The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[muppet]

In the context of the discussions, the Government tabled proposals to achieve a full-year saving of €1.4billion through the introduction of a public service pension levy. The unions decided that they were not in a position to agree to that proposal.

I would be interested to know if a public service pension levy was a levy payable by the public service only or was it a levy for all workers payable to the public service as a pension. Given the unions response I'd suggest it was the former.

[muppet]

Sorry the above question was answered here:

€1.4 billion on the public service pay bill, the great bulk of which will be achieved through a new pension-related payment to be made by all public servants (including employees of local authorities), with a small element of the total to be secured through reductions in travelling and subsistence rates and other savings. In addition, the increases provided for under the Review and Transitional Agreement with effect from 1st September 2009 and 1st June 2010 will not now be paid on those dates; this will deliver savings of €1 billion in 2010

[Rois]

I bow to your superior professional knowledge and know that the external auditors can only verify what is put in front of them but if a loan is on the books at one stage of the year and then not in the end of year balance sheet I'd have thought it may raise some questions in their minds - but that's a simple layman's view of the world.

A balance sheet is audited at a particular point in time, ie year end, the external auditors don't track what comes on and off at particular points during the year.  If you're going to question the performance of the external auditors in carrying out their duties, I think I should defend them.

Maybe the laymen should educate themselves before using obscenities to denigrate an entire profession.  Also, auditors and accountants are not part of the financial services industry, they're in professional services.

[Declan]

If you're going to question the performance of the external auditors in carrying out their duties, I think I should defend them.

No problem with that. As I said I would bow to your professional knowledge of their day to day activities.

Maybe the laymen should educate themselves before using obscenities to denigrate an entire profession

Didn't denigrate the whole profession only Ernst & Young but if they are representative of the whole profession then my initial opinion remains that the profession itself needs to take a long hard look at itself. I think it's fair to say that in the leading financial scandals of our recent past the accounting/auditing profession have been integral to their operation.

Also, auditors and accountants are not part of the financial services industry, they're in professional services.

Disagree - They are the Professional Services department of a Financial Services company

It's nothing personal Rois. My own sister is an accountant and my anger is directed at the top tier of these companies that set the tone and agenda for the rest of the staff

[Rois]

Didn't denigrate the whole profession only Ernst & Young but if they are representative of the whole profession then my initial opinion remains that the profession itself needs to take a long hard look at itself. I think it's fair to say that in the leading financial scandals of our recent past the accounting/auditing profession have been integral to their operation.

Wow, revelation, a financial scandal has an accountant/auditor involved.  Seriously, if they are a trading company, chances are an accountant or auditor will be required in some capacity.  Not exactly rocket science. 

Also, auditors and accountants are not part of the financial services industry, they're in professional services.

Disagree - They are the Professional Services department of a Financial Services company

Disagree - accountants and auditors are not financial services providers in the sense that they are not answerable to the financial services ombudsman.  As conclusive evidence as should be required to define a financial services provider.  Check up the website to show which types of companies are defined as financial service providers. 

If you should direct your anger anywhere, perhaps it should be to the legislation makers who have come up with the various Companies Acts and set down the rules by which auditors and accountants are governed.  Also refer to case law, where many judgements have been recorded that define how responsible auditors are for the actions of the various officers of the companies.

Look I know it isn't personal, and it seems I'm picking on everything you say, but it maddens me when people who are not aware of the scope of work or of any negligence that has or hasn't been found in the auditors' work so vociferously pick on the profession.   

[Declan]

Wow, revelation, a financial scandal has an accountant/auditor involved.  Seriously, if they are a trading company, chances are an accountant or auditor will be required in some capacity.  Not exactly rocket science.

It's not rocket science of course but still doesn't take away from the fact that these companies were an integral part of these scandals.

accountants and auditors are not financial services providers in the sense that they are not answerable to the financial services ombudsman.  As conclusive evidence as should be required to define a financial services provider.  Check up the website to show which types of companies are defined as financial service providers.

OK so according to that interpretation they are not financial services providers because they are not answerable to the financial services ombudsman - in what jurisdiction? Are they not answerable to the financial regulator here in the Republic? Or if not who is the regulatory body?

If you should direct your anger anywhere, perhaps it should be to the legislation makers who have come up with the various Companies Acts and set down the rules by which auditors and accountants are governed

Don't worry I am just as angry with the legislators but are you seriously trying to suggest that these companies have no input via their various lobby groups to the legislation on the books and that ultimately it's down to the legislature - Wonder how many accountants are in the Dail ?

but it maddens me when people who are not aware of the scope of work or of any negligence that has or hasn't been found in the auditors' work so vociferously pick on the profession.

Just as it maddens me when people in that profession abdicate any responsibility towards the mess we find ourselves in.

[Rois]

I can't be bothered inserting all those quotes again.  

