RBS – the taxpayers’ bank

 

          There is little discussion or analysis of what is happening at RBS amongst the political classes. This is surprising, as the size of RBS still swamps the public accounts. What RBS does is of vital importance to the future of the UK economy. Good assest management by RBS is crucial to avoid more taxpayer losses, and to get taxpayer cash back.

           I thought it might be topical to look a little at recent RBS performance, After all, the bank has been in the news recently for its computer failures, and will doubtless be in the news again  soon for the results of the enquiry into whether it had a role in the LIBOR fixing.

              The stated aims of the bank are sensible.  It aims to “serve customers well”. It aims to “restore RBS to a sustainable and conservative risk profile”. It aims to “rebuild sustainable value for all shareholders”.  I have no great quibble with those. If asked, I would say the aims should be to pay the taxpayers back for the money they have put at risk, and to make a contribution to the economic recovery the UK needs. Any large UK bank also needs such a recovery  if it is to prosper in the UK.

                Customers probably feel a bit bruised by their bank after the recent problems with giving people their balances or letting them draw out their money, thanks to computer problems. I cannot recall a major bank getting into such a difficult situation before. The Group has apologised and recognised they let customers down. Doubtless more needs to be done to make sure it cannot recur, and to ensure that customers who lost out are properly compensated.

                   The balance sheet of the Group has been reduced substantially from its peak, and strengthened through government support and other actions. Some assets have been sold to comply with competition requirements. However, as at December 31 2011 the total balance sheet had gone up over the previous year to £1.5 trillion. This included an increase of £100 billion in derivatives held during 2011, taking them up to £530 billion. In the first quarter of 2012 they shrank the balance sheet again, to £1.4 trillion, cutting the derivatives assets by £77 billion. There are also substantial derivatives on the liability side. It is important these are reasonably balanced, reducing the risk of these large positions.

                      The bank showed total loans of £516 billion to customers at the end of 2011, compared to £555 billion a year earlier. This has fallen further in 2012. There have, of course,  been asset disposals.

                       In 2010 the Group lost £1666 million. In 2011 the Group lost £1969 million. In the first quarter of 2012 the Group lost  £1404 million. Administrative expenses rose in 2011 compared to 2010.

                        The remuneration of directors remains of interest to the taxpayer funding this bank.  The directors are well paid. They also enjoy  an annual incentive scheme with “a normal maximum incentive opportunity of 200% of salary (with an exceptional maximum of 250% of salary”.) They also may gain awards to a Long Term Incentive Plan  with “a normal maximum of 400% of salary”. They receive an allowance in lieu of pension contributions. The CEO has said he is not taking his annual incentive payments this year.

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109 Comments

  1. Posted July 4, 2012 at 5:14 am | Permalink

    “There is little discussion or analysis of what is happening at RBS amongst the political classes”

    Possibly because so few of them actually understand it?

    As to LIBOR, Guido has been speculating that others outside the banking industry may have been involved in rate fixing. If true, this is the real story.

    • zorro
      Posted July 4, 2012 at 8:07 am | Permalink

      Oh yes indeedy……

      Zorro

      • lifelogic
        Posted July 4, 2012 at 9:03 am | Permalink

        It is clearly nonsense that some in government and the regulators did not know what was going on with Libor at the very least. The regulators and government are clearly incompetent but the idea that none knew what was going on at a time is simply not credible.

        Alastair Darling was very careful with choosing his words yesterday on channel 4 news. He was not asked about the absurd PIGIS deal that he signed May 9, 2010 which cost the country £7Billion and what he thought of it now. Nor if Osborne gave him the nod to sign it or he did it unilaterally – for some reason or other – I wonder why not? He seemed very shifty to me.

        • Denis Cooper
          Posted July 4, 2012 at 3:50 pm | Permalink

          “… the absurd and illegal PIGIS deal … “; illegal, as later admitted by one of the other parties to the deal, Christine Lagarde.

      • Stephen O
        Posted July 5, 2012 at 4:56 am | Permalink

        I think we can be pretty certain that most of our MP’s/lawmakers/government do not understand the industry which makes up the largest sector of the UK economy. Then again I doubt they understand many of the other sectors of the UK economy.

        This is asad and dangerous state of affairs. Any idea how to fix it. Training sessions? Exams for MP’s?

    • lifelogic
      Posted July 4, 2012 at 9:13 am | Permalink

      I also read that Guido has reported that the cost of countless civil servants being paid by taxpayers, to do work for their unions, is £36,000,000PA.

      Why on earth is Cameron still paying this?

      • APL
        Posted July 4, 2012 at 10:03 pm | Permalink

        lifelogic: “Why on earth is Cameron still paying this?”

        Err, Cameron is not a Tory.

    • lifelogic
      Posted July 4, 2012 at 1:44 pm | Permalink

      Nick Clegg has today called for employees to have a “right” to request shares in their own company as part of a move to create a more responsible John Lewis-style economy in the UK. Perhaps they should have a “right” to request to sleep with the owner wife too.

      So yet more top down, government knows best how to run your business – far better than you do. So more expense and diversions from useful activity for all the directors and owners. What a complete (mess-ed) he and the Lib Dems are, no doubt socialist Cameron will be singing along!

      • zorro
        Posted July 4, 2012 at 6:50 pm | Permalink

        Instead of ‘droit du seigneur’ we could have ‘droit du travailleur’… would that encourage mutuality?

        zorro

  2. lifelogic
    Posted July 4, 2012 at 5:50 am | Permalink

    What RBS has clearly been doing is refusing loans and calling back loans or reducing loans whenever they can do (and especially from good solid customers as they can repay) or just increasing rates and fees so much as to push them into borrowing from other banks. This has starved businesses of funds and caused them to delay or postpone investments (and caused addition pointless work and costs for them) with the effects of employment and growth we have seen so clearly.

    On pay there is no reason why anyone at the bank (certainly not in general banking) needs to be paid much more than perhaps £250K. Lending money and taking security is hardly complex compared to say building a suspension bridge or an Airbus.

    I see that Ken Clark has said, after some thirty years of a war on drugs:- “The UK is “plainly losing” the war on drugs – and may even be going backwards”. But then, he insisted, he was personally opposed to decriminalisation and that the Government had “no intention whatever” of relaxing the law. It is also the major cause of criminal and criminal gang activity. So what is he going to do? Just give us a running commentary of failure?

