BREXIT - Is This Really Still Rumbling On? 😴
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Depends on whether you start before or after the GFC recession. If you start afterwards then things don't look so bad, albeit below previous trends due to lingering impact of GFC. If you start before, then you end up concluding that a very sharp fall followed by a slow but steady rise is stagnation, which fails the "smell check" when looking at a graph.
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Worth reading, in the Telegraph.
"There are few politicians wiser and more insightful than Tharman Shanmugaratnam, who once told me that the aspiration of Singapore-on-Thames was “a ludicrous trope” that was quite unsuited to a mature advanced economy such as Britain. There was no comparison between the two; you could not make one like the other, he opined. Quite so, and he should know, since he recently became president of the Southeast Asian city state.
None of this will prevent old wounds from reopening once Labour is back in power later this year. Sir Keir Starmer, the Labour leader, has pledged to put the acrimony of divorce from Europe behind us, and forge closer links with the EU. Quite how close, and what conditionality might be attached to it, is not yet clear, but it seems certain that the perfect sovereignty once envisaged by Brexit supporters will be significantly diluted and compromised.
Sir Keir has ruled out taking Britain back into the single market and the EU customs union. The EU does not in any case want perfidious Albion back. The boil has been lanced, and neither side wants to go through all that again. All the same, whatever Labour negotiates may in practice and over time amount to much the same thing. This is partly because geo-political forces are remorselessly pushing the UK and the EU back together again.
As trade with other blocs becomes more difficult, the UK will naturally gravitate towards its closest neighbours; it already is over Ukraine."
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Was Singapore/Singers on Thames ever seriously mentioned by (sensible) Brexiters, or was it always a bit of a remainer pee take.
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It was certainly 'out there' as an idea, not necessarily as a pejorative notion from Remainers.
"According to the European Union any trade or other deal post-Brexit should keep current labour and environmental regulation so that “UK businesses cannot outcompete their EU rivals through deregulation”. That raises an interesting question – why should the UK not do precisely that and outcompete our continental neighbours?
Don’t think of this as just a matter of rivalry though. The real consideration here is what the best policies are to raise our own standard of living?
The answer is obvious – dump those unnecessary regulatory constraints. The EU’s position alone underlines that its own bureaucracy is an economic burden – if it were not, why would changing our regulations put the UK at a competitive advantage?
A deregulatory Brexit is often witheringly referred to as ‘Singapore-on-Thames’. The likes of Will Hutton insist that this is not a serious option for the UK. Well, why not? GDP per capita, (accounting for price differences across geography) in Singapore is $57,714, in Britain it’s $39,720. Would British voters really look askance at a 50% pay rise?"
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Interestingly in terms of GDP per capita... Norway beats Singapore...so maybe Singapore needs to join the single market!
Or with even higher GDP per capita, we could be Lichtenstein on Thames (although admittedly it doesn't scan anywhere near as well)...which is also part of the EEA.
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Maybe Singapore needs large oil reserves.
"I spent most of my money on birds, booze and fast cars: the rest of it I just squandered." [George Best]1 -
Deregulation is a great idea, until things start to go wrong. There are usually very good reasons for regulations, they tend to protect the population from unscrupulous business.
Britain has been suffering from de-facto deregulation over the past 13 years, if not much longer, through the weakening of oversight of the regulations. The result is polluted rivers, crumbling hospitals and dodgy cladding on tower blocks.
I think you can work out from the above that I am pro-Europe, I see regulation as a good thing, and either importers comply with the regulations or they are excluded, in that way the playing field is levelled.
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What also tends to happen is that when regulation gets so lax that something bad happens (GFC, Grenfell), there's a natural overreaction, leading to an overall greater regulatory burden. And here we are.
1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
There is such a thing as over-regulation, which I can see in my line of work. Those setting the rules typically do not take the brunt of the excessive rules so usually err on the side of over-regulating. And in the end most businesses will need to pass on the extra cost of complying to their customers.
"I spent most of my money on birds, booze and fast cars: the rest of it I just squandered." [George Best]0 -
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Financial services regulation overall was not lax even back in the build up 2008. However, the focus of the regulation was (and still is) on the wrong areas.
I suspect that is probably true across many sectors.
good and appropriate regulation is important and to be welcomed. However excessive and pointless regulation that benefits only the compliance industry is of no benefit. (FCA F'wits - are you listening? !!!)
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Yep, construction health and safety legislation is a history of people trying to get the industry to actually be safer rather than producing ring binders of stuff nobody reads.
1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
I think some specific banking stuff was problematic. The Tier 1 capital requirements were obviously too low.
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Your first paragraph is an unusual take.
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Overall is the key word. I've been in financial services for 25+ years.
Certain ascpects of FS regulation were not fit clearly (as Rick says, Tier 1 capital requirements, allowing 125% mortgages etc) but in other areas it was far from lax, but the FCA and it's predecessors have tended to over regulate the little man, and are still doing so, whilst being blind to the important pictures and signals.
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Which areas do you think were well regulated?
To give you an example, people and organisations were advised to buy CDOs that they didn't understand. They were advised by people who didn't understand them. The CDOs contained self certified mortgages as well as the 125% ones. The CDOs were then rated by rating agencies to be AAA. In part, this was due to a lack of understanding, but also done to generate work. Lenders would then hold such AAA rated assets to enable them to lend more. They frequently lent to other banks at the same rate irrespective of any consideration around a bank's credit credit rating. And did anyone worry about money laundering?
