, Mervyn King (Governor of The Bank of England) has told the Treasury Committee that there needs to be change of culture at Barclays.
"Barclays has to create a new bank with a new culture to take it forward."
He also denied that the Fed had warned the Bank of England that Libor was being manipulated:
"If the Fed had regulatory concerns they would have shared that with the regulator, [not the Bank of England].

They didn't pass any information to us that Libor was being manipulated.

The Fed could have shared that with us and they did not, all we would have done was pass it on. The Fed is a regulator, we were not; the Fed asked us for advice on how to interact with the BBA."
This denial is rather odd given the following:
"Writing to the head of the Bank of England, among others, Geithner made six recommendations, which included eliminating incentives that could encourage banks to manipulate the rate and establishing a “credible reporting procedure.” 
Not least the fact that King responded and thanked him for his recommendations.

Notwithstanding that apparent conflict between what King said and reality, his statement that the Bank of England was not the regulator may well be technically correct given the appalling tripartite system set up by Brown. However, it surely had more than a passing interest in what was going on with the banking system and, now that it will have "beefed up" powers, most certainly has an even greater "interest".



Monday, July 16, 2012

Del Missier Drops Diamond In It

As per Robert Peston:
"Del Missier is very clear he remembers Diamond telling him Bank of England wanted Barclays to understate submission to LIBOR committees."
Jerry del Missier has dropped Bob Diamond well and truly in it!

Saturday, July 14, 2012

NatWest Update

NatWest issued a further email update (wrt its recent IT problems) to all its customers this morning:
"Dear XXXX,

We're writing to provide you with an update on the technical issues we faced recently.

Where we are now The original issue has now been fixed and it remains our first priority to continue to help our customers. If you incurred fees or charges as a result of this issue, we will arrange a refund and inform you when this will take place. You don't need to do anything as these refunds will be provided automatically.


We're also working with all the main credit reference agencies to ensure that none of our customers' credit ratings will be adversely affected.

What went wrong?

The problem was caused when maintenance on IT systems in Edinburgh disrupted the regular processing of overnight transactions. It took time to resolve this problem, which in turn created a backlog, so many customers' account balances were incorrect between
19 June and 6 July.

What we're doing to make sure this won't happen again

We have commissioned an independent audit to investigate how the problem arose and we will make all the improvements necessary to ensure it doesn't happen again. We will make the findings public when they become available.

Here to help

You can find the latest information, answers to common questions and help to resolve any outstanding queries, including how you can be reimbursed by visiting Help Point, or feel free to go into any of our branches, or call our 24/7 UK call centres free on 0800 656 9639 (minicom: 0800 404 6161).

Thank you again for your patience and for bearing with us. If you have any questions or there's anything you'd like to know, we're always happy to help.

Yours sincerely,


Chris Popple
Managing Director, Retail Banking
"

Friday, July 13, 2012

ISLAMIC BANKS AND HOUSES UNDER CONSTRUCTION

ISLAMIC BANKS AND THE SALE OF HOUSES UNDER CONSTRUCTION: WHERE IS THE FAULT?

Issues have been recently raised about the predicament faced by consumers who have to suffer due to houses they purchased using Islamic banking facilities provided by Islamic banks in Malaysia. According to one report by Islamic Consumer Association of Malaysia (PPIM) complaints received by the association from consumers about house financing   in the past couples of years run into thousands mostly related to non-delivery of the purchased houses due to abandoned housing projects. Many parties have voiced their displeasure at the way the relevant financing is done and called for an immediate review by competent Shariah authority to address injustice to the consumers. What is more damaging, it has been said, the good name of Islam has been compromised by such a banking practice resorted to by the so-called Islamic banks.

What happened was that normally it involved many customers who had purchased  houses under construction from developers where the same houses were subsequently sold to Islamic banks at the original buying cost minus deposit paid to the developers and the same were repurchased back from the bank by the customers/purchasers at a higher price normally to be paid in deffered payment term or installment as a form of facility granted by the banks. In the Malaysian practice such facilities are structured using the concept of BBA (bai bi thaman ajil-sale with price differed).

