Jun 282012
 

This week has been a fun one for those of us who like kicking bankers when they’re down with two stories about banks tripping over their own shoelaces. Firstly there has been the ongoing saga of the IT woes within RBS which caused last week’s inability to process payments, and secondly the story of Barclays helping to “fix” the interbank interest rates – which made all of our loans more expensive.

We are used to these kinds of stories about the banking sector, and many of believe that there is something fundamentally broken about the banking sector. Banking is important to the world economy – our current recessions are due in part to banking incompetence and greed (which definitely triggered it but is perhaps not completely to blame).

If you look deeply at the IT woes of RBS, you begin to see that underneath the story of complicated IT “stuff” falling over there is a hidden story of banking greed. Whilst IT is never infallible, the problems at the RBS data centres may well have been caused, or at least made worse by their recent practices. RBS have been engaged in a programme of making experienced (and expensive) UK-based workers redundant, and replacing them with cheaper (and inexperienced) foreign workers by outsourcing or offshoring (the difference is not relevant here).

It is worth noting that if RBS had made expensive UK-based workers redundant and replaced them with inexperienced (and cheaper) UK-based workers, they would be breaking the law. You do have to wonder why using foreign workers makes it legal!

The article I linked to above does say that in some ways the Indian workers have been doing good work, but they lack experience when working with mainframe-based systems. This is hardly surprising when mainframe-based systems are seen as so old-fashioned, with more weight given to Windows and UNIX-based systems, but experience matters.

Most people with more than half a clue in the IT world know that experienced staff can be particularly valuable – they can oversee the work of others and point out potential issues. And when issues do arise (and they always do), they are more likely to be able to be confident about remedial actions. Perhaps best summarised as they know when to take their hands off the keyboard!

That is not to say that inexperienced staff cannot be made use of – there is no other way of someone becoming experienced after all. But you need a sensible ratio.

If RBS had taken the sensible action of using India-based staff to supplement the existing UK-based staff so that experienced staff were retained until they chose to leave, then we may have seen a different result last week. But of course that would have cost more money.

Now onto the “Barclays” situation. Staff at Barclays (in collusion with staff at other as yet unnamed banks) attempted to influence the interest rates that banks charge each other. These funds available to banks are the source of the loans that most of us make use of – including mortgages, so any effect on the interest rates would have caused the interest rates we pay to go up (or down). It is as yet uncertain whether Barclays staff were successful in influencing the rates or how much the rates were influenced.

But given the size of this market (one figure is quoted as being £225 trillion), even the tiniest influence on the interest rate could make enormous sums of money. If they had artificially inflated the interest rate by just 0.1%, they would have taken their share of in the region of £225 million. And who is to say it was as small an influence as that?

With both stories together, we can see that at least two major banks had management teams in place that encouraged profits over other priorities to an unsafe degree. Whilst the management at Barclays may not have been directly involved in the scams to defraud the public, they were responsible for the culture that allowed staff to pursue profits at the expense of banking ethics, morality, or the law. And RBS management are responsible in a similar way – by extreme cost cutting they put the day to day operations of their bank at risk.

It is perhaps unreasonable to expect bank staff to act ethically. Whilst there are hopefully people who could resist the temptation to help themselves to their share of ill gotten gains, such people are probably pretty unlikely to choose banking as a career. Especially given what we now know about how bankers behave.

There is not an easy answer to this; not even nationalisation would change the embedded culture (after all, RBS is mostly owned by the UK taxpayers), but it would be a good start. And we need to do something about how profits are shared – to make it less likely to tempt someone to make excessive profits at the expense of perfectly reasonable restraints. How about paying bankers bonuses on an equitable share? So that nobody within a bank gets a bonus bigger than his or her colleague?

