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RBS Good money after bad

Discussion in 'Current Affairs, News and Analysis' started by Hippohunter, Feb 24, 2017.

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  1. To date RBS has made a loss of £58 billion since the taxpayer bailed RBS out in 2009 to the tune of £45 billion. The obscene salaries and bonus's continue to be paid to attract the "cream of the industry". Fred the Shred who oversaw the debacle in his 4 years as CEO continues to collect his £750,000 a year pension from RBS and the bank on an almost bimonthly basis continues to be in court over illegal practices. No one gets sacked but leave with heavily plated platinum goodbyes and no one goes to jail.

    It is government policy to sell off, well at least the "profitable" parts of RBS as soon as possible. This should not happen until at least £103 billion has been recovered to the tax payer. Given the farce that selling off Royal Mail was the government would do well to shelve any sell off ideas of RBS, stop all bonus's rewarding failure, sack incompetence and get it sorted.
     
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  2. What are you going to do about it?
     
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  3. I switched banks after they refused to stop paying Fred the shred £750,000 a year in a pension despite having only been in the job 4 years and almost dongle handedly brought doen the UK banking system.
     
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  4. That'll learn em!
     
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  5. Cynical

    Cynical LE Book Reviewer

    I despise bankers at least as much as the next person. But:

    1) RBS, like many other banks, is suffering from a loan book of questionable value. Bits of it might or might not come good in time. No one knows. As the value of a bank derives (at least in part) from the quality and size of its loan book, that makes valuing RBS impossible.
    2) There are some parts of RBS that are both standalone and potentially or actually profitable. But there is little interest in buying them from the banking sector. No one wants a branch network, No one wants a whole bunch more employees and few have the appetite for the potential risks of loans that they did not write. (yes, there are specialists who do this, but they buy for pennies in the pound).
    3) If RBS were to sell an asset and raise cash that money would belong to RBS, (of which taxpayer is a shareholder) and RBS might well find a better (i.e. more commercial) use for it that returning it to taxpayer. These would include writing off more bad loans and keeping its cost of capital down.
    4) Your entirely understandable reaction to RBS's woes of moving your (profitable) business to one of their competitors is, in microsm, one of the real problems that they have. Rebuilding their brand is vital to shareholder value.​

    Yes, bankers are massively overpaid and the terms for some are obscene. successive governments have done little to sort out the City, which fundamentally overcharges. The reasons for this include:
    (a) the government always needs to borrow money
    (b) the mass of regulation reduces the pool of people suitably qualified (in the eyes of the regulator) to run a bank, thereby raising the prices
    (c) the fact that finance is international, and the US (effectively the rest of the world) pays very highly (again for dodgy reasons)
    (d) few politicians (or journalists) understand finance or the other City activities. (I include myself in this, although I probably know more than most).
    (e) reform of the City sounds marxist (and some approaches are).
    (f) the City generates a disproportionate amount of revenue for HM Treasury, and killing golden (or even silver) egg laying geese is never a good idea; less so if you happen to be an insolvent government like ours.
    The simple, awful truth is that regulation created (and continues to create) an impression of risk control that is entirely wrong. Worse, restricting where money can be invested creates both bubbles in asset prices and incentives to find unregulated instruments, such as the Collaeteralised Debt Obligations which were at the root of the crash. Fatally, much of the price modelling relates to an estimate of risk. Many of these estimating techniques (I believe, but can't prove) have flawed assumptions that the associated probabilities follow a "normal distribution" (the bell curve).

    That they don's is, to me, obvious from some of the comments on the crash seeing daily "26 sigma" price movements. (sigma is the standard deviation - in a "normal distribution" 95% of outcomes lie within 2 standard deviations of the mean.) The probability of a 26 sigma event is, I understand very much less that 1 divided by the number of molecules in the universe. If you suffer such an event once you are very unlucky, or your probability calculation was wrong. If you suffer it more than once your probability calculation is almost certainly wrong. All those maths graduates ("quants" in the jargon) who were (and are) paid huge sums to produce algorithms have failed to track (or create) their error budget.

    And very little has been done about it.
     
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  6. according to this bbc story Royal Bank of Scotland losses more than treble to £7bn - BBC News rbs is fundamentally profitable but one off fines for bad practise are holding it back - my question is why is it the yanks are able to fine the rest of the world eg vw enissions scandal, with impunity and take all the money whilst we seem to get feck all? - where is the fine money going to? where is the uk taxpayers share?
     
  7. Cynical

    Cynical LE Book Reviewer

    Because US can fine any corporation operating in its jurisdiction, just like any other country. The US's biggest advantage is that it is by far the largest economy in the world.

    US court fines eventually end up with US government, be it state or federal, and thus benefit US taxpayer. Similar in most other countries.

    With regard to VW emissions, EU has (I think) fined VW. Money will disappear into EU.

    Sorry, no one other then UK government (spelt politicians in election years) gives a tinker's cuss for the UK taxpayer.
     
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  8. Even if the government had a free hand to make changes within RBS, in what way would slashing pay and bonuses help to attract the people needed to turn it around?
     
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  9. It might reduce costs.
    If it looks like you can't gild a turd, no matter how much you pay someone to do it, perhaps we should stop trying.
     
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  10. Then we lose all our money. RBS aren't dishing out bonuses for the fun of it. They're doing what they need to do to attract and retain talent.
     
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  11. I m o the banks should have been allowed to go to the wall, that would have given them a bollock ache, we all may have had to join the soup queue as the people had to circa 1929 crash, I wonder how much (quantative easing)
    pound note printing the BOE is responsible for and what it really means for all of us.
     
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  12. ExREME..TECH

    ExREME..TECH On ROPs

    I think the plan is too sell it to their mates at a knocked down price and to make it believe we are getting rid of a money pit....bit like The Queens mail
     
    Last edited: Feb 24, 2017
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  13. Fred should be shot in front of his family
     
  14. ExREME..TECH

    ExREME..TECH On ROPs

    Even grand children?
     
  15. Especially. Future generations must know the price of failure
     
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