What's likely to have happened with our Northern Rock shares?

antrobus

Daniel54 wrote: »

....My point was that,even if an alternative solution had been possible,shareholders would have been so heavily diluted that a small shareholder with say £1000 of shares would now have enough to pay for a meal for two at the local Indian.....

Would be the correct answer.

dengrainger

The Court of the Bank of England Minutes of Weds 12 December 2007, quote this advice:-

“Nationalisation would require specific emergency legislation. Northern Rock would be put into public ownership and the shareholder rights could be overridden. But it was recognised that this option was not likely to be easy politically…” .

dengrainger

Remember that line from 'Blazing Saddles'...

"Land; for Land see Snatch....

redux

dengrainger wrote: »

The Court of the Bank of England Minutes of Weds 12 December 2007, quote this advice:-

“Nationalisation would require specific emergency legislation. Northern Rock would be put into public ownership and the shareholder rights could be overridden. But it was recognised that this option was not likely to be easy politically…” .

So the BoE supported it with liquidity loans in September.

After that, and after two potential rescue takeovers failed to materialise, those rescues having failed to commit to protecting savers and investors, something else (possibly further deterioration?) led to it being nationalised.

So, spanning the time that the BoE comment refers to, your company had 6 months leeway to sort itself out, that time ending after their interim comment which was about previous history, and not necessarily a full elaboration on a further decision 3 months later.

Please don't try to misdirect us with highly selective use of snippets of evidence.

Glen_Clark

pvt wrote: »

appoint a valuer, tell them that they must assume the value is nil, and then ask them what the value is.

You appear to be making this up as you go along

redux

Anyone interested in looking at this in more detail might study the history given and the decision reached in the European Court of Human Rights case on this matter in July/August 2012.

http://hudoc.echr.coe.int/sites/eng/pages/search.aspx?i=001-112312

42. As noted above, the Court accepts that the Government’s objective throughout its dealings with Northern Rock during this period was to protect the United Kingdom’s financial sector. As part of this policy, they aimed to maintain depositor confidence in the safety of placing money with banks. On the other hand, however, they also sought to avoid encouraging the management boards of other financial institutions from making bad business decisions on the assumption that the State would provide a safety net. There was no obligation under domestic law for the Tripartite Authorities to provide LOLR support, and no duty owed by the State to the shareholders to protect their investments in Northern Rock. Nor does Article 1 of Protocol No. 1 impose such a positive obligation on the State; indeed, the Court has stressed on many occasions that this provision cannot be interpreted as imposing any general obligation on the Contracting States to cover the debts of private entities (see Kotov v. Russia [GC], no. 54522/00, § 111, 3 April 2012). The LOLR support enabled Northern Rock to continue trading for a few more months but the company was not able during this short period to restructure in such a way as to enable it to survive without support. In the Court’s view, the decision taken in the legislation that the former shareholders of Northern Rock should not be entitled to take the value which had been created by the Bank of England’s loan was far from being “manifestly without reasonable foundation”. Instead, it was clearly founded on the policy of avoiding “moral hazard”, which is at the heart of the principles which regulate the provision of LOLR. In the Court’s view, it was entirely legitimate for the State authorities to decide that, had the Northern Rock shareholders been permitted to benefit from the value which had been created and maintained only through the provision of State support, this would encourage the managers and shareholders of other banks to seek and rely on similar support, to the detriment of the United Kingdom economy.

43. It follows that the applicants’ complaint under Article 1 of Protocol No. 1 is manifestly ill-founded and therefore inadmissible, pursuant to Article 35 §§ 3 (a) and 4 of the Convention.

For these reasons, the Court unanimously

Declares the application inadmissible.


Personally, after these parties have apparently spent years exploring legal avenues open to them, I'm finding it hard to understand why they now seem to be renewing attacks on the Labour Party.

bowlhead99

redux wrote: »

Anyone interested in looking at this in more detail might study the history given and the decision reached in the European Court of Human Rights case on this matter in July/August 2012.

Thanks for that, it's always good to have context - the results of some sort of case or enquiry, rather than the one sided, selective snippets which support the case of the person wanting their money back.

Personally, after these parties have apparently spent years exploring legal avenues open to them, I'm finding it hard to understand why they now seem to be renewing attacks on the Labour Party.

Me too, although I can see it obviously makes sense to put your enemy on the spot during an election when public image matters to him, rather than at other points when it's less important.

I'm not a fan of Labour but I would hope that if the Tories or Libs or Monster Raving Loonies happened to be running the asylum and took out NR, they wouldn't be looking to pay individual shareholders back anything either. I would think that the 45-50 million members of the electorate who did not choose to hold Northern Rock shares at that time, would think that a reasonable approach.

Of course, many of them would be biased in not wishing to give away taxpayer cash, much as dengrainger is biased in wishing to receive taxpayer cash.

I have no idea whether or not the treasury will profit from its billions of pounds of cash which it risked to support the company. If it does, that is the reward for taking risk and participating in saving the banking sector from collapse. The individual shareholders didn't have the billions of pounds of cash necessary to do that, so the individual shareholders were unable to participate in any potential upside when someone else came to the rescue.

