Governor of the Bank of England, Mervyn King, , in a landmark speech made on Tuesday night, reiterated his calls for the UK banks to be split into two separate entities, one handling utility and the other financing risk capital ventures. He emphasized his argument by stating that “a delusion” to think tougher regulation would prevent a future financial crisis that would be no less severe than the current one. His remarks strengthened the certainty that the economic crisis has prompted the UK government as well as countries across the world to re-evaluate their financial regulatory frameworks

King’s call for a break-up of banks comes from an ever-increasing theory that the UK banks had considered themselves to big to fail , and has made the Governor less than popular with the key figures in the move for domestic and international banking reform.

The Treasury and the Financial Services Authority have consistently rejected the theory of splitting up the banks whilst internationally, the proposals of the Group of 20 have been principally aimed at increasing both the quantity and quality of the banks’ working capital to ensure that the future of banking would be more stable.

In his speech, King raised a few eyebrows by his use of Churchill a style oratory, the speech was delivered at a meeting held in Edinburgh, intended to highlight and discuss the burden banks had placed on taxpayers. The Governor used the theme of one Churchill’s most famous speeches to deliver the message “Never in the field of financial endeavour has so much money been owed by so few to so many. And, one might add, so far with little real reform.”

financial

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Tags: Bank, Bank of England, Banking, British Economy, British Pound, capital venture, Credit Crunch, Currency, Economics, Economy, Financial News, Financial Services Authority, financing risk, Mervyn King, Money, Money Management, Recession, Taxpayers, Treasury, UK Banks, UK Economy, UK government, UK Recession

…a malfunctioning pension scheme
Something that was hovering in the air for a long time, and has been swept under the carpet a little as a result of the ongoing credit crunch is the fact that most UK citizens can afford to become old or worse still, to retire.

A recent report issued jointly by the Help the Aged and Age Concern charities has discovered that around two thirds of the baby boomers are no looking at a normal retirement as at best a forlorn hope, and have come to grips with the reality that their “golden years” will be a lot tougher than they worked for and in the majority of cases also deserved.

Families who have always been savers are seeing their nest eggs deflated by low interest rates, property prices devaluing at a pace and intensity that they may never recover from for at least the next decade or so. To make matters worse, their pension scheme has been knocked very hard by the decline in stock market share values, on which their pension plans were based.

Worrying but typical statistics that are coming out of the crisis, as unemployment begins to sore, is that percentage wise, the number of people in their fifties upwards who are being laid off is very high.

According to official figures released by the Office for National Statistics unemployment among people aged 50 or above has risen by 47% within the last twelve months, with the chances of these people returning to the job market looking extremely bleak for the foreseeable future. This means either retraining which takes time or money or digging into the already rapidly devaluing family next egg.

Those fortunate to stay in work face an uncertain future, especially those without a well funded pension plan. They will be forced to live the rest of their lives walking a financial tight rope, in fear of redundancy and hoping that they can continue to work for as long as possible, even well into the years when they should have been sitting in the park, feeding the pigeons.
While the pension shortfall problem exists all over the Western World, financial analysts state that it is especially acute in the UK.

A recent report from the National Institute of Economic and Social Research found that accumulated wealth, pension levels and assets if realized will still be too low on average to allow a quality of life equivalent to current standards for most UK retirees, and there is little that can be done to change the situation for most people who will reach retiral age over the next two decades.

For those of us who are in that trap it appears that the only solution appears to work longer. If the UK government would raise the retirement age to 70 for men and 65 for women it would be realistic and would allow an increase in retirement income by around 30%, most financial analysts estimate.

For those people who see that retirement is still a long way off, the news is that setting money aside for pensions should begin as early as possible, no matter how far off it seems.

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Tags: Pensions, Savings, Tax, Taxpayers, UK government, Unemployment

Lord Myners, the City Minister was lambasted by a fourteen member committee of MPs for failed to block Sir Fred Goodwin’s pension payoff, in the third part of its report into the causes and consequences of Britain’s banking crisis. The committee criticised Lord Myners claiming that he was too much of a City insider to properly police bonus payments and pension payments to bank executives It wouldn’t take too much of a poisoned mind to imagine a scenario of Lord Myners allowing Sir Fred Goodwin’s to leave the bank that he almost succeeded in ruining with a £703,000 a year life pension in his back pocket, through being totally unaware of what was going on in the last days of RBS under Sir Fred’s questionable management.

