By Pradeep Chand
I had a meeting with Andrew Caldwell (the Government's Northern Rock share valuer)on April 8th and I was able to convey all my views on Valuation. The key points I made at the meeting were:-
1. The Valuation should be professional and independent, capable of scrutiny by all stakeholders. The Valuer had a Duty of Care to present the negative impact on Valuation of Tripartite mismanagement of the Leak / Run, miserable supervision during September 2007 to February 2008, piecemeal and fragmented approach. Government conditions not defensible: only rational process would be to "Balance" these with £3 Billion of destroyed embedded value.
2. Shareholders are long term savers. Never allowed to vote on private sector bids or Rights Issue.
3. Discrimination evident if compared with terms for Bradford & Bingley valuation, waiving rules on Lloyds takeover of HBOS, and £1.6 Billion gift to Nationwide to resolve Dunfermerline. SLS and capital injections were 12 months too late. SLS would have enabled NR to flourish as a Going Concern.
4. Regard £3.3 Billion government equity injection in April 2008 as key indicator of "Imputed Value" (no rational investor would inject this unless NPV of future cash flows were OVER £3.3 Billion)
5. TSC minutes reflect badly on Governor of BoE “It could have gone either way" with regard to Run. FSA had admitted serious errors in Regulation. National Audit Report highly critical of Treasury. Mervyn King admitted to Robert Peston that Run could have been averted. Guarantees given Four Days Too Late. ALL Tripartite members failed.
6. Suggested that 96 pence was a rock bottom compensation value (heavily weighed down by worry over nationalisation). Fair Value was in the £3.75 to £6.45 range. Strongly PRAISED SRM and RAB support of share price, suggested we levy a 90% tax on Lansdowne and other Short Sellers to fund part of Compensation to NR shareholders.
7. Pointed out my personal distress, by pass -- even wearing heart monitor at meeting.
Friday 17 April 2009
Thursday 16 April 2009
RBS Rights Issue Action Group
A firm of solicitors specialising in Class Actions is exploring the possibility of legal action in respect of the RBS rights issue of April 2008 (the one at 200 pence - c.f. recent price below 30 pence)
Full details at www.leonkaye.co.uk.
There's also www.rbsactiongroup.co.uk if you are an aggrieved RBS shareholder
Full details at www.leonkaye.co.uk.
There's also www.rbsactiongroup.co.uk if you are an aggrieved RBS shareholder
Thursday 9 April 2009
Mervyn King speech - Finance: A return from risk
The link below will direct you to the transcript of a speech given by Mervyn King, Governor of the Bank of England to a selection of international bankers on March 17th 2009.
http://www.bankofengland.co.uk/publications/speeches/2009/speech381.pdf
http://www.bankofengland.co.uk/publications/speeches/2009/speech381.pdf
Friday 3 April 2009
Bradford & Bingley guarantees - over £17 billion
HM TREASURY: DEPARTMENTAL MINUTE
FINANCIAL SUPPORT FOR BRADFORD & BINGLEY
The purpose of this Minute is to inform Parliament of a change to the contingent liability, now covered by the provisions of the Banking Act 2009, in relation to guarantee arrangements to safeguard wholesale borrowings and deposits with Bradford & Bingley. This guarantee is designed to provide assurance to wholesale depositors and borrowers, and to preserve wider financial market stability and maximise proceeds in the wind-down.
On 29 September 2008 the Government made an Order under the Banking (Special Provisions) Act 2008, to transfer Bradford & Bingley's UK and Isle of Man retail deposit business along with its branch network to Abbey National plc. The remainder of Bradford & Bingley's business has been taken into public ownership.
Following the turbulence in global financial markets, Bradford & Bingley found itself under increasing pressure as investors and lenders lost confidence in its ability to carry on as an independent institution. The Financial Services Authority (FSA) determined in September 2008 that the firm no longer met its threshold conditions for operating as a deposit taker under the Financial Services and Markets Act 2000 and FSA rules.
