Co-op Bank to cut 200 jobs in Manchester and Stockport

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Co-operative Bank is cutting 200 jobs as it looks to continue its recovery. Staff have been told the posts will go by March and will mainly affect management and head office roles in Manchester and Stockport. Deputy chief executive Liam Coleman said the cost reductions were “critical” as it continues its three-year plan to rebuild the business. The bank almost collapsed in 2013 and it expects to continue to be loss-making until the end of next year.

‘Difficult journey’

Mr Coleman said: “These cost reductions are critical to progressing our turnaround and delivering a cost base which supports a sustainable core bank.” He said it would continue to consult colleagues and trade unions on the proposals over the coming weeks. “We have made progress in turning the bank around since 2013, but have always been clear that the bank’s recovery is a difficult journey.” He said the business would not make a profit this year or next year while it continues its “turnaround plan in a challenging economic environment”.

‘Real blow’

Rob MacGregor, national officer at trade union Unite, said: “The speed and breadth of these cuts will hit the Co-operative Bank’s much cherished customer service and with it the bank’s unique selling point. “Compulsory redundancies are anathema to all trade unions, but the timing of this exercise just before Christmas is a real blow to our members.” He said the union would be supporting members and pressing the bank to reconsider the cuts where possible. The bank was owned by the Co-operative Group until 2013, when a £1.5bn hole was discovered in its finances. The group had to go to outside investors to support the Co-op Bank, which is now 80% owned by US hedge funds, with the remainder held by the Co-op Group.

BBC News


RBS rejected Goldman, Deloitte warning over 2008 cash call

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A branch RBS is seen in the City of London

By Andrew MacAskill and Sinead Cruise | LONDON

Just hours before Royal Bank of Scotland (RBS.L) launched a massive cash call in 2008 to shore up its capital, the bank’s senior advisers were still discussing whether its financial figures were potentially misleading for investors, court documents allege. Late into the night, adviser Goldman Sachs (GS.N), auditor Deloitte and a lawyer for RBS exchanged emails discussing the writedowns on troubled assets that RBS was about to publish, according to the “particulars of claim” filed by lawyers acting for shareholders now suing the bank. Goldman Sachs and Deloitte feared that some figures in the prospectus for the RBS cash call were vulnerable to misinterpretation, according to the particulars of claim. The advisers thought investors might conclude RBS’s ability to withstand losses was stronger than it actually was, the claimants’ filings, seen by Reuters, allege. The late-night emails were part of a series of warnings from outside advisers that were rejected by senior RBS executives as the bank sought to raise 12 billion pounds ($15 billion), according to court documents.

RBS denies the allegations that it misled investors. In court documents for the defense seen by Reuters, lawyers for RBS say the valuation figures were reasonable and composed to help the bank decide an appropriate size for its cash call, not to guide investors on losses on the bank’s assets. RBS, Goldman Sachs and Deloitte all declined to comment. The allegations are part of a 4-billion-pound lawsuit brought by thousands of RBS’s investors who bought shares in the 2008 cash call and lost most of their money when the bank nearly collapsed a few months later. RBS had to be rescued by the UK government with a bailout that ended up costing 45.5 billion pounds. British taxpayers still own more than 70 percent of the bank. The investors are suing for compensation, alleging RBS did not give a proper picture of its finances at the time of the cash call.

Under English law a business publishing a prospectus to raise capital must disclose an accurate record of its finances to investors. If it fails to do so, it can be found liable for damages. Claimants allege that RBS advisers and lawyers questioned an estimate in the April 2008 prospectus that described writedowns “in 2008.” The advisers said the estimate, which appeared in a table of credit market exposures, could be misconstrued as a forecast of writedowns for the whole of 2008, rather than just the first four months of the year, the particulars of claim allege. Steve Almond, the Deloitte partner responsible for the firm’s involvement in RBS’s capital raising, told senior RBS executives in an email dated April 21 that “in 2008” implied “there will be nothing more in the next 8 months. This is the hope but cannot be controlled,” according to the particulars of claim. In the email, Almond warned the executives the bank had not estimated full-year losses and would break accounting rules if it published the table. He deleted the disputed “in 2008” and called for the table to be revised, the particulars of claim allege. Almond wrote in the email: “The writedowns reflect assumed exit prices in current markets – not provisions for the rest of the year,” according to the claimants’ documents. Almond, who retired from his role as global chairman of Deloitte in May 2015, declined to comment.Instead of acting on advice to clarify the timeframe, RBS allowed the ambiguous estimate to be published despite knowing the asset values and writedowns had only been calculated to mid-April 2008, the claimants’ lawyers say. They allege the bank did not want to clarify the estimate because it was worried that doing so might increase concerns about the bank’s capital position.

