Bankers

[munky]

cardigankid said:

It is therefore essential that retail banking is thoroughly and effectively separated from investment banking.

I agree, in order that investment banks be protected from reckless retail banks, especially Scottish ones. And, to level the playing field for the proper investment banks that don't have a retail bank attached, which means they get cheaper funding rates due to the implied state guarantee.

cardigankid said:

If investment banks want funds they can ask for them. I have twice been approached by investment banks to place six figure sums with them. Coincidentally they were from Barclays and Goldman Sachs.

This sounds odd. Why on earth would Goldman be interested in a measly 6 figures? Not that I'm disputing it, of course.

[RYH64E]

What do we think about this then? Who will end up paying the costs of this miscalculation? Employees or shareholders?

http://www.telegraph.co.uk/finance/newsbysector/ba...

Article said:

Nomura analysts estimate that on average banks could have to pay £4.5bn to meet legal claims brought by clients with interest rate swaps linked to Libor.

[crankedup]

Murph7355 said:

crankedup said:

....
Yes I well remember the failure of some high street banks, the regulations and Governments warranty should apply. Banks must be allowed to fail without affecting joe public financially, when we arrive at this point maybe the management of the banks will respond accordingly, lose the bank you lose your job.

The point djstevec was making was that it was banks on the retail side that are at the root of the current "crisis" (ignoring moronic government spending policies and personal greed on Joe Public's part - which is kind of like worrying about a split nail when you have cancer). In splitting the banks, at best in the scenario outlined we'd probably have protected the loathed investment bankers more than Joe Public

If a bank fails, Joe Public will inevitably be impacted by the very nature of what banks do. Rhetoric around not letting them be impacted is just that. Rhetoric. It's like trying to cut Welfare expenditure without impacting the "poor".

Ask yourself why the then government stepped in so quickly with one of the retail side banks...

I disagree, the U.K. Government stepped in during 2008 and provided a 50k + warranty against losses to private individuals cash invested in retail banks. I disagree that it was the retail banks 'at the root of the crisis'. I remind myself by reviewing Charles Ferguson's forensic analysis of the 2008 financial crisis. How any person can conclude it was the fault of the retail bank branches is a red herring.
I do agree that if major banks fail at the same time we will be in trouble, but we need to be in a place whereby that is not allowed to happen or at worst a controlled failure through appropriate mechanisms which will not include public finance.

[crankedup]

djstevec said:

crankedup said:

So many scandals are coming out of banks closets that its as if they have been operating on a 'do anything' basis as long as it makes profits for staff and the organisation. When I heard an FSA Officer talking about how the complexities of certain dealings are bewildering it isn't doing my confidence in the FSA any good at all.
Yes I have alluded to the FSA being beefed up along with beefed up or replacement regulations. These new regulations need to be effective and should apply to the investment and differing as required reg's to the retail sides and have the full weight of legislation behind them. Agreed, thieves exist everywhere, the only answer to the problem is the penalty, it has to be so severe as to deter wrong doing. It seems clear that business policies alone are not sufficient Ultimately each are a business, the retail side customers will have the support of the Government warrants customers money within the retail bank should it fail. That warrant should be deducted from the failed banks assets, like any other failed business the creditors paid first, in this case depositors.
Yes I well remember the failure of some high street banks, the regulations and Governments warranty should apply. Banks must be allowed to fail without affecting joe public financially, when we arrive at this point maybe the management of the banks will respond accordingly, lose the bank you lose your job.

Yes I hear you saying regulation should be beefed up....but HOW?

With regard to the trader collusion from 2005-2008, how would any regulatory body be able to stop this?? Barclays non-existent internal controls is where most of this would have been captured. The FSA report was, quite rightly, harsh on the compliance function within Barclays. Regulatory bodies set the rules and the landscape for the sector, but simply cannot police it every single second, all that any regulatory body can do is act retrospectively.

