Lombard

December 11, 2012 2:52 pm

Chancellor’s Bigg Northern Rock bonus

The great party city of Newcastle needs little excuse for a celebration. But payouts to Northern Rock customers should still help fuel festivities. For Geordie jeunesse doree, this means traipsing between pubs in the historic Bigg Market area clad in finery of hypothermia-defying skimpiness.

The first reason to cry “howay the lads!” is financial. The worst assets of the troubled lender were hived off into a state-owned “bad bank” after nationalisation in 2008. So the government is liable to repay £270m in interest on loans that were badly documented. Many recipients must live in the bank’s northeastern heartland.

Sadly, compensation will generally be delivered through a deduction of about £1,800 from each loan balance. No fat cheque, then. But lower interest charges will mean more money to spend on something else. Like fun.

The second reason to crack open a Newcastle Brown is Schadenfreude. The northeast has been particularly badly hit by the downturn. The austerity policies of George Osborne have added to the woes of the region, which depends heavily on public sector employment. The chancellor has tried to avoid debt-raising economic stimuli. But the compliance cock-up at Northern Rock has forced him into delivering a small one, willy-nilly.

Drinkers in Bigg Market pubs would probably agree it couldn’t have happened to a nicer bloke.

Unfederal mogul

Announcing your bank will be fined $1.9bn for, among other things, laundering the profits of the Sinaloa drugs cartel is one of the trickier tasks facing the ambitious chief executive. Stuart Gulliver of HSBC appeared to both accept blame and shrug it off on Tuesday. He said the bank was still responsible for its compliance failures in the noughties (self-evidently: no responsibility, no fines). But he added that HSBC was “fundamentally different” and “under new senior leadership” (in other words: it wasn’t me, guv).

Mr Gulliver has been shaking up HSBC, dispensing with a federated structure that gave country bosses the freedom to play by lax local rules. But it would be impossible to dispel that discredited culture in just two years.

Nor is senior leadership quite as freshly minted as Mr Gulliver claims. His previous job in investment banking insulates him from Mexican lapses. But chairman Douglas Flint was finance director from 1995 to 2010, and thus had broad responsibility for risk.

However, the fingerpost erected by Mr Gulliver labelled “they went thattaway” points more damningly to the dust trail of Lord Green, who has left the bank. US regulators found money laundering compliance was weakest between 2006 and 2010, when Lord Green was group chairman. He is now a trade minister. His utility on marketing trips to the US looks questionable. On his watch, HSBC promoted the kind of cross-border capital flows no one should boast about.

Mr Gulliver has meanwhile yielded a hostage to fortune in suggesting HSBC now has “the highest standards” of compliance. Big banks have a habit of breeding leftfield challenges to such assumptions.

The Costa virtue

A couple is Christmas shopping.
Woman: Fancy a coffee at Starbucks?
M: No way. They avoid tax, supposedly.
W: Costa, then?
M: Too crowded. Costa paid £18m in corporation tax last year. For fiscally responsible consumers like us, that’s a bigger lure than a triple-choc mochaccino with sprinkles. Costa’s third-quarter sales are up 7 per cent.
W: My feet hurt. Why don’t we go home and order our presents online instead?
M: You can’t use Amazon. It minimises UK tax by routing transactions through a lower-tax jurisdiction.
W: I could find other suppliers on Google.
M: Same problem. And you can’t use your iPad either.
W: Why?
M: I smashed it. To save you from yourself. Apple sells globally but pays less than 2 per cent of its tax outside the US.
W: OK. We’ll go home. We’ll conduct a line-by-line analysis of retailers’ results. Then we’ll come back tomorrow and only buy from shops with a strong record of corporation tax payments.
M: Good plan.
W: Anyway, we need to get ready for dinner at Auntie Pat’s.
M: Are you crazy? We’ve no idea of her tax status. For all we know, she could be routing her profits from the flower shop to a secret account in Grand Cayman via a front company in Jersey.
W: (Sighs) I think I preferred it when I only had to worry about the ethics of my own tax returns.

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