Lord Turner “calls it how it is” but even a Public Inquiry may not restore trust

FSA Chairman Adair Turner For a flavour of just why Lord Adair is talking in such terms this extract from the FSA report into the collapse of RBS (published late last year) should help:

“the multiple poor decisions that RBS made suggest that there are likely to have been underlying deficiencies in RBS management, governance and culture which made it prone to make poor decisions.”

Of course this is not the full extent of what went wrong at RBS – I actually don’t believe that this statement adequately covers the scandalous £12bn rights issue, “forced” by Hector Sants (former FSA CEO), aided and abetted by, such as, Goldman Sachs, UBS & Merrill Lynch  IF THIS ISN’T A SPECTAULAR FAILURE OF CORPORATE GOVERNANCE BY GOODWIN AND HIS FORMER CO-DIRECTORS I DON’T KNOW WHAT IS – but they are not the only “guilty” parties. Just the worst in UK…and that is before we learn the extent of RBS involvement in Libor rate-fixing.

So, if the original crimes weren’t enough to justify the “Public Inquiry” that Cameron and Osborne were so keen on, when they were in opposition in 2008(!), perhaps this latest scandal will change things. But I won’t hold my breath!

The fact of the matter is that, such an inquiry would have to ask far too many awkward questions implicating far too many influential firms and figures within, not only, banking but in Politics, FSA and “big four” Accountants.

So, in the meantime, it is a case of Business as Usual with banks and bankers believing themselves to be “above the law”! Content to treat customers, depositors, shareholders and Regulators with utter contempt.

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e-petition:: join the call for a Judge-led inquiry into banking

Fed up listening to all the media talk around symptoms with fines to swell Govt. coffers whilst we carry all the burden? Sign this petition calling for a judge-led inquiry into fraud, ethics and wrongdoing in British banks and the role of the British Bankers’ Association:

We the undersigned call for an independent, judicial public enquiry into fraud, wrongdoing and ethics of British banks, their management and their staff, and the role of the British Bankers Association. The terms of reference of this inquiry should also include the manipulation of interest rates on about £225 trillion of assets. The inquiry must have full powers to compel witnesses to appear on oath, and to obtain all forms of evidence.


Institutional abuses:: “cut the crap” – from edifice to artifice

So what if, Barclays and others* have been caught screwing the system…AGAIN!

*”Other big names believed to be under investigation include Citigroup, JP Morgan, Deutsche Bank, HSBC and Royal Bank of Scotland”

Cue outcry, righteous indignation, questions in the House and sound bites from every direction. This passes as information but isn’t it just a smokescreen!? Never mind “white collar” crime this is YET ANOTHER case of bare-faced THEFT. £290m is a helluva lot of money to you and me but it will not amount to the collective remunerations to Directors of Barclays (or any other bank) over the last 10 years!!!

What happened to Corporate Governance? Too big to fail was just code for “way too close and too complex to prosecute” without being recognised as accomplices and suffering the, unthinkable but inevitable, loss of office…the jails are too overcrowded anyway!

What is “the system” that they have been abusing?

According to Wikipedia “The phrase in this usage can carry negative connotations”. Damn right it does…PLEASE think about the question. What is it? Why is it? Who pays for it? How can it be changed? But don’t just think about “it” in terms of the banking or financial system, because the culture has contaminated and corrupted Institutions that were once pillars for all that was good in our society.

American capitalism is predatory, and American politics are corrupt: The same thing is true in England and the same in France; but in all these three countries the dominating fact is that whatever the people get ready to change the government, they can change it

Upton Sinclair (1918)

At what point does a “high-risk” strategy become a matter of Corporate Governance?:: FSA on HBoS “very serious misconduct”

…perhaps a more pertinent question is: “how many sets of rules are there?”

The FSA has censured Bank of Scotland after finding it guilty of “very serious misconduct” which led to it being bailed out by the Government and taken over by Lloyds Banking Group.

The regulator says a fine in this case would be “both merited and substantial” but has decided against imposing a financial penalty as it says the taxpayer has already bailed out the bank once through the Lloyds takeover of Halifax Bank of Scotland in January 2009. Read more of this post

The view from “Olympus” and “Why did RBS fail?” v “Roads to Ruin”

The long anticipated report…for what it is worth [in terms of the difference it may make!] is out and, whilst I haven’t read it through fully I was struck by the similarities between this passage and the content of the recent “Roads to Ruin” report into dangerous risk management failure/limitations (delete as required):

FSA on RBS Roads to Ruin
It is difficult, from the evidence now available, to be certain how aspects of RBS’s
management, governance and culture affected the quality of its decision-making,
but the Review Team’s analysis prompts the following questions:• Whether the Board’s mode of operation, including challenge to the executive, was as effective as its composition and formal processes would suggest.

• Whether the CEO’s management style discouraged robust and effective challenge.

• Whether RBS was overly focused on revenue, profit and earnings per share rather than on capital, liquidity and asset quality, and whether the Board designed a CEO remuneration package which made it rational to focus on the former.

• Whether RBS’s Board received adequate information to consider the risks associated with strategy proposals, and whether it was sufficiently disciplined in questioning and challenging what was presented to it.

• Whether risk management information enabled the Board adequately to monitor and mitigate the aggregation of risks across the group, and whether it was sufficiently forward-looking to give early warning of emerging risks.

…weaknesses were found to arise from seven key risk areas that are potentially inherent in all organisations and that can pose an existential threat to any firm, however substantial, that fails to recognise and manage them. These risk areas are beyond the scope of insurance and mainly beyond the reach of traditional risk analysis and management techniques as they have evolved so far. In our view, they should be drawn into the risk management process. They are as follows:

A. Board skill and NED control risks – limitations on board competence and the ability of the Non-Executive Directors (NEDs) effectively to monitor and, if necessary, control the executives.

B. Board risk blindness – the failure of boards to engage with important risks, including risks to reputation and ‘licence to operate’, to the same degree that they engage with reward and opportunity.

C. Poor leadership on ethos and culture

D. Defective communication – risks arising from the defective flow of important information within the organisation, including to board-equivalent levels.

E. Risks arising from excessive complexity.

F. Risks arising from inappropriate incentives – whether explicit or implicit.

G. Risk ‘Glass Ceilings’ – arising from the inability of risk management and internal audit teams to report on risks originating from higher levels of their organisation’s hierarchy.

Now, someone please try to persuade me that the root of the problem isn’t fed by the bounteous supply of Corporate Read more of this post