However given the fact that there are two immediate transactions (one after the other) entered into by the bank and the customers concerned, such a facility is in fact a form of what is known as Inah transaction i.e it is a form of BBA where there is an embedded element of Inah sale (sale and repurchase back) in it where the house is sold to the bank and repurchased back by the customer at much higher prices.

Notwithstanding this Inah issue, what is problematic here relates to the fact that the subject-matter of the sale is a house under construction or one that is to be constructed. This is the first mistake done by the parties to this form of financing which they name  as BBA (deffered payment sale), since  according to Shariah law in BBA/deffered payment sale, only the price is allowed to be paid in future ( deffered) and not the asset (subject-matter of the sale) also be deffered as well like  what happen in the context of the housing finance as described above where the house is yet to be in existence. The true Shariah concept of BBA dictates that in a Shariah compliant BBA ( setting aside the issue of Inah for a while), once agreed, the BBA must end up with the purchaser being delivered with the asset purchased (together with conveyance of full title to depict true ownership transfer from the seller) right after the sale contract.

But what happen in the financing done by the banks is that the bank purchases the so-called house from the customer (do not forget at that time the house is yet to be constructed by the developer) and immediately sells it back to the same customer for a deffered price to paid in installment the first of which is to be paid right after the contract is signed and after the bank had paid the proceed of the first sale ( sale by customer to the bank) to the developer (who had in the first instance sold the same “house under construction” to the customer in the first place) thereby releasing the customer from the debt owed to the developer and at the same time assuming new  debt toward the bank (the amount of which is higher) as a result of the BBA purchase from the bank in the second transaction.

As seen, such a procedure as described can be aptly termed as a form of conventional financing rather that an Islamic one given the absence of one of the most important element of validity from Shariah perspective where the BBA was affected for a non existent subject matter whereas a  valid BBA sale  requires the subject matter to be in existence and actually delivered to the relevant purchaser right after the conclusion of the contract.

What is more astonishing is that (as reported by consumers) irrespective of whether the house is completed and delivered or not they have to pay the installments to the bank for  houses that have never seen the day light. Worst still at the same time the same customer in some cases is forced to pay rent for a substitute housing during the relevant period such that it is more like he has been penalized twice for such an event of non- completion/delivery for which he also has to blame himself for entering into such an arrangement in the first place. But for the banks who hold out to be running their business as per the Shariah requirement, such an issue cannot be taken lightly and the society at large surely has an interest  at stake when issues are raised about such a practice that seems to be a blatant disregard of Shariah requirement.

LIEBORGATE The Oncoming Storm

The roll of distant thunder coming across the Atlantic has hit the shores of Britain.

The Washington Post reports that the Bank of England was warned by Timothy Geithner (then President of the Federal reserve bank of New York) in 2008 that Libor needed to be fixed:
"While president of the Federal Reserve Bank of New York, Timothy F. Geithner pressed British regulators to reform the way a critical global benchmark called the London interbank offered rate, or Libor, is calculated, according to a June 1, 2008, e-mail obtained by The Washington Post.

Writing to the head of the Bank of England, among others, Geithner made six recommendations, which included eliminating incentives that could encourage banks to manipulate the rate and establishing a “credible reporting procedure.”

'We would welcome a chance to discuss these and would be grateful if you would give us some sense of what changes are possible,' Geithner wrote."
Here is a link to a copy of the email and the Bak of England's response: Geithner email.

The New York Fed is set to release a treasure trove of documents Friday morning (EST) detailing its response to concerns raised as early as 2007 about Libor, which helps set the standard for $10 trillion worth of corporate bonds, credit cards, mortgages and other loans around the world.

The storm is coming, the Bank of England and others had best batten down the hatches!

Wednesday, July 11, 2012

Spain Appeases The Gods of Austerity

The Spanish prime minister, Mariano Rajoy, has announced more sweeping austerity measures; including a rise in VAT and other taxes, increases to spending cuts and suspending Christmas bonuses for civil servants.

The measures are designed to cut Euro65BN from Spain's budget deficit by 2014.

Among the measures proposed are a 3% rise in VAT, cuts in unemployment benefit and civil service pay and perks. There will also be new indirect taxes on energy, plans to privatise ports, airports and rail assets and a reversal of property tax breaks.

