Regular readers of Bank Return, the Bank of England’s weekly summary of its assets and liabilities, can probably be counted only in the dozens these days. But it was not always so.
In the great banking disaster of 2007-2009, the publication was a must-read in the City. It was analysts’ essential guide to estimating the amount of emergency support being shovelled into the stricken Northern Rock, for example.
Threadneedle Street did not take kindly to having to reveal its covert operations so quickly, arguing that their effectiveness could be undermined. Thus the Banking Act of 2009 removed the requirement to issue a weekly statement. Now the dust has settled, Bank Return is being quietly dropped; the last publication is on Thursday.
Simon Ward, chief economist at Henderson Global Investors, is not impressed. He has three arguments why this move is unnecessary – all are persuasive.
First, why should assistance to ailing banks be more effective if it is covert? Withholding information is just as likely – perhaps more likely – to create uncertainty. As Ward says, “Confirmation of large-scale assistance may have a stabilising effect by demonstrating a central bank’s commitment to fulfil its lender of last resort responsibilities.”
Second, no other major central bank thinks transparency must be sacrificed for the sake of financial stability. The central banks of the US, eurozone, Japan, Canada and Australia will continue to publish weekly balance sheet statements. The Bank of England will have a truncated weekly version; but the full balance sheet will appear only quarterly with a five-quarter lag.
Third, Ward argues that original aim of Bank Return – to demonstrate responsible management of the Bank’s balance sheet – remains important. “Ceasing publication may encourage conspiracy theories that the Bank wishes to engage in risky lending or interfere in markets, or even that the Treasury plans to cancel the Bank’s gilt holdings,” he argues. Good point. Bank Return ran for 170 years. In the next crisis, Threadneedle Street itself may rue its death.
Once upon a time – actually, only a few years ago – a £30m-plus fine from the City regulator for failing to keep clients’ money properly protected would have been regarded as a very big deal.
Keeping clear records of whose assets are where is a basic requirement of good banking. Inept record-keeping undermines faith in the financial system and, in a calamity, causes confusion, as witnessed at Lehman Brothers. When JP Morgan was caught mixing its own money with clients’ in 2011, the £33m fine from the old Financial Services Authority was a record.
Barclays has now topped that with a £37.7m punishment from the successor body, the Financial Conduct Authority. This is not a new record because plenty of other scandals, such as Libor-rigging, have come along since 2011. Inflation in fines is also at work and, looked at coldly, it’s fair to say that Barclays’ offences within its investment bank from 2007 to 2012 were less grave than JP Morgan’s.
All the same, you would think somebody in authority at Barclays would wish to apologise – either to clients or to shareholders, who will have to pay the fine. This was not a trivial matter, as Tracey McDermott, the FCA’s director of enforcement, made clear: “Barclays failed to apply the lessons from our previous enforcement actions, numerous industry-wide warnings, and exposed its clients to unnecessary risk.”
Barclays’ statement – attributed to “a spokesman” rather than a named officer – conceded that the bank “fell short of what is expected”. But then it trotted out a list of what Barclays clearly regards as mitigating factors – the bank reported itself to the regulator; systems have been improved; no client was harmed.
Maybe we are numbed by banks’ bad behaviour. But have we really reached the point where an institution can be fined £37.7m for serious shortcomings by its regulator and feel no need to apologise? Barclays says it is trying to restore old-style values to banking. Some old-fashioned manners wouldn’t go amiss.
It gets worse for Tesco. The last figures from Kantar show sales down 4.5% in the last quarter. The other story in the data, though, was a 1.8% decline at Sainsbury’s, which until now has been able to plot a safe path between the discounters and Waitrose. That script is starting to look frayed. The race for second place in the grocery market seems to have turned in Asda’s favour. Down 5% yesterday, and 30% this year, Sainsbury’s share price is indicating trouble ahead.
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