From Mr Michael Maslinski, on Thursday…
Sir, Richard Lesmoir-Gordon (Letters, June 
is undoubtedly right in his conclusion that the excessive reliance on mathematics and financial models has driven out the traditional banking skills of “common sense, assessment of character, knowledge of history, how countries and cultures differ and experience of life”… Read more
The investment that Hewlett-Packard made in an entity called Foppingadreef back in 1996, thinking that it would give rise to significant tax benefits over the next seven years, was not typical of so-called “foreign tax credit generators”.
Barclays’ structured trust advantaged repackaged securities (Stars) are perhaps the most well-known FTC generators and they have allowed multiple US banks to reduce their tax liabilities — though the Internal Revenue Service is challenging this in the courts. Read more
In our last post, we presented the genesis of a transaction set up by AIG Financial Products in 1996 that stood to reap significant tax benefits by generating an abundance of foreign tax credits (FTCs) as well as a deduction arising from a capital loss.
The Internal Revenue Service fought back when some of the benefits were claimed, and on May 14, 2012 they won in the US Tax Court, leading to the benefits being disallowed. This case, along with another won by the IRS in September last year, allows a rare glimpse into the world of international tax arbitrage. Read more
On May 14th, 2012, the US government won a case against Hewlett-Packard. The company was trying to reduce its tax bill by claiming certain foreign tax credits (FTCs) and a deduction on a capital loss that arose from a transaction it had entered into in 1996 with a Dutch entity called Foppingadreef. Both were claims disallowed in the ruling. The case may go to appeal.
The type of transaction can generally be classified as a so-called “FTC Generator” as one of the main benefits, if not the main benefit, concerns positive tax attributes created by it. Read more
Alternative title: The bull that got away.
Everyone else has got it in the neck for the failure of RBS, so it’s only right that we remember those who masterminded the disastrous acquisition of ABN Amro. Read more
…we don’t like carrying more capital than we need to. You’ve heard me before on the subject of building up war chests and carrying; that’s not the way we would wish to operate at all.
At end-2006 and end-2007 respectively, RBS published tier 1 capital ratios of 7.5% and 7.3% of RWAs, and total capital ratios of 11.7% and 11.2%… Read more
Ah, the Stability and Growth Pact. You remember. Joining the SGP, members promised fiscal restraint, and in return were allowed to junk their soggy old currencies for a Deutschemark with a suntan. They all promised to keep the gap between revenue and spending to below 3 per cent of GDP, or if they weren’t quite there, they’d get there jolly soon, and never mind if they had to invent the numbers to do so.
So, your starter for 10: which country was the first to exceed the 3 per cent limit? No, not Greece, Italy, Spain, Portugal or Ireland, but Germany. Oddly, there were no calls for austerity measures in Berlin. A decade on, and the game’s up. Fiscal continence in the periphery is a distant dream, so to save the euro we’re promised the European Stability Mechanism and a new “fiscal compact”, which looks like the SGP, but without the growth or stability. Read more
Royal Bank of Scotland plans to shed as many as 2,000 employees from its investment banking arm as it completes the integration of ABN Amro, the disastrous Dutch acquisition that pushed RBS to the brink of collapse. John Hourican, the head of RBS’s global banking and markets division, told the FT that a smaller, more focused business would deliver more stable profits, while avoiding the “strategic tourism” that saw past management teams pursue ill-fated expansion. The 2,000 jobs earmarked for elimination within global banking and markets are part of the “Change the Bank” initiative, which was set up to reduce inefficiencies across the group. Under Mr Hourican, RBS has already scaled back the scope of its investment banking business. The bank reduced its client base to 5,000 – from 26,000 before the financial crisis – and got out of 12 countries. Read more
Sir Fred Goodwin and other former directors of Royal Bank of Scotland will escape regulatory punishment for their role in leading the bank to the brink of collapse, after the UK’s FSA watchdog said there were no grounds for action, reports the FT. The FSA on Thursday said it would close its 17-month probe into RBS’s government rescue without bringing formal charges. The regulator and outside investigators from PwC concluded that while bad decisions were made, there were no grounds for action. The probe covered the bank’s disastrous 2007 takeover of part of ABN Amro as well as its 2008 capital raisings. In an analysis, the FT says the FSA’s 17-month probe ended with a whimper rather than a bang, while Lombard notes that in one stroke, the FSA has ensured the lessons of RBS “will stay unlearnt”. Read more
Dutch retail investors who own bonds sold by a unit of Lehman Brothers Holdings will oppose the bankrupt bank’s proposal for pay-outs to its creditors, reports the FT. The group believes that European creditors who own bonds issued by Lehman Brothers Treasury, a Dutch-based unit, are being treated unfairly and plans to dispute Lehman’s plan in US proceedings this month, said Gerhard Zeilmaker, a bondholder and former executive at ABN Amro. Read more
The former ABN Amro, now part of Royal Bank of Scotland, on Monday agreed to pay $500m in US fines as part of a settlement with the US Department of Justice and admitted that it willfully and systematically violated US sanctions against Iran, Libya, the Sudan and Cuba, reports the FT. The settlement marks the latest, large penalty brought by US prosecutors over money-laundering violations. Read more
As you may have read, HM Treasury has released full details of the toxic RBS assets being guaranteed under the Asset Protection Scheme.
