Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Currencies, Equities

Scary movie sequel beckons for eurozone markets

Just as horror movies can spook fright nerds more than they expect, so political risk is sparking heightened levels of anxiety among seasoned investors. Investors caught out by Brexit and Donald Trump are making better preparations for political risk in Europe, plotting a route to the exit door if the unfolding story of French, German […]

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Dollar rises as markets turn eyes to Opec

European bourses are mirroring a tentative Asia session as the dollar continues to be supported by better US economic data and investors turn their attention to a meeting between Opec members. Sentiment is underpinned by US index futures suggesting the S&P 500 will gain 3 points to 2,207.3 when trading gets under way later in […]

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Basel Committe fail to sign off on latest bank reform measures

Banking regulators have failed to sign off the latest package of global industry reforms, leaving a question mark hanging over bankers who complain they have faced endlessly evolving regulation since the financial crisis. Policymakers had hoped to agree the contentious new measures at a crunch meeting held in Chile this week, but a senior official […]

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Banks, Financial

Banking app targets millennials who want help budgeting

Graduate debt, rent and high living costs have made it hard for millennials to save for a house, a pension or even a holiday. For Ollie Purdue, a 23-year-old law graduate, this was reason enough to launch Loot, a banking app targeted at tech-dependent 20-somethings who want help to manage their money and avoid falling […]

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Archive | November, 2016

Eurozone compact

Posted on 31 January 2012 by

This must be what they mean by Disziplin. Germany’s reading of the debt crisis is that it is the fault of profligate governments. Monday’s “fiscal compact”, with its coercive imposition of budgetary orthodoxy, debt sustainability and economic convergence, is meant to bring them to heel. That should provide Angela Merkel, the chancellor, with the political cover she needs to increase Berlin’s commitment to addressing the crisis. The question now is whether Germany is ready to repay the favour to the eurozone.

The compact is a reworking of the discredited Maastricht treaty. Among other things, this stipulated that budget deficits could not exceed
3 per cent of gross domestic product and that a nation’s debt should ideally be no more than 60 per cent of GDP. Germany itself undermined that agreement. The compact will be more securely enshrined in law, assuming that it will be ratified by the 25 countries subscribing to it. It encourages governments to aim for structural budget deficits of no more than 0.5 per cent of GDP. That is a blueprint for economic stagnation. Citigroup is forecasting a recession in the eurozone in 2012/13 and annual growth of only 1 per cent between 2014 and 2016. Happy days.

Having imposed coercive austerity on her fellows, Ms Merkel now needs to don the armour they handed her and to look the sovereign debt crisis in the eye. The fiscal compact makes it more likely that indebted countries will need more emergency funding while markets remain closed to them. Berlin must be ready to underwrite that funding, through reinforced bail-out mechanisms or joint eurobonds. Germany should allow the European Central Bank greater leeway to intervene in the secondary bond markets. And it must reconcile austerity with the need for reviving the eurozone. The compact is a big “take” by Germany. Now it’s time for some “give”.

E-mail the Lex team in confidence at lex@

European shares end the month on a high

Posted on 31 January 2012 by

Solid gains for insurers ensured the FTSE Eurofirst 300 enjoyed its best January performance since 1998.

The FTSE Eurofirst closed 0.6 per cent higher on Tuesday at 1,037.05, taking its gains over January to 3.6 per cent.

Dutch insurer Aegon rose 4.4 per cent to €3.71 after JPMorgan released a bullish note on the stock, raising its target price from €4.72 to €5.32. ING
, meanwhile, continued its strong start to 2012, gaining 3.6 per cent to €6.96 as the AEX rose 0.9 per cent to 318.47.

In Paris, the CAC 40 index rose 1 per cent to 3,298.55. French utility Veolia Environnement
gained 5.5 per cent to €8.69 as Morgan Stanley upgraded the stock to “equal weight” from “underweight”, citing reduced debt risk.

An analyst at another broker said: “Given that the stock has been hated so much – and has tasted a wave of downgrades ever since its first-half results – this is the bounce you would expect following an upgrade from a serious analyst.”

fell 0.4 per cent to €17.45 as concerns surrounding the French retailer’s outlook persisted despite its decision to replace its chief executive.

Mike Tattersall, analyst at UBS, said: “We remain very bearish on Carrefour’s prospects given the trading trajectory it is experiencing in Europe, while recent trends in China also provide cause for concern.”