A spokeswoman for RBS declined to comment for this article on that allegation and others made by the claimants. As Reuters reported on Nov. 16, the lawsuit also includes allegations that senior management dismissed calls from subordinate staff to mark down the values of distressed U.S. mortgage-backed assets more aggressively in the final quarter of 2007, as a global crisis in credit markets began to take hold. RBS rejects those allegations, and says in court documents for the defense that a lack of trading in such assets at the time made it difficult to pinpoint what the correct values were. The case, scheduled to start in March, is expected to last six months and to hear from scores of witnesses.


The joint financial advisers and sponsors of RBS’s 2008 capital raising plan were Goldman Sachs and Merrill Lynch. As part of their due diligence, those advisers undertook a review and valuation of some RBS asset-backed securities and complex credit funds called collateralised debt obligations (CDOs). At the same time, RBS had its own estimates for writedowns and the current value of the assets. The claimants lawyers say a draft of the bank’s assessment, circulated on April 17, 2008, estimated what it described as “Total writedowns 2008” at 5.9 billion pounds. They allege that figure was originally described as the figure “to date” – to April, not for the whole year. According to the claimants’ documents, the draft announcement for the rights issue circulated on April 20 or April 21, 2008, described the 5.9 billion figure as a pretax “estimated capital effect from write-downs in respect of credit market exposures in 2008,” which the bank said was based on “the outlook in credit markets at this point. The table which followed cited the 5.9 billion pounds figure in a column called “Estimated write-downs before tax.” A footnote to the column added the phrase “in 2008. According to the particulars of claim, Goldman Sachs, like Deloitte, specifically objected to the phrase “in 2008.” The documents seen by Reuters do not say whether Merrill Lynch made any objections.

Goldman Sachs, Deloitte and Merrill Lynch, which is now owned by Bank of America, declined to comment. In addition to his original warning in the April 21 email, Deloitte’s Almond repeated his objections in a further email later that day, the claimants documents allege. That email was addressed to colleagues at Deloitte and later forwarded to RBS’s then finance director Guy Whittaker, the claimants’ documents allege. Whittaker declined to comment.In defence documents, lawyers for RBS say the figures were not misleading but reasonable estimates made for capital planning purposes, based on what the board considered to be prudent assumptions in view of credit market conditions. Lawyers for RBS deny in the defence documents that Almond’s comments were disregarded. They point to an email exchange between him and Tom Shropshire, a partner at RBS’s law firm Linklaters, which referred to a conversation between him and Almond on the same evening. In that April 21 conversation Almond allegedly said his concerns were “not of a fundamental nature,” the defense documents allege.

Shropshire declined to comment. At 00:43a.m. on April 22, the day the rights issue was launched, Goldman Sachs Executive Director Julien Petit also emailed objections to Shropshire, according to the claimants’ particulars of claim. “We at Goldman Sachs still believe that this is a problem … We find it is misleading to say estimated writedowns before tax in 2008 as there may be further writedowns in 2008,” the email said, according to lawyers for claimants. Two minutes later, Shropshire replied to Petit and advised him to contact the bank directly and to “resolve the issue before publication,” the claimants’ documents allege. At 00:47a.m., according to the particulars of claims, Petit emailed Shropshire to say that the message had been relayed to a senior executive of the bank. Petit allegedly added: “You cannot assume that it has been resolved as the client (RBS) did not want to take our comment.”