'Pvt' makes the point that it's not unreasonable to have borrowings of £50m when you have assets of £60m. For some businesses, this is true.

However, if the assets of £60m are mostly loans which don't come due for 25 years and are secured on some residential property of indeterminate value, and your loans were previously financed on borrowed money, it can be quite difficult to say you would like to borrow £50m for a month or a year against that alleged £60m of value. How would you pay it back when it became due again? Especially when credit is thin on the ground and financial institutions are going bust to your left, right and centre, and there is a lack of confidence in global subprime mortgage markets - you'll find it impossible to securitise your own mortgage book.

So unfortunately oversimplifying the arguments still doesn't help to make a supportable case. The only way you can make a case is by dealing with the full complexity of all the arguments, which I would suggest few here are qualified to do. Certainly, Grainger et al and their team of lawyers attempted to prove this in court, with appeals dismissed by domestic divisional court, court of appeal, supreme court and then at a Europe level by ECHR.

On the point about the valuer valuing the former shareholders' interests at nil because he'd been instructed to - he had to take account of all the facts. per the ECHR commentary:

40. The applicants contend that the statutory assumptions inevitably resulted in the payment of nil compensation to the shareholders. However, like the Court of Appeal, the Court does not find this to be the case. The assumptions required the Valuer to allow for the realities of the situation, namely that Northern Rock had survived only because of the provision of LOLR support and that the Government now sought to bring an end to that support. There was nothing in the statutory assumptions to prevent the Valuer from taking into account the company’s assets when deciding its total net worth. The fact that he found the former shareholders to be entitled to no compensation indicated that, in the light of the events of the preceding few months, the company’s assets did not offset its losses.

Being unable to prove it in the various courts doesn't mean that the the Labour Party receiving the 'open letter' shouldn't consider the merits of the facts summarised in the letter, indeed I am sure it will receive every single second of the attention which it deserves.

redux

There has to be some degree of irony underneath all that.

Two of the parties bringing the cases against the UK banking system were hedge funds incorporated in the Cayman Islands.

Why do the Cayman Islands contain far more companies than people, we might wonder. Do they perhaps enjoy a less stringent financial reporting and regulatory regime than here?

dengrainger

The ECtHR refused to hear the case in full, and we were unable to provide newer evidence which had come to light whilst we waited years for the Court to decide our case was 'inadmissible' (for proper consideration?).
This extraordinary and much delayed decision was believed to be on the basis of not starting a domino effect of other claims against European Governments, and it was stressed as final with us having no right to Appeal it whatsoever.

There was some sympathy fir the Small Shareholders' case however expressed by the Court.

We did not then, and do not now ask for any value created by state support, we wish only to have consideration for the embedded value of the assets taken from us.

Of course LOLR was not in domestic law, we agree with the ECtHR on that, but, it has always been the support system for all banks, and never has the funds loaned in the way been required to be repaid instantly (the Rock Valuer was required to value on the basis that LOLR and state aid was withdrawn.
Consider also the, for example, £62 Billion of lending given to RBS in secret.

Remember too that Rock originally asked for a LOLR contingency facility only; but then the leak (which bank could stand that?) - caused massive withdrawals and then more state support - and it came from within the Tripartite, i.e. The Government.

Whilst we still take advice on what legal routes we may yet pursue, there is no harm in us asking openly any of the political parties for a review of why and how the Rock was treated so differently from other banks.
Also, for consideration of the unfairness of us losing everything by expropriation by the Government thief, only for the state loans (not tax payers' gifts, as some on here seem to think!) to be being fully repaid (with penalty interest Euro Judge) and then a huge surplus reaching the same thief.

We are entitled first to ask the Labour leader, as it was on their watch, and he was in the Cabinet (with Ed Balls and Gordon Brown) which made the expropriation decision including the fixing if the terms of the reference of the Valuer, which ensured a NIL payment to owners.

We are asking not for cash, but for a public inquiry where all the evidence can be reviewed, including of the different treatment of the Rock compared to other banks, a point we were not able to raise in the ECtHR (as it came to light only after our case was lodged, and, as I have said, we were NOT allowed to ask the Court to consider new evidence arising in the years we waited for a full consideration, which we never got anyway.

There was also sympathy for the small shareholders expressed in our High Court.

bowlhead99

redux wrote: »

Why do the Cayman Islands contain far more companies than people, we might wonder. Do they perhaps enjoy a less stringent financial reporting and regulatory regime than here?

Typically the financial reporting regime for a private fund depends on the jurisdiction(s) in which it is marketed - e.g. US, UK, Germany, wherever the investors are - which can also drive the financial regulations that the fund operates under (e.g. AIFMD etc).

Generally a reason for a fund to be domiciled somewhere like Cayman is for reasons of tax neutrality for its diverse international set of investors. Such investors may be sovereign wealth funds, supranational organisations, international development finance entities, pension funds, government or corporate pension funds, insurance companies, family offices and high net worth individuals and so on from across the globe. There may even be feeder vehicles for retail investors to participate - for example you can access one of the share classes of RAB Special Situations (Master) Fund Ltd through a Guernsey incorporated, London listed entity RAB Special Situations Company Limited (ticker RSS).