Barclays Bank and the “Dark Pool”.
Like many other large investment banks Barclays has a “dark pool”. It may have started when Barclays acquired Lehmann Brothers bank in New York when it collapsed. This pool is dark because the deals done in it are secret. Quite how secret is unclear.
Obviously the traders know their own trades. But who buys what , and at what price is not known to the owners of these assets. Nor is it clear which senior managers outside the dark pool, but in the bank, know anything at all.
This pool may have started to facilitate very high levels of trading, at very high speed on computers, with very small profits to the bank on each trade. But the very high volumes of trading still produced handsome profits for the bank. This changed when some few trades for very large sums started in the pool, because the trade could be in secret, and there would be no public knowledge until after the trade was done. This also avoided public stock exchanges in New York.
Some clients objected to this and were assured that it would stop. There is now an investigation by New York lawyers on behalf of the Bank’s customers.
This is especially embarrassing for Barclays as they have a new chief executive who has set up a Compliance Academy, with Cambridge University, to ensure that all employees are aware of compliance issues around the dark pool. So, the bank spends £300 million on compliance; and employs 2,100 people to actively ensure compliance. There are 2 year long classes for graduate recruits; and regional master classes for more senior employees.
The Judge Business School at Cambridge are reported as training Barclays staff in truthfulness and “what is compliance”. The School itself offers classes on the “interface between values and behaviour”; “ways in which the sector responds to acts within the regulatory environment”; and “behaviours and practices of organisations to respond to the need for trust and good conduct”.
All this seems relevant, if vague; and nobody can object to the need for trust and good conduct. Most employees in banks today are already graduates, and some may feel that their university days are behind them. So, it will be interesting to see what long term influence these classes have on behaviour back at the bank. Also, the need for classes trust and good behaviour may strike some as implying that they personally lack these morally desirable values.
Closing down these dark pools, and insisting that all deals are done in public stock exchanges, might be more effective and less costly. But then there is the loss to the bank of a large slice of their total profits. Introducing free in-credit banking for individual current accounts is seen by Barclays Chairman as driving banks to seek income elsewhere! It begins to look like the retail customer is responsible for the darkness of the pool.
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Public Sector Strike: Immediate Reactions
The Conservative party reaction was predictable. Over the last 4 years public support for strikes has fallen; it was claimed. Evidence from the British Social Attitudes surveys from 2010 to 2013 (inclusive) has a different story.
When asked whether management will always try to get the better of employees, the replies from a national sample were as follows:
Agreeing and strongly agreeing to the above question rose over the above years from 51% to 54%.
Disagreeing and strongly disagreeing fell from 46% to 43%.
These figures can be interpreted in different ways. Firstly, they can be seen to imply a stability over 4 years. Secondly, they can be seen to show a small but significant majority distrusting management. This implies some support for striking. Thirdly, this distrust of managers is stable. This implies that support for strikes is stable, and not falling. Fourthly, the two sets of figures are not so far apart. So the views of both strikers and non-strikers, and trusters and non-trusters in managers are all to be fought for.
There is no clear overall majority against strikes.
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Public Sector Strikes: The Preparations.
At least 6 major public sector unions are set to go on strike on Thursday 10th July. Union leaders expect a major turn out, the biggest since 1926.
The government is threatening stricter union laws to stop weak or old ballots making strikes legal. Currently a simple majority of those voting is enough to make a proposed strike legal. A stricter rule might require half of all the membership to both vote and support the proposed strike. Few ballots would get a 50% vote currently. This has to do with many things.
Poor record keeping, members moving address and not informing the union, members leaving the union, members retiring are just a few reasons. But perhaps the major reason is that workplace balloting is illegal. Were this to be allowed in future it seems reasonable to assume that 50% could be reached. Also, the actual turn out on the day of the strike is often higher than the ballot.
The possibility of workplace balloting is a return to the past, and is most unlikely to happen. The unspoken fear here is of unions bullying their members to vote for a strike.
The vast majority of union members are now in the public sector. This leads to a criticism of unions being very weak in the private sector. This is true, although there has been some increase in recent years, but from a low base. However, one could argue that this strike is an example of unions operating from their position strength; the public sector.
All the above is an argument to persuade unions to be more open about their support, especially in the public sector. But having a government which is also your employer is a position of weakness. Unlike disputes in the private sector there is no other government to appeal to! This is all the more reason to show the union’s strength; not only by the numbers marching on Thursday, but by showing internal efficiency, and loyalty by their members, who have suffered.
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Zero Hours Contracts: The Latest Evidence.
The Office of National Statistics estimates that there are 583,000 or 2% of the total workforce on Zero Hour contracts. The Chartered Institute of Personnel Development (CIPD) estimates a figure of about 3% based on their evidence from employers. Most zero hour workers are in hospitals, about 75% , with 51% in Further Education.
The justification for these contracts is they offer flexibility to both the employer and the employee. The benefits to the employer are clear. They can adjust employee attendance at work to deal with booms and slumps in demand. For the employee the situation is not so clear.