Petit declined to comment. In the defence documents, lawyers for RBS said Goldman Sachs signed off the sponsor declaration approving RBS’s cash call as required by financial regulators, indicating that the adviser did not consider the information to be misleading.


Claimants’ lawyers allege RBS acted as it did because it wanted to avoid disclosing how its capital position had deteriorated until after it had completed the critical cash call. In emails dated April 18, 2008, Almond told Deloitte colleagues he felt the timing of writedowns was “an issue” for RBS, and if they happened before the rights issue, the bank’s total capital would be “down to 8.59 percent,” according to the claimants’ documents. At the time, Individual Capital Guidelines (ICG) set by UK regulators stipulated minimum total capital of 9 percent of “risk-weighted assets” – assets whose valuations take into account the perceived risk those assets pose to a bank’s financial health. Almond wrote in the email that RBS had “not got the capacity” to take further assets writedowns at that time, according to the claimants’ documents. In defence documents, the bank says it did not recognise all of the writedowns in its books immediately because it did not consider that the accounting rules required it to do so. UK corporate accounting rules allow some leeway in how companies interpret them. Claimants’ lawyers allege that Ian Tyler, then RBS group head of capital, raised the issue of writedowns and capital levels with senior management. According to claimants’ particulars of claim, Tyler sent an email on April 20, 2008, to a senior RBS colleague, saying that booking the estimated writedowns in April would trigger falls in the bank’s capital, potentially taking it below regulatory requirements. Tyler declined to comment. In the defence documents, RBS says it did not consider that it had suffered losses of 5.9 billion pounds by the prospectus date. The bank says it complied with accounting rules and took a reasonable approach to the timing of the expected writedowns.


Whiplash plans to ‘cut car insurance premiums by £40’

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Millions of motorists could see their car insurance premiums reduced as a result of plans to cut compensation for whiplash injuries.

Whiplash claims have risen by 50% over the last decade, costing insurance companies about £1bn a year. The government said insurers have pledged to pass on the savings, worth about £40 a year. Following a promise made last year, ministers are looking at scrapping the right to compensation or capping it. In its consultation, the Ministry of Justice suggests that such payments – which are separate from medical bills or loss of earnings – could be banned. Or they could be capped at a maximum level of £425. By contrast the current average pay-out is £1,850.

‘Better deals’

The government pointed out that while the number of road accidents in the UK has been falling, the number of whiplash claims has been increasing. “For too long some have exploited a rampant compensation culture and seen whiplash claims an easy payday, driving up costs for millions of law-abiding motorists,” said Justice Secretary Liz Truss. “These reforms will crack down on minor, exaggerated and fraudulent claims.”

Other proposed measures include:

  • Introducing a tariff system for compensation, payable for more significant injuries than whiplash
  •  Allowing small claims courts to handle all personal injury claims up to £5,000, rather than just £1,000, so reducing legal costs
  •  Requiring medical reports from an accredited expert, before any claims could be paid


The Association of British Insurers (ABI) welcomed the consultation. “These reforms are important. They will help to give honest motorists a better deal,” said an ABI spokesperson.

Nuisance calls

The insurance industry has been complaining about the issue of whiplash claims for at least eight years. And the government has tried to crack down on fraudulent injury claims before. Under the Legal Aid, Sentencing and Punishment of Offenders Act 2012, so-called “no win, no fee” legal actions were curtailed, and referral fees were banned. Following that law, whiplash claims fell by 19%, but it remains to be seen how effective any further measures might be. Nevertheless, one of the UK’s largest insurance companies, Aviva, has promised to pass on 100% of any savings to motorists. The insurer said the measures might also help to discourage nuisance calls and texts from claims management companies. “This is welcome news for consumers who are rightly fed up with nuisance calls, fraud such as crash for cash, and the huge number of spurious whiplash claims they pay for in their premium,” said Rob Townend, claims director at Aviva. “These proposals bring us a step closer to saying good riddance to the ‘whip-cash’ merry-go-round that is the bedrock of the UK’s compensation culture.”