For the moment, it appears that pensions have come out of the cuts unscathed. However, as and when the plans unravel, doubtless pensions will be placed on the altar for sacrifice to the gods of austerity.

Spanish banks will receive up to Euro100BN of aid, whilst the Spanish people pay the price of saving the banks.

Suffice to say, the plan will unravel.

Tuesday, July 10, 2012

Bob Diamond To Receive "Only" £2M



"Good" news everybody, Barclays has agreed a payoff for Bob Diamond.

Diamond has agreed to waive his share awards (worth around £20M) and will walk away with "only" £2M, being 12 months' salary, pension allowance and other benefits.

Diamond is estimated to have earned well over £100m during his career at Barclays.

Here is a statement released by Barclays to confirm Bob Diamond's pay-off arrangements:
"Mr Diamond has voluntarily offered to waive all of his unvested deferred bonus awards and long term incentive share awards.This is in addition to his previous decision to forgo any consideration for an annual bonus this year. The Board has accepted this offer, and all of Mr Diamond's outstanding unvested deferred bonus awards and long-term incentives will lapse, with no compensation made in respect of the lapsed awards.

The Board has asked Mr Diamond to support the transition to the new Chief Executive as necessary, and he has agreed. Consistent with his contract of employment, Mr Diamond will receive up to 12 months' salary, pension allowance and other benefits; and he has agreed to forgo his contractual entitlement to tax equalisation going forward. The Board has agreed with Mr Diamond that he will not receive any future bonus or incentive awards; nor will he receive any further compensation payment in connection with the termination of his employment.

Marcus Agius, Chairman, said: "The Board deeply regrets the circumstances that led to Bob resigning his positions at Barclays. Despite having no personal culpability, he recognises more than anyone the negative attention that they have generated and has taken characteristically strong action to address that. These circumstances do not detract in any way from the tremendous legacy that Bob has left at Barclays, and his actions are clear indications of his commitment to the institution to which he has contributed so much."

Bob Diamond said: "For the past 16 years I've had the honour of working at Barclays. The wrongful actions of a relative few should not detract from the outstanding work that Barclays employees carry out each day on behalf of clients and customers around the world. It is my hope that my decision to step down and today's agreement on my remuneration will help close this chapter and allow Barclays to move forward and prosper."

In other news, Farepak savers after a six year wait have been advised that they will receive 50p for every £1 they saved with the company.

Deal Agreed For Farepak Victims

The long suffering victims of the Farepak debacle (the Christmas savings club that collapsed in 2006) have finally had some reasonably "good" news.

They will end up receiving a total of 50p for every £1 that they saved with the company. Final payments will be made in August.

Suzy Hall, national campaign co-ordinator of victim group Unfairpak, is quoted in the Guardian:
"This is a much better outcome than we expected – to get 50p overall when we started with nothing in the pot, and then [were offered] just 4p for every £1. 

I'm extremely happy."

Monday, July 9, 2012

The Diamond and Tucker Emails Obtained By Sky



Mark Kleinman of Sky has just Tweeted this:
"EXCLUSIVE: I've obtained emails between Bob Diamond, Paul Tucker and Jeremy Heywood ahead of TSC session this afternoon. Full story soon."
More:
"Email from to in Oct 08: “struck that your [government guaranteed] bond was issued at around 140 over gilts… That’s a lot”."
Also Faisal Islam is tweeting:
"Email Oct 22 2008: from Paul Tucker to Bob Diamond, and Jon Varley: Subject: "Cld I talk to one or other of you about libor pl...


Email from Tucker to Diamond/ Varley: cont: "Sorry to bother you but I think mark d is away. Its a slightly sensitive point Thanks Paul...


So having read the emails, 1. clear that Tucker had serious concerns about libor from 22nd and Barclays funding from 23rd/24th oct 08.


2. Intriguing that Bob Diamond and not CEO Varley replies to Tucker when concerns first expressed


3. On 24th Oct 08 (week before Abu Dhabi capital inj) Tucker asks for meeting to understand where Barclays got its pre crisis funding from."
To remind Barclays and others who intend to commit fraud of what I advised some days ago, if you are intending to commit fraud do not communicate your intentions to others via email, texts or other electronic media.

