Perhaps Sir John Vickers has been spurred by the shocking venality revealed in The Big Short, or perhaps it was watching the incredible shrinking share prices of the banks that spurred his cry of pain in the FT this week. The chairman of the widely-acclaimed Independent Commission on Banking frets that not enough has been done to brace the banks for the next crisis, and he fears that when it comes, the taxpayers will be the usual mugs who bale them out.

He believes that the bankers have pushed the Bank of England into accepting lower slices of permanent capital than his commission recommended. This argument can quickly scuttle off into the technical undergrowth of risk-weighted assets and buffer zones, and his complaint was immediately challenged by two of the four deputy governors of the Bank, which at least shows they take him seriously.

Honestly, they responded, our new regime is jolly tough. Sir John does not agree,  but the deputies do have a point. Among the innovations since the crisis are the so-called co-cos, debt securities sold by banks and which can be compulsorily converted into shares should things get bad. Nobody knows how these exotic instruments would work in practice, but the slump in bank shares has at least concentrated a few minds, and the price of co-cos has fallen hard. Many more of them are needed, and it seems they are not going to be the cheap capital the banks first envisioned.

In between the clash of the banking titans comes the still small voice of calm from Mark Bogard, chief executive of the diminutive Family Building Society. The debate has been how to insulate depositors from “casino” banking, but Mr Bogard reports that he is already seeing more reckless mortgage lending. HBoS did not fail because the directors went off to the casino, but because it lent money to people who could not pay it back. The Big Short exposes the casino, but it was The Big Mortgage that caused the crisis.

It’s ugly, but it’s in the can

It is hard to get as excited about drinks cans as, say, mobile phones, which may explain why the competition authorities seem happy to allow a merger which clearly destroys competition among the canmakers. It is a year since Ball Corporation agreed to pay £4.4bn for Rexam, a deal that would give the combine 61 per cent of the market for soft drinks cans in North America and 69 per cent in Europe.

The two companies have spent the time seeing what they could get away with, and it appears that assets worth around $3bn, or half the value of the bid, will have to go. It is not hard to see who is making the serious money here, in the form of the fees from putting the two companies together, and then breaking chunks off. The Rexam shareholders should be pretty happy to be insulated from the “difficult conditions” which this week culminated in a 27 per cent plunge in profits. As for the customers, we can only presume that the competition authorities believe that the likes of Coca-Cola are themselves big and ugly enough to deal with a near-monopoly supplier of their cans.

Mind your language

Spare a little sympathy for Charles Grom, an analyst at Deutsche Bank who is $100,000 poorer for being nice to a client company in public, while signalling doubts to investors in private. The Securities and Exchange Commission insists that a written “buy” recommendation is more than an attempt to stay friends with the management, and must really mean what the analyst believes.

Lest we get too metaphysical about Mr Grom’s true view of the value of  shares in Big Lots, an Ohio-based discount retailer, before writing “buy” he might have considered the helpful euphemisms available to say “sell” without upsetting the company. “Long term buy” means the share price is miles ahead of reality, “fairly valued” means “too high”; “add” really means “if you must”, while “hold” means “don’t.” Analysts should avoid the infamous: “Can’t Recommend A Purchase” which cost the analyst his job (even though he was right).

This is my FT column from Saturday (with apologies to both of you for the delay).

 

 

 

 

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