The Government, on the advice of the FSA and the Bank of England, acted immediately to maintain financial stability and protect depositors, while minimising the exposure to taxpayers to bring about the part public, part private solution that met those objectives.
On 29 September 2008, the Treasury put in place guarantee arrangements to safeguard certain wholesale borrowings and deposits with Bradford & Bingley existing as at midnight on 28 September 2008. The guarantee arrangements were notified to the European Commission as rescue aid. As part of the restructuring aid notification to the European Commission the Treasury is seeking approval to continue the existing guarantee arrangements. The guarantee arrangements will remain in place while the Commission considers the Treasury's request. If approved by the Commission, the guarantee arrangements will continue until the wind-down of Bradford & Bingley is completed.
As reported in the Treasury's Spring Supplementary Estimates 2008-09 the size of Bradford & Bingley's wholesale deposits and borrowings covered by the guarantee arrangements is estimated to be about up to £17 billion. The amount guaranteed and therefore the size of the contingent liability will reduce as the wholesale deposits and borrowings reach maturity.
Arrangements will be put in place to ensure that Bradford & Bingley will pay an appropriate fee for the provision of these guarantee arrangements in order to ensure it does not receive a commercial advantage.
In normal circumstances, if any of these liabilities are called, the Treasury would seek Parliamentary approval through the normal Supply procedure. However, if the Treasury and the National Audit Office are satisfied that the need for expenditure is too urgent to permit normal arrangements, direct funding from the Consolidated Fund under the Banking Act could be used. The Treasury would as soon as is reasonably practicable lay a report before Parliament specifying the amount paid, unless it considers that the report should be delayed or dispensed with on public interest grounds.
It is normal practice, when a Government department proposes to undertake a contingent liability in excess of £250,000 for which there is no specific statutory authority, for the department concerned to present to Parliament a Minute giving• particulars of the liability created and explaining the circumstances; and to refrain from incurring the liability until fourteen parliamentary sitting days after the issue of the Minute, except in cases of special urgency.
This Minute gives notification of a guarantee into which the Treasury has entered into with the Financial Services Authority.
On 29 September 2008 the Government made an Order under the Banking (Special Provisions) Act 2008, to transfer Bradford & Bingley's UK and Isle of Man retail deposit business along with its branch network to Abbey National plc.
The remainder of Bradford & Bingley's business was taken into public ownership. In order to enable Bradford & Bingley to meet its regulatory requirements as defined by the FSA, the Treasury provided a guarantee to the FSA of its intention to take appropriate steps (should they prove necessary) to ensure that Bradford & Bingley will continue to operate above the minimum regulatory capital requirements. The size of this guarantee is unquantifiable. This commitment will remain in place for so long as required by the FSA to continue to regulate Bradford & Bingley.
In normal circumstances, if any of these liabilities are called, the Treasury would seek Parliamentary approval through the normal Supply procedure. However, if the Treasury and the National Audit Office are satisfied that the need for expenditure is too urgent to permit normal arrangements, direct funding from the Consolidated Fund under the Banking Act could be used. The Treasury would as soon as is reasonably practicable lay a report before Parliament specifying the amount paid, unless it considers that the report should be delayed or dispensed with on public interest grounds.
This guarantee was given on 30 March 2009. Owing to market sensitivity it was not possible in this case to give Members the usual period of 14 parliamentary sitting days notice before incurring the liability.
FINANCIAL SUPPORT FOR BRADFORD & BINGLEY
The purpose of this Minute is to inform Parliament of a change to the contingent liability, now covered by the provisions of the Banking Act 2009, in relation to guarantee arrangements to safeguard wholesale borrowings and deposits with Bradford & Bingley. This guarantee is designed to provide assurance to wholesale depositors and borrowers, and to preserve wider financial market stability and maximise proceeds in the wind-down.