‘Broken system’

Amanda Blanc, the chief executive of insurance firm AXA UK, also called for the government to push ahead with the reforms. She said: “We have been here before and still not yet managed to beat the whiplash epidemic. “This is a golden opportunity for the government to tackle the compensation culture once and for all.” And the RAC motoring group’s director of insurance, Mark Godfrey, said the plan was “broadly welcome… The present system is now widely regarded as broken and in need of reform”. But he added: “It is crucial that motorists that have genuine claims are not disadvantaged, which is why we now look forward to seeing the finer detail of the government’s proposals.”

Any changes would require an act of parliament, so are likely to be many months away.

By Brian MilliganPersonal Finance reporter

Ed Balls: Bank of England independence should be curbed

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Former shadow chancellor Ed Balls has called for the Bank of England’s independence to be curbed in response to growing “popular discontent”. In an academic paper, he said central banks could “sacrifice some political independence” without undermining their ability to do their job. “We need a more nuanced approach to central bank independence in this brave new world,” he added. A former top Bank official said Mr Balls had raised “an important issue”. Andrew Sentance, who used to be on the Bank’s Monetary Policy Committee, told the BBC’s Today programme: “In the UK we have a model where the government sets a remit for the Bank of England, and the government could change that remit, and I think there is a case for looking again at that remit to say whether it’s the right one in the circumstances we now face after the financial crisis. “Mr Balls’ views came in a paper for Harvard University’s Kennedy School, co-written with James Howat and Anna Stansbury.

‘Better dialogue’

For his part, Mr Balls told the Today programme that in order to protect its operational independence, the Bank needed “more political support and accountability”. To that end, he said, there should be a “systemic risk body”, chaired by the chancellor, to oversee policy. There needed to be “a better dialogue” between central banks and the government, while the government needed to support the economy better with more spending on infrastructure. Mr Balls added that he disagreed with Prime Minister Theresa May’s recent criticisms of low interest rates, which she said had benefited the rich and made savers poorer. He said the low-rate policy had been “the only thing which stopped our economy sliding back into depression”. He added that the case for operational independence for central banks remained “as strong as it’s ever been” and that it was “very worrying” to see Bank of England governor Mark Carney being attacked for his policies.

BBC News


Court documents allege clashes inside RBS over 2008 toxic assets

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A Royal Bank of Scotland branch is seen in London

Royal Bank of Scotland (RBS.L) bosses avoided repricing billions of dollars of souring investments on the eve of the 2008 financial crisis for fear of endangering bonuses and a takeover bid for a rival, court documents allege. The claimants’ filings allege senior managers were warned by internal risk experts for more than six months that overvalued toxic debt, including subprime mortgage bonds, had left the bank dangerously exposed to a collapse in U.S. property prices. But some managers resisted the warnings, allege lawyers acting for RBS shareholders now seeking billions of pounds in compensation for losses suffered when the bank was bailed out in the 2008 crisis, according to the claimants’ “particulars of claim” and a witness statement seen by Reuters. In documents filed by lawyers acting for RBS, the bank rejects those allegations, and denies that it should have repriced assets more promptly or that it misled shareholders over its finances. The allegations, which focus on the months leading up to the 2008 crisis, are at the heart of a 4 billion pound lawsuit brought by thousands of RBS’s investors, which is due to start in the UK early next year. Documents seen by Reuters include the claimants’ particulars of claim and the bank’s defence. In the 1990s and 2000s, RBS had gone from being a small Scottish lender to a global banking giant, largely thanks to an aggressive expansion plan led by former chief executives George Mathewson and Fred Goodwin. In the summer of 2007, the bank stunned markets by leading a consortium of lenders in a 71 billion euro (62.08 billion pounds) takeover of Dutch bank ABN Amro just as worries about a massive U.S. credit bubble were gathering momentum. Little more than a year later, RBS became one of the biggest casualties of the turmoil that engulfed the industry. In 2008, the Edinburgh-based bank made a then record 12 billion pound cash call on investors. Just six months later, RBS – Britain’s largest corporate lender and home to hundreds of billions of pounds of customer deposits – required the first tranche of a UK government bailout that ended up costing 45.5 billion pounds. As a result, some shareholders, including some of Britain’s biggest institutional fund managers, lost more than 90 percent of their investments. They are now claiming they were misled about the state of the bank’s finances ahead of the 2008 cash call and are seeking compensation for their losses. A trial is scheduled to begin in London in March after the two sides failed in July to agree an out-of-court settlement. It could end up being one of the costliest cases in English legal history. RBS, which is still 70 percent owned by the British taxpayer, declined to comment for this article. But Chief Executive Ross McEwan said last month that the bank, while still pursuing settlement talks with some of the claimants, was ready to fight if the case reaches court. The bank has already booked billions of pounds of writedowns since 2008 and is facing a number of U.S. cases alleging mis-selling of mortgage bonds. It has provisioned $5.6 billion to settle these and other historic misconduct charges. Some analysts estimate the total eventual claims against the bank will outstrip RBS’s expectations.


