Bank of England

Tom Burgis

Welcome to our live coverage of Marcus Agius’ testimony to MPs. The outgoing Barclays chairman faces questions on rate-rigging by the bank’s traders and his defence of Bob Diamond. By Tom Burgis and Ben Fenton in London. All times are London time.

12.53 That’s that for our live coverage of Agius’ evidence. That was brutal — even if the outgoing Barclays chairman somehow contrived to compare himself to Donald Rumsfeld and his bank to Roger Federer.

Three key nuggets from what we heard today:

  1. After points in Agius’ testimony contradicted Bob Diamond’s comments to MPs, some members of the Treasury select committee are convinced that Bob Diamond misled them
  2. Diamond will walk away with £2m in salary and cash in lieu of pension, inlcuding being paid double his contractual entitlement of six months’ notice. He has waived bonuses worth up to £20m
  3. FSA chairman Lord Turner wrote to Agius in April and told him that the regulator’s “cumulative impression” is that “Barclays has a tendency continually to seek advantage from complex structures or favourable regulatory interpretations”

12.41 Here’s a last thought from Chris Giles, the FT’s economics editor:

[blackbirdpie url=""]

12.37 And with that, after two and a half hours in the hot seat, Agius is ejected into the Thames allowed to depart. Read more

Jim Pickard

It was all just a dream.

You may have thought that the Tories were the party of fiscal probity. You may have thought that they were the ones who were going to get a grip on Britain’s desperate public finances. They were the ones who would prevent the loss of the UK’s AAA credit rating and keep interest rates low. Etc, etc, etc. Read more

Jim Pickard

An astonishing tale emerged this morning as Bank of England executives faced the Treasury select committee.

It transpired that the BoE extended secret emergency financing to RBS and what was then HBOS during the banking panic in October 2008, indicating the two banks were even closer to collapse than had been thought.

Jim Pickard

Okay, it’s not the same Fred Goodwin. This one works as an analyst at Nomura, apparently.

But the Tories have seized upon Goodwin’s report which suggests “the prospect of a UK fiscal crisis is a clear and present danger”. The report suggests that a fiscal crisis is “far more likely” in the UK than in the US – because the dollar is a reserve currency. Read more

Jim Pickard

A brief passage in George Osborne’s last Andrew Marr interview stands out: In it, the shadow chancellor heaps praise at the feet of the world’s central banks for preventing financial meltdown.

“But we say the most effective form of stimulus is monetary policy, is the low interest rates, which both here and around the world I think have been the most effective tool at bringing the world back from the brink of depression.”

 Read more

Jim Pickard

Lord Myners gives short thrift today to Tory plans to kneecap the Financial Services Authority and transfer many of its powers to the Bank of England. Read more

Jim Pickard

Attempts to clean up the financial system have become more urgent given reports of the banking world returning to normal. Read more

Jim Pickard

It is a difficult circle to square: Read more

Jim Pickard

You would have thought that the prime minister would now have his public sector spending numbers at his fingertips – given that David Cameron has made the issue his focal point for three sessions of Prime Minister’s Questions in succession. Read more

Jim Pickard

The charge against Gordon Brown is that his promise of future investment – instead of cuts – is cloud cuckoo land given the grim public finances. You may think this unfair.

But here is the verdict of the governor of the Bank of England today when asked about the national deficit: Read more

Some grim developments on the public finances front. Alistair Darling prepares to acknowledge the biggest forecasting error ever made by a British chancellor (he takes the crown from Denis Healey). The IFS calculates that we’ll have to find £39bn a year in extra taxes or spending cuts till 2016, just to plug the fiscal black hole. And, perhaps scariest of all, one of the most powerful UK hedge fund managers warns that the “only policy option left” for Darling is to print lots more money.

This is not a cheap audition to be the next George Soros. Mike Platt, co-founder and chief executive of BlueCrest, Europe’s fifth-largest hedge fund, is a serious figure who usually shuns the limelight. Read more

Jim Pickard

Stern words today from the Audit Commission about the 127 councils who stuck £954m in Icelandic banks which subsequently collapsed.