    If the war cannot even stop drugs being rife in prisons and prices are so cheap anyway then surely the war is counter productive and achieves nothing but dangerous, high risk contaminated drugs that cost slightly more and lots of criminals and criminal gangs running the industry and largely pointless activity by the state as he admits.

    • zorro
      Posted July 4, 2012 at 8:40 am | Permalink

      Yes indeed……think of all the soldiers and money spent in Afghanistan over many years and still we cannot seem to knock out the supply of heroin……funny that isn’t it?

      I would also like to make an apology – if I have sounded less than reverential about the PM or suggested in any way that he might be shallow, opportunistic, without any real political values, anything less than ‘Eurosceptic’, and prone to blaming the inaction of his government on a small minority with which he is in a coalition…….

      Also for suggesting that he makes short term supposedly tactical PR style pronouncements on things which he can do which he later u-turns or backtracks from……His latest pronouncement on Greeks……http://www.guardian.co.uk/uk/2012/jul/03/david-cameron-immigration-greece-uk

      Zorro

      • alan jutson
        Posted July 4, 2012 at 11:07 am | Permalink

        So if he thinks he can stop Greeks who are EU citizens, he can surely stop them all.

        Then perhaps we will have more jobs for those that are already here to fill, and thus our unemployment should reduce.

        I wonder what his fellow EU supporters will think of this plan.

        I see a fine coming on if he tries this one, more taxpayers cash wasted to no effect.

        Now if we were not in Europe, he could do exactly as he suggests.

        I see Mr Clegg says he is being overwhelmed by the simple scale of government, indeed he said as a joke (it is reported) that he feels like he has had a lobotomy.

        He certainly looks tired, heavy eyed, and strained of late.

        I wonder if he has ever connected the two things together, that Government is too big, and getting too involved, with too many things at too much cost.

        Again, if we were out of the EU it may relieve some pressure on all of us.

        At least our Parliament would be able to have some control, if it was capable.

        • alan jutson
          Posted July 4, 2012 at 3:59 pm | Permalink

          John

          If this is being held in moderation because of comment about Mr Clegg.

          The report is in today’s Daily Mail page 17

          Reporter Kirsty Walker Political Correspondent

          Headlines Clegg: It feels like I’ve had a lobotomy

          • APL
            Posted July 5, 2012 at 6:37 am | Permalink

            Glegg: “It feels like I’ve had a lobotomy”

            As leader of the flibbedy libberady party, he has only confirmed what many people have suspected all along.

        • Lindsay McDougall
          Posted July 6, 2012 at 11:41 am | Permalink

          One of the first acts of Ronald Reagan, on taking office as Governor of California, was to shut government offices at 2 pm every day, on the grounds that he was going to reduce the amount of government. It’s only because they want to control things and people so much that today’s politicians make themselves so tired. Just think about it, Nick: pull Lord’s reform and you could have an extra hour with your family every day.

      • Tad Davison
        Posted July 4, 2012 at 1:17 pm | Permalink

        Thanks for the link Zorro, I have read that piece, and the devil is in the detail.

        We know what Cameron is like. He promised us a referendum on the Lisbon Treaty, provided it had not already been ratified. Cameron knew it would be, so that bit of chicanery got him off the hook. Today’s pronouncement follows in a similar fashion. It reads:

        ‘Prime minister says it would be in UK’s interests to impose stringent border controls if Greece is forced to leave euro’

        That’s IF!

        He’s still prepared to let them come here in the meantime!

        I harken back to something Frank Field wrote. We’re full up. How many more can we realistically take?

        Tad

      • lifelogic
        Posted July 4, 2012 at 3:25 pm | Permalink

        So David Cameron would impose stringent border controls that would block Greek citizens from entering the United Kingdom, if Greece is forced out of the single currency.

        Pathetic posturing as usual.

        • Iain Gill
          Posted July 4, 2012 at 7:59 pm | Permalink

          especially as they are printing work visas and indefinte leave to remain visas in record numbers for Indian nationals and India is not in the EC

          personally I have lots of Greek friends and I think they deserve easy entry a lot more than many others we allow (entry -ed)

      • Posted July 5, 2012 at 1:57 pm | Permalink

        When my Office Manager’s Son went to Afghanistan with the Royal Marines some eight years back on his return his Mother asked him about the poppy fields and their destruction to which he said they wern’t allowed to touch them in case they upset the growers. So much for most of the Heroin coming to this Country. We are governed by idiots and have been foe decades.

    • lifelogic
      Posted July 4, 2012 at 10:52 am | Permalink

      So Lord Patten has appointed George Entwistle, an internal BBC person, as the next Director-General of the BBC propaganda organisation. His salary is reported as £450,000 (so about 3 times the market rate plus gold plated pension I assume). Indeed many would clearly do it rather better than the last one for nothing.

      It seems he attended the independent Silcoates School in Wakefield, West Yorkshire and gained a dreaded PPE degree (but at least from Durham not the discredited Oxford one that has done such damage to the country). I assume his grades were not good enough for Oxbridge so Durham was advised, but perhaps I am being unfair. Hopefully he will do a good job, but as he is Patten’s choice and working under Patten (who was Cameron’s absurd choice) it seems very, very, unlikely.

      His first statement should be to say the BBC will start to be neutral on the green issue, the ever bigger state and the non democratic EU – in place of the current absurd socialist propaganda they have rammed down licence payers throats for so many years.

      • lifelogic
        Posted July 4, 2012 at 1:06 pm | Permalink

        It is reported that the new director general is “steeped in BBC journalism” how hugely depressing. Hopefully he has time to realise what a dumbed down, lefty, pro EU, pro the green quack science, pro tax borrow and waste organisation it is.

        In terms of waste I also hear that Patten spent a very large sum on head hunters for the position. Surely anyone interested knew the position was available and some one at the BBC could have all produced a short list. All the BBC has to do was talk about it on air a few times and put it on the web site as indeed they did. What a complete waste of licence payers money from “well it is not my money is it” Lord Patten.

      • Sebastian Weetabix
        Posted July 4, 2012 at 11:19 pm | Permalink

        PPE. Media studies for the posh.

