All in favour?

So now we know. Doubts are banished. The hypocrisy is exposed.

On 11 June 2009 the newspapers reported that the Royal Bank of Scotland is proposing to transfer thousands of its small business customers to a new division because it cannot make a profit out of them.

The Times said “the move will lead to some of them being treated more harshly…”

By co-incidence I have received anonymously through the post (in a plain brown envelope) the Minutes of a recent Board meeting of an unidentified Bank:

“Chairman: ‘Right. No apologies. You’ve all seen the Minutes of the last meeting.
Let’s move on…’

Voice from down the table: ‘Actually Chairman I wondered if I might raise a point under item 8 ‘Risk Management’?

Chairman (to Company Secretary): ‘Who’s that?’

Company Secretary (in a whispered voice): ‘He’s a non-executive Director Chairman. Former member of the MPC.’

Chairman: ‘If you must’.

Non-executive Director: ‘Thank you Chairman. I have met with the Head of Compliance and here is his opinion on our present systems:

The Gaussian Copula statistical technique as a measure of correlation and default probabilities in CDOs is flawed. Neither ABCPs and ABSs will be fully reflected in their risk profile. CDOs, because of their leverage, and other credit derivatives weaken the model because of weaknesses in the base statistical series.

Mr. Chairman I think this is very serious and we need to…..

Chairman: ‘Chief Executive, what do you think?’

CEO: Chairman, I intend to close the department today and out-source the function. I’ve never heard such nonsense.

Non-executive Director: ‘But we have only just taken the new staff in Compliance. It was agreed with the FSA.’

Chairman (to Company Secretary): FSA?

Company Secretary: ‘The Financial Services Authority Sir. They regulate us’

Chairman: ‘I thought my pal at the Bank regulates us. I played bridge with him last night.’

Non-executive Director: ‘Chairman I must protest…’

Chairman: ‘PROTEST! You are here….’

Non-executive Director: ‘Why am I here Chairman’

Chairman: ‘You are here Sir because the advisers say that to impress our Institutional shareholders we have to have a certain number of you.

(splutter, glass of water)

Right. The CEO is taking decisive action on this matter. All in favour? Good. Let’s move on.’

CEO: ‘Chairman, under your inspired leadership, we are through the recession and now able to concentrate on re-building the profitability of the bank.

I am proposing that we cut the budgets of our commercial division by 32% so saving over £235million in the next year. We do this by reducing our lending by nearly 50%.

We will make our money in credit derivatives. That’s what the American banks are doing. I am hiring a team from JP Morgan. They are the best.’

Chairman: ‘Brilliant. I propose that the Remuneration Committee reviews the CEO’s package to reflect this break-through’

Second Non-executive Director: “Chairman, I thought it was the inability of the Compliance divisions of the US banks to risk assess derivatives that led to the problems in…..’

Chairman: ‘Which is why the CEO is out-sourcing Compliance. Please pay attention.’

First non-executive Director: ‘Chairman, I have read the CEO’s full report and it is most certainly…er…challenging. The part which concerns me is that we are proposing to give up on smaller businesses. The report refers to any company under £50million being put on punitive terms…’

Chairman: ‘ And I Sir have read the Report. They don’t make us any money. They lose us money. They default. They are a nuisance. The CEO is absolutely right.’

Third non-executive Director: ‘What about our social responsibility. The measures we are proposing will cause hardship across the land.’

Chairman: ‘Next item. Review of non-executive Directors’ pay. I have approved an across the Board rise of 17% back-dated to January to reflect the extra responsibility the Board has carried.

All in favour…..?’

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