Singled out for the wooden spoon are the seven which put £32.8m in Reykjavik(pictured) in early October – in the week after the ratings agencies had downgraded the Icelandic banks and one, Glitnir, had already been nationalised on September 29.

Here is the role of shame:

London Borough of Havering £2m
Kent County Council £3.3m
Redcar and Cleveland Borough Council £4m
Restormel Borough Council £3m
Bridgnorth District Council £1m
Kent County Council (again) £5m
South Yorkshire Pensions Authority £10m
North East Lincolnshire Council £3m
North East Lincolnshire Council (again) £1.5m

The report says: “In some cases, a contractual agreement to place the deposit may have been made before 30 September.”

In defence of the local authorities, their savings in Icelandic banks did drop from £2bn at the start of 2008 to the £953m when the Reykjavik banks imploded.

For the full report read here.

Regular readers of this column may remember which public finances watchdog was embarrassed by the Icelandic saga because it, too, had £10m placed there. That’s right: the Audit Commission. Read more

Jim Pickard

We predicted in October that the government could suffer an uncovered gilt auction within months because it was trying to raise such a vast amount of money from the bond markets.

From Bloomberg a few minutes ago: Read more

Jim Pickard

Jean-Claude Trichet, president of the European Central Bank, warned on Monday that governments should stop concocting new stimulus measures and just get on with the ones they’ve already announced. Read more

Jim Pickard

I’m sure there’s a mixed metaphor to be had here re a big fish across the pond.

But the RBS director with an equally impressive pension – according to RBS’s 2007 accounts – is one Larry (Lawrence) Fish, chair of the bank’s US operations. His pension pot was $24m at that point. Read more

Chris Giles chronicles Mervyn King’s faltering response to the credit crunch and the fading power of the Bank:

Success certainly bred a certain arrogance when it came to views about how the economy worked. Dismissing as “an old shoe” the idea that asset prices should be taken into account when setting interest rates, [King] said those who worried about the effect on consumer spending of rapidly rising house prices were peddling “mindless regressions” and should instead think about the economics. “Housing does not determine consumption; there are more fundamental influences on consumer spending,” he insisted. Read more

The lack of attention given to the Bank of England’s grim forecast for the economy is bizarre. Mervyn King basically said the recession, from peak to trough, will be two times worse than the Treasury expects. That knocks about £30bn to £40bn off official GDP forecasts, hits the tax take by up to £20bn and raises the deficit from 8 to closer to 10 per cent of national income. You have to wonder why David Cameron decided to raise VAT in the Commons on Wednesday and ignored the big “gloom gap” between Gordon Brown and the Bank.

For those who are interested, the calculations are based on this Bank fan chart. It is not a straight comparison with the Treasury forecasts, so the figures have to be put into a spreadsheet. Read more

Jim Pickard

It’s the question being asked today – and the best explanation I’ve seen is in this morning’s Lex column:

Britain came off the gold standard in 1931 and sterling devalued by 28 per cent. The economic crisis that followed marked the end of the UK as a global power. It also led to an effective default on almost half the national debt, which was restructured into bonds still outstanding. Parallels with today are eerie. Since the middle of 2007, the trade-weighted pound has fallen by 27 per cent. Furthermore, as the government shoulders contingent liabilities for ever greater amounts of delinquent bank debt, worries are growing about the state’s finances. Read more


A politically explosive economic policy was smuggled into the bank bailout today. With little fanfare, the Bank of England was given a green light to start printing money, should it deign it necessary to do so. Welcome to the world of “quantitative easing”. Read more

Jim Pickard

This blog asked yesterday morning whether Gordon Brown really meant what he said when he demanded that banks should quantify all of their toxic loans.

A research note put out on Friday by analysts – at RBS, ironically – points out that “the domestic UK banks are technically insolvent on a full marked-to-market basis” (although it adds that this is not unusual at this stage in the economic cycle). Is the prime minister sure that he wants them all to come clean? Read more