The claimants’ particulars of claim and a witness statement seen by Reuters detail allegations regarding the bank’s behaviour in the months before its near-collapse; they allege there were significant disagreements between staff with responsibility for steering the lender through the worst banking crisis since the Great Depression. The issue of whether the bank deliberately decided against writing down the value of its troubled mortgage-backed bonds – and whether this decision caused misrepresentation of the bank’s financial health – is a key area of contention. The bank was one of the world’s leading sellers of mortgage-backed securities (MBS) and other asset-backed securities (ABS) in the mid-2000s. RBS Greenwich, a U.S. unit of the bank, underwrote $99 billion of U.S. sub-prime securities in the two years to the end of 2006, a volume surpassed only by Lehman Brothers, according to a separate set of U.S. court documents filed in the Southern District of New York in connection with a July 2015 action by RBS investors against the bank. According to the UK claimants’ court filings, senior RBS managers on both sides of the Atlantic clashed with risk analysts over how to value the bank’s exposure to distressed debt. Much of the risk was embedded in complex structured credit products called Collaterised Debt Obligations (CDOs). In September 2007, Victor Hong, a former risk manager for JP Morgan and Credit Suisse, was appointed head of fixed-income Independent Price Valuation (IPV) at RBS Greenwich. As a managing director of risk management, he was one of the most senior analysts responsible for assessing the market value of the unit’s fixed-income portfolio. Hong says that soon after he was appointed he complained to his bosses that these assets were troubled and needed to be marked down in value, according to his witness statement. Hong says he refused to sign off the IPV report for September 2007, alleging in his statement that the IPV function was “effectively a sham and was not independent at all.” Claimants’ lawyers told Reuters his testimony is likely to prove important in their case against the bank. The trial is expected to last six months and to hear from scores of witnesses. Hong’s witness statement alleges that analysis and research passed to senior RBS management from subordinate staff, including Hong, showed some other banks and dealers were marking down some ABS CDOs towards 25 cents in the dollar by October 29, 2007, while RBS senior management was recommending that ABS CDOs were marked at 75 cents in the dollar. Ultimately, the September 2007 report carried a disclaimer stating the bank had been unable to independently verify the value its $3.5 billion portfolio of super-senior ABS assets since July 31, 2007, “due to a lack of market liquidity and transparency.” In court documents for the defence, RBS says a lack of trading in such assets at the time made it difficult to pinpoint what the correct values were. Hong told lawyers for the claimants that his predecessor, Lauren Rieder, told him that the writedowns he and others were calling for would not be authorised by senior RBS management, according to the particulars of claim. The documents do not specify what level of writedown Hong wanted. In that conversation, Hong alleges in the particulars of claim, Rieder used words to the effect that he should “get comfortable” with signing off the September 2007 IPV report and the unchanged marks because to press for lower valuations would mess up “the bonuses.” In a message sent to Reuters via social media network LinkedIn, Rieder said the allegations against her were “totally false and completely made up.” She declined to comment further. Rieder is not expected to testify at the trial. According to the particulars of claim, Hong alleges that Bruce Jin, former head of Market Risk at RBS Greenwich Capital Markets, encouraged him to sign off the September 2007 valuation report, and that Jin said he would support Hong if anyone questioned the bank’s inability to revalue the assets. Jin told Reuters the conversation Hong describes never took place. Lawyers for RBS say in court documents that there is no truth in Hong’s claims and that Hong was told by at least one manager, identified in the documents as Carol Mathis, that the issue of how to value super-senior (SS) CDOs had been escalated to more senior management. Mathis was then the chief financial officer for RBS in North America. Emails sent by Reuters to Mathis via Digital Asset Holdings LLC, where she now serves as Chief Financial Officer, went unanswered. Hong, who also alleges that managers in London wanted to avoid writedowns because of RBS’s bid for ABN Amro, resigned in November 2007, less than two months after he had started at RBS. He blamed “persistent discrepancies between trader marks and analytical fair-market values” for making his job intolerable, according to his witness statement. Hong, who went on to work for the Federal Reserve Bank of New York, alleges that Jin told him he would receive a bonus at the end of March 2008 if he reconsidered his resignation, according to his witness statement. Jin told Reuters that such a conversation never took place. In a defence document filed at the court, RBS says that Rieder signed the September IPV report in place of Hong but denies her action was inappropriate, noting that Hong was a new recruit. In court documents RBS also denies Hong was improperly prevented from performing his IPV job. The bank says it was already considering changes to the valuation of some of the assets in question, and that some ABS CDOs were written down within a month of Hong’s departure. The bank denies that Hong conducted any substantive analysis of the value of RBS’s super-senior CDOs, alleging his research amounted predominantly to “unstructured provision of press reports, research notes and market information relating to the valuation of ABS CDOs held by other institutions.”


