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Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

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Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

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Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

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Spate of recent shock departures by 50-something CEOs While the rising financial rewards of running a modern multinational have been well publicised, executive recruiters say the pressures of the job have also been ratcheted upOn approaching his 60th birthday...

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UK Uncut loses legal challenge over Goldman Sachs tax... While judge agreed the deal was 'not a glorious episode in the history of the Revenue', he ruled it was not unlawfulCampaign group UK Uncut Legal Action has lost its high court challenge over the legality...

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IAG losses grow over troubled Iberia

Category : Business, World News

Losses at International Airlines Group balloon in the first quarter due to its troubled Spanish carrier Iberia.

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GM profits pulled lower by Opel

Category : Business, World News

US automotive giant General Motors reports a 14% fall in profits during the first three months of the year, with losses at its European subsidiary Opel.

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Swiss bank UBS returns to profit

Category : Business

Swiss bank UBS returned to profit in the first three months of the year, after racking up big losses related to the Libor scandal at the end of 2012.

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Spain’s Bankia returns to profit

Category : Business

Troubled Spanish lender Bankia announces a return to profit after a disastrous 2012 that saw record losses and an EU-sponsored bailout.

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Profits down at JD Sports Fashion

Category : World News

JD Sports Fashion reports a drop in profits following losses at its outdoor chains, Millets and Blacks.

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The 10 stages of Jamie Dimon’s London Whale grief

Category : Stocks

How Wall Street’s most outspoken CEO publicly dealt with one of the largest trading losses in history.

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HBOS: the bank that couldn’t say no

Category : Business

Report lays bare reckless risk and leadership failures, and attacks board for trying to blame failure on 2008 crash

Banking group HBOS was not driven to point of bankruptcy by the global financial meltdown, but by its own strategy of high-risk lending, over-ambitious growth targets and poor controls, according to a hard-hitting report by the parliamentary commission on banking standards.

The report, which found that HBOS had a funding gap between its loans and deposits of more than £200bn at the time of its downfall, reveals that a “brash” culture developed inside the bank following its creation in 2001.

The funding gap meant it had to rely on borrowing from other banks in the wholesale markets. While this was the “immediate cause” of the collapse of HBOS, it was not the “fundamental issue” the report found. Instead, it concluded that if the problems at the bank had only been ones of liquidity, it would not have needed a combined capital injection of £28bn from the taxpayer and Lloyds to keep it afloat and “there would have been no losses to the UK taxpayer”. Instead, the report says, the key problem was vast, and reckless, lending to UK and overseas companies.

Lord Turnbull, the member of the commission who led the HBOS investigation, said: “This is a story of a retail and commercial bank, rather than an investment bank, brought down by ill-judged lending, poor risk control and inadequate liquidity. Its strategy was flawed from the start.”

Sir Charles Dunstone, the founder of Carphone Warehouse and former non-executive director of HBOS, had pointed out in his evidence that under the Vickers ring-fencing proposals intended to shield retail banks from riskier investment banking operations, nearly all of HBOS would have been inside the fence.

In 2001, the bank’s chief executive, Sir James Crosby, set ambitious targets for returns to shareholders. He planned to ramp up lending in an attempt to challenge the “big four” banks. But HBOS had a risk department – meant to be on alert for bad lending decisions – that could not keep up with the pace of growth, and a management structure that left decisions about lending to division heads.

The damning report begins with a warning by a former finance director of HBOS telling the board in January 2004 that the Financial Services Authority felt that the rapid growth being pursued “may have given rise to an accident waiting to happen”.

But it notes that the FSA – disbanded by the government last weekend – failed to act on its own concerns. “The picture that emerges is that the FSA’s regulation of HBOS was thoroughly inadequate,” the report said.

“From 2004 until the later part of 2007, the FSA was not so much the dog that did not bark as a dog barking up the wrong tree,” the report said, as the regulator moved its focus from prudential risks to a new regulatory system that let banks mark their own homework – using their own models to measure risks – and implement new rules on treating customers fairly.

“The experience of the regulation of HBOS demonstrates the fundamental weakness in the regulatory approach prior to the financial crisis and as that crisis unfolded. Too much supervision was undertaken at a too low a level – without sufficient engagement of the senior leadership within the FSA.”

While the FSA missed opportunities to prevent HBOS from “pursuing the path that led to its own downfall … Ultimate responsibility for the bank’s chosen path lies, however, not with the regulator but with the board itself.”

The commission estimated that £47bn of losses was incurred – £25bn in the corporate division, £15bn in Australia and Ireland, and £7bn in the bank’s own HQ in its Treasury operations. The report says that those losses on their own would have been enough to bring the bank down. “Both the relative scale of such large losses and the fact that they were incurred in three separate divisions suggests a systemic management failure across the organisation. Together they would have led to insolvency,” the report said.

To illustrate the scale of the risks being taken on, the report said that in the corporate bank in 2001 the biggest exposure to one single borrower was less than £1m. By 2008 there were nine customers who had each been lent £1bn. One borrower had been advanced £3bn.

“The roots of all these mistakes can be traced to a culture of perilously high risk lending. The picture that emerges is of a corporate bank that found it hard to say ‘no’,” the report said.

The commissioners said they were “extremely disappointed” that HBOS management had tried to blame the closure of wholesale markets rather than the risky lending. In early 2008, the chairman, Lord Stevenson, had argued that the bank was a “highly conservative institution”. But the report said: “Far from being a highly conservative institution in a safe harbour, HBOS was in a storm-tossed sea.”

In the days after Lehman Brothers collapsed in September 2008, some £35bn was withdrawn from customer deposits at HBOS. The bank was rescued by Lloyds three days after the Lehman crash. Eventually £20bn of taxpayer funds was used to prop up the enlarged bank while Lloyds used another £8bn to shore up the troubled loan book.

A Treasury spokesman said: “The failure of HBOS was a symptom of the financial crisis and the regulatory system in place at that time.”

Bank of Japan shocks markets

Category : Business, Stocks

Japan’s Nikkei reversed early losses and closed 2.2% higher Thursday after the country’s central bank pledged to double its monetary base over the next two years.

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Banks told to raise more capital

Category : Business

The Bank of England is expected to tell the UK’s banks on Wednesday they must raise more capital to absorb potential future losses.

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Drew: JP Morgan losses not my fault

Category : Business

Ina Drew, a former chief investment officer at JP Morgan, says she is not to blame for trades that led to multi-billion-dollar losses.

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