Specifically, there is an exclusivity clause which stipulates that the zero hours worker may not look for work elsewhere whilst with the current employer. Clearly, this limits the flexibility of the worker. The CIPD evidence shows that about 40% of employers use this clause. Further not all workers are aware that they are on this contract, until their wages drop.
The CIPD evidence says that most workers are happy with zero hours, especially nurses in the NHS. Here, these contracts are long established, and well managed. However, it is still the case that zero hours gives more employer flexibility than agency workers, with written contracts
The only right a worker has is to be an employee with a fixed hours contract, after 12 consecutive months of a broadly consistent work pattern. This is important as the worker becomes an employee with a long list of rights, including to be protected for “whistle blowing”. However, this creates a perverse incentive to sack workers before 12 months elapse.
What is to be done? Exclusivity clauses should be made illegal. Workers should become employees as soon as the law can change. Employers should have to provide a brief written summary to all employees of rights responsibilities and pay, within one week of starting work. A much fuller legal contract should follow soon after.
Bank Bonuses time has arrived again!
Sir John Sutherland is chair of the Remuneration Committee at Barclays Bank. He is responsible for setting this year’s bonuses. Chairing this committee would normally go to a director who is independent; that is not an employee of the bank. Sir John has served as an independent director for nearly 10 years. His independence can now be questioned, and even his objectivity.
Total bonuses are up to £2.4 billion, up from £2.2 billion in the previous year. The average bonus across the whole bank was £17,000 up from £15,600 the previous year. But bonuses in the Investment Bank were £60,000 , up from £54,000. Last year 428 bankers in Barclays received bonuses over £1 million. This year’s figure will be revealed next month.
The new Chairman of Barclays has waived his bonuses; and claims support from shareholders to increase bonuses within the bank. How great this support is is not clear. He has also introduced “allowances” for key staff, presumably in the Investment bank. This is to compensate for an EU ruling that future bonuses must be limited to 100% of salary; or 200% if shareholders agree.
The Chairman wants his key staff to have broadly similar pay to Goldman Sachs and J.P. Morgan. So Barclays pay levels must be comparable to banks from “Singapore to San Francisco”. This lays him open to the charge that he is running the bank for the benefit of staff, and not shareholders.
Arguably, this could be a good thing; especially for the large number of staff paid £30,000 and below per annum. However, there is little here about the interests of bank’s customers, apart from good intentions. And finally, the freedom of the bank to pay what it takes to retain top staff ,makes any attempt to control excessive pay seem pathetic.
How to nationalise, and not nationalise, the banks.
Nationalising can take many forms. But the obvious one is to install civil servants on to boards of Directors. This mild form of nationalisation has not been taken by recent Labour Party policy. Instead the proposal is to ask the Competition and Markets Authority to investigate the possibility of a form of cartel between the big 5 banks.
By removing this technical task from the Labour Party, there will appear to be an objective set of recommendations that have apolitical legitimacy. The next step would be for the above Authority to implement these recommendations on the banks. This leaves the banks as private companies maximising their profits for their shareholders. This is how not to nationalise.
In the current political climate, with an election to win in 2015, there is a need for some creative thinking about nationalisation, and it’s implementation. If the Labour Party retains some distance from actual implementation this may be wise in terms of getting votes. Also, it avoids the traditional fear that the Party is not seen as very efficient in managing the economy.
However, what the Party does after winning an election in using it’s new authority is crucial. Depending on the technical recommendations, it could implement, some, none, or even add new controls. This may yet not be seen as nationalisation. But it is on the way!
The detail of which controls to adopt is important. But more important is to have at least some controls that have a good chance of working in the short term. This begins to deal with the traditional scepticism about Labour managing the economy. Then more radical controls can be attempted. For example, taking a share of banks’ profits annually would produce capital for a government controlled bank. With this annual income the government could do various popular things; reduce income tax for the low paid, give money to local authorities to build new houses etc.. Also the new bank would be seen as increasing competition.
Royal Mail Strike: No Strike Agreement Reached?
Both the Communication Workers Union and academic commentators agree that the recent agreement is a model of successful negotiations. Certainly an increase in pay, backdated to 1.4.2013, at around 3% is just above the Retail Price Index; and 3% is higher than a lot of other recent agreements.
But the real praise is for more nebulous agreements. They are called employee protections. The extensive list includes:
The employer will not outsource
The employer will not franchise parts of the business
The employer will not make employees self-employed
The union will meet employers monthly at “Growth Forum”.
The above list does not include a no-strike agreement. However, should the union call a national strike, the employer will withdraw the employee protections above. Thus we have a new style agreement, which both allows a strike and allows a variety of management sanctions.
This agreement goes to the union members for validation in January 2014. Promised closer union management cooperation seems to be a return to the Corporatism of 40 or more years ago. Mediation by ACAS features strongly.
But will it work? Union leaders sitting on a growth forum is not the same as sitting on the Board of Directors. If at any time over the next 5 years union members vote for a national strike the whole agreement collapses. However, not franchising and not out sourcing will be attractive to members.
Finally,the language of zero hours contracts is not used, but implied in the above list. Why this unclarity?