      • uanime5
        Posted July 5, 2012 at 6:08 pm | Permalink

        How are you determining the market rate for the Director-General of a media company?

    • Tad Davison
      Posted July 4, 2012 at 12:31 pm | Permalink

      This makes me fume. The battle against crime can be won, but not by tying our hands behind our backs. If the politicians really want to win it, then let’s not restrict ourselves with endless stupid human rights legislation. Make punishments actually mean something.

      I believe the political will to solve this doesn’t presently exist, otherwise, they’d take the gloves off and treat it properly as a war.

      Do-gooders like Clarke have wormed their way into so many of society’s most influential positions, a great many of which are unelected. They affect the law, they argue for the most expensive, least effective options, they make sentences a nonsense, and in doing so, deny us the best means to effectively combat crime. We can no longer afford to have failed liberal lefties in charge of the criminal justice system.

      I would make sentences so severe, very few would even consider breaking the law in the first place. And that applies equally to bankers as it does to drug dealers.

      Clarke says we’re losing. That’s because he’s a loser. We simply can’t afford to lose. Take a look at Mexico, and ask ourselves if we really want a similar thing right here in the UK?

      A life of crime is an option. I am adherent to the old phrase, when you have them by the gonads, their hearts and minds will follow. I can’t help but think if we had proper deterrents on the statute books, a lot of the excesses of the bankers wouldn’t have happened either.

      Tad Davison

      Cambridge

      • uanime5
        Posted July 5, 2012 at 6:12 pm | Permalink

        What you’re proposing is what they’re doing in the USA. Given their high prison population and crime rate it clearly doesn’t work. By contrast the more left-wing policies of Europe which include shorter prison sentences, more emphasis on rehabilitation, decriminalisation the possession of drugs, and free drugs for addicts has resulted in a large fall in crime.

        Also the UK will never become like Mexico unless it’s possible to grow large amounts of cocaine in the UK and sell it to the USA or Europe.

      • zorro
        Posted July 5, 2012 at 6:14 pm | Permalink

        Operation ‘Fast and Furious’ has not assisted the situation in Mexico….

        zorro

    • A different Simon
      Posted July 4, 2012 at 12:50 pm | Permalink

      Clarke must be on drugs to claim “Britain should still join the Eurozone” .

      Peter Green is a better advert for narcotics .

      I’m not a Conservative but if I was I would not want this quisling in my party .

      • Bob
        Posted July 4, 2012 at 6:10 pm | Permalink

        Ken Clarke is a Tory, not a conservative.
        The people that have taken over the Tory Party are gradually replacing conservatives with Common Purpose yes men.

      • APL
        Posted July 5, 2012 at 6:42 am | Permalink

        A different Simon: “I’m not a Conservative but if I was I would not want this quisling in my party .”

        Agreed, I came to the conclusion a LONG time ago, I can’t be in the same party as that rotten traitor.

    • uanime5
      Posted July 4, 2012 at 2:56 pm | Permalink

      People are paid more than £250K per year to ensure that companies are able to hire the very best in order to remain competitive. Oddly this only applies to the senior executives and not anyone lower down in the company hierarchy.

      I guess constantly raising the salaries of senior executives is another triumph of the free market.

      • lifelogic
        Posted July 4, 2012 at 4:29 pm | Permalink

        It can be in the case of certain people who have talent and a following – footballers, actors, comedians for example, but it usually just a symptom of poor shareholder democracy and control or an over protected profession exploiting people such as the legal profession.

        • zorro
          Posted July 4, 2012 at 6:10 pm | Permalink

          Indeed, you pay your money and take your choice. If people want to pay silly prices to watch football, watch a film etc that’s their prerogative….shareholders should man up a bit and make their presence felt….or buy somthing else.

          zorro

          • Bob
            Posted July 5, 2012 at 12:46 pm | Permalink

            @zorro

            It doesn’t matter what shares you buy.
            If they are in a pension or an ISA you lose your right to vote a the AGM.

            Ask yourself why this needs to be the case.

        • Bob
          Posted July 4, 2012 at 6:11 pm | Permalink

          Well said lifelogic.

      • Sebastian Weetabix
        Posted July 4, 2012 at 11:30 pm | Permalink

        For once I find myself in agreement with uanime5. There is a golden circle of management in this country that all sit on each other’s remuneration committees giving each other whacking great pay rises (ahem… ‘appropriate compensation’), employing an army of scumbags called executive pay consultants, all because they want to be in the upper quartile of executive pay. It’s an accelerating spiral of misappropriation of shareholder funds. They’re just well dressed looters. I get especially enraged when I hear them talk about wage arbitrage; in plain English, they keep their job, but the little people’s jobs all go to China.

        I don’t mind someone getting filthy rich if they’ve built their own business from scratch or they have a superlative talent that enables them to fill stadia. What we have in most organisations in this country is time serving mediocrities worming their way up the greasy pole and running off with the loot, irrespective of their competence or company results.

        • Bob
          Posted July 5, 2012 at 12:49 pm | Permalink

          Sorry to keep repeating myself, but this system will not change unless the government allow us to vote the shares we hold in pensions and ISAs.

    • Bazman
      Posted July 4, 2012 at 7:02 pm | Permalink

      Hippy wigs will be sold in supermarkets soon.

  3. colliemum
    Posted July 4, 2012 at 5:53 am | Permalink

    All very interesting, with some jaw-dropping numbers.
    In view of the recent scandals (‘glitch’, LIBOR), I think it is time for the major shareholder in RSB in particular, and for the sake of our economy in general, that these huge banks are split into what is called ‘High Street Banks’ and Investment Banks.
    I believe such split may even be of help for our economy when the € zone banks and economy will drag the whole lot even further down, because the exposure of us ordinary tax payers to those new ‘financial instruments’ like debt swaps will be minimised.

    • zorro
      Posted July 4, 2012 at 8:10 am | Permalink

      Under the current system, as I have said previously, Glass-Steagall type banking is the only practical solution to help improve trust in banking. There must also be more competition in banking, smaller, nimbler, more locally accountable banking to help small businesses. In short, RBS must die……It is a lumbering zombie which will continually rely on taxpayer funding/bailout.

      Zorro

      • lifelogic
        Posted July 4, 2012 at 9:31 am | Permalink

        RBS needs to be split up but also they need to stop it damaging the real economy as it clearly is doing every day.