European financials rallied after a tough start to the week for banks. Société Générale
recovered 3.3 per cent, closing at €20.37.

Banks with significant exposure to Europe’s periphery were among the best performers, however, as “risk on” sentiment triggered gains for Italian and Austrian lenders. Erste
rose 2.9 per cent to €16.79.

topped the FTSE Eurofirst 300 after it gained 6.3 per cent to close at €3.79. The FTSE MIB gained 0.5 per cent to 15,828.05.

The Xetra Dax edged up 0.2 per cent to 6,458.91. Steelmaker ThyssenKrupp
jumped 2.7 per cent to €21.67 after it agreed to sell its stainless steel business to Finland’s Outokumpu Oyj
in a deal worth €2.7bn. Outokumpu’s shares fell 14.8 per cent to €6.27 following the announcement.

The Ibex 35 lagged behind its peers, falling 0.1 per cent to 8,509.2. Spanish oil group Repsol
fell 2.4 per cent to €21 after reports that the Argentinian energy company YPF
, in which Repsol has a 58 per cent stake, might be nationalised.

Consumer lending falls sharply

Posted on 31 January 2012 by

Banks reduced their exposure to consumer loans last month by the biggest amount on record, figures from the Bank of England suggest.

After climbing steadily for most of the year, net consumer lending fell by £377m in December, the sharpest monthly drop since records began in 1993. “Other loans and advances” dropped sharply while credit card debt remained fairly stable.

The drop does not reflect a decline in new lending to consumers, since gross lending rose in December. There could be several explanations for the decline in net lending. Banks might have sold portfolios of loans to other institutions, or written off the value of some loans they think will never be repaid. Alternatively, Britons might have decided to pay down more of their existing debt, though this would be surprising in light of recent figures suggesting Britons spent heavily in the shops over Christmas.

Corporate Britain showed some appetite for fundraising, meanwhile – but not from the banks. Private non-financial companies raised a net £1.3bn last month, largely by tapping the capital markets. In the same period they repaid a net £2.4bn in loans from UK banks.

“It appears that companies are favouring bond issuance over bank loans for the small amounts of finance they are raising,” Brian Hilliard, an economist at Société Générale, said.

So-called M4, a measure of the broad growth of money in the economy, fell by £11.5bn or 0.7 per cent last month. M4 also contracted slightly on an annualised three-month basis, after expanding slowly for most of last year.

David Page, an economist at Lloyds Bank, said: “Given that this period saw the second full month of renewed quantitative easing, which should be boosting cash holdings, these developments do not bode well.”

Separately, banks approved a slightly higher number of mortgages and remortgages last month. Both the number and value of mortgages remain fairly steady and subdued, reflecting the anaemic state of the housing market in the aftermath of the recession.

Greek debt hopes strong enough to sustain euro

Posted on 31 January 2012 by

The euro rose against the dollar on Tuesday following hopes from investors that a Greek debt deal would be reached by the end of the week.

The single currency moved above $1.32, gaining 0.5 per cent, after Lucas Papademos, the Greek prime minister, said following Monday’s EU summit that he was seeking to reach a deal with Greece’s creditors before Friday.

Analysts said that the outcome of the EU summit, with 25 out of 27 EU members signing up to a new fiscal deal, had little impact on the single currency.

Reports that European banks were set to borrow more from the European Central Bank at the next longer-term refinancing operation, or LTRO, in February also gave risky assets a boost, as investors hoped the greater liquidity would be used by banks to buy government bonds and ease Europe’s government debt woes.

Commodity currencies bounced back from losses the previous day. The Australian dollar rose 0.7 per cent to $1.0666 while the New Zealand dollar gained 1.2 per cent to $0.8280. The Canadian dollar rose 0.4 per cent to $1.0018, a three-month high against the US dollar.

The pound rose 0.4 per cent against the dollar to $1.5770 and 0.1 per cent against the euro to €1.1962.

The yen rose to a fresh post-intervention high against the dollar, prompting Jen Azumi, Japanese finance minister, to warn that Tokyo was ready to intervene again in the currency if necessary. The Bank of Japan last stepped in to weaken the yen on October 31 when the dollar hit Y75.55. The dollar reached a low of Y76.14 on Tuesday.

