BBA pushes for no ring-fencing - I think they are wrong

purch

From the annual report for HBOS for 2008...

Retail Banking Division: £ 1,367m PROFIT
Corporate Banking Division: £ 6.793m LOSS
Insurance Division £ 739m PROFIT
International Division £ 154m PROFIT
Treasury Division £ 3,627m LOSS


.......looks like Retail Banking was a real drag on the results :eek:

Wookster

purch wrote: »

.......looks like Retail Banking was a real drag on the results :eek:

The banks are being thoroughly disingenuous in their protestations.

Generali

Wookster wrote: »

The banks are being thoroughly disingenuous in their protestations.

That's the joy of a bank's financial statement, you can get it to say just about anything you want. Lehman was solvent until it suddenly wasn't.

SGE1

If there's no profit to be made in pure retail banking, how come we have so many retail banks? Retail banks like Northern Rock, Lloyds, Santander... - none of them have/had any substantial investment banking activity.

In fact, the only 'universal'/'casino' banks we have based in the UK are RBS, Barclays and HSBC. These are the only banks that would be affected by a ring-fence.

Thrugelmir

pqrdef wrote: »

Bankers don't suffer at all. Their remuneration and severance packages are at the front of the queue. They don't even get disqualified from being directors of banks.

Really?

Two of Northern Rock’s top former directors have been fined by the City watchdog and banned from working at any bank for concealing the scale of bad debts at the mortage lender in the years before its nationalisation.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7585460/Ex-Northern-Rock-directors-fined-and-banned-by-City-watchdog.html

Thrugelmir

purch wrote: »

From the annual report for HBOS for 2008...

Retail Banking Division: £ 1,367m PROFIT
Corporate Banking Division: £ 6.793m LOSS
Insurance Division £ 739m PROFIT
International Division £ 154m PROFIT
Treasury Division £ 3,627m LOSS


.......looks like Retail Banking was a real drag on the results :eek:

Then in 2011.

Lloyds Banking Group has announced a first quarter loss, after making a £3.2bn provision for mis-selling claims by customers who took out payment protection insurance (PPI).

Prior years profits not so rosy now!

sabretoothtigger

Thats why this is true

Generali wrote: »

That's the joy of a bank's financial statement, you can get it to say just about anything you want. Lehman was solvent until it suddenly wasn't.

and also losses can be carried forward and used to avoid taxes in the years after and so on.
One year doesnt say much, thats what tripped them up I think basically overfocusing on nearterm profits and bonuses.

Dangerous to focus on one year when the banks are dealing in 25 year debts, they were never allowed to deal mortgages previously so maybe this is why that was a good thing.

Right now I think we may have some repeat except its government debt that could go bad, again its overly focused on right now that rates are low and it just keeps on going up in price but holding a 10 year bond paying 2% just doesnt work imo

Again these assets form part of the banks tier 1 capital giving the losses a devastating effect?


Retail was (very) profitable for years because of all the hidden charges. And people are alot more careless with their money then business customers I guess.
The charges are lower now and stuff like the easy insurance sales is being cut also
I remember in 1996 Natwest was making 2bn a year profits before RBS took them over

Pity we didn't just nationalise the lot of them.

We should have just left them alone. I dont think we had to do anything especially. Lehmans workerswent over to Barclays, plenty of their gear got picked up very quickly and the bond holders who didnt pay more attention are the ones left waiting and wondering ( I heard they will do much better then any thought recently)


Nationalising would still involve value destruction, before it was a private profit making business and now its another drain on government. Is Northern rock our nationalised bank such an asset now, I dont think it is.
Theres a chance while private they may get profitable and pay the government taxes instead of the other way round

Also RBS was likely too large to have its debts honoured so if nationalised it would had to go bankrupt first. Not sure how that works because surely those creditors are owed any assets not government declaring its ours now :laugh: Chavez style
I think RBS is like 90% government anyway, it probably shouldnt even be listed under official rules

doubt if they feel very bailed-out

shareholders avoided total loss and received the true value of their companies bad judgement but it was mostly bond holders who got most benefit.
I think the reason we love bond holders is because of such large government debts.
Large scale failure would reflect badly and raise rates payable in general so they have subsidised it all via the monetary base which is not likely to work imo since thats what bonds pay back out

michaels

The battle between the politicians and the banks continues.

Link to BBC piece on ITEM club report stating ring-fencing will hit growth.

It is interesting. There is political will to show that politicians have some say in running the economy and it is not just the markets who are in charge. However the bankers know the natural Tory (and latterly Nu-Labour) inclination is to look after their mates in the city and that it is only the lib dems who are really up for a confrontation and so maximum pressure is being applied.

I suspect the bankers will win. While this might be correct economically it is a shame that via our vote we no longer control our destiny.

michaels

Whilst I very much dislike the govt announcing economic policy via the bbc (something the Tories now seem to be copying from nu-lab) this piece from Robert Peston suggesting the PMis also onside with ring-fencing seems relevant.

I still think a deal will be done where we will get a toothless form of ringfencing that the banks can work around but which appears to satisfy the lib dems.

Thrugelmir

pqrdef wrote: »

So far. But retail banks borrow short-term and lend long-term and are always at risk of depositors panicking and wanting all their money out at once.

Until 2000 the entire UK mortgage book was funded entirely by retail deposits.

The UK banks problems stem from 2003-2007. When around £600 billion of wholesale funding was drawn on to fund UK mortgage lending.