Banks win fresh concession on ringfencing rules

worldtraveller

The City on Thursday won the second clear signal in 24 hours of a political shift in its favour when financial regulators granted a key concession on the ringfencing rule for the UK’s largest banks.

In rules set out by the Bank of England“ringfenced” banks will be allowed to transfer capital from their retail arms to other parts of their businesses in the form of dividends.

The concessions came after the Treasury said on Wednesday night that it was scrapping the most contentious part of a tough new accountability regime, designed to hold the most senior executives to account.

In a last-minute U-turn, the Treasury said it would excise from a bill the principle of the “reversal of the burden of proof”, which would have, in effect, seen senior managers treated as guilty until they could prove themselves innocent.

Ringfencing and the accountability regime were key elements of post-crisis reforms, designed respectively to reduce the likelihood of taxpayer bailouts and clean up the City of London after a series of misconduct scandals.

FT

An interesting one, not widely reported yet. The "casino's" are getting more betting money and the management have less to worry about! A one-off, or just the start? :think:

I doubt this would have happened if we still had the last coalition Government.

skid112

The dividends can only be paid under strict conditions, one of these being that if the casino element is bust the retail side cannot pay. Most banking entities have 100's if not 1000's of subsidiaries and this relief just makes common sense.
The main concession is the removal of guilty until proven innocent, an alien concept within British law, but, the new law and rules from the regulators will mean in essence this remains the case and senior bankers will have to attest they did everything possible to prevent egregious behavior

princeofpounds

I think it's totally ridiculous to oppose this.


If the owner of a business (the group company that owns the retail bank subsidiary) wants to take money out of the business via a dividend, and put it into another totally separate business they own (the investment bank), then why on earth should they not be able to?


The retail bank will be running according to all capital limits imposed by the regulators. Any capital above that is by definition excess and should be available to its owner.


Moving equity capital between the different units via dividends is entirely different to providing intra-group debt financing, which is how it was often done previously. If the investment bank goes bankrupt, the equity in that gets wiped out, but there is no recourse to the equity capital of the retail bank.


But basic points like these seem to elude most of the population, but unfortunately many politicians and even the odd regulator unfortunately.

martinsurrey

princeofpounds wrote: »

I think it's totally ridiculous to oppose this.


If the owner of a business (the group company that owns the retail bank subsidiary) wants to take money out of the business via a dividend, and put it into another totally separate business they own (the investment bank), then why on earth should they not be able to?


The retail bank will be running according to all capital limits imposed by the regulators. Any capital above that is by definition excess and should be available to its owner.


Moving equity capital between the different units via dividends is entirely different to providing intra-group debt financing, which is how it was often done previously. If the investment bank goes bankrupt, the equity in that gets wiped out, but there is no recourse to the equity capital of the retail bank.


But basic points like these seem to elude most of the population, but unfortunately many politicians and even the odd regulator unfortunately.

spot on.

and innocent until proven guilty... that's how we treat suspected murderers and !!!!!philes, I know some people dislike bankers but really, guilty until proven innocent...?

CLAPTON

which of our UK banks went to the verge of bankruptcy due to investment banking?

Thrugelmir

RBS and Barclays

antrobus

CLAPTON wrote: »

which of our UK banks went to the verge of bankruptcy due to investment banking?

Barings Bank.

But given our most recent troubles, I would say that the whole point of ring-fencing is to protect a bank's investment banking arm from the idiocies perpetrated by its retail banking arm.

Conrad

For those troubled by the big Banks, stop moaning and instead use a Building Society. Funny how most never do, it's like those anti capitalist banner wavers that none the less quietly enjoy all the benefits of capitalism such as ISA's and pensions, indeed you can bet they shop around for decent funds.


I'd love to take a peek at Chomsky's pension statement.

kabayiri

Conrad wrote: »

For those troubled by the big Banks, stop moaning and instead use a Building Society. Funny how most never do, it's like those anti capitalist banner wavers that none the less quietly enjoy all the benefits of capitalism such as ISA's and pensions, indeed you can bet they shop around for decent funds.
...

... or Credit Union !

(Just bigging up the use of Credit Unions here..)

antrobus

Conrad wrote: »

For those troubled by the big Banks, stop moaning and instead use a Building Society....

Not that building societies are immune from bankruptcy. As the fate of the Dunfermline demonstrated.

kabayiri wrote: »

... or Credit Union !...

Or credit unions for that matter. Crumbs, one goes belly up almost every month.

Thrugelmir

antrobus wrote: »

Barings Bank.

Wasn't that at the single handedly caused by Nick Leeson?