(Left: after a hard day spent defending the honour of Mme Néolibertine, Romeo Dragula collapses onto her bed, exhausted)
I suppose passing a stress test wouldn’t be that difficult if £11bn of your assets were the result of fraudulent insurance selling. But that’s what has been revealed as the bill Lloyds Bank now has to pay….so you’d think in that case, passing any stress test would be very hard indeed.
I mean just to put this into perspective, in 2013 the Group made £6.2bn profit. So they’re going to be £4.8bn adrift after paying the fine aren’t they? Well, no – not really, because the balance sheet shows that deposits grew by £13.8bn, and assets by £7.5bn…and as the latter are loans, FRB accounting rules allow the bank to, er, double their assets by simply writing the amount they lent twice. Of course, if the loans go bad, then well – that’s a different story. Or rather, the auditors will need another story.
Mind you, Lloyds had other expenses as well. For instance, the Group invested £600 million in ‘being the best bank for customers’, so God alone knows what might have happened if they hadn’t. Although don’t forget that there are a thousand millions in a billion.
To put that in turn into perspective, the scale of the Lloyds insurance mis-selling (they mean ‘fraud’ actually) was so enormous, people were swindled out of the equivalent of £220 for every adult in the UK. One is reminded of the old Tommy Cooper joke: “Every five minutes, a man gets knocked down in Britain. And he’s getting bloody fed up of it”.
The entire banking system is the sort of off-colour joke that even today you couldn’t tell in remotely civilised company. Think it through:
I give them my income every month, absolutely free, and they immediately start churning it into the overnight markets to make an infinite profit margin…anything /0 being by definition infinity. If I go over my deposit limit, they will charge me a rate of interest way past usury, even though bond interest-rate Zirp has been in operation for the last five years. Whenever they are caught cheating – be it insurance fraud on a national scale or merely bankrupting the powerhouses of our future economy – they ‘set aside’ a fine. The only man to go to jail in recent history was Bernie Madoff, and that was because he made off with rich people’s money. Bankers’ money.
But still they managed to pervert derivative futures so completely over thirty years, it cost the world in just the 2008-10 period $23 trillion to bale them out. Within six months, they were paying themselves vast bonuses again. Now we aren’t customers any more, we’re creditors. So when (not if) the excrement hits the air-conditioning again, the idea is (as in Cyprus) to steal our deposits, and then depict us all as rich gangsters who had it coming. This despite the now accepted certainty that at the last crash, all of them connived with their intermediaries to bend the Libor rate in their favour.
I’m left wondering exactly whose stress should be tested here – ours or theirs. But even this feeble attempt by the EBA aka Mario Draghi to make eurozone investors look good is being criticised across the board, on the entirely sensible grounds that it was a massive assumption for the test to assume 1% inflation, when it is already down to 0.3% in the ezone. To ignore the risk of deflation is, said one senior banking observer, “to leave out a fundamental part of due diligence”.
But banks can profit from anything in the end. As I predicted yesterday (see left) my bank’s shares rose sharply after the results emerged. It passed ‘with flying colours’…by reversing a negative 3-year deposits record during the test period. How they did it has already been discussed in these columns.
I think it’s time to bring on playwright Georges Feydeau, and make a proper farce out of it. In the boudoir of Mme Néolibertine, arch despoiler Romeo Dragula is giving the lady a good seeing to when they hear the lock turn in the front door.
“Ciel – mon mari!” she exclaims, “Depeche-toi Romeo…vite…à la fenêtre!”
But Monsieur Dragula smiles, calmly dresses and descends the stairs to confront her husband Arnaud Néolibertine.
“Ah, mon vieux,” he hisses, “I have been testing the stress capacity of your bed. I declare it to be entirely satisfactory.”