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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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Bank ring-fence plan ‘still best’

Category : Business, World News

A break between the retail and investment arms of UK banks is still the best way forward, Sir John Vickers says, despite recent scandals.

Read more here: Bank ring-fence plan ‘still best’

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Banking reform bill ‘fails to spell out high-risk activities’

Category : Business

MP leading scrutiny of banking reforms wants clarity on whether interest rate swaps will be ringfenced from savings and loans

The government is facing mounting pressure to spell out precisely what activities it regards as high-risk “casino-style” investment banking – which are to be ringfenced from traditional savings and loans to safeguard the banking system.

Publishing a draft banking reform bill , Treasury minister Greg Clark said: “We want to ensure that taxpayers are protected whilst retaining our status as a global financial centre. The government remains on course to have all ICB [Independent Commission on Banking,] legislation in place by the end of this parliament.”

But Andrew Tyrie, the MP leading the scrutiny of the government’s banking reforms as chairman of the parliamentary commission on banking standards, is annoyed at the lack of clarity in the bill. He wanted to know which recommendations from the ICB – better known as the Vickers’ commission after chairman Sir John Vickers – the government wants to jettison. In broad terms the proposals have been endorsed enthusiastically by the chancellor, George Osborne, who is pressing to get the bill formally before parliament early next year. There are similar moves to erect a EU-wide regulatory ringfence in banking were unveiled this month by European commissioner Michel Barnier.

But Tyrie raised concerns over a lack of detail in the draft bill and wants clarity on whether or not controversial interest rate swaps – derivatives found to be at the centre of widespread mis-selling scandals – will sit within the ringfence.

The Treasury is understood to have written to Tyrie seeking his views on which side of the ring-fence interest rate swaps sold to small business should sit.

Nevertheless, Tyrie said: “The draft bill appears to leave a lot of detail to be determined in secondary legislation. We will press vigorously to find out what that is going to contain. Only by doing so will anyone – the industry, bank customers, parliament and the public – be able to find out what this legislation really means for them.” Despite the importance of this legislation, MPs have less time to scrutinise the proposed laws than is typical as all sides recognise the need to get the bill into law as quickly as possible.

Tyrie will next week issue a call for written evidence from banking experts in response to Friday’s draft bill to be submitted as soon as possible. His commission must deliver its scrutiny report on the banking reform bill by 18 December, and will then produce a second, wider report on standards in banking which is expected to be published in the new year.

The commission will host veteran American regulator Paul Volcker next Wednesday and is expected to question him on the scepticism he has already voiced over ring-fencing. The former chairman of the Federal Reserve is often cited as the intellectual forebear of Vickers. He is credited with coining the so-called “Volcker rule”, which seeks to prevent commercial banks from owning hedge fund-type operations and using their own money to take high risk bets on the markets.

Last month Volcker told one newspaper: “In my experience ring-fencing is not terribly effective … It only works in fair weather, but doesn’t work in foul weather. They have already run into problems and they are bound to run into more.

“John [Vickers] and I have the same concerns in mind. But the logic would be to separate the two parts of banking, not to keep them within the same institution. I find it puzzling to suggest that within one organisation you can have a branch that is entirely independent of another subsidiary, with the confidence that never the twain shall meet?”

Ed Miliband tells British banks: change now or be broken up

Category : Business

Labour leader gives ultimatum to City and says: ‘We will split off casino operations’

Ed Miliband will make his boldest, most controversial policy commitment since becoming Labour leader on Sunday when he pledges to force the break-up of Britain’s biggest banks unless they agree to revolutionise their operations and put ordinary customers first.

In an interview with the Observer, the Labour leader says he will confront the City of London with what is seen as the nuclear option for reform if the banks fail to separate their “casino” investment operations from services to account-holders, savers and businesses.

In terms that will incense the investment banking industry, Miliband says a Labour government, as one of its first acts, would push through a modern-day equivalent of the 1933 Glass-Steagall Act, which split the commercial and investment operations of US banks after the 1929 stock market crash.

