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Casino Bank unlimited protection from BoE

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Casino Banks given unlimited protection by Bank of England

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Casino Bank unlimited protection from BoE

  1. 1. Derek Louden Abbian House Tower Street Tain Ross-shire IV19 1DY Tel: 01862 892734 Mob: 07876 774412 Email: LoudenDW@aol.com Dear Sirs, 09 Sept 2014 Unlimited Credit for Casino Banks – Who voted for that? In June at the Lord Mayor’s Banquet for Bankers and Merchants of the City of London at the Mansion House, London the Governor of the Bank of England, Mark Carney, a former employee of merchant bank Goldman Sachs extended the right to borrow from the Bank of England in a time of crisis to the so-called "Shadow Banks" who are the market makers. He said: "Just as there will be times when central banks must backstop the banking system, there are also times when they should backstop core markets in a way that supports their contribution to the real economy but doesn’t encourage excessive risk taking. That need was behind the recent transformation of the Bank of England’s sterling market framework for banks, and it is why I can announce that, in the coming year, the Bank will widen access to our facilities to include the largest broker-dealers regulated in the UK and to those central counterparties authorised to operate in UK markets. We will also look into whether we should further develop our capacity to lend in currencies other than sterling." These changes mean that the Bank of England will be on the hook for losses incurred by central counterparties and market makers when we hit a time of crisis. What risk have we taken on and who are these "shadow banks"? The risk was quantified in an article in the Financial Times which ran a series of articles on shadow banking in June this year: http://www.ft.com/indepth/shadow-banking
  2. 2. In this editor Patrick Jenkins and Sam Fleming wrote that the Financial Stability Board stated that shadow banking had grown from global assets of $26.1Tn in 2002 to $71.2Tn in 2012. (Financial Times, 17th June 2014) That's the risk we're extending credit to cover our share of in a crisis. Hands up who knew that? The following is taken from the FSB annual review Nov 2013: http://www.financialstabilityboard.org/publications/r_131114.htm My second question was who are these "shadow banks"? This proved impossible to determine. There is no sign of a list on the Bank of England's website or on that of HM Treasury. I've attempted to list the firms I think are covered and have uploaded this to SlideShare. I've no idea if it is accurate but hopefully it will be corrected if it isn't. If Mr Carney gets this wrong and the banks prove unreliable then the UK will be bankrupt. I'm not sure the UK parliament approved this. I think this was concocted in the City and pushed through without reference to any democratic institution. George Osborne didn’t correct Mark Carney’s statement which must then have met with his agreement. Is this another example of why we're "Better Together"? The Central Counterparties are (I think): 1) European Central Counterparty Limited - acts as a central clearing house for equities, ETFs, Currency ETCs and Depositary Receipts. The trading company has made losses every year since 2008 & consequently has paid no tax in the UK. It has a positive cash flow since additional share capital is issued each year to cover the losses. It appears to make gross profits as it has a positive working capital position but ends up making losses once its parent company takes management fees and intellectual property charges. It is not clear if the
