Queen Talks of 'Lax' Bankers and 'Toothless' Regulators behind Financial Crisis

THE DAILY TELEGRAPH: The Queen has spoken about "lax" City workers and a banking regulator which "didn't have the teeth" to intervene as she discussed the causes of the financial crisis during a visit to the Bank of England

With her face on every banknote and coin in circulation, it is only natural that the Queen takes a sharp interest in the nation's finances, as she showed on a visit to the Bank of England today.

Her Majesty suggested the financial crisis of 2008 had happened because the Financial Services Authority “didn’t have the teeth” to rein in the biggest risk-takers.

The Duke of Edinburgh, meanwhile, had a typically blunt piece of advice for the Bank’s executives: “Don’t do it again!”

The Queen and the Duke grilled Bank of England staff during a visit which included a tour of a vault stacked with £27 billion worth of bullion.

Suit Kapadia, one of the Bank’s financial policy experts, said he wanted to answer a question the Queen asked academics at the London School of Economics in 2008 about why no one saw the financial crisis coming.

“Oh!” said the Queen, looking slightly taken aback.

Mr Kapadia said the City had got “complacent” because it thought risk was being managed better than it was, and the financial system had become too interconnected.

The Queen agreed: “People got a bit lax … perhaps it was difficult to foresee.”

She asked if the financial system was less interconnected now and concurred with a suggestion that part of the problem had been the lack of powers given to the Financial Services Authority. “They didn't have the teeth,” she said. » | Gordon Rayner, Chief Reporter | Thursday, December 13, 2012

How a Broker Spent $520m in a Drunken Stupor and Moved the Global Oil Price
THE TELEGRAPH: PVM Oil Futures trader Steve Perkins bought 7m barrels of crude in late-night trading binge on his laptop, driving the oil price to an eight-month high.

It's probably not uncommon for City traders to wonder how they burnt so much cash during a drunken night on the town.

But Steve Perkins was left with a bigger black hole in his memory than most when his employer rang one morning to ask what he'd done with $520m of the oil trading firm's money.

It was 7.45am on June 30 last year when the senior, longstanding broker for PVM Oil Futures was contacted by an admin clerk querying why he'd bought 7m barrels of crude in the middle of the night.

The 34-year old broker at first claimed he had spent the night trading alongside a client. But the story began to fall apart when he refused to put the customer in touch with his desk for official approval of the trades.

By 10am it emerged that Mr Perkins had single-handedly moved the global price of oil to an eight-month high during a "drunken blackout". Prices leapt by more than $1.50 a barrel in under half an hour at around 2am – the kind of sharp swing caused by events of geo-political significance. Ten times the usual volume of futures contracts changed hands in just one hour.

By the time PVM realised the trades were not authorised and swiftly began to unwind the positions, losses of exactly $9,763,252 had stacked up.

The amount was almost equal to PVM Oil Futures' entire annual revenue of $12m and caused a $7.6m loss last year - shared by the senior brokers who are its only shareholders.

It swiftly emerged that Mr Perkins had been relieved of his position at PVM, but details of the bizarre incident have only just been made public after a Financial Services Authority investigation. >>> Rowena Mason, Energy Correspondent | Wednesday, June 30, 2010

Steve Perkins, the Broker Who Traded $520m When Drunk, to Resume Career in Switzerland
THE TELEGRAPH: Steve Perkins, the oil trader banned by the UK financial regulator for illegally trading $520m in a drunken stupor, is about to resume his career as an energy broker in Switzerland.

The Daily Telegraph can reveal that Mr Perkins, who was fined £72,000 by the Financial Services Authority (FSA) on Tuesday, was in Geneva on Wednesday for talks about joining a commodity broker called Starsupply Renewables SA.

The revelation that Mr Perkins is once again poised to trade the global markets after single-handedly moving the oil price by $1.50 in the middle of the night will be deeply embarassing for the FSA.

The regulator said that "Mr Perkins poses an extreme risk to the market when drunk". However, it admitted last night that it knew he was planning to restart his career in Switzerland – only 24 hours after being banned for five years in the UK.

The FSA confirmed that it has notified the Swiss regulator, but admitted it was powerless to stop Mr Perkins from trading in Europe.

"The Swiss would have been made aware of this and it is up to them whether they continue giving him authorisation to work," a spokesman said.

Recommendations by the Basel Committee on Bank Supervision were meant to improve the co-ordination of cross-border financial monitoring, but this case is likely to raise concerns about whether European regulation is sufficiently joined up. >>> Rowena Mason | Thursday, July 01, 2010

Banks Told to Comply on Bonuses or Lose UK Banking Licences in Shock FSA Ultimatum
THE TELEGRAPH: Investment banks have been told that every bonus issued must comply with the regulatory guidelines – or they face having their licences to operate in Britain revoked.

In an extraordinary ultimatum that has shocked some of the City's biggest companies, the Financial Services Authority (FSA) told bank bosses that 60pc of all pay must be deferred, with no exceptions, even for those whose contracts conflicting [sic] with the edict.

