Have you ever wondered which bank is at the heart of the majority of government schemes?
Which bank finances the Motability scheme which provides loans to disabled people for their mobility vehicles at highly inflated rates? Motability is supposedly a charity but one bank makes a handsome profit from its involvement in the scheme
Which bank got into bed with Boris Johnson and has its logo plastered on all the push bikes around London? Some wag has made an association between the logo of the bank and another brand that was famous for not being quite all it purported to be; something that was discovered too late for many.
Which bank hosts seminars and events for the DWP while at the same time benefiting from preferential treatment by the DWP?
In all cases it is Barclays Bank.
Now it is reported in The Telegraph that 80 bankers are pocketing £85m for 19 months work carried out managing the toxic assets that caused the collapse of the banking system and which took £1trillion from the public purse. That means that each banker will get more than £1million each on top of the trillion already paid out, nice work if you can get it.
If we understand the scheme operated by Barclays in this particular instance (and lets be clear that this is probably one such scheme of many throughout the banking industry); the debris caused by the collapse of the banks cause by the overselling of toxic investments was offloaded to a newly created company called Protium.
This company was created in September 2009 using a loan from Barclays of $12.6billion from the taxpayer (well, fundamentally it’s true – they couldn’t have afforded it otherwise) and $12.3billion toxic waste was moved from Barclays’ books to this new company – surely an accountancy trick by any other name.
An annual fee of $40million was paid to a US company, C12 Capital, and 45 Barclays bankers were transferred to that company to ‘manage’ those toxic assets. More people were ’employed’ bringing the number to 80 and they were all in line for a share of any profits.
Remember, those 45 bankers who moved to C12 are the very ones that bought that toxic waste in the first place so how they managed to hold onto their job is a mystery and with Barclays paying them $40million annually in fees, they were in a win-win situation.
The report says that the deal was ‘controversial’ and sparked concerns that exposed Barclays to risk but let’s face it when you’re playing with the seemingly never ending stream of money from the public purse, what real risk is there?
Although Barclays are now apparently taking back these assets onto its balance sheet, they have no doubt been playing ‘fast and loose’ with their accounting and even if this change quietens the regulators’ fears, the taxpayer who have indirectly financed all this duplicity and accountancy playtime should remain concerned as there seems to be no provision for giving anything back to us.
What is striking is that there are no threatening letters from the Inland Revenue being sent to these organisations with threats to remove their goods as they are wont to do.
The banking industry claims that there are ‘no rewards for failure’ but that’s hogwash. Barclays instigated this overly complex and unnecessary transaction and haven’t really answered the question raised by the comments of the bank’s finance director, Chris Lucas when he said that “there will be no major profit or loss impact from the change” but clearly there have been some additional cost implications by way of what might be considered unnecessary fees.
Barclays may not have had a huge handout from the taxpayer but “it you’re not part of the solution then you are part of the problem” and given their propensity to play with accountancy procedures, who knows what’s hiding and just waiting to be discovered.
Things like using a “quirk” in the accounting rules to distort profits reported in its accounting. Pensions & Investment Research Consultants (Pirc) calls Barclays’ method of accounting for its bonuses “deficient” and distorts investors’ views of its profits.
Pirc has previously raised concerns about Barclays’ pay policies and points to an obscure note in the 2010 annual report where it is revealed that it paid £437m to the Treasury for a one-off bonus tax yet chose to spread the impact of the levy (and the bonuses themselves) over a five year period. It seems that the bank has a habit of “recognising” what it wants, when it wants in order to produce reports that suit its purposes – now we know why they get on so well with the government who are also masters of spin.
It has been calculated from a document produced by Pirc that an outstanding deferred tax of £116m relates to around £1.4billion in bonuses paid out. In 2010 Barclays paid dividends of £670m to its shareholders while its staff costs, including bonuses amounted to £11.9billion – doesn’t sound like a good return on an investment to me.
The chief executive of Barclays, Bob Diamond attracts a total package of £27million for his services and has only been in his role since January. He was awarded £6.5million in bonuses at the time of taking over from John Varley as well as a conditional share award of £6.75million and shares worth £13.8million. His salary was increased to £1.35million which was 23% of his predecessor.
When millions of pounds were wiped off its market value when the bank’s true performance expectations were leaked, they begin an investigation of their senior managers. These concerns were supposed to be kept internal which perhaps is another indication of the banks duplicity especially as there are doubts that it can deliver when it claims a return on equity within three years according to the bar charts produced by the US-born Bob Diamond at the recent Morgan Stanley banking conference in London.
Mr Diamond is claiming to double the banks profits to about £11billion, forecasting a return by the end of 2013 of 13% (compared with 7.2% in 2010). Industry analysts consider this optimism to be unfounded and perhaps an attempt by Barclays to gloss over their part of expectations of a downturn in profitability of investment banking as a whole (due soon).
As the bank most complained about, clearly they are not concerned about their customers but are, like all other banks, enjoying a luxury cruise that serves no one but themselves and while the rest of the world is imploding under an avalanche of debt, banks like Barclays are oblivious to the realities that affect the rest of us – the fact that the taxpayer is picking up the tab for the toxic mistakes made by banks which led to the collapse of the entire system is lost on them.