The euro continued to lose ground against the Swiss franc, with traders remaining on high alert for any fresh intervention from the Swiss National Bank to weaken the franc. The euro lost 0.1 per cent against the franc to SFr1.2046, but remained slightly above its low of SFr1.2034 the previous day.

Eurozone jobless rate at euro-era high

Posted on 31 January 2012 by

Unemployment in the eurozone reached a new record last month, in a further sign of the currency bloc’s faltering economic recovery.

Joblessness in the 17 countries that use the euro rose to 10.4 per cent at year end – the highest level since the single currency was introduced a decade ago, according to seasonally-adjusted data from the European Union’s statistical arm. The 0.1 percentage point increase from November’s estimate compares with an unemployment rate of 9.5 per cent a year earlier.

A 20,000 rise in the number of claimants marks the eighth consecutive monthly increase, though the rate is down from an average of just over 100,000 new jobless per month since May.

A small fall in Germany, from 5.6 to 5.5 per cent, was offset by rises in much of the debt-laden periphery of the eurozone, including a 0.4 percentage point rise in Portugal to 13.6 per cent. France and Italy both experienced 0.1 percentage point increases, to 9.9 per cent and 8.9 per cent respectively.

Youth unemployment unexpectedly fell 0.1 percentage points, although it remains more than twice the overall jobless rate, at 21.3 per cent.

National data from Germany – also out on Tuesday – showed a larger-than-expected drop in joblessness in January, from 6.8 per cent to 6.7 per cent, the lowest level since reunification in 1991.

The eurozone unemployment rate compares unfavourably with the situation in the US, where joblessness fell to 8.5 per cent in December.

The deteriorating employment situation – particularly youth unemployment – has become a key focus for policymakers, featuring prominently at the World Economic Forum in Davos and during Monday’s summit of European Union leaders.

Interactive graphic:
Youth unemployment

Youth unemployment

This graphic shows how unemployment levels for people aged 24 and below have fluctuated since 2005 and which countries have been most affected.

There are now 23.8m jobless across the 27-country EU, one of the motivations for Monday’s summit that was ostensibly dedicated to “growth and jobs”. The measures agreed include reprioritising EU development funds to promote employment and national governments submitting “national job plans” to Brussels.

Beyond being a political headache for leaders, the persistently high unemployment in the euro area is keeping domestic demand subdued, depriving the ailing eurozone economy of a key source of growth, economists say.

“The high and rising unemployment rates in the periphery cast a dark cloud over growth prospects in the euro region,” said Martin Van Vliet, economist at ING.

This view was reinforced on Tuesday by the German December retail sales data, which unexpectedly fell in December. The notoriously volatile indicator fell 1.4 per cent in real terms on the month, and 0.9 per cent on an annual basis, data from the Federal Statistics Office showed.

The dire job market is seen as one factor behind the European Central Bank’s loose monetary policy but it could now impact the very core of European economic governance.

“The elevated unemployment rates in southern Europe are partly caused by structural factors but also reflect the pain inflicted by the draconian austerity programmes. In that regard, one should welcome any decision to relax unrealistic fiscal deficit targets, as being contemplated in the case of Spain,” Mr Van Vliet said.

Santander annual profit falls 35%

Posted on 31 January 2012 by

Net profit at Spain’s Santander, the eurozone’s biggest bank by market capitalisation, fell 35 per cent last year to €5.35bn from €8.18bn in 2010 as the Spanish property market collapse and the eurozone debt crisis continued to erode earnings.

Santander released results on Tuesday showing it barely made a profit in the final quarter of last year – net profit was €47m compared to €2.10bn a year earlier – after it set aside a €1.81bn fourth-quarter gross charge to clean up bad property loans in Spain.

Over the year as a whole, the bank made total net extraordinary provisions of €3.18bn, largely because it is anticipating new provisioning rules likely to be announced on Friday by the centre-right government that took power in Spain in December.

Of the total, €1.53bn came from realised capital gains, and €1.67bn from the fourth-quarter charge on a net basis.

The Spanish government of Mariano Rajoy, prime minister, has signalled it will increase provisioning requirements for bad and doubtful property assets from 30 per cent of book value to more than 50 per cent.

Santander said it had already raised coverage for repossessed property from 31 per cent to 50 per cent with the latest provisions.