I was referring to the republic regarding the financial services ombudsman (in the UK I think it's the financial services authority).  We do not handle people's/companies' cash or financial products, which to me is what defines a financial service company.   We service many companies in the financial services industry by providing professional services.  

The mess we are in, in my mind, is due largely to credit provision.  Accounting firms do not have access to credit, so cannot provide it.  There may certainly be qualified accountants in the banks, or in the Dail, but your anger is vented towards those at the head of the Big 4 firms (none of whom are in the Dail, or in the banks) and therefore in my opinion misdirected if it is EY, KPMG, PwC and Deloitte or any other small accounting firm or sole trader you are implicating in the current crisis.

As for the accounting firms being found guilty of some sort of misconduct in recent financial scandals (though please don't quote Enron as I got enough of that during my student days), I'll bow to your superior knowledge this time and ask you to quote them so I can have a read.  I'm not trying to be smart, I'm genuinely interested.

[passedit]

I can't be bothered inserting all those quotes again.  

I was referring to the republic regarding the financial services ombudsman (in the UK I think it's the financial services authority).  We do not handle people's/companies' cash or financial products, which to me is what defines a financial service company.   We service many companies in the financial services industry by providing professional services.  

Rois the firm I worked for had a financial services arm regulated by the FSA. By necessity (regulatory purposes) it was a separate company but was controlled and heavily promoted by the firm. I believe this to be similar to the other members of the big 4 (or 5 as was). the term Chinese walls was often used (usually followed by a hollow laugh.

Also, I could take a wild guess at who prepared yer man's tax returns and how much HE paid for the privilege.

[Bogball XV]

I bow to your superior professional knowledge and know that the external auditors can only verify what is put in front of them but if a loan is on the books at one stage of the year and then not in the end of year balance sheet I'd have thought it may raise some questions in their minds - but that's a simple layman's view of the world.

A balance sheet is audited at a particular point in time, ie year end, the external auditors don't track what comes on and off at particular points during the year.  If you're going to question the performance of the external auditors in carrying out their duties, I think I should defend them.

I don't see why you're defending them rois, and whilst a balance sheet audit is an audit at a point in time, one has to be aware of the possibility of transactions in and around year end being possibly of more materiality than those taking place at other times.  In addition, these loans were apparently notified to the financial regulator on a quarterly basis throughout the year, an audit of this size would take place on an quarterly basis anyway?  Also, would part of the audit not involve an analysis of returns to the regulator, just to ensure that the company was in compliance with regulatory standards?
Put it this way, if you had been carrying out this audit would you be disappointed with yourself if this had slipped through the net?

[Declan]

We'll not agree on what constitutes a financial services company Rois. I agree re the mess and the provision of easy credit which to my mind was encouraged and fed by both the government and the "financial" industry, if I can use that term, and of which to my mind the large accounting firms are an integral part.

Won't quote Enron but what about WorldCom, and other scandals  like Duke Energy, Homestore. com, and Peregrine Systems. I got the attached quote from an American Analyst's paper in 2006 Many ended with the indictment of top executives and million or billion dollar settlements or fines. In addition, most of the large public accounting firms, including Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers, either admitted to or faced charges of negligence in the execution of their duty as auditors for failing to identify and prevent the publication of falsified financial reports by their corporate clients.  
I think PWC are the auditors in the recent Satyam case in India. Here's a discussion paper I found which might be of interest as well http://www.armsdeal-vpo.co.za/special_items/reading/mitchell.pdf  
Also got this gem from America in Oct 2005
A required report by the Public Company Accounting Oversight Board, released last week, uncovered flaws in 18 audits performed by KPMG LLP for publicly held companies.
the PCAOB reviewed just 76 of KPMG's 1,900 publicly traded clients between June and October 2004. Some of the failures by KMPG, according to the PCAOB, include not thoroughly evaluating some known or likely errors, not keeping crucial documentation, and not backing up its opinion with "sufficient competent evidential matter." In a prepared statement, KPMG Chairman Timothy Flynn said, "KPMG is committed to the goal of continuous improvement in audit quality. We appreciate the constructive dialogue and consider it an important element in the process of improving our system of quality controls."

What I'm failing to see here is what actual protection an external auditor provides to the shareholders of a company. If basically they can only sign off on what is provided by the client without digging a bit deeper whats the point in them? That's not meant to be a smart arse comment it's a genuine question if they are that hamstrung by regulation etc is it just a rubber stamp?

By the way on the 9 o'clock news tonight the internal auditor said to the Dail committee only Fitzpatrick and one other executive were privy to the loans!!!

[orangeman]

Further cut in UK rates expected 

The Bank's latest rates decision is due at midday
The Bank of England is widely expected to reduce UK interest rates to 1% from the current 1.5% when it makes its latest monthly decision later.

