Joe Bloggs is bankrolling the recovery of Northern Rock as Alistair Darling
announced the stricken lender will be nationalised. Uproar ensued at the news;
shareholders cried lawsuit, sterling fell against all but one of the 16 most
traded currencies and Brown’s people became managers of assets worth £113bn and
6,500 staff. Darling said the intention was to sell the bank to a private bidder
when markets improve, while Richard Branson’s defeated bid consortium said
simply that it hoped the bank would “somehow find better fortune in the future”.
Whether that fortune is at the end of a yellow brick road leading back to
Branson’s pearly smile remains to be seen. Meanwhile, Lloyd’s of London white
knight Ron Sandler has been installed as executive chairman on £90,000 a month,
while ex-Swiss Re CFO Ann Godbehere joins as rescue CFO on £75,000 a month.
That’s a lot of shoes – or a pensioner’s life savings.
An internal report prepared by Société Générale reveals that staff failed to dig
deep enough into queries raised by Jérôme Kerviel’s trades “because this was not
specifically part of their job description”, reports The Wall Street Journal.
One employee who did so with considerable trepidation apologised to Kerviel for
his “excessive zeal”.
Whistleblowers on corporate fraud at US-listed companies in the UK and beyond
will be protected by the Sarbanes-Oxley Act, following a ruling that has gone
against years of refusal by US courts to permit the legislation within Sarbox to
be applied outside US jurisdiction.
The Financial Reporting Council is proposing a 10% hike in its annual levies
based on market capitalisation of member firms, making the largest annual fee
any UK listed company can pay £20,550 – as opposed to £18,600 the previous year.
Aim and Plus Markets firms will pay 50% of that.
The Auditing Practices Board has recommended companies move to a ‘permissive’
regime for publication of preliminary announcements from a mandatory one. The
APB said that these announcements should give details of any modification of the
auditor’s report that was likely to be published with the annual report.
Pay back time
Virgin and British Airways are awaiting approval from a US court on a $200m plan
to refund passengers who bought long-haul flights with them. The airlines
admitted colluding to fix the price of fuel surcharges on long-haul tickets
bought in the US or the UK between August 2004 and March 2006.
Cuban family business
The Bank of England’s Monetary Policy Committee voted eight-to-one to cut
interest rates to 5.25% in February, the committee’s minute show. The notes
discussed the committee’s belief that credit markets would continue tightening
and the UK economy would follow. Observers believe there will be further cuts.
Credit Suisse said it suspended a handful of its traders as it looks into
suspected market manipulation that led to the value of mortgage-backed bond
investment being inflated by $2.85bn. The news came days after the bank
announced losses to the sub-prime crisis of £1.8bn for the last quarter of 2007.
Bernanke’s crystal ball
US Federal Reserve chairman Ben Bernanke said growth in US exports and the
country’s fiscal assistance package should shore up household and business
spending through the credit crisis and well into the first part of 2008.
Speaking before the US Committee on banking, housing and urban affairs, Bernanke
hinted at further interest rate cuts, saying the Fed would “act in a timely
manner as needed to support growth and provide adequate insurance against
Cuban family business
The appointment of Raul Castro as president and successor to his brother Fidel
could open the door for Europe to do business with the country. Raul, temporary
president since 2006 when Fidel became too ill, has said before that he thinks
Cuba needs major economic and structural reform. Though American reaction to
Fidel’s retirement was predictable – Dubya proffered his mantra about “helping
the people of Cuba realise the blessings of liberty”, while his government said
the 1962 trade embargo would not be lifted – the European Union indicated plans
to create a new relationship with Cuba that had been stymied by Castro. EU
commissioner for development and humanitarian aid Louis Michel is visiting Cuba
this month and, on hearing the news of Castro’s retirement, said that Cuba’s
recent move to sign international covenants on economic rights signalled a
willingness to work with the EU – which could pave the way for Europe to start
doing business there.
The Pensions Regulator says that it will more closely scrutinise scheme recovery
plans where the mortality assumptions appear to be “weaker” than average, or
where the assumed improvement in mortality “tends towards zero”.
The Accounting Standards Board published a consultation document on pensions
valuation issues with a view to updating FRS 17. It suggests that scheme
liabilities should be valued using a risk-free rate rather than a high-quality
corporate bond rate. The consultation period is open until 14 July.
Pension schemes that use the iBoxx corporate bond index interest rate to value
their liabilities received in aggregate a £12bn boost as a result of a
reclassification of the index constituents, say actuarial consultants Hymans
Robertson. On 31 December 2007 the yield on the index was 5.8%, but on 2 January
2008, following the change, it was 6.0%. The increase would have reduced scheme
liabilities by 3% overnight.
The government has back-tracked on some of its most contentious plans for
information disclosure by non-domiciled UK residents. These include no longer
asking for detailed information about offshore trusts; not taxing works of art
brought into the UK for public display; and not taxing money brought into the UK
to pay the £30,000 levy.
A number of companies have overlooked new disclosure requirements arising from
implementation of the Takeover Directive, according to the Financial Reporting
Review Panel, which has published a list of the key points to be disclosed in
annual reports. It includes details of loss of office compensation to be paid to
directors or employees in the event of a takeover bid.