Many of the global players have in recent weeks made representations to the City watchdog, in particular about pre-existing employment contracts that guarantee bonuses over a year or more. But their appeals have been met with the FSA's toughest yet response.

One pay executive in a major bank told The Daily Telegraph: "The message came back that while the FSA agreed that it does not have jurisdiction over contractual law, it does have jurisdiction over issuing bank licences in London, and that we should go away and unwind the contracts."

Bankers at Merrill Lynch are among the first affected. Those with pre-existing contracts were told about the FSA's tough stance on Friday when their bonuses were agreed.

One Merrill Lynch employee said: "We thought that contracts would be immune from changes but were told by bosses that their hands were tied and there was nothing they could do, the regulator had put its foot down."

Banks that have not yet told staff about the bonus payouts are now scrambling to ensure that they are comply with the FSA rules.

Senior directors are concerned that the stance could result in the banks facing a series of legal challenges from individuals with pre-existing contracts. Headhunters say that banks including Barclays Capital and Nomura have lured star performers by offering them large guaranteed bonuses.

One headhunter said: "Many of these contracts have guarantees that 50pc of the bonus will be paid in cash. These are tricky things to unpick. But cleverly, the FSA has put the onus on the banks to unwind the contracts, rather than itself getting embroiled in a complex legal row." >>> Louise Armitstead and Helia Ebrahimi | Wednesday, February 03, 2010

Greed! Sheer Greed!
TIMES ONLINE: The City watchdog was accused of giving banks a green light to continue paying multimillion-pound bonuses yesterday when it backed away from introducing tough rules to curb excess pay.

The Financial Services Authority’s proposals on City pay embarrassed Gordon Brown, who had promised to sweep aside the bonus culture in the financial sector. Opposition politicians branded the FSA’s new proposals a capitulation. The Treasury also indicated that they did not go far enough.

Some of the most onerous provisions in the FSA’s original proposals from March have been softened. Under the new guidelines the banks must link risk and reward. But they will have more freedom to structure bonus packages than was previously suggested and many bank executives and some smaller City firms are excluded from the plan altogether.

The row came as unemployment rose to a 14-year high and the Bank of England admitted that the recession was deeper than previously thought and that recovery would be slow, partly because banks were still not lending enough money.

It will be exacerbated by the disclosure that Royal Bank of Scotland, in which taxpayers have a 70 per cent interest, has hired two bankers on multimillion-pound packages. One of them, Antonio Polverino, who has been headhunted from Merrill Lynch, will earn £7 million in his first year. Watchdog 'gives green light' for huge City bonuses >>> Philip Webster, Political Editor, and Katherine Griffiths, Banking Editor | Thursday, August 13, 2009

Britain Isolated as EU Tightens Grip on City
THE TELEGRAPH: Britain has been unable to block plans for an EU regulatory machinery with binding legal powers, securing only a loose agreement at a key meeting of EU finance ministers that any proposals should not interfere with budget and taxation policy.

A joint statement yesterday said that legislation to be drawn up by Brussels this autumn “should ensure that such powers should not impinge in any way on the fiscal responsibility of members of states”.

Chancellor Alistair Darling said Britain had upheld the principle that “taxation is clearly a matter for member states”. However, there was no change in the crucial proposal to give EU bodies the ultimate power to override national regulators in areas of banking, insurance and securities.

The Commission aims to create three “authorities” with their own staff, full-time president and independent budget. If there is a dispute between regulators from EU countries over how to proceed, these EU bodies can “settle the matter” by binding mediation. The European Court would have final jurisdiction. The wording would appear to reduce Britain’s Financial Services Authority (FSA) to a subservient arm of the EU apparatus, limited to “daily oversight”. Britain does not have a veto since legislation that affects the “internal market” is decided by qualified majority vote (QMV).

While some East European states share British concerns, Mr Darling is largely isolated in trying to defend the interests of the City of London. EU leaders will grapple with the subject at a Brussels summit later this month.

There is widespread suspicion that Paris and its allies have seized on the financial crisis to rein in Anglo-Saxon capitalism and impose their Colbertiste ideology on the City. >>> By Ambrose Evans-Pritchard | Tuesday, June 09, 2009

Savers Should Have £500,000 Worth of Savings Protected, Says Financial Services Authority
THE TELEGRAPH: Savers should have £500,000 worth of their savings protected if a bank or building society collapses, says the Financial Services Authority.

The City watchdog called for the "quantum leap" in the level of protection offered by the Financial Services Compensation Scheme from its current level of £50,000, saying it would boost confidence among savers.

If a bank goes bust, the FSCS will repay up to £50,000 per person, per authorised bank or building society.

However, there would be a time limit of six months on the additional protection covering balances stemming from selling a property or a divorce settlement.

Thomas Huertas, a director at the FSA, said: "Our proposals will protect people who have little or no choice about holding a high balance for a limited period over the current FSCS limit of £50,000 before they can diversify it, if they wish, between different institutions."

Experts welcomed the proposals, saying they would help to reassure savers amid the economic turmoil. >>> By Myra Butterworth, Personal Finance Correspondent | Tuesday, March 31, 2009


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