  4. Alte Fritz
    Posted July 4, 2012 at 6:31 am | Permalink

    The CEO of RBS appears generally pretty impressive, but is this leviathan beyond human control?

  5. Robert K
    Posted July 4, 2012 at 6:33 am | Permalink

    It will be interesting to see where the Libor “scandal” ends up. So far, there has been little rational analysis in the media about the issue. My recollection fr0m 2008 was that Libor was worryingly high and gave a message that the banking system was on the brink of collapse. In that context, it would be surprising if the banking regulator did not have a view on the accuracy of the rates that the banks were submitting. You might imagine that the banks, the regulator, and the Treasury would have had an interest in keeping Libor as low as possible. It will be interesting to see how far Mr Diamond decides to open up this particular tin.
    On RBS, it might seem crazy that us taxpayers still own this zombie. Maybe the government has discovered it likes playing at bank management.

    • Lindsay McDougall
      Posted July 4, 2012 at 4:25 pm | Permalink

      It’s odd. Northern Rock, who relied heavily on the inter-bank lending market for funds, went bust in August 2007. You would have thought the Bank of England would have spend several months before that trying to fiddle the LIBOR rate downwards for Northern Rock’s benefit but they apparently never did.

      • libertarian
        Posted July 4, 2012 at 9:20 pm | Permalink

        But they WERE fiddling Libor rates down meaning mortgages and borrowing was cheaper. It was savers, depositors and pensioners who were losing out er just like now with a base rate of o,5%

  6. Robert K
    Posted July 4, 2012 at 6:35 am | Permalink

    I meant to add, how would consumers lose out if Libor was artificially low? I would have thought it would made their loans cheaper, not more expensive.

    Reply: It would. It might not be so kind to savers.

    • forthurst
      Posted July 4, 2012 at 10:51 am | Permalink

      …and price manipulation can be used to effect the settlement value of derivative contracts which form a substantial component of banks’ ‘assets’.

    • Lindsay McDougall
      Posted July 6, 2012 at 11:45 am | Permalink

      So how is it that the Prime Minister still says the low-balling LIBOR has led to increased mortgage payments? Perhaps he would appreciate an Abacus for Xmas.

  7. Pete the Bike
    Posted July 4, 2012 at 6:40 am | Permalink

    It will take more than RBS to make an economic recovery in the UK. As long as the government continues it’s funny money policies there will be no real savings by real people. Without savings you cannot have real investment in business which is the only way you’ll ever have growth. Also whilst you have excruciatingly high taxation neither business nor consumer has any money to invest or spend. There really is no aspect of current economic policy in this or most other “developed” economies that makes any logical sense unless you realise that the ruling elites are terrified and desperate to keep the status quo.

    • alan jutson
      Posted July 4, 2012 at 8:37 am | Permalink

      Pete

      Indeed

      In addition any fine imposed on these people will mean more charges or less interest paid to their customers.

      Thus we pay tax to support them, and pay the fines when they do not comply with taxpayer funded quango’s who have failed to supervise properly.

    • lifelogic
      Posted July 4, 2012 at 9:36 am | Permalink

      Indeed it will take more than RBS – we need cheap energy gas (in the US gas is 25% of its cost here due mainly to fracking), fewer and better regulations, sound money, proper banking, easy hire and fire, lower taxes. less government.

      From Cameron we get nothing in the right direction what so ever and much in the wrong one.

  8. Mike Stallard
    Posted July 4, 2012 at 6:57 am | Permalink

    I am a fairly poor OAP. Do you know what? I am tired of hearing how much people earn. I am actually not jealous, as I think I am expected to be. Sorry.

    “However, as at December 31 2011 the total balance sheet had gone up over the previous year to £1.5 trillion”
    Allow me to remind you that our annual taxation comes to something under £800 billion. We are also in debt to just over one trillion.
    In no way can we be held responsible for this unwieldy bank.

    • Tad Davison
      Posted July 4, 2012 at 8:08 am | Permalink

      Mike, it all depends how one measures wealth. It is entirely possible for a rich person (in terms of financial wealth) to be impoverished when it comes to personality, compassion, consideration, and understanding. You have those qualities in spades, so by that measure, I’d say you were pretty well off.

      Tad

      • backofanenvelope
        Posted July 4, 2012 at 8:33 am | Permalink

        I’m with you Mr Stallard – I just don’t care what they pay themselves, as long as they do a “proper” job, as we say down here. What gets me is the glacial speed of change. Everyone, including Mr Redwood, seems to think that the banks need to be broken up into more manageable units. But in two years, nothing much seems to have happened.

        • Duyfken
          Posted July 4, 2012 at 11:39 am | Permalink

          Seconded.

        • A different Simon
          Posted July 4, 2012 at 1:01 pm | Permalink

          Timescales are tending towards infinity aren’t they .

          That is what happens when the regulated capture the regulator .

      • lifelogic
        Posted July 4, 2012 at 8:54 am | Permalink

        If you are happy, healthy, housed and fed what does it matter?

        • Tad Davison
          Posted July 4, 2012 at 11:18 am | Permalink

          Exactly LL.

          A little soil well-tilled, a little house well-filled, and a little wife, well-willed, are great riches. And that of course applies equally to females.

          That pretty little verse opens up the highly contentious but relevant issue of incentives, and what people go out to work for. Is it right to put personal material aquisition above all other considerations, and is it reasonable to bend the rules to feather one’s own nest?

          I’d be most interested to hear the views of others.

          Tad

        • alan jutson
          Posted July 4, 2012 at 11:27 am | Permalink

          Lifelogic

          I certainly agree.

          But if you are not in the best of health, live in unsuitable accomodation, have little in the way of family support, are only left with a little of your own money after paying council tax and all other taxes out of a small hard earned salary, you thus have little choice, and you may not feel quite so happy, and may, just may, feel just a little peeved at the scale of some of these salaries of some of these CEO’s who then fail to perform, and then get a huge pay off to go.

          Not just in Banking I may add, also happens in general commerce, the civil service, and local government.

          It now seems that some salaries/payments are completely out of proportion with ability.

          I am fortunate, I have some choice and am reasonably happy with my lot, but that does not mean that some balance needs to be restored to some salaries.

          Those who have made their own way, with their own money, taking their own risk, absolutely no problem at all, and good luck to them.