The Secrets of The Taxman - #Taxman

Those of you who "enjoy" paying tax should make an effort to watch this programme tonight:

The Secrets of The Taxman

Friday, July 6, 2012

SFO To Investigate LIBORGATE

The Serious Fraud Office (SFO) has announced that it will hold an investigation into LIBOR rate fixing.

It will not say which companies and individuals it is investigating:
"The SFO Director David Green QC has today decided formally to accept the LIBOR matter for investigation."
An SFO spokesperson has confirmed to the BBC that a dedicated case team had now started work.

The Serious Fraud Office is a government department responsible for investigating and prosecuting serious and complex fraud. The SFO is headed by the Director (David Green QC) who exercises powers under the superintendence of the Attorney General. These powers are derived from the Criminal Justice Act (1987). 

#bankersarentus - Bob Diamond's Payoff

Those of you who are following the Barclays soap opera may be gemused to learn that Bob Diamond may have to put up a wee bit of a fight for his £20M-£30M payoff.

The Telegraph reports that the bank's board called a late meeting to review the terms of Bob Diamond's contract and decide the bank's legal position wrt Diamond's £18M of unvested share options and £4M-plus of benefits.

For good measure, Diamond is also due more than £2M in lieu of a year's salary and pension after being thrown out of Barclays by the "Governor's eyebrows".
Despite having earned more than £100M since 2005, Diamond does not appear to intend to forgo any part of his payoff.

Although Diamond had offered to give up his bonus this year, which he had yet to earn, in recognition for the "responsibility" he bore. However, he has not admitted any culpability.

Doubtless everyone in the real world wishes him well in his attempts to extract a payoff!

Feel free to tweet about this using hashtag #bankersarentus

Thursday, July 5, 2012

Bank of England Increases QE £50BN

The Bank of England has left interest rates unchanged. However, it has increased quantitative easing by £50BN over the next four months.

The rationale for turning on the printing presses again being the persistent lack of economic growth, slowing export markets and weak business indicators.

NatWest IT Update

Despite the recent valiant attempt by Bob Diamond and Barclays to divert attention from their chums in NatWest, the NatWest IT glitch and the aftermath of that glitch continues to rumble on.

This morning NatWest sent yet another email update out to its hapless customers, subject line "Working hard to put things right":
"Dear ****,

We have fixed the underlying technical issue and are now working hard to help our customers that have been affected. I wanted to get in touch to let you know what we are doing to deliver on our promises.

Putting things right For the vast majority of our customers who have raised a concern we have resolved it straight away. Those that need more attention are being handled directly by our dedicated response team, who have so far resolved over 90% of the 21,000 cases received.


Reimbursing our customers

We made a promise that no customer will be left permanently out of pocket and we intend to keep it. We will automatically reimburse all of our customers' fees, charges and interest on their current accounts, credit cards, mortgages and loans where they have been charged or overcharged as a result of the incident.

Here to help

You can find the latest information, answers to common questions and help to resolve any outstanding queries by visiting Help Point, the dedicated area on our website. Or feel free to go into any of our branches, or call our 24/7 UK call centres free on 0800 656 9639 (minicom: 0800 404 6161).

Thank you for your understanding during this period and again we're sorry for any issues that we've caused.

Yours sincerely,


Chris Popple
Managing Director, Retail Banking
"
I understand that the problems with Ulster Bank may well continue until 16 July.

Wednesday, July 4, 2012

Bob Diamond Speaks



Bob Diamond has just claimed that he only found out about LIBOR "low balling" at Barclays "this month".

That would be last Sunday then would it Bob?

Hmmm!

LIEBOR - The Essential Truth

There is much hoopla going on in the media about this afternoon's bunfight at the Treasury Select Committee hearing, where Bob Diamond will be the guest star.

All attention and focus (thanks to deft media manipulation by Barclays) is on the alleged phone call from Paul Tucker (Deputy Governor of The Bank of England) on 29 October 2008:
"Bob Diamond received a call from Paul Tucker, the Deputy Governor of the Bank of England. The substance of that call was captured by Bob Diamond via a note prepared at the time. A copy of that note is appended to this document; it was circulated to John Varley, then Barclays Chief Executive, and Jerry del Missier, then President of Barclays Capital.

Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier. Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier. However Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep LIBORs so high and he therefore passed down a direction to that effect to the submitters
."
This is all very well, and has given Barclays the veneer of an "excuse"; wherein it can imply that it was asked to fiddle the rates. It has also given the Tories an opportunity to unleash the hounds, and castigate various Labour ministers of the day.

However, let us not forget the essential truth, Barclays were fiddling the LIBOR rates long before the alleged phone call took place.

For why?

To make a profit for their own greedy ends, not to save the country or the bank from financial ruin.

Let us not forget that!

Tuesday, July 3, 2012

Barclays Dishes The Dirt and Publishes Document



Barclays have published a document ahead of tomorrow's appearance by Bob Diamond at the Treasury Select Committee.

Here are a few highlights of the full document which can be viewed here:

"Supplementary information regarding Barclays settlement with the Authorities in respect of their investigations into the submission of various interbank offered rates

Context

In anticipation of Bob Diamond’s appearance before the Treasury Committee tomorrow, 4 July, 2012, in the interest of clarity and transparency we set out on behalf of Barclays a brief summary of the salient events and the actions that Barclays has undertaken since becoming aware of them. These explanations are in no way intended to excuse any of the events that occurred. These events should never have taken place, and Barclays deeply regrets that they did....

The investigation
The bank has conducted an exhaustive internal investigation over more than three years supported by external counsel. The bank has reviewed 22 million documents from over 200 custodians, over 1 million audio files and conducted more than 75 interviews. The results of the reviews were shared with the Authorities, who in turn made their own requests for documents and interviews.

In total, the bank has invested nearly £100m to ensure that no stone has been left unturned. The bank’s exceptional level of cooperation was expressly recorded by each of the Authorities, and was described by the DoJ as “extraordinary and extensive, in terms of the quality and types of information provided” and ”the nature and value of Barclays cooperation has exceeded what other entities have provided in the course of this investigation.”

That cooperation has led to Barclays being the first to reach resolution of these issues. It ironic that there has been such an intense focus on Barclays alone, caused by our being first to settle in the midst of an industry-wide, global investigation.....

29 October 2008 Communication from Bank of England
During October 2008, in the wake of the collapse of Lehman Brothers, when liquidity conditions had tightened acutely, Barclays raised its US Dollar LIBOR submissions more significantly than other panel members. In the month of October 2008, in particular, Barclays US Dollar LIBOR submissions for the 3 month maturity were the highest or next highest of the panel on every single day of the month and therefore excluded from the calculation of LIBOR.

Barclays did not understand why other banks were consistently posting lower submissions; Barclays firmly believed that the other panel members were not, in fact, funding at a lower cost than Barclays, and we were disappointed that no effective action was taken, notwithstanding our having raised these issues with various Authorities during the whole financial crisis period as outlined in the attached timeline.


As one would expect, Barclays (including Bob Diamond and Jerry del Missier) was in close contact with the Bank of England and other Authorities about the liquidity crisis generally.

On 29 October 2008, Bob Diamond received a call from Paul Tucker, the Deputy Governor of the Bank of England. The substance of that call was captured by Bob Diamond via a note prepared at the time. A copy of that note is appended to this document; it was circulated to John Varley, then Barclays Chief Executive, and Jerry del Missier, then President of Barclays Capital.


Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier. Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier. However Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep LIBORs so high and he therefore passed down a direction to that effect to the submitters.


There was no allegation by the Authorities that this instruction was intended to manipulate the ultimate rate. The bank’s submissions had consistently been excluded from the LIBOR calculation. Moreover the instruction became redundant in a matter of days as market conditions improved.


The FSA investigated Jerry del Missier personally in relation to these events and closed the investigation without taking any enforcement action.


Chronology of key issues
A. 2005 to 2009 – Trader requests


.....During this period, Barclays was consistently raising concerns with the BBA, questioning why other banks’ LIBOR submissions appeared to be so high compared to those of Barclays. Many of these concerns were based upon Barclays observations that other banks were making submissions which were lower than levels at which they appeared to be undertaking transactions. ......


Barclays also raised concerns with the FSA, the Bank of England and the US Federal Reserve. The documented occasions on which Barclays made such contact are illustrated in the attached document Timeline of regulatory contact..."