On 29 September 2008 the Government made an Order under the Banking (Special Provisions) Act 2008, to transfer Bradford & Bingley's UK and Isle of Man retail deposit business along with its branch network to Abbey National plc. The remainder of Bradford & Bingley's business has been taken into public ownership.
Following the turbulence in global financial markets, Bradford & Bingley found itself under increasing pressure as investors and lenders lost confidence in its ability to carry on as an independent institution. The Financial Services Authority (FSA) determined in September 2008 that the firm no longer met its threshold conditions for operating as a deposit taker under the Financial Services and Markets Act 2000 and FSA rules.
The Government, on the advice of the FSA and the Bank of England, acted immediately to maintain financial stability and protect depositors, while minimising the exposure to taxpayers to bring about the part public, part private solution that met those objectives.
On 29 September 2008, the Treasury put in place guarantee arrangements to safeguard certain wholesale borrowings and deposits with Bradford & Bingley existing as at midnight on 28 September 2008. The guarantee arrangements were notified to the European Commission as rescue aid. As part of the restructuring aid notification to the European Commission the Treasury is seeking approval to continue the existing guarantee arrangements. The guarantee arrangements will remain in place while the Commission considers the Treasury's request. If approved by the Commission, the guarantee arrangements will continue until the wind-down of Bradford & Bingley is completed.
As reported in the Treasury's Spring Supplementary Estimates 2008-09 the size of Bradford & Bingley's wholesale deposits and borrowings covered by the guarantee arrangements is estimated to be about up to £17 billion. The amount guaranteed and therefore the size of the contingent liability will reduce as the wholesale deposits and borrowings reach maturity.
Arrangements will be put in place to ensure that Bradford & Bingley will pay an appropriate fee for the provision of these guarantee arrangements in order to ensure it does not receive a commercial advantage.
In normal circumstances, if any of these liabilities are called, the Treasury would seek Parliamentary approval through the normal Supply procedure. However, if the Treasury and the National Audit Office are satisfied that the need for expenditure is too urgent to permit normal arrangements, direct funding from the Consolidated Fund under the Banking Act could be used. The Treasury would as soon as is reasonably practicable lay a report before Parliament specifying the amount paid, unless it considers that the report should be delayed or dispensed with on public interest grounds.
It is normal practice, when a Government department proposes to undertake a contingent liability in excess of £250,000 for which there is no specific statutory authority, for the department concerned to present to Parliament a Minute giving• particulars of the liability created and explaining the circumstances; and to refrain from incurring the liability until fourteen parliamentary sitting days after the issue of the Minute, except in cases of special urgency.
This Minute gives notification of a guarantee into which the Treasury has entered into with the Financial Services Authority.
On 29 September 2008 the Government made an Order under the Banking (Special Provisions) Act 2008, to transfer Bradford & Bingley's UK and Isle of Man retail deposit business along with its branch network to Abbey National plc.
The remainder of Bradford & Bingley's business was taken into public ownership. In order to enable Bradford & Bingley to meet its regulatory requirements as defined by the FSA, the Treasury provided a guarantee to the FSA of its intention to take appropriate steps (should they prove necessary) to ensure that Bradford & Bingley will continue to operate above the minimum regulatory capital requirements. The size of this guarantee is unquantifiable. This commitment will remain in place for so long as required by the FSA to continue to regulate Bradford & Bingley.
In normal circumstances, if any of these liabilities are called, the Treasury would seek Parliamentary approval through the normal Supply procedure. However, if the Treasury and the National Audit Office are satisfied that the need for expenditure is too urgent to permit normal arrangements, direct funding from the Consolidated Fund under the Banking Act could be used. The Treasury would as soon as is reasonably practicable lay a report before Parliament specifying the amount paid, unless it considers that the report should be delayed or dispensed with on public interest grounds.
This guarantee was given on 30 March 2009. Owing to market sensitivity it was not possible in this case to give Members the usual period of 14 parliamentary sitting days notice before incurring the liability.
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