Leeson managed to bring down an entire bank due to the failings of the internal controls and procedures by Barings, notwithstanding his own wrongdoing, but the controls put in place by the bank itself, simply should not allow that type of behaviour happen. Management at Barings Bank allowed Leeson to remain Head Trader while also being responsible for settling his trades, jobs usually done by two different departments. This made it much simpler for him to hide his losses. Although not a UK example, those types of failings within the bank cant be policed directly by the regulator.

The FSA already have the power to try criminal prosecutions and they have indeed done so. I would also pretty much guarantee the FSA would have had conversations with BofE and SFO long before any of this came close to making news, simply due to the implications this investigation has uncovered. Names of individuals and other banks involved have not been mentioned, so if criminal charges are brought, then there can be no issue of prejudicing a trial.

The FSA itself has suffered a "brain drain" over the last few years, mainly due to banks/hedge funds/asset manager etc, hiring FSA staff to fill their own compliance depts as the FSA required more and more intrusive oversight. The FSA simply cannot offer the types of remuneration packages the private sector can.

The upcoming split of the FSA in 2013 to the PRA and the FCA, will move the oversight of the "big" banks back to the BofE and will result in even more intrusive oversight at a prudential level.

However as I said before, imo, the failings of those high street banks and the current failing of Barclays are not due to the "universal bank" structure or the regulations as they currently stand.

Beefed up regulations shouldn't be beyond the wit of man, we are hugely talented in many fields of science, technology, Pharmaceutics, engineering to name a few. If we can't put into place regulations and supervision to curtail wrongdoing in finance something about finance must be wrong. OK its not going to stop all wrongdoing, nothing can. Always crooks and thieves will find ways to beat any system, but honesty needs to up its game now. Extreme penalties for wrongdoing will help, no second chances, if found guilty a very harsh penalty needs to be meted out.

Lesson was a long time ago, what has changed since to stop illegal practice. I am not an insider so I'm afraid I cannot answer your direct question of 'HOW'. It will take more than one person to come along with best solutions to a complex problem I guess. Perhaps we have constructed the perfect monster (a bit OTT but added for a touch of lightness).

I'm not sure that 'universal bank structures' are the best we can live with, for years the Russians thought Communism was ideal.

[turbobloke]

Surely we need better regulation not more regulation. The cost of more regulation is almost certain to exceed any benefit from it, except perhaps in giving the glands of bankerphobic zealots a rest.

[fido]

crankedup said:

I disagree, the U.K. Government stepped in during 2008 and provided a 50k + warranty against losses to private individuals cash invested in retail banks. I disagree that it was the retail banks 'at the root of the crisis'.

You may disagree because it doesn't suit your bash the Investment Banks agenda?) but let's stick to the facts .. HBOS and the building societies were all on the retail side - not to mention those retail entities that were placed into administration (Dunfermline Building Society, London Scottish Bank, Heritable Bank, Icesave, Kaupthing Singer & Friedlander). It's simples - they lent too much - something the BoE had warned about in the years leading up to the crash. Behind this was poor regulation (lending criteria), low interest rates and lack of inflation control. IMO the universal framework is fine, providing that proprietary trading (on the IB side) is moved into separate companies e.g. Barclays sold BGI to Blackrock.

Edited by fido on Friday 6th July 17:18

[anonymous-user]

crankedup said:

Beefed up regulations shouldn't be beyond the wit of man, we are hugely talented in many fields of science, technology, Pharmaceutics, engineering to name a few. If we can't put into place regulations and supervision to curtail wrongdoing in finance something about finance must be wrong. OK its not going to stop all wrongdoing, nothing can. Always crooks and thieves will find ways to beat any system, but honesty needs to up its game now. Extreme penalties for wrongdoing will help, no second chances, if found guilty a very harsh penalty needs to be meted out.