        • Bazman
          Posted July 4, 2012 at 7:05 pm | Permalink

          It is the sign of an unbalanced and unjust society. Huge wealth differentials are bad for everyone. It is not just simple jealousy. If you think that then you are obviously not able to think far.

          • lifelogic
            Posted July 4, 2012 at 9:12 pm | Permalink

            Bazman life is unfair and unjust just get over it. You say “Huge wealth differentials are bad for everyone” – complete and utter nonsense, have you been reading that silly book the spirit level or something similar.

            What matters is that the money has been made without cheating, rigging the markets or exploiting monopolies, Made by providing goods or services that benefit others and how the money one made is used or invested well.

            If the assets are owned by the state and run by people like Mandelson, Clegg and Barossa, rather than individuals, things would be far, far, less efficient and far, far, worse for everyone.

          • Bob
            Posted July 5, 2012 at 12:53 pm | Permalink

            Google British Constitution Group

          • Bazman
            Posted July 5, 2012 at 8:44 pm | Permalink

            Effects on health, housing social cohesion, distribution efficiency, economic welfare, aspiration, incentives and many more fueled by crony capitalism, market rigging etc. You really do have simple view on everything don’t you?

    • zorro
      Posted July 5, 2012 at 6:17 pm | Permalink

      Mike,
      The issue here is that this bank is losing money hand over fist, and the situation is not improving…..yet the directors have a ridiculously generous reward scheme which does not appear to chime with the bank’s performance…..

      zorro

  9. NickW
    Posted July 4, 2012 at 7:10 am | Permalink

    I understand that RBS’s English branches have been sold to Santander, (Spanish), which for those with accounts at these branches might be “Out of the frying pan into the fire”.

    As “The Royal Bank of Scotland”, RBS’s also has “Referendum blight” in that it’s business would be affected by Scottish independence and its reputation tarnished by any surge of anti-English Scottish nationalism during the referendum process.

    Likewise, anti English Scottish nationalism would severely imperil RBS’s bailout by English taxpayers.

    In the event that RBS is found to be complicit in Libor manipulation, the taxpayer will end up paying the bulk of the fine.

    The Banks, in general, make tens of billions of pounds out of the activities for which regulators are fining them. Fines for breaking the law in millions are simply seen as a business expense and will do nothing to curb the Bank’s behaviour. Either gaol time and/or the power to ban people, (temporarily or permanently) from working in the financial sector is needed.

  10. Lord Blagger
    Posted July 4, 2012 at 7:19 am | Permalink

    Swamps the accounts? It’s off the books like all the debts that are being hidden too.

    Now you’ve said this

    So it proved with the Coalition government. They have published figures showing much larger state liabilities.

    However me and another poster asked you to provide a link to the numbers.

    Still waiting …

    Reply: The official figures consolidate bank liabilities. I did all this for you ages ago.

  11. alan jutson
    Posted July 4, 2012 at 7:19 am | Permalink

    Does not sound too good does it.

    Losses and overheads increasing, loans to businesses/customers decreasing.

    Sounds rather like central government performance, lots of talk, little action, with more and more money required to support it.

    Share price still low as well, although given the above, not a surprise.

    What a spectacular investment Gordon landed us all with.

    • Tad Davison
      Posted July 4, 2012 at 8:29 am | Permalink

      That’s true Alan, and now people are talking about the possibility of another Labour government!

      Lest we forget!

      It would make the choice far easier for the voting public, if there was more than a fag paper’s difference between Labour and the present coalition. And if it is truly the case that current borrowing and spending is mainly down to the influence of the Lib Dems, then it should be exposed so that we can make an informed choice, and make sure they never get anywhere near government in future.

      I have made this point before, but it’s worth repeating again. If this is a case of the tail wagging the dog, it is perhaps the only time I am in favour of tail-docking.

      Spendthrift politicians need to be exposed for their incompetence, but then it’s no good criticising them, but carrying on as before.

      Tad

      • lifelogic
        Posted July 4, 2012 at 9:39 am | Permalink

        Labour back in 2015 is surely inevitable – unless Cameron has a brain transplant or is replaced.

        • zorro
          Posted July 4, 2012 at 6:40 pm | Permalink

          http://www.guardian.co.uk/politics/2010/mar/24/david-cameron-stumbles-gay-rights

          This is an example of where Cast Iron comes over less than convincingly/lacking core beliefs when exposed to difficult questioning…..a bit like an actor who has forgotten their lines.

          zorro

          • lifelogic
            Posted July 4, 2012 at 9:23 pm | Permalink

            He clearly thinks he is just an actor. Doing a series of plays that are designed to appeal to the particular audience that evening. He seems to forget that the audience will expect him to do what he promises not just say it. He thinks he will be just doing a different play the next day and can say the opposite.

            Politicians need stand for something more than an endless series of broken promises but he does not.

    • norman
      Posted July 4, 2012 at 9:36 am | Permalink

      We’re all sharing the proceeds of growth (in government) together.

      Two soundbites for the price of one!

  12. Brian Tomkinson
    Posted July 4, 2012 at 7:41 am | Permalink

    Judging by recent events and these figures it seems that RBS is failing to achieve any of its own stated aims. They don’t seem anywhere near to meeting your aims either.

  13. Michael Read
    Posted July 4, 2012 at 8:54 am | Permalink

    Respectfully suggest, JR, and your posters, to take a look at what Barclays has actually said about its involvement in Libor fixing.

    http://group.barclays.com/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobheadername1=Content-Disposition&blobheadername2=MDT-Type&blobheadervalue1=inline%3B+filename%3D3-July—Supplementary-information-on-LIBOR.pdf&blobheadervalue2=abinary%3B+charset%3DUTF-8&blobkey=id&blobtable=MungoBlobs&blobwhere=1330686951854&ssbinary=true

    (Apologies for the extraordinary long-winded IP address. It came via the Guardian)

    I’ve changed my mind. Don’t let the vast bonus distract. Diamond is a wronged man.

    • zorro
      Posted July 4, 2012 at 9:29 am | Permalink

      He has his chance to put his case/spill the beans today.

      Zorro

    • REPay
      Posted July 4, 2012 at 1:53 pm | Permalink

      I think you’ll find that the Bank of England was much more of a tool of the last government that is obvious. I suspect the players were lent on to meet the price Brown/Balls wanted. This is the thrust of the Barclays document Michael Read kindly posted.

