Tax Research UK

FT.com / Companies / Banks - Barclays plans global wealth manager role.

The FT notes:

Barclays plans to add several hundred bankers to its staff to serve its richest clients in a push to break into the top ranks of global wealth managers.

The UK bank believes that its Barclays Wealth business can mirror the growth of Barclays Capital, the bank’s hugely profitable investment banking arm.

If there was one thing the world does not need now it is the growth of Barclays’ private banking.

This remember is the bank that is promoting a new tax haven in Ghana for this purpose - and act widely condemned as likely to facilitate corruption.

Richard Murphy Barclays

Tax haven risks corruption, OECD warns Ghana | Business | guardian.co.uk .

As the Guardian notes:

Ghana has had a stern warning from the Organisation for Economic Co-operation and Development to ensure that its emergence as a tax haven does not fuel corruption and crime in west Africa.

Ghana is becoming an offshore financial centre but Jeffrey Owens, head of the OECD’s Tax Centre, said: “The last thing Africa needs is a tax haven in the centre of the African continent.”

The OECD is in talks with Ghana to guarantee the country “adheres to the highest standards and integrity”. Owens said Ghanaian officials “are aware of the risks they are running”.

They might be. But let’s be clear, they’re not the real moves and shakers behind this. As the Guardian also notes:

Barclays Bank has been advising Ghana’s government on establishing its financial centre.

Wilson Prichard, a researcher at the Institute of Development Studies at Sussex University said:

Aside from the general social costs associated with the operation of tax havens globally, in the absence of a very strong regulatory framework and very strong standards of transparency there’s a particularly high risk that a tax haven in west Africa, which is home to major oil wealth and high levels of corruption, could facilitate large-scale corruption and tax evasion, and pose a correspondingly large risk to good governance and economic growth in the region.

But Barclays are backing it anyway.

And you want a better example than that of the complete and utter social irresponsibility of banks in the face of the risk of corruption, fraud and social breakdown?

It would be hard to find unless it is PricewaterhouseCoopers’ support for the development of a tax haven in Jamaica.

This is the financial services industry pursuing profit at cost to society at large. There’s nothing new about that. But the time has come to stop it.

Richard Murphy Barclays, Development, PWC, Tax Havens

Have a  look at the web page issued by Barclays Wealth relating to their new Deferred Deposit Account. It says:

Take your interest when you’re good and ready

If you’ve got plans to change where, or how, you’ll live in the future, there’s a good chance your tax status will change too. So why not plan for this?

Our new Deferred Interest Deposit Account lets you defer taking the interest on your savings until a time that suits your tax planning. It’s up to you to choose when the best time will be*.

Is it right for me?

The Deferred Interest Deposit Account is ideal if you’re thinking about moving, working or travelling extensively abroad, changing income level for any reason or retiring.

How does it work?

When you open your account, you can set a specific date to receive your interest. Or, if you don’t know when that will be, you can select until further notice. This means you can defer for as long as you like with interest being earned on your savings all the while - it’s your choice.

That’s the spiel. The reality is different. First this is a blatant product designed to reduce the impact of the 50% tax rate – roll up the interest until you hope the Tories abolish it is the message. Second, it’s also a case of roll up till you leave the UK as a second message.

This is outright abusive planning deliberately engineered by a bank. The answer is simple: such accounts must be assessed on an arising basis, not a payment basis as is used for interest now. The law has to be changed in the Pre-Budget Report.

So much for ethics Barclays. And so much for any hope that the voluntary Bank Code of Conduct might work.

And on that my message is simple: they were given the chance to cooperate – now legislate it – with personal penalties (very big personal penalties) for all directors and employees found to be in breach of that statutory Code. As Stephen Herring of BDO said, some tax planners clearly need some time at Her majesty’s pleasure if they can’t learn what is acceptable.

This account is unacceptable.

Richard Murphy Banking, Barclays, Ethics, Tax avoidance

The FT notes:

“Curious” and “largely cosmetic” were two of the opinions offered by analysts on Thursday as they sought to explain Barclays’ decision to sell more than $12.3bn (£7.5bn) of risky credit assets to a new company.

Barclays loaned the new company, Protium, the money to buy the assets, thus replacing the volatility caused by owning risky assets with regular cash flows from interest payments.

It says:

The crucial question is whether the merits of protecting against further problems with the assets outweigh the amount of upside being handed to the new fund.

The decision to shift $8.2bn of structured credit securities insured by monolines, as well as $2.3bn of residential mortgage-backed bonds and $1.8bn of unpackaged mortgages, will certainly help Barclays to reduce risks.

Well that’s one opinion. It’s also very hard to justify since Barclays is providing funding on commercial terms in the form of a $12.6bn 10-year loan that will net it $3.9bn in interest over the next decade. Candidly, if there’s a monoline default and two thirds of the assets of this new company, which is based in Cayman relate to monoline then the debt will go bad. Where the heck is the protection in that?

So let’s look at this another way. First, welcome back to offshore. $12 bn of assets move to Cayman in a supposedly arm’s length deal. What’s arm’s length when Barclays provides about 96% of the funding? Sorry: I don’t buy that as an arm’s length deal. I call that control – but the purpose is to take this stuff off balance sheet, I know.

Second, welcome to ‘tax free’. Oh, jolly fun. Except I’ll guarantee that most of this will really be managed from London and New York – the fund manager is based in the US. Back to the old governance charades then.

Third, welcome to ‘no stamp duty zone’ in future – how convenient.

Fourth, I notice ex Barclays Capital people are running this – what a great way to give them bonuses off balance sheet. It does not seem they’re providing much at all of the capital but will be getting £40 million a year in fees.

