As Mervyn King attempts to build a regulatory empire the like of which we have not seen in the UK for many years he today endorsed the UK government's decision to strip the FSA of the majority of its powers and pass them back to the Bank of England. Despite the fact that the Bank of England will now be in charge of regulating individual banks, overseeing the regulatory system for the financial arena and also in control of UK base rates, the Governor of the Bank of England still rejects accusations of empire building.
At a time when the UK authorities are slashing public budgets in almost every department of the government, it has been revealed that the abolishment of the FSA and the transfer of regulatory power back to the Bank of England will cost the UK government £50 million. There will be a mountain of legal work and reorganising for the government to do in a relatively short space of time which is predominantly the reason why a figure of £50 million has been suggested. However, are taxpayers getting value for money?
Tony Hayward, the chief executive of BP, has announced that he will leave the company with a £1 million payoff and a £10 million pension fund. He will receive a pension of around £500,000 a year and has already been earmarked for a position at a joint venture company between BP and TNK in Siberia.
A Green paper issued today by the UK government will detail significant changes within the structure of the Bank of England and the creation of a new subsidiary to be known as the Financial Policy Committee. The new committee will be under the control of the Bank of England and will be responsible for "prudential regulation" of all investment banks, insurers and deposit taking institutions in the UK.
The UK government will this week set out a raft of changes to the UK regulatory system which will see much of the current power handed back to the Bank of England amid concerns that the FSA (Financial Services Authority) is about to be disbanded. While it would appear almost certain that the FSA will be closed down or at the very least certain powers transferred to a new financial body, there are concerns that the current regulatory framework could be compromised. So why is the UK government handing power back to the Bank of England?
Despite the fact that the Spanish banking sector was hardest hit by the European Union stress test, released into the public domain last Friday, there was a rebound in share prices with many pessimistic forecasts blown out of the water. While there is no doubt that everything was not perfect with regards to the EU stress test there is also no doubt that things are not as bad as many people had predicted.
Tony Hayward, the chief executive of BP, is rumoured to be on the verge of leaving the group with an announcement expected with tomorrow's second-quarter figures. It is believed that the board of directors are currently in negotiations regarding a multimillion pound severance package which they hope will draw a line under the BP crisis in the Gulf of Mexico and allow the group to move forward. It is believed that the company will report a $13 billion loss for the second quarter with a potential $25 billion provision made for the cost of cleaning up the oil spill.
The financial press is rife with rumours that BP has a board meeting organised for Monday during which the subject of chief executive Tony Hayward's position at the group will be discussed in great detail. There has been speculation for some time that Tony Hayward will be the fall guy with regards to the ongoing Gulf of Mexico crisis and indeed calls from the US authorities for somebody to be "blamed" for the tragedy. So is Tony Hayward about to fall on his sword?
Standard Life, one of the largest investors in the UK stock market, has this week rejected a £2.9 billion takeover offer for engineering conglomerate Tomkins. While the indicated offer, from a Canadian consortium, was well above the Tomkins share price at the time there are growing fears that overseas investors are using a weakness in the UK exchange rate and a weakness in the UK stock market to "grab UK assets on the cheap".
Despite the fact that the overall picture for UK equity dividend payments is likely to show a fall of 6.5% in 2010 the vast majority of the shortfall is made up of the fact that BP will suspend dividend payments in the short-term. If you strip out the BP dividend, which is by far the largest factor, the trend has actually turned and is beginning to improve. So what can we hope for the future?