      I hope Bob Diamond tells us the truth some time soon. The idea of the spendthrift Labour Party being back in charge beggars belief but that is were we are headed.

      The lazy and lying left wing media now regularly ignore all causes for our problems except the bankers. Out of jail free for Balls and co. Our not very competent government finds it hard not to join in with the banker bashing. The way is paved for the return of tax and spend.

      • APL
        Posted July 5, 2012 at 6:52 am | Permalink

        Personal attacks on Balls and Cooper for their expenses without providing evidence-ed

        Reply: I do not post allegations about MP expenses or non MP alleged personal wrong doings as I do not have time to check out the facts or to seek the person’s response, which I would need to do to be fair.

  14. Acorn
    Posted July 4, 2012 at 9:32 am | Permalink

    “The decision to trim the bottom and top quartiles in the calculation was taken to exclude outliers from the final calculation. By doing this, it is out of the control of any individual panel contributor to influence the calculation and affect the bbalibor quote.” http://www.bbalibor.com/bbalibor-explained/the-basics .

    It is going to get worse; there is going to be a lot of “waggon circling” to protect the guilty. The trouble is the guilty are positioning themselves for maximum political protection

    Reply: There is underway a strong regulatory probe into what happened, to see if there was wrong doing and if so to take appropriate action.

  15. Alan
    Posted July 4, 2012 at 9:33 am | Permalink

    I’m not going to pretend that I know much about banking but I would expect a bank in which the Treasury holds a controlling share to concentrate on two areas – supplying cash for the daily needs of its retail customers, and lending to businesses. If I have followed the accounts correctly (a big assumption), RBS has assets of about £1,400 billion, it keeps cash in the ATMs and the tills of about £82 billion and it has loaned its customers about £497 billion.

    That seems to leave about £800 billion doing something else.

    • Bob
      Posted July 4, 2012 at 6:30 pm | Permalink

      “That seems to leave about £800 billion doing something else.”

      Maybe it’s invested in Greek government bonds?

  16. Posted July 4, 2012 at 9:46 am | Permalink

    “the economic recovery the UK needs. Any large UK bank also needs such a recovery if it is to prosper in the UK.”

    Puts it in a nutshell. Almost all oputr problems are insignificant if we get out of recession and insiluble if we don’t.

    With the rest of the world in 6% annual average growth it is obvious we too could be out of recession in days if the political class would allow it. I have detailed my programme here several times and there has been no fact using dispute that it would work (here or anywhere else).

    The recession is the deliberate creation of the political class.

    • lifelogic
      Posted July 5, 2012 at 6:12 am | Permalink

      Indeed be have a government killing growth and industry all over the place. No government wanting growth would employ Vince Cable.

  17. stred
    Posted July 4, 2012 at 10:02 am | Permalink

    The advent of high speed computer trading has resulted in the banks, funds, and other market traders making continual high volume trades, though apparentlyat low fee income. I gather that if an individual decides to put his loss making savings into shares or bonds, then the system can detect the bid and the individual’s bid will be priced up by the computer getting in first. Added to this, it is not only LIBOR that can be fiddled but traders regularly trade with themselves in order to influence the market. The whole cost of this sort of leaching is borne by the value of the whole market. Added to this of course is the cost of bonuses, salaries and options, which mop up any bank profits and lower shareholder value.

    The system is sick but, as it is international, nothing can be done. Let’s hope Mr Diamond enjoys his payoff.

  18. sm
    Posted July 4, 2012 at 10:31 am | Permalink

    Start breaking them up into seperate parts and sell them/float them off with Golden shares to prevent them being bought by megamegacorp. Or just run them down to minimize losses until it can be closed down.

    A future mega bank banking levy can be introduced to recoup the cost of this closure activity, possibly even a UK financial transaction tax on derivatives or all acquisitions.

    Only then will space be created for others to replace the failed.

    The Co-op not having apparently enough banking experience may actually be an advantage.

    • waramess
      Posted July 4, 2012 at 5:13 pm | Permalink

      Agreed in spades. too much of Browns legacy is being followed through to a not very sensible conclusion. We should stop thinking about recovering money from a sell off of the shares; after having sold off the bits of the bank that are worth selling, just force them to sell assets until they have nothing left to sell .

      I suspect there is much in this bank that will be unsaleable but it would be better to put it all behind and move on.

      • Bob
        Posted July 4, 2012 at 6:38 pm | Permalink

        @waramess
        “I suspect there is much in this bank that will be unsaleable but it would be better to put it all behind and move on.”

        That’s right.
        It contained anything of value it would have been sold already. It’s just a case of keeping the plates spinning on the wobbly sticks to defer the moment when they have to admit it’s a crock of you know what, and the P45s start flying.

        • alan jutson
          Posted July 5, 2012 at 7:35 am | Permalink

          Bob

          I tend to agree, but if the indebted Government subsidised Banks were completely sold off, who would be left to buy government debt and help out with QE.

          Good heavens, the government may need to live within its means, that is why it will not happen.

    • APL
      Posted July 5, 2012 at 6:57 am | Permalink

      sm: “float them off with Golden shares to prevent them being bought by megamegacorp.”

      Such an idea is quite good, but I bet you next weeks wages would contravene EUropean competition ‘law’.

      Anyway, our government has sanctioned the sale of RBS English branches to Santander. Hopefully, watch the headlines, Santander is in better shape than Bankia?

      Otherwise, the phrase “out of the fryingpan into the fire” springs to mind.

  19. Dan H.
    Posted July 4, 2012 at 10:46 am | Permalink

    As things stand now, the best thing to be done with RBS is to break it up into a number of much smaller units and sell these off at a loss to whoever will take the poxy things. The Government has no business running a bank; for a start it is completely rubbish at the job (governments are rubbish at most things, actually) and has a worrying tendency to subsidise the bank from public funds.

    A simple remedy for this sort of scenario in future is as follows:

    1) Determine how large an organisation is to be deemed “Too big to be allowed to fail”.

    2) Enact a law that levies swingingly, absurdly high tax rates on any organisation that is 90% of the size of a “Too big to be permitted to fail” bank; rates on the order of 150% of turnover would be reasonable here.