The move is part of an attempt by Miliband to flesh out his promise to deliver a more “responsible capitalism” – amid signs that the public does not yet believe he is tough enough, nor has a sufficiently clear vision, to be prime minister.

Speaking ahead of Labour’s annual conference, opening in Manchester on Sunday, Miliband says banks must concentrate on core functions such as lending to small businesses “rather than playing the international money markets”. Such behaviour puts ordinary customers at risk of having to share the consequences of failed investments.

Echoing concerns expressed last month by Sir Mervyn King, governor of the Bank of England, who believes that reforms proposed last year by Sir John Vickers are being “watered down” after lobbying by the banks, Miliband said it was time to stop backsliding and change banking culture for good. The recent Libor scandal involving the fiddling of inter-bank interest rates and the £10bn scandal over mis-selling of payment protection insurance showed the culture was still rotten.

Miliband said: “Either they can do it themselves – which frankly is not what has happened over the past year – or the next Labour government will, by law, break up retail and investment banks.

“The banks and the government can change direction and say they are going to implement the spirit and principle of Vickers to the full. That means the hard ringfence between retail and investment banking. We need real separation, real culture change. Or we will legislate.”

The coalition government says it will implement the majority of the Vickers report, which will be the subject of legislation due to reach the statute book by 2015. But the changes will not come into effect until 2019. The plans have, however, been watered down, with ministers agreeing that the ringfence will only apply to the UK operations of banks – even though many in the UK have vast overseas operations.

Vickers also wanted the government to insist that banks hold higher grade assets in their reserves to insure against another financial collapse. But the government relented after the industry complained that buying these assets would be expensive and the £1.3bn estimated cost would be passed to customers.

Miliband called on Saturday for the “rebuilding of Britain” and for 16-year-olds to be given the vote. Speaking to the Observer, he said: “It is incredibly important to show that we ‘get it’ on spending. We are very serious about understanding that the next Labour government is going to face difficult economic times.”

But fiscal discipline had to be balanced with an appreciation that borrowing was rising faster because the government had cut too deep and fast. “If you don’t have a growing economy, businesses aren’t paying taxes, people are claiming benefits and it is not working. So it is a two-pronged approach.”

Labour is a solid 10 points ahead of the Conservatives, according to the latest Opinium/Observer poll. Labour is on 39% (down 3% on a week ago) and the Tories are on 29% (down 1%).The Liberal Democrats are up 2% on 10%, the same as Ukip.

However, Miliband’s personal ratings, particularly against David Cameron, remain poor, as does the party’s reputation for economic competence. Depressingly for Labour, 29% say the coalition government is responsible for the state of the economy, against 46% who blame the last Labour government.

Jon Cruddas, who heads Labour’s policy review, tells BBC’s Sunday Politics London that Labour could retain the coalition’s limit on immigration. Asked whether Labour could stick to the 21,700 cap on non-EU immigrants, he said: “We’re looking at it, obviously. It’s part of our review of the whole area. We haven’t got a specific position on it, in terms of the level at the moment, but it’s something that we’re monitoring.”

George Osborne has confidence in Plan C – but do the banks? | John McFall

Category : Business

Osborne has ditched austerity with a ‘funding for lending’ scheme, but he still has to address the growth problem

The magnificent setting of Mansion House is usually a place for gentle self-congratulation from the chancellor of the day on the economic achievements of the government and the financial industry. With the global financial crisis, that hasn’t been the case for the past few years. But on Thursday evening, Mansion House took a further dramatic twist with the pronouncements from the chancellor and the governor of the Bank of England.

Gone was Plan A, the last rites had been read for Project Merlin, and the modest reforms proposed by Sir John Vickers to make banks safer were severely diluted, to the author’s dismay.

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Jess + Moss

Category : Entertainment, World News

Jess, age 18 (Sarah Hagan) and Moss, age 12 (Austin Vickers) are second cousins in the dark-fire tobacco fields of rural Western Kentucky. Without immediate families that they can relate to, and lacking friends their own age, they only have each…

Continued here: Jess + Moss

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