Jun 202012
 

Today the Prime Minister made the “mistake” of naming one particularly famous tax cheat – Jimmy Carr. Of course it is not just him who is a slimy tax cheat – there are also people like Gary Barlow, Howard Donald and Mark Owen. And probably very many others. The rich have always had ways of avoiding paying their fair share of tax, and it is time we started pointing fingers at them and sneering.

There are those who claim it is unfair that these people are being singled out for naming. Actually it is very fair indeed; what might be unfair is that there is not a long list of everyone who is using some dodgy scheme to reduce their tax bill published on the front page of every newspaper.

Apparently Jimmy Carr’s lawyers have released a statement to say that he has done nothing wrong on avoiding tax. That is completely wrong – he has done something wrong. It may be legal but that does not make it moral.

What he has done is only marginally better than hanging around outside a hospital on pay day and mug the next nurse coming out.

Jun 022012
 

Apparently the government has announced plans to stop charging council tax for those who live in so-called “granny annexes”. The opposition has quite rightly pointed out that this is an interesting position to take as there has long been a council tax exemption for those living in granny annexes who are over 65, or who are impaired in various other ways.

For those not familiar with granny annexes – and this may come as a surprise to many Tories, but not everyone is familiar with the concept – if you have a large enough house, it is possible to set aside part of it as a separate dwelling. Usually to give some member of the family some level of independent living – traditionally used for a live-in grandparent. Thus the term “granny annex”.

It may come as a bit of a surprise to many Tories, but most ordinary hard-working families live in homes where space is at a premium. Indeed having the spare space to create an annex could be a definition of “wealthy”. Or in other words, Tories have come up with a nifty way of giving a tax cut to the wealthy whilst trying (and failing) to sound like they are helping ordinary people.

Or to put it another way, why are we giving council tax exceptions to grannies and disabled people? If someone over the age of 65 lives in their own flat they have to pay council tax, but if they live in an annex in their family’s home, they don’t. I’m not against the idea that those who are somewhat constrained in their income should get some sort of discount on their council tax, but getting a discount because you have rich relatives?

May 232012
 

I am sure that pretty much all of us are familiar with what happens in school when the teacher leaves the room on a Friday afternoon and a whole class full of rebellious children start kicking up fuss. Shouting, throwing insults around, and generally making a lot of unnecessary noise.

When watching “PM Questions” at lunchtime today, it occurred to me (and probably not for the first time) that our politicians in parliament act pretty much like a bunch of unruly school kids. Let us look at some of the examples of boorish behaviour :-

  1. Calling the leader of the opposition an “idiot” (for which David Cameron was spanked for and forced to retract).
  2. Growling with approval during speeches.
  3. Shouting dissent during speeches.

This may be the sort of behaviour expected during an Oxbridge debate, but most of us have not been unfortunate to take part in such a thing, and this sort of behaviour of our representatives is disgusting.

It has been suggested before that PMQs needs reform, but with no obvious change to the behaviour seen. Perhaps those MPs who behave this way should be made aware that most of us are only aware of how they behave from their behaviour at the weekly PMQs ?

May 232012
 

There are reports that share prices in world markets fell dramatically on the announcement that Europe has asked countries to prepare contingency plans in the event of Greece dropping the Euro. Which probably shows that there are some pretty dumb share dealers around.

That is not to say there are not valid concerns about the possibility of Greece reverting to the old drachma but that is hardly news – I knew about the chances of that happening this morning well before the announcement. Perhaps some intellectually-challenged people believe that preparing contingency plans increases the risk of something happening.

Of course preparing contingency plans does not increase the risk of anything (except possibly a shortage of paper). An event will occur with or without a contingency plan which is after all a way of preparing for an event if it occurs.

In fact it is probable that such contingency plans already exist for Greece leaving … or indeed any other country. In fact they bloody well should do – those whose job it is to draw up contingency plans would be grossly irresponsible if they have not drawn up plans by now. To draw a parallel with the computing world, the person who waits until their disk drives all start making strange and worrying sounds before starting to perform backups is doing so far too late.