Annex A of the 100 page report (which was quietly put up on the HM Treasury website on Monday) provides the full breakdown of the £282bn assets being insured. Read more
Deutsche Bank has reached preliminary terms with the Dutch government to buy commercial banking assets from ABN Amro, removing a potential obstacle imposed by Brussels on plans to restructure the nationalised Dutch bank. Deutsche first struck a deal last year to buy the units from Belgo-Dutch group Fortis for €709m in cash. The Dutch government then insisted on renegotiating the deal, which will see Deutsche become the fourth largest provider of corporate and investment banking in the Netherlands. Read more
Or the Emotion Mirroring System for Online Traders.
This stylish bracelet and bowl are the fruits of a joint venture between Dutch electronics group Philips and ABN Amro, and were designed to help online traders make better decisions.Here’s how the system works: The Emobowl ™ acts as an emotion mirror, in which the intensity of the user’s feelings is reflected. Read more
The non-call risk which has haunted hybrid bonds, or subordinated debt, in recent months appears to have spread — all the way to Dutch RMBS.
Recall that a number of hybrid bonds have been downgraded recently, on the presumption that banks which received government funds are under pressure by the European Commission not to call their callable securities (the thinking is that this will force bondholders to `burden share’ some of the banking bailouts). Read more
The Dutch state is pursuing parallel tracks to sell the commercial banking arms of either ABN Amro or Fortis Bank Nederland in an effort to satisfy EU competition regulators that a merger between the two state-owned banks can proceed. FBN and ABN, both nationalised late last year, are to be merged ahead of a planned privatisation in or after 2011. BNP Paribas has shown interest in the commercial banking operations of FBN while on a separate track, there may yet be a deal with Deutsche Bank. Read more
Woosh. That is the sound of a hybrid debt bomb being dropped on the European market, courtesy of ratings agency Fitch:
FITCH DOWNGRADES LLOYDS, RBS, ING, OTHER EU BANKS’ HYBRIDS ON INCREASED RISK OF COUPON DEFERRAL
Fitch Ratings-London-20 August 2009: Fitch Ratings has downgraded the ratings of hybrid securities at Lloyds Banking Group plc (LBS), Royal Bank of Scotland Group plc (RBS), ING Group, Dexia Group, ABN Amro, SNS Bank, Fortis Bank Nederland and BPCE and certain related entities. The downgrade reflects increased risk of deferral of interest payments after the European Commission (the “Commission”) clarified its stance on bank hybrid capital, and in particular the application of the concept of “burden-sharing”. A full list of ratings actions is available at the end of this commentary. Read more
Royal Bank of Scotland will take at least three to five years to recover after the disastrous acquisition of ABN Amro assets that were instrumental in damaging its balance sheet, chief executive Stephen Hester said at the bank’s annual meeting on Friday. Mr Hester said insufficient risk controls, a short-term profit focus and misguided strategy were among a series of problems that, combined with the ABN deal, saw the once-great Scottish bank fail, the Telegraph reported. At the same meeting, chairman Philip Hampton declared, “we should bring to an end the public flogging and focus on the good and enduring people and businesses of RBS and allow them to earn our way back to success.” Read more
He’s a man who has been heavily involved in disastrous banking mergers.
Bespectacled, married, in his late 40s and drives a Maserati. Read more
Amsterdam: the most civilised city in the world, some might say. Famously permissive (although no tobacco allowed in those reefers these days) and offering a tight social safety net for the disadvantaged. What better place for a man unwelcome in his home nation and potentially about to lose his main source of income to rest up for a while…?