Lesson was a long time ago, what has changed since to stop illegal practice. I am not an insider so I'm afraid I cannot answer your direct question of 'HOW'. It will take more than one person to come along with best solutions to a complex problem I guess. Perhaps we have constructed the perfect monster (a bit OTT but added for a touch of lightness).

I'm not sure that 'universal bank structures' are the best we can live with, for years the Russians thought Communism was ideal.

Id like to know of any regulatory body of any industry that is able to catch wrongdoing as its happening, live and real time.

Any action taken by the FSA (PRA/FCA from 2013), unless that structure materially disrupts the trading process by being so intrusive as effectively mean trading isn't possible, will always be retrospective. Its as simple as that.

The FSA (and the relevant UK exchanges, LSE, LIFE etc) collate and forensically examine data on every single order placed on the market order book. The FSA looks for trends in relation to stocks, or orders sent by Firms, or individual traders to build a picture of who's doing what at any particular time on the markets, and then look at other market factors to determine if that order or series of orders requires further investigation. The market order doesn't even need to be filled (and then it becomes a trade) for market abuse or manipulation to be occur.

The Firm I work for recently received a letter from FSA reminding us of our obligation to report any "suspicious" trades that we ourselves even think could possibly constitute market abuse, purely because we haven't submitted any suspicious trade reports (STR's), or even any "near misses". So even a Firm that has not reported any remotely dodgy trades, its getting reminders that we should!

One of my roles is trade monitoring, where I choose a random day of the prior month and a random time in that day to check from cradle to grave a set number of trades. From an initial phone call to a trader from a broker or client or other market maker, check any instant messages discussing the trade(s), integrity check the agreed trade itself and follow that through to settlement, client/counter party confirmation and the internal reconciliation of the trade between ourselves and our clearing bank.

I then have to research the bid/offer spread of that particular product at the time the trade was agreed, to ensure it was within the normal market range, check the size (number of shares or options contracts etc) is within the nominal market size for that stock, then I need to check if there was any market info regarding that stock or company at that time to ensure we weren't privvy to any info we shouldn't have been and weren't acting ahead of the market if there was or other such price affecting event.

So you appreciate just from that, that checking of even a relative handful of trades can take me 2-3 days to pull all the info together and that's then if there aren't any further issues that need to be researched or escalated. so it may give you an appreciation of the work that every single regulated Firm already has to undertake, and STILL things fall through the net.

My example of Leeson was that illegal practice was allowed to happen through lack of adequate controls by the banks themselves, Barings were guilty of this and Barclays have been guilty of this too. As you also point out, irrespective of whatever the regulation is, some traders will exploit loopholes if they are desperate enough to find them.

Any trader found to have acted dishonestly, will usually be fined as an individual, his/her company will be fined and the individual banned or censured by the FSA, upto criminal prosecutions. You only need to check the FSA register for the number of actions taken and the number of banned individuals and companies. Now unless you are that shifty that you change your name or hide your identity, no reputable Firm in their right mind would hire someone with an FSA disciplinary history, firstly the FSA would never approve them again, and it will mean a very direct spotlight on the Firm asking to approve the banned person from the FSA, as that Firm should have already conduced a thorough background search to determine there's no "history" in that persons background and to be sure the person is "fit and proper" to undertake an approved role. So there already are many incentives for any person (approved or not) to keep their nose clean in the banking sector.

The problem with LIBOR as other have pointed out (and as far as Im aware), is that the setting of LIBOR isn't a regulated activity and so doesn't come under the FSA remit specifically, therefore they would not actively look at the numbers being submitted. The accuracy of LIBOR is down the guidelines set by the BBA, although I think the BBA have requested LIBOR setting does become regulated. The FSA got involved when market conduct and/or market abuse was brought to their attention as potential issues.

That said, the change to the dual regulators next year, will mean even more intrusive monitoring of the large banks by the PRA and the FCA with most being caught "in both nets" so to speak.


This has been written in iPhone on my way home so sorry for bad spelling, grammar etc