  3. 3. business is continuing to trade in the UK or if it has moved its operations to Holland where a new company has been incorporated. 2) CME Clearing Europe Limited - deals with Over the Counter (OTC) commodity derivatives and interest rate swaps. The trading company has made losses in the last two years reported & consequently has paid no tax in the UK. It has a positive cash flow since additional share capital is issued each year to cover the losses. It appears to make gross profits as it has a positive working capital position but ends up making losses once its parent company takes management fees and intellectual property charges from, as might be suspected, an offshore tax haven (Luxemburg). 3) ICE Clear Europe Limited - deal with energy and commodity contracts and European credit Default Swap transactions. The trading company has made profits in each of the last five years reported & has paid significant amounts of corporation tax in the UK. It has a positive cash flow. It has c £15Bn in Current Assets and in Current Liabilities and although the cash pile has climbed in recent years any market collapse would rapidly deplete this. Profits in large part are paid out to shareholders in the year in which they are earned. The Bank of England would take a proper bath if something like this went under. 4) LCH Clearnet Limited - deals with Interest Rate Swaps, repos, equities and commodities. The trading company has made profits in each of the last five years reported & has paid significant amounts of corporation tax in the UK. It has a positive cash flow. It has c £370Bn in Current Assets and c £365Bn in Current Liabilities and their cash pile has climbed in recent years. 5) LIFFE Administration and Management Ltd - deals with Exchange Traded interest rate products, equities, index and commodity derivatives but trades via ICE Clear Europe Limited. This business is profitable and pays its taxes. The larger Broker/Dealers that Mr Carney is proposing to insure are: Gilt Market Market Makers and Inter Dealer Brokers This page provides the names, postal addresses and website addresses for the Gilt-edged Market Makers (GEMMs) and Inter Dealer Brokers (IDBs). A Gilt-edged Market Maker is a primary dealer in gilts and actively trades in either conventional gilts, index-linked gilts or both. Inter Dealer Brokers act as intermediaries for anonymous trading between market makers. Gilt-edged Market Makers Conventional and Index-linked Market Makers Barclays Bank plc† 5 The North Colonnade Canary Wharf London E14 4BB
  4. 4. www.barclays.com BNP Paribas (London Branch) 10 Harewood Avenue London NW1 6AA www.bnpparibas.com Citigroup Global Markets Limited Citigroup Centre 33 Canada Square London E14 5LB www.citigroup.com Credit Suisse Securities One Cabot Square London E14 4QJ www.credit-suisse.com Deutsche Bank AG (London Branch) Winchester House 1 Great Winchester Street London EC2N 2DB https://gm-secure.db.com Goldman Sachs International Bank Peterborough Court 133 Fleet Street London EC4A 2BB www.gs.com HSBC Bank PLC† 8 Canada Square London E14 5HQ www.hsbcgroup.com Jefferies International Limited* Vintners Place 68 Upper Thames Street London EC4V 3BJ www.jefferies.com
  5. 5. JP Morgan Securities PLC 25 Bank Street Canary Wharf London E14 5JP www.jpmorgan.com Lloyds Bank plc 25 Gresham Street London EC2V 7AE www.lloydsbankcommercial.com Merrill Lynch International Financial Centre 2 King Edward Street London EC1A 1HQ www.baml.com Morgan Stanley & Co. International plc 20 Cabot Square Canary Wharf London E14 4QW www.morganstanley.com Nomura International plc One Angel Lane London EC4R 3AB www.nomura.com Royal Bank of Canada Europe Limited Thames Court One Queenhithe London EC4V 4DE www.rbccm.com Royal Bank of Scotland† 135 Bishopsgate London EC2M 3UR www.rbsmarkets.com Santander Global Banking & Markets UK 2 Triton Square Regent's Place
  6. 6. London NW1 3AN www.santandergbm.com Scotiabank Europe plc 201 Bishopsgate London EC2M 3NS gbm.scotiabank.com Societe Generale Corporate & Investment Banking SG House 41 Tower Hill London EC3N 4SG www.sgcib.com The Toronto-Dominion Bank (London Branch)* 60 Threadneedle Street London EC2R 8AP www.td.com UBS Limited 1 Finsbury Avenue London EC2M 2PP www.ubs.com/investmentbank/ Winterflood Securities Limited†* The Atrium Building Cannon Bridge 25 Dowgate Hill London EC4R 2GA www.wins.co.uk † Strips Market Participant * Retail GEMM Inter Dealer Brokers BGC Brokers L.P. One Churchill Place Canary Wharf London E14 5RD www.bgcpartners.com
