Category Archives: Britain

Banking, Britain, Economic, Financial Markets, Government, United States

Libor handed over to the Americans…

BLOW FOR THE CITY OF LONDON

The owner of the New York stock exchange has been handed responsibility for setting controversial LIBOR interest rates in a move slammed by MPs as a ‘tremendous blow’ to the City of London.

Earlier this week the Treasury confirmed that the key role will pass from lobby group the British Bankers’ Association (BBA) to transatlantic NYSE Euronext from early next year.

The process, which will still take place in London, will be overseen by City watchdog, the Financial Conduct Authority (FCA).

But while FCA head Martin Wheatley hailed this as ‘an important step in enhancing the integrity of LIBOR’, John Mann, a member of the Treasury Select Committee, blasted the decision.

The Labour MP said it was further evidence that British banks are being unfairly singled out for rigging LIBOR interest rates – while, he says, their US counterparts escape punishment.

He said:

… This is a tremendous blow to the prestige of the City of London and sends out the message that you can’t trust the British.

… What the Americans have been doing is selectively picking out British banks that have done wrong and selectively ignoring the same scandals that have been committed by their own banks… The Chancellor has failed to stick up for the City. French and Germans will be rubbing their hands with glee at the prospect of stealing other financial markets.

LIBOR – The London Interbank Offered Rate – is a key benchmark rate which is used to set mortgages for millions of homeowners and is linked to $300 trillion of financial contracts around the world.

The BBA was criticised for being asleep on the job as a number of banks, including Barclays, the Royal Bank of Scotland and UBS, routinely rigged rates under its nose.

This culminated in huge fines for these banks and the decision by an independent review headed by Mr Wheatley to strip the BBA of its role.

The decision to award the contract to the New York Stock Exchange-owner followed a bidding war orchestrated by an independent committee, headed by former journalist Baroness Hogg – now a senior independent director at the Treasury. NYSE Euronext, which owns the pan-European Euronext market and will pay £1 for BBA Libor Ltd’s assets, said it is ‘uniquely placed’ to restore the international credibility of LIBOR. BBA has refused to reveal how many of its employees work on LIBOR.

Failed bidders are understood to include financial information provider Thomson Reuters, which has calculated LIBOR on behalf of the BBA since 2005.

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COMMENT

The British Bankers’ Association, a wildly discredited organisation given its mishandling of LIBOR, the interest rate that sets the price for trillions of dollars of transactions across the world, has much to answer for. Its sclerotic behaviour under the BBA’s previous leadership failed to respond with any willpower to criticisms made by the Federal Reserve. Had it done so, it is possible that the LIBOR scandal – which wiped out the top management at Barclays – might never have happened.

Not that the Bank of England has totally clean hands in any of this. It may have had no direct responsibility for keeping Britain’s markets honest, but it can be accused of being lackadaisical in making sure the BBA acted on Fed criticisms and forced through reforms designed to erect Chinese walls between LIBOR setters and traders so that opportunities for rigging were stamped out.

Paradoxically, the Libor business that NYSE Euronext will inherit has shrunk dramatically. Post the Great Recession the LIBOR market has been in deep slumber because banks are so distrusting of each other, especially in the eurozone.

It’s possible that among the reasons for awarding the LIBOR contracts to NYSE Euronext rather than the London Stock Exchange is that London’s bid came in association with Thomson Reuters, the financial institution which set the reference rate under the old broken regime.

Thomson Reuters’ independence has been challenged recently by the New York State Attorney Eric Schneiderman who is critical of an arrangement under which premium customers get privileged access – a two second advantage – to the University of Michigan consumer confidence index. At a time when the City is under siege from Brussels over a variety of issues, it does seem bizarre that we should allow an interest rate market that grew in London in the 1970s, to escape US tax measures, to head back across the Atlantic.

And while several European banks, including Barclays, RBS and UBS, have paid a heavy price from US regulators for LIBOR manipulation, so far there has not been a single successful prosecution or settlement with an American bank. That in itself should raise many previously unanswered curious questions, as LIBOR setting now moves to the United States.

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Arts, Britain, Culture, Government, Media

Plans for a tough new Press watchdog following the Leveson Inquiry…

PRESS STANDARDS

Following the Leveson Inquiry into press and media standards, Britain’s newspaper and magazine publishers have revealed the details of a tough new Press watchdog.

The Independent Press Standards Organisation (Ipso) will have the power to impose fines of up to £1 million for systemic wrongdoing and require editors to publish upfront corrections ‘whether proprietors like it or not’.

The Media and Culture Secretary, Maria Miller, has said she is ‘glad’ that progress is being made following months in which talks on Press regulation have stalled.

The watchdog will have far tougher rules than the previous toothless Press regulator, the Press Complaints Commission (PCC). It is understood that Ipso will incorporate a standards and compliance arm, with strict investigative powers to call editors to account. The majority of members of the new body will be independent and the industry itself will have no veto on appointments, but proper processes for public appointments and scrutiny will be in place.

