Think about it. More than 130 peaceful UK Uncut protestors have been arrested for sitting in Fortnums - when the police agreed in advance they would not be because they'd been peaceful and done no harm. And at after the police had recognised, on film, that the anarchists outside were wholly unrelated to UK Uncut - and that UK Uncut protestors needed protection form then as much as anyone else did.
But not a single banker has been arrested for trashing the economy.
They could be. There is a criminal offence of "fraudulent trading" contrary to s993 Companies Act 2006. This occurs where a person (usually a director) is "knowingly party" to the business of a company being carried on "with intent to defraud creditors" or "for any fraudulent purpose". Fraudulent trading necessarily involves dishonesty. The maximum penalty for fraudulent trading is 10 years imprisonment.
Our main banks were, we now know, known to be insolvent in 2008. Their auditors had to seek government assurance that there would be a bail out to ensure they could sign off the accounts as going concerns. They have admitted this in the House of Lords.
Before that assurance was given the banks had the liabilities about which the auditors sought assurance. They were therefore trading during that period knowing they could not meet their obligations. That resulted in their creditors being defrauded - we paid the bill as a country and the government was undoubtedly a creditor at the time. The government could rightly bring the charge against the directors involved, in my opinion.
But they have chosen not to do so. Why?
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“Trashing the economy” is not a criminal offence.
@Raul
Well it should be. It hurts more people than a bunch of stinky hippie students with placards…
Perhaps because the banks were not insolvent according to the dictionary definition. For example, Northern Rock had a surplus of assets over liabilities of more than £2.5 billion when it was nationalised. Lloyds reported a gain on acquisition of £11 billion on the acquisition of HBOS.
The banks were not actually close to insolvency in the Companies Act sense. They were however well below their Tier 1 and Tier 2 capital adequacy requirements but that is a completely different matter. Northern Rock and Bradford & Bingley both theoretically had an excess f assets over liabilities, but they ran out of funding. Running an excessive liquidity gap is not covered by the Companies Act, but when both banks ran into trouble because they couldn’t get market funding they both sought help from the FSA and the Treasury. I don’t see that the directors were notably at fault over that.
@MarkT
I think that if you check you will find that Barclays, HBOS, HSBC and Lloyds (I haven’t looked at RBS data because I don’t like RBS) were above their Basel Tier 1 and Tier 2 capital adequacy requirements: they raised new capital because Darling’s Treasury decided that the capital levels set by Brown’s Treasury were too low and demanded that they increase their capital forthwith.
I think some of you need a serious lesson in solvency
First these banks, as the House of Lords now agree, had failed to provide for their bad debts under IFRS and as such had bogus assets on their balance sheets
Second, as their auditors knew, which is why the House of Lords exposed it, balance sheet worth is not a measure of solvency – cash flow is – and they were out of that
In other words you reveal profound ignorance in your commentary
That may have been shared by the directors of the banks in question, but that would compound their guilt
I hope they don’t hire you for the defence
@ Richard Murphy
The £2.5 billion was the figure provided, after all the write-downs that he could pretend to believe in, by the Accountant appointed by Darling to try to minimise Northern Rock’s net assets to justify expropriating Northern Rock with no compensation. The £11 billion was the figure after Lloyds Bank wrote down all the loans that it could query in the HBOS accounts so as to make its future profits look better when the provisions turned out to be unnecessary.
Cash flow is not a measure of solvency. The dictionary definition does not mention cash flow. Are you, perhaps, looking at the definition of illiquid?
The terms of reference of the Bank of England make it the lender of last resort to a banking institution with temporary liquidity problems so actually the balance sheet IS the relevant measure of solvency (not that any of Barclays, HBOS, HSBC, Lloyds had liquidity problems either).
It would be appreciated if you would bother to check with reality before slinging out unjustified insults.
@John77
Respectfully you show your lack of knowledge. Cash flow is very definitely a measure of solvency – the ultimate test, as every auditor knows
And I suggest you raed the HoL report today
I think you’ll find they agree with me
I did work with Tim Bush on evidence they found compelling
Respectfully – stop wasting your breath – you’re wrong
@ Richard Murphy
Cash Flow is dealt with by IAS 7
Insolvency is defined as inability to satisfy creditors or discharge liabilities, either because liabilities exceed assets or because of inability to pay debts as they mature.
If you want to say sufficiency of cash is a measure of solvency, then I should not argue, but that is not the same as cash flow as every auditor *should* know. a company can have positive cash flow but be bankrupt if it has to write-off an asset which it was using as a security for its borrowing. Burmah Oil had positive cash flow in 1974 (as well as a surplus of assets over liabilities). It is equally possible for a company to have negative cash flow to the tune of tens of millions of pounds and be happily solvent.
@John77
So you agree then – inability to pay is the issue
That’s cash
And fo curse balance sheets tell other stories – but the fact was the banks could not pay – so they were bust
That’s the beginning and end – so you’re wrong and I will not be allowing a reply for that reason