British banking’s lead UK pantomime villian, Sir Fred Goodwin, might consider such a move. After all, the Dutch have plenty of reasons to welcome him with open arms. Read more
This CDS report was written by Markit’s Gavan Nolan
It is not often that a company reporting a £24.1 billion net loss for a year – a UK record – would be regarded as a cause for celebration. But these are extraordinary times, and Royal Bank of Scotland is no ordinary company. The figures were no great surprise to the market, and in some respects were better than expected. Most of the loss – £16.2 billion – was due to a goodwill writedown on its near-fatal acquisition of ABN Amro. But the real focus was on the bank’s participation in the government’s asset protection scheme. RBS is putting £325 billion of its assets in to the scheme – more than expected. The terms are also more favourable to the bank than many supposed. RBS will be liable for the first £19.5 billion of losses. If further losses are incurred, 90% will be absorbed by the government, with RBS exposed to the 10% residual. The cost for the insurance will be £6.5 billion in non-voting B-shares. The government will increase its stake even more as RBS is issuing more B-shares to fund the initial tranche of losses.
The former bosses of RBS, one of the UK’s highest profile banking casualties, admitted to a parliamentary inquiry into the near-collapse of the bank and HBOS that RBS’s acquisition of Dutch rival ABN Amro at the height of the boom in financial markets “a bad mistake”. Sir Tom McKillop, former chairman said: “In retrospect we bought ABN Amro at the top of the market. So anything we paid was an error…In fact, we are sorry we bought ABN.” On Wednesday, MPs will question Stephen Hester, the new chief executive of RBS, on whether the bank plans to pay up to £1bn of bonuses to staff. RBS also announced Tuesday it would cut a further 2,300 jobs, representing about 2% of its UK workforce of 106,000. Read more
ABN Amro, the nationalised Dutch bank, has held exploratory talks with Royal Bank of Scotland on buying back some of its former businesses as the Dutch government tries to recreate a viable third large Dutch bank. Wouter Bos, Dutch finance minister, told the FT there had been contact between RBS and ABN, although he added, the idea was not to recreate ABN Amro as it was before its purchase and break-up by an RBS-led consortium in 2007 . RBS, which is expected to report full-year losses this month of £28bn, is conducting a strategic review of operations to determine what can be sold. Read more
It has not been a good start to 2009 for one unlucky analyst at ABN Amro India. On Wednesday morning, the hapless number cruncher decided to upgrade his rating on Satyam Computer to “buy”. Hours later, shares in Satyam had plunged by almost 80% after B. Ramalinga Raju, its chairman and chief executive, confessed to fixing the company’s books in a $1bn fraud which is being described as the country’s “Enron”.
We reproduce the note below for your reading pleasure. The final paragraphs are particularly painful. Read more
A little over a year ago, Nationalised Westminster Bank Royal Bank of Scotland and friends splashed out $100bn on a Dutch bank called ABN Amro.
Just look what it could buy now. Read more
In case you missed these stories:
Dutch unveil revival plans for ABN Amro
The Dutch government on Friday announced plans for a revival of a large part of ABN Amro, the Dutch bank acquired and broken up by an RBS-led consortium last year.
Campaigners give up battle for HBOS
Sir George Mathewson, former chairman of RBS and Sir Peter Burt, former chief executive of Bank of Scotland, the two Scottish bankers campaigning for HBOS to remain independent rather than be taken over by Lloyds TSB, gave up their fight on Friday. Read more
In case you missed these developments:
US regulators close Silver State Bank
US regulators closed Silver State Bank on Friday, the 11th US bank to fail this year as the struggling economy and falling home prices take their toll on financial institutions. Read more
ABN Amro’s former private equity arm has won a new lease of life by raising almost €1bn ($1.5bn) from the Dutch lender’s three new owners and a Goldman Sachs-led consortium that is buying ABN’s old buy-out portfolio. AAC Capital Partners, formerly called ABN Amro Capital, has secured its future with the deal, which is expected to be announced in September, marking one of the biggest transactions in the private equity secondaries market. Royal Bank of Scotland, Banco Santander and Fortis, which together bought ABN Amro for €71bn, have agreed to provide €500m of fresh funding for AAC’s recently launched Northern Europe buy-out fund. Goldman Sachs has teamed up with Alpinvest, the Dutch fund of funds, and the Canada Pension Plan to provide €450m of new funding for AAC. Read more
Older entries
1Bernanke weighs in on robot wars; brings Keynes for backup
2Pump up, debase
3Further reading
4The risk of a Japanese VaR shock
5In which the FTSE puts the crisis behind it
Show more6A Kazakh muddle
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