With the recession showing no signs of easing, most analysts agree the Bank will cut rates further as it aims to help stimulate the economy.

However, some business groups do not want a further cut, as they say recent reductions have failed to help.

Instead they want the Bank to do more to help restore lending levels.
UK interest rates have so far been reduced four times from October's 5% to January's 1.5%, the lowest rate in the Bank's 315-year history.

'Struggling for finance'

The Federation of Small Businesses (FSB) is one of the business groups saying it would prefer rates to stay on hold for February.


  The recent interest rate cuts are not having the desired effect and other means of economic stimulus are required

FSB national chairman John Wright
It said that a survey of its members found that 63% wanted rates to remain at their current level, compared with only 24% who wanted a further cut.

In December, 58% of its members had called for a reduction.

"These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required," said FSB national chairman John Wright.

"Small businesses are clearly worried that this monetary policy has been used extensively over the last few months yet they are still struggling to access cheaper finance."

Mr Wright said the onus now should be on getting the commercial banks to start lending at the already low rate of interest "to fire up the economy".

Stephen Alambritis, of the FSB, told to BBC: "We believe that if there was a further cut there would be no impact".

"The wise move would be for the Bank of England to say 'hold your horses, that's it, it's 1.5%, go and borrow wisely, go and spend wisely, don't sit back and think money is going to get any cheaper'".

Bank lending

The FSB's position is shared by influential think tank National Institute of Economic and Social Research (NIESR), which said there was "not very much point" to January's rate cut.

However, the Bank has been doing more than just cutting interest rates.

It revealed earlier this week that it had lent £185bn to financial institutions since April last year, in an attempt to help improve their liquidity.

The Bank said that 32 banks and building societies had taken part in the scheme.

Worsening recession?

Official figures showed in January that the UK is now in recession, following two consecutive quarters of falling economic output in the second half of 2008.

The economy contracted by 0.6% between July and September, and by 1.5% from October to November, Office for National Statistics (ONS) figures showed.

The ONS also said UK unemployment had risen to 1.92 million in the last quarter of 2008 - the highest level since 1997.

NIESR predicts that the economy will now shrink by 2.7% in 2009, its worst performance for 60 years.

Figures from the Purchasing Managers' Index (PMI) released earlier this week showed manufacturing remained weak last month, despite a slight improvement on December

[naka]

Further cut in UK rates expected 

The Bank's latest rates decision is due at midday
The Bank of England is widely expected to reduce UK interest rates to 1% from the current 1.5% when it makes its latest monthly decision later.

With the recession showing no signs of easing, most analysts agree the Bank will cut rates further as it aims to help stimulate the economy.

However, some business groups do not want a further cut, as they say recent reductions have failed to help.

Instead they want the Bank to do more to help restore lending levels.
UK interest rates have so far been reduced four times from October's 5% to January's 1.5%, the lowest rate in the Bank's 315-year history.

'Struggling for finance'

The Federation of Small Businesses (FSB) is one of the business groups saying it would prefer rates to stay on hold for February.


  The recent interest rate cuts are not having the desired effect and other means of economic stimulus are required

FSB national chairman John Wright
It said that a survey of its members found that 63% wanted rates to remain at their current level, compared with only 24% who wanted a further cut.

In December, 58% of its members had called for a reduction.

"These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required," said FSB national chairman John Wright.

"Small businesses are clearly worried that this monetary policy has been used extensively over the last few months yet they are still struggling to access cheaper finance."

Mr Wright said the onus now should be on getting the commercial banks to start lending at the already low rate of interest "to fire up the economy".

Stephen Alambritis, of the FSB, told to BBC: "We believe that if there was a further cut there would be no impact".

"The wise move would be for the Bank of England to say 'hold your horses, that's it, it's 1.5%, go and borrow wisely, go and spend wisely, don't sit back and think money is going to get any cheaper'".

Bank lending

The FSB's position is shared by influential think tank National Institute of Economic and Social Research (NIESR), which said there was "not very much point" to January's rate cut.

However, the Bank has been doing more than just cutting interest rates.

It revealed earlier this week that it had lent £185bn to financial institutions since April last year, in an attempt to help improve their liquidity.

The Bank said that 32 banks and building societies had taken part in the scheme.

Worsening recession?

Official figures showed in January that the UK is now in recession, following two consecutive quarters of falling economic output in the second half of 2008.

The economy contracted by 0.6% between July and September, and by 1.5% from October to November, Office for National Statistics (ONS) figures showed.

The ONS also said UK unemployment had risen to 1.92 million in the last quarter of 2008 - the highest level since 1997.

NIESR predicts that the economy will now shrink by 2.7% in 2009, its worst performance for 60 years.