Fifth, just to show how odd this deal is:

Barclays has derecognised the assets on its balance sheet for accounting purposes but has kept them on its balance sheet for regulatory reasons.

There are words to describe that. Transparent accounting is not anywhere near the ones that are appropriate. But the FT says:

Barclays’ move could be the first in a series of these types of deals as investors seek to make a return on these toxic assets – particularly if the banks involved are prepared to offer juicy returns.

So the world of offshore financial abuse continues. Have we learned nothing? Is it really the case that opaque offshore risk is, once again, being lined up to bring down our banks? I think you know my answer to that.

I have a horrible feeling in the pit of my stomach: this will end in tears.

Richard Murphy Banking, Barclays, Cayman

The FT has reported:

City advisers on Thursday sought to fend off a proposal to force banks to simplify their legal structures, saying reforms mooted by Lord Turner, chairman of the Financial Services Authority, would harm the competitiveness of the British industry.

Unsurprising. But the comment I’d highlight is that of Richard Collier, partner at PwC. The FT reports that he:

said the costs might outweigh the benefits and would raise concerns about competitiveness. “It could potentially be very expensive indeed,” he said.

Interesting. First no mention of his enormous benefit from the existing system. PWC is earning millions from the Lehman debacle. Second, PWC shows its true colours. Imposing a cost of more than a trillion on the state is a price worth paying for banks too big to fail – of which PWC, it should be noted, did not warn us despite auditing many of them. This is pure hypocrisy and has to be ignored.

Incidentally, the FT based their research for this article on the TUC research on bank tax haven subsidiaries. I know, because I explained it to them. Pity no credit was given.

But just look at that research and you’ll see the problem Turner is talking about. Why have Barclays got 143 Cayman island subsidiaries?

Richard Murphy Banking, Barclays, Cayman, PWC

It’s been reported:

Barclays and Chinese lender Mega International have been censured by Australia’s anti-money laundering body, the Australian Transaction Reports and Analysis Centre (Austrac), for "significant breaches" of its rules on reporting suspicious transactions and account activity.

Barclays has undertaken to review all account transactions carried out since July 1, 2002 and will report any suspicious activity to Austrac. It will also have to submit information about any large fund transfers into or out of Australia.

There must be some mistake, surely? Barclays? Whatever next?

Richard Murphy Barclays

A couple of weeks ago Bob Diamond of Barclays said:

Our aim is clear - it’s to be the premier global investment bank over the next couple of years

He wants that for personal advantage.

He can only do it with our cash.

And as Vince Cable has said:

it is madness for the British taxpayer to be a last-resort guarantor for this kind of business.

And yet that is exactly what we are doing.

This is madness. We have to regulate. Barclays cannot free-ride on the back of the UK taxpayer. It is. It mustn’t. And it really is time the government realised this. Or, and I’m quite convinced of this, the next crisis may arrive much sooner than anyone is predicting because there is no substance to current increases in bank activity, and another crash could in that case happen sooner rather than later.

It’s not a pretty prospect. Curtailing Barclays’ ambitions will be a small price to pay for preventing it.

Richard Murphy Banking, Barclays, Economics

I drafted the Tax Justice Network / Association for Accountancy and Business Affairs code of conduct for tax in 2007 ( summary here). It attracted some attention at the time at selected addresses in Paris and London SW1, but there was not a lot of strong positive feedback right then. Being nice to banks was in vogue.

Not ant more.

In another indication that the world is moving (albeit not as fast, and not as far as I’d like, but moving nonetheless) in the direction of tax justice the Guardian has noted:

Banks which help their customers to avoid paying tax will be targeted by intensive surveillance from HM Revenue & Customs under a new "name and shame" regime to be announced by Alistair Darling next week.

The chancellor is understood to have a hit list of UK and international banks which he will invite to sign his new code of conduct on tax which is designed to save the taxpayer billions of pounds lost through legal and complex avoidance schemes.

Banks that refuse to sign the code of conduct or act against the "spirit" of the current tax laws will be subjected to heavier scrutiny from the tax authorities. Darling will also make it clear that chief executives of non-compliant banks will be forced to appear before MPs sitting on the Treasury select committee. Banks are under no obligation to sign up but will be expected to answer requests from the public about whether they have signed up.

Excellent. Quite right too. make them justify their anti-social behaviour.

Predictably the tax profession is not happy:

Ever since Darling announced his intention to publish the code, there has been criticism from some tax experts about how the "spirit" of the law should be interpreted. However, a Treasury source disputed this: "It is quite clear to market professionals what the spirit of the law actually means".

I agree, wholeheartedly. The person who cannot spot that should not be in practice.

And as indication of where this will go:

The Treasury source said: "We will start with the big banks and work through the system."

"We have some confidence that Barclays will sign up to it," the source added.

The source said: "There will a lot of embarrassment and public pressure and trips to the Treasury select committee to be humiliated by a lot of MPs. This is a name and shame policy".

Just what I wanted.

And excellent news for the ordinary taxpayers of the UK, because this is going to swing the pendulum of obligation to pay back towards the banks. And that’s the right thing for our economy. They have abused for far too long. And now the game is up.

Richard Murphy Banking, Barclays, Code of Conduct, Ethics, Tax avoidance

FT.com / Companies / Banks - BarCap told to disclose Lehman information.

If you will brag about making £2 billion of profit by buying assets at undervalue then you might expect someone to complain.

And maybe even seek retribution.

Richard Murphy Banking, Barclays

FT.com / Companies / Banks - Barclays to scrap final salary pensions .

Jenkins and Diamond:    40

Barclay’s staff:                    Love

Don’t doubt it: that’s what this is about; shifting wealth to thsoe who already have it at cost to those who don’t.

Richard Murphy Banking, Barclays