Unlike some smaller Spanish lenders, Santander has remained profitable through more than three years of crisis in Europe because of its exposure to overseas markets.

For the first time, Latin America accounted for more than half of group profits as earnings from Spain, Portugal and the UK fell sharply.

Santander said it had realised capital gains by selling some assets “in a selective manner” without affecting the generation of pre-provision profit.

Net interest income rose 5.5 per cent to €30.82bn.

Rally momentum fades after US GDP data disappoints

Posted on 31 January 2012 by

Friday 2115 GMT. The 2012 broad risk asset rally displayed a mild bout of fatigue as attention returned to the eurozone crisis amid Greek debt negotiations, and after data showed the US grew slightly less than expected in the fourth quarter.

Also adding to the cautious tone on Friday, rating agency Fitch took action on six eurozone sovereigns, cutting the long-term ratings of Italy, Spain and Belgium.

However, selling was relatively meagre as disappointment over the world’s biggest economy is tempered by this week’s reconfirmation that the US Federal Reserve stands ready to provide additional support if required.

The FTSE All-World equity index was slightly lower by 0.1 per cent, but still up about 6 per cent this year. Industrial commodity prices are softer and Treasuries are adding to recent gains, with benchmark 10-year yields down 3 basis points to 1.90 per cent.

The FTSE Eurofirst 300 was down 0.7 per cent, and the S&P 500 in New York was 0.1 per cent lower by closing time in New York.

Before faltering late in the day, Wall Street’s benchmark index on Thursday touched its best level since July, lifted by an unexpectedly dovish statement from the US central bank, which said interest rates would remain “exceptionally low” until at least late 2014 and also didn’t rule out further asset purchases to help the economy.

The Fed news joined mostly better US economic data of late and reduced signs of eurozone stress – as the sovereign bond yields of Italy and Spain retreated from unsustainable levels – to propel global growth-focused assets to multi-month highs.

Investors shifted money back into “growth assets” with flows into emerging markets equity and bond funds surging to levels last seen in the second quarter of 2011, according to data by EPFR.

But “bull” markets don’t go up in a straight line, and Friday witnessed a more contemplative mood.

Copper, for example, was up 0.4 per cent to $3.92 a pound early on Friday, its most expensive in more than four months, before pulling back to $3.88 after the US GDP data broke.

Also in traders’ thoughts were the tortuous negotiations between Athens and its creditors, the failure of which may reignite concerns about the sovereign debt exposure of the European financial system.

Investors are also wary of the message bond markets are sending about the likelihood of a default by Portugal, with yields and credit default swaps at extreme levels.

Still, for now the euro is relatively stable and holding on to much of its recent gains. Since hitting a 16-month low two weeks ago, the single currency has rallied more than 3.5 per cent and was up almost 1 per cent on the day at $1.3226.

Latest data from the Commodity Futures Trading Commissioned released on Friday showed currency speculators raised bets in favour of the US dollar and raised their net euro short positions to a straight record high in the latest week. CFTC data, a gauge for future currency moves, was compiled before this week’s Fed announcement, which triggered a sell-off in the US dollar.

On European government debt, Italian 10-year bond yields were down 17 basis points to 5.88 per cent, their lowest levels since early December.

Additional reporting by Jamie Chisholm in London


Trading Post

The news that the Federal Reserve would be “looser for longer” and stands prepared to undertake QE3 if required had the expected positive impact on many risk assets, writes Jamie Chisholm.

But one move stands out.

Gold spurted higher as bullion revelled in the prospect of more dollar liquidity. Crucially, for gold bugs, it managed to escape the $1,666 an ounce level that provided resistance for several sessions.

Having reclaimed $1,700, gold is $1,740, comfortably back above the 200-day moving average of $1,647, and the refreshed narrative of quantitative easing will have bullion bugs again talking about the $2,000 mark.

For that to happen, it may be necessary – though arguably not imperative – for the dollar to endure a lengthy period of weakness.

But is that realistic? The euro’s move to six-week highs versus the buck is based not just on interpretations of Fed policy but also easing eurozone tensions – the latter is a bold bet given continuing disappointments.

In addition, there is also building talk that long-term yen strength may be on the turn after it briefly burst above Y78 this week – though it has since dropped back below Y77. A tricky one.