  7. 7. BrokerTec Europe Limited 2 Broadgate London EC2M 7UR www.icap.com Dowgate 6th Floor Candlewick House 120 Cannon Street London EC4N 6AS www.ksbb.com GFI Securities Limited 1 Snowden Street London EC2A 2DQ www.gfigroup.com ICAP WCLK Limited 2 Broadgate London EC2M 7UR www.icap.com Tullett Prebon Gilts 155 Bishopsgate London EC2N 3DA www.tullettprebon.com 1. The role of Gilt-edged Market Makers and Inter Dealer Brokers is described in the DMO publication "A guide to the roles of the DMO and Primary Dealers in the UK government bond market". 2. The DMO is not responsible for the content of external websites linked to or referenced from the DMO server. The DMO neither endorses the information, content, presentation, or accuracy of such websites, nor makes any warranty, express or implied, regarding these external websites. http://www.dmo.gov.uk/index.aspx?page=Gilts/Gemms_Idb For Commodity Broker Dealers, the following list is attached:  Abacus Trading Co Ltd 1138 High Road London United Kingdom  Amalgamated Metal Corporation Plc 55 Bishopsgate London United Kingdom  Amalgamated Metal Trading Ltd
  8. 8. 55 Bishopsgate London United Kingdom  Amt Futures Ltd 55 Bishopsgate London United Kingdom  Armajaro Coffee Ltd 16 Charles Street London United Kingdom  Armajaro Securities Ltd 16 Charles Street London United Kingdom  Arzak Global Securities Limited 32 Athol St Isle Of Man United Kingdom  Bache Commodities Ltd 9 Devonshire Sq London United Kingdom  Benn Commodities Ltd Eastfield House, North End Lane Orpington United Kingdom  Bimax Plc 11 Hollycroft Avenue London United Kingdom  Bnp Paribas Commodity Futures Ltd 10 Harewood Avenue London United Kingdom  Brandler (U K ) Ltd 20 Grove Place Bedford, BEDS United Kingdom  Britannic Trading Ltd 1 Broad Gate London United Kingdom  Bycen Ltd 7 Torkington Rd Cheadle United Kingdom  Cantaloupe (London) Ltd Flat 21 King Regent Place London United Kingdom  Capita Financial Group Ltd 2 The Boulevard Leeds United Kingdom  Capital Assets 13 Great King Street Edinburgh United Kingdom  Cargill Finance Ltd Knowle Hill Park Cobham United Kingdom  Caters Choice Parkdale House Huddersfield United Kingdom  Cenkos Channel Islands Limited Hirzel Court Guernsey United Kingdom  Coach Broker Coptic House 4-5 Cardiff, S GLAM United Kingdom
  9. 9.  Commodity Universal Ltd Cambridge Court London United Kingdom  Compliance & Derivatives Consultancy Ltd High Westgarth Richmond United Kingdom  Consolidated Tin Smelters,Ltd 55 Bishopsgate London United Kingdom  C R S Framley Cottage Shrewsbury United Kingdom  C S Commodity Solutions Ltd Renshaw Barns Salisbury, WILTS United Kingdom  Dalehead Trustees Ltd Ebenezer St Austell United Kingdom  Donaldson, Lufkin & Jenrette International One Cabot Sq London United Kingdom  Duggan, Jonathan Po Box 167 Woodbridge United Kingdom  Futter Commodity Brokers 26 Greengate Dereham United Kingdom  Glencore Energy Uk Ltd 50 Berkeley St London United Kingdom  Glencore Uk Ltd 50 Berkeley St London United Kingdom  Global Mortgage Services Ltd 7 Eddleston Avenue Newcastle Upon Tyne United Kingdom  Gold Buying Centre Halifax 34 Market Street Halifax United Kingdom  Goldenberg Hehmeyer & Co 50 Bank St, 3rd Floor London United Kingdom http://www.manta.com/world/Europe/United+Kingdom/commodity_contracts_brokers_and_dealers-- A10DD/ The Wholesale Market Brokers Association has the following members. Please click on a link to access details about its member firms  BGC Partners  GFI Group Inc  Gottex Brokers SA
  10. 10.  ICAP plc  Martin Brokers (UK) Ltd  Reuters Transaction Services Ltd  Sterling International Brokers (a division of BGC Brokers LP)  Sunrise Brokers LLP  Tradition (UK) Ltd  Tullett Prebon Ltd  Vantage Capital Markets LLP http://www.wmba.org.uk/pages/index.cfm?page_id=3&title=members_directory As was stated at the outset, this is unlikely to be an accurate list. I’ll be happy to update and amend it should participants demand their inclusion/exclusion from the lists. I would be happy to remove it entirely should the Bank of England let us in on the secret of who they are covering and, just as importantly, to what extent. In the meantime since there is nothing we can do at Westminster to control our risk, I’m going to pop on a B.B. King track, pray a bit, and hope against hope and experience that the shadow banks won’t blow up the world again. Come on B.B., “let the good times roll”. Oh, and in case you hadn’t picked up on it, I’m voting “Yes” next week to live in a democracy run in the interests of its people, not in the interests of its bankers.

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