It was a systemic failure of regulation from top to bottom, and that's why it was quite a big crash.
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AFAIK, Northern Rock's high risk loan book, acquired by the government as part of the "Bad Bank" didn't really suffer much by way of losses, with a profit being turned for the government from its period of ownership. In fact, AFAIK (again) other than RBS, the government's "investments" in banks turned a small profit overall. RBS was a complete basket case though.
NR went down the pan as it was matching short term liabilities (bullet payments on the securitisation structure) with long term assets (resi mortages). This mismatch was managed by regular new issues from the securitisation structure, which was fine, until it suddenly wasn't, when the credit markets took fright in 2007. (Not of NR per se; of the whole securitisation market.)
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Where have I suggested the regulation was done well or competently?
All I have said is that overall Financial Services has been heavily regulated. The fact that the regulation has missed so much doesn't mean the regulation overall wasn't and isn't heavy. It's just been done badly.
Another current example is Consumer Duty. I now have a 70 odd page document that cost a significant sum to put in place that is of no benefit to anyone bar the regulator and the compliance industry. That's heavy regulation, but it's also crap regulation.
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It was a run on the bank. NR had no idea what it had been doing and where the money was or wasn’t. Don’t over think it
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My favourite example was SVB lobbying to be exempt from loads of banking rules and then ended up falling over because they were doing things the rules would have prevented
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It's a bit more nuanced than that.
News emerged (confidential info leaked to the media for some sort of political gain) that NR had approached the BoE for emergency liquidity because of issues in the securitisation structure due to the asset liability mismatch I highlighted. Depositors understandably wanted their cash back when they heard the news, hence the "run" on the bank and queues of pensioners down the street on the evening news.
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I was responding to this "Financial services regulation overall was not lax even back in the build up 2008"
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Yeah. They didn't know what they were doing when they got into MBS etc and when word got out they didn't, it spooked the street first and then the punters. A run on the bank is a liquidly crisis.
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I think "They didn't know what they were doing" is a bit OTT, as The Rock's securitisation programme (Granite) had been running successfully for a number of years. And per my earlier comments, their 125% mortgages didn't lead to any great level of losses. They definitely took their eye off the ball re the risks of relying on short term wholesale funding, though. (A common mistake to make, as mostly, it's not a problem.) The Rock was definitely less badly managed than HBOS and RBS. (I think HBOS was less badly managed than RBS, but that is to be damned by faint praise!)
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All you're doing is explaining the mechanics of the failure. That's not the cause of the failure. That's just what happened. A bit like saying "the car careered off the road, and then flipped". The cause was the fact the man necked 5 pints before he go behind the car.
I mean, the inquiry into the collapse literally said that senior management had no idea what business they were actually doing day-to-day and had "lost touch with the coalface".
That was the point. When it became clear to the market, which was funding activities, that senior management had no grip on risk, they pulled their lines and it was a classic run. Anyone can make money when the ignore the risks.
We can all get bogged down in the anatomy of what it was, short-term wholesale markets drying up etc etc, but it was just a basic case of senior management not fully understanding what they were actually up to so when the market went tits up they went tits up fast. Faster than any other bank. If they were running the business properly, they wouldn't have run into problems the second markets even hinted at turning.
I refuse to agree that they were less badly managed than HBOS- they were the first British bank to have a run since 1866 and is internationally known as the the bank run that heralded the GFC. Beggars belief senior management didn't end up in prison.
It makes me quite angry that Matt Ridley not only was able to get high profile work after that, but that he is still regularly quoted by journalists as a voice worth listening to. Man deserves to be in prison and pilloried for the rest of his life. Disgraceful, and a classic example of chins closing ranks. Let's not forget, as Chairman he declared an "excellent year" and that "our strategy of using growth, cost efficiency and credit quality to reward both shareholders and customers continues to run well" two and a half months before the collapse. Asleep at the wheel.
To think Apollo thought it appropriate to hire Adam AppleGarth shows what kind of "talent" exists in private credit - massively overrated.
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Rick - Whilst I agree that senior folk at the failed banks walking into new jobs is hard to stomach, the idea that the run on Northern Rock heralded the Financial Crisis is errant nonsense. The "Credit Crunch" started in the summer of 2007 (early August) when the credit markets got very twitchy following developments at Bear Sterns during June and July. Some of its funds lost value rapidly due to losses on sub-prime loans. This was the signal of the start of the financial crisis albeit the more user-friendly term "Credit Crunch" was used initially. Northern Rock was the first indicator to those with a UK focus that all was not well with the world.
Actually, the Northern Rock saga was quite useful as it primed the UK authorities that when the confidence in the banking sector was in question, worrying about "moral hazard" was for the fairies and that securing deposits, to stop bank runs, was the most important thing. It was nothing to do with the quality of management at HBOS and RBS that stopped runs on those banks. It was early intervention by the authorities. The relative quality of management can be assessed via the ultimate level of losses: RBS = huge due to there being no underwriting standards or due diligence standards applied for years; The Rock = minimal; HBOS = somewhere in between, but less bad than RBS.
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This must be really riling the Eurocrats:
"I spent most of my money on birds, booze and fast cars: the rest of it I just squandered." [George Best]0 -
Totally disagree. Just because your deals were in the money *after you fell over* is not a measure for success at a bank.
And of course it heralded the crash - it was the first bank globally that fell over in that crisis - which shows how badly it was run.
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