Report: The Leveson Inquiry highlighted ethical failings in the press

Report: The Leveson Inquiry highlighted ethical failings in the press

The public will be able to call a hotline number if they want to ask media organisations to leave them alone. And a whistleblowers’ hotline will also be set up for journalists if they are asked to do anything they believe is unethical.

The details were released ahead of a meeting today of the Privy Council at which a Royal Charter to govern the rules surrounding Press regulation will be discussed.

Newspaper publishers appear to hold a common consensus in that the Independent Press Standards Organisation will be a ‘complete break with the past’ and will deliver all the ‘key recommendations’ made by Lord Justice Leveson.

The Culture Secretary said:

… We have been urging the newspaper industry for several months to set up a new self-regulator, and are glad that they seem to now be making progress.

… We all want to see the principles of the Leveson report implemented and the self-regulatory body is a key component of that.

Most in government will welcome that the Press are forging ahead with the establishment of a new regulator. Ipso will go a long way to remedying the deficiencies of the PCC and in fulfilling the recommendations of Lord Justice Leveson.

Though it may take several months for the new body to be operating, the proposals offer a route map out of the deadlock eight months after Leveson reported. That deadlock is mostly attributable to the lobby group Hacked Off which has tried to stitch up a deal for political control of newspapers.

A watchdog with teeth is needed. The public have a right to expect a resolution to this matter sooner rather than later.

PROPOSALS

  • Maximum fines of £1 million for systemic wrongdoing by the Press
  • Upfront corrections when stories are wrong
  • A phone hotline for the public to complain about harassment by the Press
  • A whistleblowers’ hotline for journalists who are concerned they are being asked by bosses to do something unethical
  • A standards and compliance arm, with investigative powers to call editors to account
  • The Press have no veto over appointments to the new regulator
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Britain, Politics

Labour’s struggle with Unite…

EXPOSING MILIBAND’S WEAKNESS

For Ed Miliband, the Labour Party’s leader in the UK, the last ten days or so have been wretched. Mr Miliband who has been so desperately unimpressive in the past few months, particularly in response to the spending review delivered by George Osborne, now finds himself at the centre of a scandal that exposes his weakness even further.

Mr Miliband would never have guessed that a Westminster barroom brawl involving Falkirk MP Eric Joyce would have had such seismic repercussions.

Mr Joyce decided to stand down and subsequently this has triggered a poisonous battle in who should become the next Labour candidate in this safe Labour seat. The issue is now threatening to engulf the Labour leader, who has never looked so weak, rattled and indecisive.

The first allegations to emerge were that the union Unite – whose block vote was crucial in winning Mr Miliband his job following the departure of Gordon Brown – had swamped the local party constituency with new and unfettered members, so they could vote for the union’s preferred Left-wing candidate.

Worse still, it was then discovered that Unite, led by Len McCluskey, was itself paying the new members’ subscription fees, and in some cases had even signed up people as members without their knowledge. This could lead to a potential criminal act of identity theft.

A strong leader of the Labour Party would have recognised the huge political danger in allowing a militant trade union (which wants Labour to wreck the economy all over again with more spending and more debt) to tighten its already vice-like grip on the party.

It is alleged that, for weeks, Mr Miliband knew about the Falkirk allegations and did nothing. It has taken the deeply suspicious resignation of his election chief Tom Watson, and the revelation that Unite had tried to influence the outcome in a further 40 selection contests elsewhere in the country, to wake him up from this pathetic dithering.

And yet Ed Miliband’s response has been feeble and inadequate.

On Friday, Mr Miliband made much of the fact that he has referred Labour’s internal report into Falkirk to the police. But, in reality, was this not an act of weakness given that 24 hours earlier the Conservative MP Henry Smith had written a public letter to the Chief Constable of Police Scotland calling for a full fraud inquiry?

Mr Miliband who champions the cause of openness and transparency is steadfast in his refusal to make the report public. A string of senior figures, however, has demanded that he do so.

Mr Miliband, who wants to shackle Britain’s free Press with statutory regulation, is a position that is at odds with the openness he calls for. For how would the murky dealings and vote-rigging within his party have surfaced if such a framework had existed? It is likely the shenanigans and underhand dealings of Unite would never have been exposed.

Calling on Mr McCluskey to turn his back on ‘machine politics’, the Labour Party has to answer as to why it has quietly changed the rules by making it a condition that any candidate in a council or Parliamentary election must be a union member (as opposed to should be, which was formerly the case). This was done shortly after Mr Miliband become leader.

Many people will question whether Mr Miliband is in any position to confront Unite and its leadership over its bid to drag Labour back to the bad old days of 1980s militancy. It is certain that if Unite withdrew its financial support of the Labour Party, the party would quickly become inoperable, if not by going bust. Over the past three years alone Unite has given Labour a staggering £8 million.

No wonder then that Labour are unable to commit properly to spending cuts, in fear that Mr McCluskey and his union cronies might not like it.

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