    This would ensure that as organisations approached the danger zone, they would simply fission into smaller entities. The tax would never collect a penny, but its purpose would simply be to prevent organisations too big to be allowed to fail existing in Britain.

    Following this, a very publicly discussed policy framework on how best to shut down a failed bank with the least damage to innocent customers needs to be performed. This would be part policy, part theatre and part warning, and once thoroughly debated must then be laid down in law to prevent a future political muppet like Gordon “Goldie” Brown circumventing it on the quiet. The whole ethos of future policy must be that Britain rewards winners, and disposes of losers quickly, quietly and efficiently. This then ought to act as a decent deterrent to reckless casino banking such as Northern Rock was engaged upon (borrowing short to lend long, in their case).

  20. Voice_From_The_Floor
    Posted July 4, 2012 at 10:48 am | Permalink

    Excuse me, but did I understand your post correctly?

    In 2010 the RBS Group lost £1666 million.
    In 2011 the RBS Group lost £1969 million.
    In 2012 in the first quarter ALONE the RBS Group £1404 million.

    Speaking as someone who has run his own business in the UK for the past 44 years, these figures are incomprehensible.

    What manner of management in any line of business not only fails to curtail losses of such staggering magnitude but actually presides over exponential INCREASES in those losses?

    I cannot help feeling that we are heading for economic meltdown the like of which most of us have not experienced in our lifetimes.

    I’m afraid…………………….VERY, VERY afraid.

  21. Lindsay McDougall
    Posted July 4, 2012 at 10:52 am | Permalink

    RBS’s CEO said that he needed 5 years to restore RBS to profit. Progress towards that isn’t very good. A good practical thing to do would be to tell Stephen Hester that he will lose his job if he fails to achieve that objective. I would like to know why it is still making losses. Is it still drip feeding the bad news about toxic assets? Has it not done enough to reduce its cost base? Have there been one off items such as redundancy payments etc? I think that we all need to be told. If you want an informed electorate, then take the trouble to inform them.

  22. MajorFrustration
    Posted July 4, 2012 at 12:54 pm | Permalink

    I seem to remember that Barclays refused substantial B0E support during 2008/09 and I wonder if the “White Knight”Saudi investors in Barclays may now consider a claim/conversion given that a lower LIBOR implied bank strength which was clearly misleading. Where are we with Vickers – given the present shambles do we still have to wait until 2019 for the split between retail and investment banking?

    • Lindsay McDougall
      Posted July 6, 2012 at 11:27 am | Permalink

      Let the Saudis look after themselves. They did all right out of the deal. Just be grateful, as a tax payer, that there wasn’t a third major bank holding out its begging bowl.

  23. Atlas
    Posted July 4, 2012 at 1:50 pm | Permalink

    I hope Diamond’s testimony to the Select committee is followed up wherever it may lead.

  24. Winston Smith
    Posted July 4, 2012 at 2:18 pm | Permalink

    I suspect the political classes are busy celebrating the return of Denis McShane to their fold. The Police have dropped their investigation into his expenses, (etc).

    • APL
      Posted July 5, 2012 at 7:03 am | Permalink

      Winston Smith: “The Police have dropped their investigation into his expenses, ”

      Of course, one law for the degenerates on the sink estates, another for the well connected degenerates within networking distance of government.

      JR: ” (etc).”

      Always trying to play down the expenses scandal.

      This is a ROTTEN Parliament.

  25. RB
    Posted July 4, 2012 at 2:41 pm | Permalink

    I dont know what we should be dong about these banks, but politicians are not the answer.

    I am watching Diamond being questioned now. As always with Parliamentary Committees the only impression one ever leaves with is that MPs are pretty dim and have no idea how to ask questions. Diamond bats them off like so many flies as business leaders and others in front of parliamentary committees always do, and his 14 rogue traders line is left pretty much intact. Honestly, if ever there was an argument for a judge lead public enquiry into the banks then watching this committee is it.

    • oldtimer
      Posted July 4, 2012 at 4:52 pm | Permalink

      I followed it from c3.15 to the end at 5pm. I too was not impressed by most of the questioners; and not for the first time. Many of the questions were repetitions of the same question asked earlier by another member. The was some grandstanding, playing to the gallery. After one such episode Diamond merely asked “And the question is?” or words to that effect.

      I am not persuaded by the idea of another judge led enquiry. The FSA and FBI have already concluded the enquiry that resulted in the Barclays fine, with other retribution to follow for other banks to follow. Vickers has reported and there is a Banking Bill already proceeding through Parliament. Both strands of investigation brought appropriate specialists to bear. They need to get on with implementing the conclusions. The latest issue of setting/fixing LIBOR during the financial crisis is already heavily politicised, with blame being sprayed around. Judges will not settle political arguments.

      • alan jutson
        Posted July 5, 2012 at 7:47 am | Permalink

        old timer

        I think to a degree I am with you, I too viewed the last hour or so.

        Thought Bob Diamond answered the questions reasonably well, but like you, thought many of the questions rather weak.

        Barclays spent £100 million on their own internal investigation, the FSA ,who failed in the first instance to uncover anything, then had their own report.

        Why not simply request a copy of the internal report first, to see what it actually says before making any further decisions.

        From the slant of the questioning and answers it now would appear that it is at least possible, that many other Banks could have acted in the same manner as Barclays.
        Thus unless the whole industry is investigated there seems little point in concentrating just on one Bank.

        Should the Police be involved at huge expense, and huge delay, with a case so complex that many of the jury would simply fall asleep I am not so sure.

        The record of prosecution on huge fraud cases is questionable at the very least.

    • waramess
      Posted July 4, 2012 at 5:17 pm | Permalink

      Odd you should think this way. For my part I thought the select committee were asking some pretty searchng questions and Diamond was pretty poor at addressing them.

      Just goes to show how perceptions differ.

    • Acorn
      Posted July 4, 2012 at 5:37 pm | Permalink

      RB; I have to agree with you. You can understand why Cameron wants to keep this low key with nice-but-dim amateur politicians leading the enquiry. The Tory party is dependant for its finance on the “1%”. He will have been instructed to do everything he can to protect the “1%” from any damage.

      The Treasury Select Committee proved this afternoon that we need a full scale, Judge led, public enquiry with trial in open court; where all the parties and witnesses testify in a public courtroom; and, attorneys make their arguments in public to the trier of fact.