Bob Diamond's Payoff

Despite the fact that Bob Diamond resigned from Barclays, it seems that he is in line for a payoff.

Some are speculating it will be between £20M-£30M.

Any bets anyone?

Jerry del Missier Resigns From Barclays - One Month Into His Role #Dismissier

In June 2012 Jerry del Missier was appointed as Barclays Co-Chief Executive of Corporate and Investment Banking.

Less than one month on, and he is resigning from Barclays.

Another career shattered by greed and fraud.

Here is his resingation statement:
"My 15 years at Barclays have been a time of great accomplishment, both for me personally and for the bank. I am grateful for the opportunities that were provided to me and proud of what we achieved. We built one of the premier global investment banks from scratch – something that we are all very proud of. The firm is as strong today as it ever has been and is incredibly well placed to succeed within the post financial reform competitive landscape.  

I have every confidence that the Board and Executive Management of Barclays will be successful in executing their plans, and I wish them the best of luck in doing so."
Here is his Barclays resume (which now acts as a form of career obituary).

Jerry
del Missier

Chief Operating Officer

Mr. del Missier is Chief Operating Officer of Barclays. He is a member of Barclays Executive Committee.

Mr. del Missier joined Barclays in June 1997 as Head of Derivatives and went on to assume responsibility for Trading, Sales and Research. He was appointed Co-President of Barclays Capital in 2005 and appointed President in 2008. In 2009, Mr del Missier became Co-Chief Executive of Corporate and Investment Banking, and assumed his current position in June 2012.

Prior to Barclays, he was at Bankers Trust in London as a Senior Managing Director of Derivatives Products, responsible for the European business. Previously, he was based in Toronto, Canada, responsible for the Canadian Dollar interest rate derivatives business. Before Bankers Trust, he worked for Bank of Nova Scotia.

Mr. del Missier is Chairman of the Board of the Securities Industry and Financial Markets Association (SIFMA), and serves on the Boards of Room to Read; the Global Financial Markets Association (GFMA); the Markets Management Group (MMG) of the International Institute of Finance (IIF); British American Business Council; the Metropolitan Opera in New York, and the Advisory Board of the Queen’s University School of Business in Kingston, Ontario. He is a past Board member of the International Swaps and Derivatives Association (ISDA) and the Queen’s University Board of Trustees.

Mr. del Missier has a BSc in Chemical Engineering (1985) and an MBA (1987), both from Queen’s University, Ontario.

Diamonds Aren't Forever - Bob Diamond Resigns

Yesterday I wrote:
"Barclays has promised:
  • a "root and branch review" of its "flawed" past practices 
  • a public report of the audit's findings 
  • a new mandatory code of conduct for all staff
This presumably is being done in the hope that it doesn't have to sacrifice Bod Diamond, the CEO, who will appear before the Treasury Committee on Wednesday.

Bob and Barclays need to understand two things:


1 Shutting the stable door after the horse has bolted is too late, and


2 Diamonds are not forever!
"
A day is a long time in banking, and diamonds are not forever.

Today Bob Diamond and Barclays have bowed to the inevitable and Diamond has resgined as CEO of Barclays.

Ironically Marcus Agius, who resigned as Chairman yesterday (in order to save Diamond), will stay on as executive chairman to lead the search for a new CEO. Agius has never had day-to-day operational responsibility for any bank of this size or complexity in his life.

Diamond will still appear before the Treasury Committee tomorrow.

Here is his resignation statement:
"I joined Barclays 16 years ago because I saw an opportunity to build a world class investment banking business. Since then, I have had the privilege of working with some of the most talented, client-focused and diligent people that I have ever come across. We built world-class businesses together and added our own distinctive chapter to the long and proud history of Barclays. My motivation has always been to do what I believed to be in the best interests of Barclays. No decision over that period was as hard as the one that I make now to stand down as chief executive. The external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen. 

I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth. I know that each and every one of the people at Barclays works hard every day to serve our customers and clients. That is how we support economic growth and the communities in which we live and work. I look forward to fulfilling my obligation to contribute to the Treasury Committee's enquiries related to the settlements that Barclays announced last week without my leadership in question. 

