Idealists instead of realists = fail

[DonkeyApple]

Another case of unsuitable punters managing to find their way onto a board.

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

A rather pathetic state of affairs with remarkable similarities to RBS for making big acquisitions without carrying out research and only finding out you are buggered because someone outside tells you.

Will be interesting to see of the hole is plugged by a white night, it's shut down or there are any prosecutions. One thing is for sure and that is that there must be no tax payer money anywhere near this business. If it is dead then it must be left to die.

[Blib]

article said:

The Co-op is looking to claw back bonuses from departed senior managers in the wake of the losses. Among the main targets of any clawbacks is understood to be Neville Richardson, the former chief executive of the Britannia, who led the Co-op’s combined banking business until he left the mutual in 2011.

There's a major part of the problem. Short-term thinking by executives. They are given targets to reach for their bonuses, they do everything in their power to reach those targets and to hell with the future viability of the business as they themselves will be long gone.

This has gone on for far too long and has had a disastrous effect on business.

What these executives conveniently forget is that they are merely employees of the company. It is not to be run for their benefit. Instead, it is the long term return to the shareholders, or in this case, the members interests that should be paramount.

[DonkeyApple]

Blib said:

There's a major part of the problem. Short-term thinking by executives. They are given targets to reach for their bonuses, they do everything in their power to reach those targets and to hell with the future viability of the business as they themselves will be long gone.

This has gone on for far too long and has had a disastrous effect on business.

What these executives conveniently forget is that they are merely employees of the company. It is not to be run for their benefit. Instead, it the long term return to the shareholders, or in this case, the members interests that should be paramount.

The real issue is very similar to how we end up with horrific political leaders. Modern society actually doesn't give a st until it goes wrong and then like a woman scorned rush to ensure all blame is on others.

In the case of the Brittannia sale, it really has little to do with the board of Brittania but rather the abject failure of the due diligence team at the Co-Op. what will be interesting about this is that the media battle will fall into the standard Roundhead v Cavilier or Semite v anti Semite rules rather than ever actually focussing on the truth of what happened.

[RYH64E]

Plenty of banks run by realists have got into trouble. It isn't a question of realism or idealism, simply competence and the skewed balance between personal risk/reward in parts of the banking sector.

DonkeyApple said:

One thing is for sure and that is that there must be no tax payer money anywhere near this business. If it is dead then it must be left to die.

Agree 100% with the above, failing businesses shouldn't be supported by the taxpayer, although I can't help thinking that it's a bit late to shut this particular stable door...

[vodkalolly]

Oh I do hope it all goes pear shaped I hate green organisations.

[Countdown]

vodkalolly said:

Oh I do hope it all goes pear shaped I hate green organisations.

AIUI the parent organisation is quite succesful and has plenty of money to bail out the banking arm. Therefore it won't go pear-shaped a la RBS/Lloyds/Northern Rock, although it might be restructured/hived off purely for business reasons.

AIUI a lot of the Greater Manchester Councils use the Co-Op for their banking. I know Bury MBC have several tens of millions on deposit with them

[grumbledoak]

These councils have tens of millions of pounds of our money on deposit? At risk with no guarantee? aholes. They are at least as stupid as the bankers themselves.

[Countdown]

grumbledoak said:

These councils have tens of millions of pounds of our money on deposit? At risk with no guarantee? aholes. They are at least as stupid as the bankers themselves.

They were AA-rated until fairly recently and I'm pretty sure any risk is minimal given the size of the parent Group.

[grumbledoak]

And Iceland's rating was?

Idiots. It isn't theirs to risk; it's just a budget to be spent.

[Countdown]

grumbledoak said:

And Iceland's rating was?

Idiots. It isn't theirs to risk; it's just a budget to be spent.

I think you're comparing chalk and cheese. The Co-Op's parent group is massive and has sufficient capital to support the banking arm. None of the Icelandic banks (or even UK banks) had this.

http://www.thisismoney.co.uk/money/saving/article-...

http://www.independent.co.uk/money/spend-save/qa-c...

[12v3pot]

grumbledoak said:

Idiots. It isn't theirs to risk; it's just a budget to be spent.

Er, tell me about the alternative - you know, the risk-free bank that local authorities can use for their deposits. If you know of one, there are plenty of other people keen to hear about it.

[Countdown]

grumbledoak said:

Idiots. It isn't theirs to risk; it's just a budget to be spent.

Just to add if it was a "budget to be spent" it would be, well, "spent" . i.e. It wouldn't be sat in a bank account. Most of the stuff in the bank is Reserves accumulated by making savings over a number of years.

[grumbledoak]

Are we seriously suggesting that local government cannot keep it's budget risk-free with the Bank of England?