      Time to bring back the “Grand Jury” me thinks. Remember what I said previously, the “1%” does not prosecute other members of the “1%”.

  26. Richard
    Posted July 4, 2012 at 5:59 pm | Permalink

    Firstly, thank you Mr Redwood, yet again, for an excellent and illuminating article.
    I learn more from your site than I do from the press and other broadcast media.

    In previous decades the whipping boys have been property developers, landlords, asset strippers, employers and trade unions. Now it is the Bankers turn.
    The problem in this sector is the lack of real competition. Not enough new banks, building societies and insurance companies and the ones that do exist know that they are too big to be allowed to fail. Hence the bad behaviour and the excesses.

    If you dont borrow from them they have no power over you. This applies to individuals as much as it applies to Governments.
    I once spoke to a very old and very wealthy businessman who said ..beware of the banks, they are either at your throat or at your feet…but they are never in between”.

  27. Jon
    Posted July 4, 2012 at 6:06 pm | Permalink

    The governments since I would say the last 30 years have kept decreasing the capital holding requirements of banks. That requirement seems to have been met through the use of derivatives which now account for around $700 trillion almost entirely by banks.

    What confused me initially in 2008 was why the banks needed bailing out when they had hedged against losses with derivatives. Then it came clear that they not only sold them but then bought them thereby buying back similar liabilities which seems stupid to me.

    The equivalent would be insuring your house against flood by paying a monthly premium because you can;t afford to pay the damage. To pay for that monthly premium you then ask your neighbour for the same amount on the basis if their house flooded you would pay for their damage to be fixed and this goes on down the row of houses. Its not then rocket science to work out happens to them financially when there is a flood.

    (Allegation re Barclays deleted as no proof offered -ed)
    I would like to think Stephen Hester is a bit more intelligent, I hope so. Derivatives were a specialist hedging tool used by investment fund, annuity providers and other types of insurances. I’m not confident banks are competent to use them afterall, how many actuaries do the banks employ assessing these liabilities, I’ve not heard of any. I’ve not noticed banks sending their actuaries to answer these questions at the enquiries/select committees. Does that mean they don’t have any in this area in which case with $600 trillion in derivatives held by banks shouldn’t they start?

  28. Bazman
    Posted July 4, 2012 at 7:23 pm | Permalink

    You are a great bunch and it was really interesting and amazing to read all your comments. I will answer any questions in a friendly like Bazman manner on any subject, in particular banking and financial ones. Maybe Mr Redwood. I mean John, could ask me some really difficult and tricky questions relating to international finance and the banking system in general and how in my work with metal and driving a lorry I deal with such subjects. It would be really great to hear from you all and put your minds at rest to the great stress and worry of the banking system. In particular I know you will be concerned about the rise in the use of cash cards in the pub and how this slows done and interrupts beer drinking with all the faff of the wrong/rejected card and can’t remember pin. Or flash gits with no money pulling out £50 quid notes causing service problems. I’ll happily tackle some of the more in depth ones about the Libor rates though I frankly do not see what this has to do with me as I don’t owe any money and the pub landlord only asks for the correct ‘Libor’ or something like that. Anyway for the next few hours just fire away and we will see how it goes and if we can get to the bottom of banking and its relationship with the political system.

  29. Iain Gill
    Posted July 4, 2012 at 7:56 pm | Permalink

    the leaking of British intellectual property (yes the bank does generate some) to India too, this outsourcing of key activities has bitten then long and hard and there is much more beneath the hood than is public domain in that area
    As a customer I am getting regular emails now from the MD telling me how hard they are working to fix things
    Another mess is the way Gordon Brown pressured Lloyds to take over Halifax/Bank of Scotland and the total destruction of net value in the economy as a result
    etc
    Keep it up John

  30. zorro
    Posted July 4, 2012 at 8:33 pm | Permalink

    This girl makes some sense on banking….at least more than Chloe Smith does…..http://www.youtube.com/watch?v=7MHez_ECrNM (12 year old gets it…Why don’t you? – Public Banking)

    How much was Mr Diamond paid for not having a clue what his staff were up to until last week?

    zorro

  31. Martin
    Posted July 4, 2012 at 9:23 pm | Permalink

    A state controlled bank, how very Soviet! (There are those on here who talk about Eussr – perhaps they haven’t noticed the UssrK!) As for bonuses for making a pigs ear of state resources it is time RBS were told that in Soviet society a one way ticket to Siberia was the reward for making a mess of things. (A bit namby pamby compared to Stalin’s time when a bullet was the punishment.)

    As for the IT problems will the managers who outsourced IT to India be flung in the tower?

  32. Stephen O
    Posted July 5, 2012 at 5:03 am | Permalink

    I can’t help think the RBS computer debacle is a result of the trend to outsource services to countries with cheaper staff.

    This always looks a great idea on paper with big savings in annual costs. What does not get factored in is the increased risk of an ‘event’, where things go wrong and with remote staff, with a fraction of the experience of those they replaced, trying to understand issues from a distance, are far harder to fix. Then in a few days those year on year savings get wiped out and the outsourcing ends up looking like a hugely expensive decision.

    Reply: I think I read that this is not the RBS view of what went wrong

    • Iain Gill
      Posted July 5, 2012 at 6:15 pm | Permalink

      John,

      I read all the sites and forums which IT pros use to swap info and ideas. Its fairly obvious from the blatantly obvious facts which I am in a position to evaluate professionally that Indian outsourcing was a major factor. There also appears to be plenty of proof about if anyone cared to look.

      Cheers etc

  33. Conrad Jones (Cheam)
    Posted July 5, 2012 at 10:21 pm | Permalink

    Basically you are saying that RBS is losing money – tax payers money.

    “The balance sheet of the Group has been reduced substantially from its peak, and strengthened through government support and other actions. ”

    Why are we not surprised?

    What RBS needs to do is get some Good marketing. I think you’ve stumbled upon some.

    “RBS – The Taxpayers’ bank”

    Nice Slogan.

    Better than: “For the Journey” or “The Bank that likes to YES!”

    (You tube commercial ad reference left out as it names an organisation that is said to have banned it-ed)
    “The Bank that likes to say yes with other peoples money” – perhaps.

  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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