Figures from the Purchasing Managers' Index (PMI) released earlier this week showed manufacturing remained weak last month, despite a slight improvement on December

would agree with this, interest rates are no longer helping, the fact is the banks are not lending to anyone, we are bailing the feckers out and all they are doing is shoring up their balance sheet

[orangeman]

UK reduces interest rates to 1% 


The Bank of England has reduced interest rates to a record low of 1% from 1.5% in an attempt to boost the shrinking economy.

This marks the fifth interest rate cut since October, as the Bank seeks to encourage more lending.

The decision comes after official data showed the UK had entered a recession in December, after two successive quarters of economic contraction.

But some business groups argue rate cuts will not ease the economic crisis.
Following the rate cute Paul Broadhead of the Building Societies Association (BSA) told the BBC that savers were being "punished", arguing that the move could hinder the funds available to societies to lend as mortgages.




The interest rate transmission mechanism is clearly impaired but it is not yet kaput



Graeme Leach, Institute of Directors chief economist


The Bank Rate has now been reduced from 5% in October last year.

The Federation of Small Businesses (FSB) was one of the business groups that had favoured keeping rates on hold, arguing that what was needed was improved access to capital.

It said that a survey of its members found that 63% wanted rates to remain at their current level, compared with only 24% who wanted a further cut.

"These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required," said FSB national chairman John Wright.

Among the mortgage lenders, Halifax said it would pass on the rate cut to customers with standard variable rate mortgages.

Balancing act

Others business groups welcomed the cut. The Institute of Director's chief economist Graeme Leach said: "The interest rate transmission mechanism is clearly impaired but it is not yet kaput".

The Ernst & Young Item Club had also favoured a cut of half a percentage point, but added that the economy was in "deep recession" and believed that interest rates should drop further - "possibly to zero".

Hetal Mehta, senior economic adviser to the Ernst & Young Item Club highlighted the "difficult task" the Bank faced.

"Six months ago the Bank was balancing slowing economic growth with accelerating inflation.

"However the Bank now has to act to avoid deflation without fear of a further weakening of sterling; a weaker currency should serve to add to the competitiveness of exports."

Economic data

The rate cut comes against a backdrop of gloomy economic data.

The economy contracted by 0.6% between July and September, and by 1.5% from October to December, Office for National Statistics (ONS) figures showed.

And the ONS also said UK unemployment had risen to 1.92 million in the last quarter of 2008 - the highest level since 1997.

Figures from the Purchasing Managers' Index (PMI) released earlier this week showed manufacturing remained weak last month, despite a slight improvement on December

[Bensars]

I for one will welcome the additional cut.

Heard on the radio this morning that there is a row brewing, with RBS about to award bonus payments to top executives. The figure mentioned was £100 Million +. 

[orangeman]

I for one will welcome the additional cut.

Heard on the radio this morning that there is a row brewing, with RBS about to award bonus payments to top executives. The figure mentioned was £100 Million +. 

Mandelson warns RBS on high pay 

Lord Mandelson urged the bank to be mindful
Lord Mandelson has told the Royal Bank of Scotland that it risks alienating ordinary people if it gave its traders and bosses "exorbitant" bonuses.

The business secretary's comments came after a report in The Times said the firm is to award large bonuses, despite expectations of huge annual losses.

"Please be mindful about how this looks and what public opinion will be," said Mr Mandelson.

The recently bailed-out bank said its pay policy had yet to be decided.
The bank told the BBC: "The board has yet to decide on remuneration policy for the year."

"We have previously announced that the Board will receive no bonuses in 2008 and if there are any bonuses for 2009 they will be paid in shares."

Record loss expected

RBS, which is set to be 70% owned by the government, is due to release its annual earnings results on 26 February.

It has already said that it expects to report write-downs of between £7bn and £8bn in 2008. The forecast caused shares in the bank to plunge 67%.


  The banks have got to be sensitive to public opinion and I think they need to think about what is the best way forward

Business Secretary Lord Mandelson


See RBS share price
Obama unveils executive pay cap
Analysts predict it will report a record annual loss for 2008, beating the £15bn loss posted by Vodafone in 2006.

According to The Times newspaper, RBS paid out £1.83bn in remuneration in 2007, most of which is thought to have been in bonuses.

Speaking at the launch of a £3bn cash injection to boost lending to small businesses, Lord Mandelson said: "Of course you have got to do all you can to recruit the best people and keep the best people in place - there is a huge job on our plates.

"On the other hand the banks have got to be sensitive to public opinion and I think they need to think about what is the best way forward."

US cap

Lord Mandelson's comments come one day after US President Barack Obama announced a $500,000 (£355,000) limit on executive pay at US firms that need fresh government aid.

Wall Street paid $18.4bn (£12.7bn) in bonuses in 2008 and $32.9bn (£22.7bn) in 2007.

BBC business editor Robert Peston said the move in the US will inevitably put pressure on the UK government to introduce a similar cap on British banks that have received state support.