Former staff at RBS Greenwich, which is based in Connecticut, have told Reuters that UK-based management undermined their powers to reprice billions of dollars of distressed debt. While Jin, speaking out for the first time since leaving the bank, rejected Hong’s specific allegations against him, he told Reuters that RBS’s approach to valuing troubled assets at the time was too slow, given the market data then available. He said that senior UK managers influenced pricing decisions at RBS Greenwich. “Normally, if you have a trading book position, the desk has the ability to mark those positions, it is within their rights, and no other authority can take away that ability. But that happened at RBS,” he said. “You do not have another body, certainly not from another region, taking over the ability of a trader to mark their marks.” In court documents for its defence, RBS says it was appropriate for senior management to take part in discussions when it was hard to judge the value of distressed assets. Jin, who now works at the Japanese bank Nomura as head of market risk in New York, said he had been a “vocal” opponent of the alleged failure by RBS to respond to market conditions more quickly. He said he has so far declined to help lawyers acting for shareholders, and was reluctant to get involved in the legal case because he wanted to focus on his current role. A second source, who asked not to be named, said RBS Greenwich bosses were uncomfortable with the loss of authority over U.S marks but acquiesced to avoid clashes with more senior executives in Britain. “It was all being run out of London. It was entirely run out of there,” the source said. The claimants’ particulars of claim allege that Chris Kyle, the London-based chief financial officer of RBS’s investment bank, and Deloitte, the bank’s accountant, had suggested a batch of revised “fair value marks” on super-senior CDOs by April 2008. The heads of the investment bank, John Cameron and Brian Crowe, allegedly overruled them because they were unhappy with the writedowns these new marks would have triggered, according to the particulars of claim. Crowe told Reuters he could not remember whether such a conversation took place. Cameron did not respond to requests for comment by email and LinkedIn. Kyle and Deloitte declined to comment. In its defence document, RBS says it did discuss the valuations of these assets with Deloitte both before and after April 9, 2008. The defence document says that the values ultimately decided upon were higher than those first discussed with the accountancy firm. The bank denies that this supports shareholders’ claims that the bank knew these exposures had been “dramatically over-marked” since late 2007.

By Sinead Cruise and Andrew MacAskill | LONDON

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