A week for euro trend-setting

Posted on 31 January 2012 by

There is an old investor saw that markets will take the route of most pain.

As colleagues note on these pages, we see this with regards to the euro, where many traders are suffering as the single currency confounds expectations. It last week hit a five-week high versus the yen, for example.


This phenomenon is no aberration. Strong consensus leaves markets vulnerable to opposite trends because the majority’s arguments are already well established and there are few new investors left to enter the trade.

So, will further pain be on its way for euro bears?

This week could prove crucial in establishing the next medium-term trend.

The euro’s previously tight correlation with risk appetite has faded somewhat of late but it is still likely to benefit from better global economic news. February’s national surveys of manufacturing activity due on Wednesday may hold the key, alongside Friday’s US non-farm payrolls data for January.

But Monday’s slip shows the main driver is eurozone woe. A relatively harmonious European Union summit (well, it’s possible) and a Greek debt deal over the next few days could see the euro enjoying short-covering propulsion.

Low rates: the drug we can all do without

Posted on 31 January 2012 by

Low interest rates and novel forms of monetary accommodation, such as quantitative easing, have become a panacea to economic problems. The US Federal Reserve has committed to holding rates around zero for the foreseeable future. Faced with deep-seated economic problems, other central banks are likely to follow.

Financial markets have generally reacted positively to low rates, pushing up asset prices. However, low rates point to a worrying lack of economic growth and the increasing risk of deflation. Indeed the relationship between rates and economic activity is tenuous. The cost of funds is only one factor in the complex drivers of demand.

In the housing market, demand depends on many factors – the level of required deposit, existing home equity (the price of a house less outstanding debt), the ability to sell a current property, income levels and employment security. In the absence of growing demand for their products, businesses are unlikely to borrow to invest in new capacity based purely on the low cost of debt.

In reality, low interest rates create economic distortions, especially where real interest rates (nominal rates adjusted for inflation) are low or negative.

Low cost of debt encourages substitution of labour with capital in the production process. Given 60-70 per cent of activity in developed economies is driven by consumption, this reduces aggregate demand as employment and income levels decrease.

Low rates favour borrowing, encouraging substitution of debt for equity in financing structures, increasing financial risk. Where companies and nations are over extended, this decreases incentives to reduce debt. In fact, low rates which lower coupon payments are economically identical to a disguised reduction of the principal amount of the loan.

Low rates discourage savings, creating a disincentive for capital accumulation which would reduce overall debt levels. Lower earning on savings should encourage spending stimulating economic activity but may perversely encourage greater saving to provide for future needs reducing consumption and demand. For an individual saving for retirement, a drop in interest rates from 5 per cent to 4 per cent requires an 18 per cent increase in savings each year to reach the same target sum over 30 years.

Low rates also increase the funding gap for defined benefit pension funds. In the US, for every 1 per cent fall in rates, pension fund liabilities increase by around $180bn.

Low rates also feed asset price inflation. Low costs of borrowing encourage investors to seek investments with income, feeding recent demand for high dividend paying shares and low grade debt. A resurgence of structured products where investors take on additional risk, which they have not fully understood, to generate higher income is driven by low rates. In previous cycles, this has led to large losses and costly disputes between investors and dealers. In this way, low rates encourage mispricing of risk, creating asset bubbles.

Minimal opportunity costs allow investors to hold assets that pay no income in the hope of price increases, evidenced in demand for commodities and alternative investments such as art works. Money tied up in non-productive investments driven by artificially low rates reduces the flow of capital and economic activity.

Low interest rates also provide an artificial subsidy to financial institutions, allowing them to borrow cheaply and then invest in higher yielding safe assets such as governments bonds. Assuming bank deposits of around $6tn and a difference between borrowing costs and government bond rates of around 2 percentage points, this equates to a transfer to the American banking sector of around $120bn.

Low rates do not necessarily increase the supply of credit as risk aversion and higher returns on capital encourage banks to invest in government securities, eschewing loans. In the US, bank holdings of cash and government securities currently exceed the outstanding volume of commercial and industrial loans.

Internationally, low interest rates distort currency values and also encourage volatile and destabilising short term capital flows as investors search for higher yields.

A sustained period of low rates, like the one the world is experiencing, makes it difficult to increase the cost of borrowing. Levels of debt encouraged by low rates become rapidly unsustainable when they increase as evident in Europe. This reinforces the financial distortions implicit in the policy.