Or is it that they could but they are trying somehow to 'profit'? Do you realize that is like the Head of HR taking the company's salary budget down to Ladbrokes the day before pay day and trying to both pay the staff and pocket the winnings?

[Countdown]

Ii

grumbledoak said:

Are we seriously suggesting that local government cannot keep it's budget risk-free with the Bank of England?

Or is it that they could but they are trying somehow to 'profit'? Do you realize that is like the Head of HR taking the company's salary budget down to Ladbrokes the day before pay day and trying to both pay the staff and pocket the winnings?

Like any large organisation LAs are involved in active treasury management. It increases income and reduces the amount they need to charge in council tax. Normally it is very risk averse - very few LAs got caught up in the Icelandic banks fiasco, relatively speaking.

[vodkalolly]

Countdown said:

vodkalolly said:

Oh I do hope it all goes pear shaped I hate green organisations.

AIUI the parent organisation is quite succesful and has plenty of money to bail out the banking arm. Therefore it won't go pear-shaped a la RBS/Lloyds/Northern Rock, although it might be restructured/hived off purely for business reasons.

AIUI a lot of the Greater Manchester Councils use the Co-Op for their banking. I know Bury MBC have several tens of millions on deposit with them

Oh yes the communist shop and insuance company are very flush. Wouldn't it be great if the GMC lost all there money and had to abandon the silly trams project.

[DonkeyApple]

Countdown said:

Like any large organisation LAs are involved in active treasury management. It increases income and reduces the amount they need to charge in council tax. Normally it is very risk averse - very few LAs got caught up in the Icelandic banks fiasco, relatively speaking.

But, it should not involve politics such as opting for a less secure option to save fluffy bunnies etc. plus it must take into account risk/reward.

[Countdown]

DonkeyApple said:

Countdown said:

Like any large organisation LAs are involved in active treasury management. It increases income and reduces the amount they need to charge in council tax. Normally it is very risk averse - very few LAs got caught up in the Icelandic banks fiasco, relatively speaking.

But, it should not involve politics such as opting for a less secure option to save fluffy bunnies etc. plus it must take into account risk/reward.

I don't agree or disagree. The thing is, with CSR, lots of FTSE companies will indulge in similar "ethical" policies. It's not unique to local authorities. In either case It's down to the electorate/shareholders to decide how important "ethical" behaviour is.

Up until quite recently the Co-Op were offering the best rates for monthly/quarterly/annual fixed term deposits and it was probably more secure than the big high street banks.

[DonkeyApple]

Countdown said:

I don't agree or disagree. The thing is, with CSR, lots of FTSE companies will indulge in similar "ethical" policies. It's not unique to local authorities. In either case It's down to the electorate/shareholders to decide how important "ethical" behaviour is.

Up until quite recently the Co-Op were offering the best rates for monthly/quarterly/annual fixed term deposits and it was probably more secure than the big high street banks.

True with the first bit. Although the theory is that a FTSE co is answerable to bond and equity holders and will go bust or be bought out if it fails. Whereas a LA will always be bailed by the tax payer so in theory should act accordingly.

The second point is hard to know whether correct or not as mutuals have no diversification and so are beholden to their debt book which in the UK is primarily residential property and so are in essence 100% exposed to a single asset class and in this case one which we know is currently high risk.

But the industry has known the coop was on soft ground since the purchase of Brittania so I think it would be fair to say that a professional investor would or should take this into account.

[markcoznottz]

12v3pot said:

grumbledoak said:

Idiots. It isn't theirs to risk; it's just a budget to be spent.

Er, tell me about the alternative - you know, the risk-free bank that local authorities can use for their deposits. If you know of one, there are plenty of other people keen to hear about it.

Any british bank is effectively risk free. There are two things that the state will not tolerate, runs on banks and riots, look at the sentences meted out for proof of that. Take northern rock it went from the riskiest bank in the uk to the safest overnight when the uk government guaranteed all deposits. No g8 country will allow runs, the deposit guarantee is a gesture. Of course Mickey Mouse countries like Cyprus and Iceland may either be forced to have a haircut or roll over and default but they are the exception.

[Ozzie Osmond]

DonkeyApple said:

.....their debt book which in the UK is primarily residential property and so are in essence 100% exposed to a single asset class and in this case one which we know is currently high risk.

I think that perfectly describes the idiocy of Britain's bankers. The idea that property is "currently" high risk takes the biscuit. The risk profile hasn't changed on jot. It can't. Residential property is still exactly the same thing as it was.

The idiocy was muppet bankers who thought it wasn't risky. IMO only a complete fool would ever lend 90%, 100% or 110% against the "security" of a property. Try taking your watch to a pawn shop and see how much they'll give you for it!