I leave behind an extraordinarily talented management team that I know is well placed to help the business emerge from this difficult period as one of the leaders in the global banking industry.
"
This of course is not the end of the affair, for either Barclays or the other banks and their executives in the firing line, the ducks are being lined up neatly in a row.

The numerous inquiries (internal and external), investigations by the SFO and FBI and class actions will open the gates of hell for the banks and the BBA.

By the way, can you smell that?

It's the stench of fear coming from the politicians and the Bank of England, as they contemplate what the freshly resigned Bod Diamond will say to the Treasury Select Committee tomorrow.

Bob Diamond's CV (as per Barclays):

Bob Diamond

Barclays Chief Executive

Previously, he was President of Barclays PLC and Chief Executive of Corporate & Investment Banking and Wealth Management, comprising Barclays Capital, Barclays Corporate and Barclays Wealth.
He is an Executive Director of the Boards of Barclays PLC and Barclays Bank PLC and has been a member of the Barclays Group Executive Committee since 1997. He joined the firm in 1996.
 
Bob is also a Board Member of BlackRock following the integration of Barclays Global Investors.
 
Prior to Barclays, Bob was Vice Chairman and Head of Global Fixed Income and Foreign Exchange at CS First Boston, where he was also a member of the Executive Board and Operating Committee. Previously, he was Managing Director and Head of Fixed Income Trading at Morgan Stanley International, spending 13 years with the firm.
 
Bob began his career as a lecturer at the School of Business, University of Connecticut.
 
A native of Concord, Massachusetts, Bob received a Bachelor of Arts degree in Economics from Colby College in Maine (1974) and an MBA from the University of Connecticut, where he ranked first in his class (1977). He was awarded Doctor of Humane Letters from the University of Connecticut in 2006 and Doctor of Laws from Colby College in 2008.
 
His external affiliations include:
 
  • Chairman, Board of Trustees of Colby College, Waterville, Maine
  • Chairman, Old Vic Productions, Plc
  • Trustee, The Mayor’s Fund for London
  • Member of the Advisory Board, Judge Business School at Cambridge University
  • Board Member, The Diamond Family Foundation
  • Member of International Advisory Board, British-American Business Council
  • Life Member of The Council on Foreign Relations
  • Member, The Atlantic Council.
Bob is married with three children.

Monday, July 2, 2012

Marcus Agius Resigns From BBA

Marcus Agius having resigned from the role of Chairman of Barclays earlier today has also now quit the chairmanship of the British Bankers' Association (BBA).

This being the same BBA that expressed "shock" last week at the fact the LIBOR was rigged.

One wonders how it is, with Agius at the helm, that the BBA managed to remain so "blissfully ignorant" of the wholesale fraud going on around them!

Barclays Is Not Alone - Watch The Ducks Be Lined Up!

The FSA says that Barclays not alone in Libor case.

This will be an "interesting" week, watch as all the ducks are lined up in a nice neat little row!

Barclays Shuts The Stable Door

Barclays has now begun to realise that a simple fine from the FSA will not be quite enough to rebuild its shattered reputation. Therefore in order to atone it has sacrificed its chairman Marcus Agius, who has resigned.

Ironically the surname Agius means "a very old and wise person".

Agius is indeed very wise allowing himself to be removed from the eye of the storm in this manner. He might also care to consider his position with the British Bankers' Association (BBA), which only last week expressed "shock" at Barclays actions.

What is Agius's position within the BBA?

Why he is their chairman!

What was it the BBA said last week?
"The British Bankers’ Association is shocked by yesterday’s report about LIBOR." 
Don't the other members of the BBA ever talk to their chairman?

For good measure, in order to further appease the baying crowd, Barclays have launched an audit of its business practices. This will be conducted by an independent body and report to the new deputy chairman, Sir Michael Rake.

Barclays has promised:
  • a "root and branch review" of its "flawed" past practices 
  • a public report of the audit's findings 
  • a new mandatory code of conduct for all staff

This presumably is being done in the hope that it doesn't have to sacrifice Bod Diamond, the CEO, who will appear before the Treasury Committee on Wednesday.

Bob and Barclays need to understand two things:

1 Shutting the stable door after the horse has bolted is too late, and

2 Diamonds are not forever!