For the moment, policymakers are relying on the advice of actress Tallulah Bankhead: “Cocaine isn’t habit forming. I should know – I’ve been using it for years.” But reliance on low interest rates, like all addictions, is dangerous. It is also ineffective in addressing the real economic issues.

Satyajit Das is the author of ‘Extreme Money: The Masters of the Universe and the Cult of Risk’ (2011)

Hounded Hester exposes RBS to pack of meddlers

Posted on 31 January 2012 by

There comes a point in a traditional fox hunt when the fox, hearing hounds baying and hooves thundering close behind, must know he is bested. Stephen Hester, chief executive of Royal Bank of Scotland, who is sometimes pictured in hunting garb alongside critical articles, reached that point himself on Sunday. Like Brer Fox, Mr Hester had become prey to an overwhelming enemy. Better to surrender his £1m share bonus than be torn limb from limb by politicians and media.

Mr Hester aims to be remembered for transforming RBS, which is 83 per cent owned by the state, into a bank that private investors will want to own in its entirety. Suffering a motion of censure in parliament for taking a pay-out contributing only modestly to his wealth was not part of that plan.

However, his capitulation will make his job harder. It proves that UK Financial Investments, the arm’s length body that holds government stakes in RBS and Lloyds, cannot insulate either bailed-out bank from politics. The danger is that interventions from MPs bloodied by their victory over Mr Hester will weaken both banks, extending the timetable for selling government-held shares and reducing the price that can be achieved. Attracting good staff would become difficult.

RBS chairman Sir Philip Hampton may hope to forestall bonus controversies by diminishing the role of the remuneration committee and making pay-outs automatic when executives beat published performance targets. But even then, a culture gap means that rows remain likely. In the City, broadly speaking, you earn a bonus that is a big part of your pay just for doing your job. For employees of most organisations, bonuses are occasional, smaller pay-outs for outstanding performance. That unhelpful benchmark implies that no chief executive of a struggling bank should get a bonus, even if he was parachuted in as a troubleshooter.

The going is now good to firm for the City’s enemies in Westminster. Barclays boss Bob Diamond and John Hourican, head of investment banking at RBS, will be targeted next. One hopes for the sake of both men that they have never been photographed in hunting kit.

Momentous machines

News that BlueCrest Capital, a big hedge fund business, is floating shares to invest in computerised asset manager BlueTrend, could have been timed better. Man Group, owner of AHL, the City’s best-known cyber investor, announced a 7 per cent loss for 2011 not so long ago. BlueTrend, while unrelated to Deep Blue, the chess-playing computer created by IBM, bears a family resemblance to AHL in a fondness for momentum strategies. It aims to spot trends in financial markets early and exploit them before they evaporate.

BlueTrend did better than AHL last year. But a return of 1 per cent still provides little buttressing for a compound annual growth that has averaged almost 17 per cent a year since 2005. Like AHL, BlueTrend gets a nasty migraine in its motherboard during markets volatility of the kind experienced last autumn. Both programs can do well in rising markets and superbly in a crash.

Investors in the shares of BlueCrest BlueTrend will be spared the obligation to scrutinise wider business strategy. The company is a feeder fund, whose shares should rise and fall roughly in line with BlueTrend’s net asset value. All that shareholders need to decide is whether momentum itself has momentum. Easy.

Unreliable emissaries

Royal Bank of Scotland has added to its crimes against humanity by selling its aircraft financing division to an underbidder this month. The bank agreed to take $7.3bn from Sumitomo Mitsui in preference to a slightly higher offer from the China Development Bank. However, this scandalous waste of taxpayers’ money looks less scandalous if you consider that CDB negotiators reputedly failed to turn up for important meetings. Reading between the lines, RBS also suspected they could not be taken seriously because shadowy Communist party bosses were the real decision makers.

That fear is understandable. Chinese representatives of state-owned businesses encountered by Lombard in the UK have often resembled Peruvian exile Paddington at the point when he still bore the luggage label “Please look after this bear”.

Interrogation revealed that party officials had shoved them on to international flights with instructions to promote their brands, but without explaining what a brand was. The miracle of Chinese state capitalism has been achieved at a terrible cost in Chinese bosses forced to blunder around the world giving their business cards to the wrong people.