There may be many explanations why this was allowed to happen but the one that must spring to mind for many, especially the irate taxpayers who had to eventually dig the bank out of the very deep hole that Sir Fred and his hapless colleagues dug for them might well be “gross negligence.”Lord Myners, comes under heavy criticism for his “naiveté” in allowing Sir Fred Goodwin to engineer a scheme where the CEO apparently opted for early retirement ostensibly at the bank’s request without taking that fact into account when calculating the pension amount. Apparently Lord Myners was unaware of the precarious state that Sir Fred had led the RBS into, and if he had done so could have ordered his dismissal.

If this had been the case, Sir Fred would have been entitled to a mere £416,000 a year pension, and only from the age of 60. The report went on to add that the RBS board had shown itself to be incompetent in the management of the bank, steering it towards catastrophe, with most major policies, including bonuses and pensions at management level, probably handle under the “domination of Sir Fred Goodwin”. The chairman of the committee, which is expected to sit on several more occasions, went on to some up this particular and unfortunate chapter by saying “the design of bonus schemes was not aligned with the interests of shareholders and the long-term sustainability of the banks and has proved to be fundamentally flawed”.

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Tags: Financial News, Lord Myners, Sir Fred Goodwin, Taxpayers

The recession is a huge learning curve and a big test for the government, economists and businessmen.

Recession is not an accident that just happens – like a car crash, it’s the culmination of a series of events.

Dealing with recession is dealing with the management of change. Recession is a change in the economy and if business and politicians can’t find new ways of coping, they will fall by the wayside.

The problem with recession is politicians and economists base policy on historical data – they know what has happened in the past and how people have reacted. For politician’s recession is a juggling act based on keeping the economy prospering while maintaining their popularity.

Sometimes, the two don’t go together. A parent still gives the child medicine needed to get better even if dosing the child makes the parent unpopular.

That’s the basis of our economic problems. Businesses want to make profit and politicians want popularity to stay in office. These two objectives don’t solve our problems; they undermine economics and make our lives worse.

What we need are new solutions. Saddling our children’s children with billions in debt is putting off decisions for someone else to deal with, not taking action and showing leadership.

The banks are manipulating the economy. They put us in this mess in the first place – and the government were happy not to regulate their actions while money poured in to the City. Now the banks have revealed their true face – a Dorian Gray portrait of greed – while stacking countless billions of taxpayers’ cash in their vaults.

Even after all that has happened in recent months, almost daily new depths of banking greed emerge – like the weekend’s revelations of the huge losses the Royal Bank of Scotland, Santander and HSBC have suffered in the $50 billion Wall Street fraud.

The people suffering are those working for Woolworth’s, the car firms and countless other small businesses who have lost their jobs or are on short time with no imminent prospects of life improving.

The past week is damaging the pound in the little man’s pocket.

• Taking the interest rate down to 2% is great for homeowners – but for pensioners living off their savings or looking to buy an annuity with their pension, the rate means after tax they receive about 1.5% on their savings – an income of £7,500 a year on a £500,000 pension pot.
• The property gravy train has hit the buffers – with prices 15% down on the year and forecasts that the worse is yet to come, millions who are relying as property as a pension and need to sell to clear their debts are facing a financial struggle
• Two million people are expected to be out of work by Christmas – the highest jobless total for 11 years.
• The Pound plunged to the lowest ever rate against the Euro – starting the week at 1.15 euros and ending at 1.11 euros. Performance against the US dollar was stagnant – with the Pound at $1.48 at the beginning of the week and $1.49 at the end.
• The City and Wall Street don’t seem to know which way to turn – the FTSE shifted up from 4049 to 4280 – a rise of 231 points – while the DOW staggered from 8637 to 8629, a change of eight points.

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Tags: Banking, Current Credit, Economics, HSBC, Recession, Taxpayers, UK Banks, Woolworths