Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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Archive | November, 2016

Fitch warns on US housing finance reform

Posted on 28 February 2013 by

The profitability and dominance enjoyed by US-backed mortgage giants Fannie Mae and Freddie Mac will limit policy makers’ motivation for winding them down, Fitch Ratings has said.

The warning comes as appetite to transform the state-backed companies into private sector entities wanes in Washington, where wrangling over budget, insurance and tax issues is likely to dominate the legislative calendar in the months to come.

    The Obama administration two years ago outlined three options to reform the US government’s role in funding residential property. Since then Treasury officials have described conditions that must be met when fashioning a reform of the US housing finance system, but they have declined to settle on a specific plan.

    Members of Congress have introduced legislation to wind down Fannie Mae and Freddie Mac and set up a new system to fund home mortgages, but those bills have gone nowhere.

    With the US housing sector in recovery, Fannie Mae and Freddie Mac are enjoying record profits thanks to rising home prices and stricter underwriting that has led to fewer defaults.

    On Thursday, Freddie Mac reported $4.5bn in net fourth-quarter income, raising its full-year earnings in 2012 to $11.0bn. It posted a $5.3bn net loss in 2011.

    The White House is expected to state in annual budget documents to be made public in the coming weeks that Fannie Mae and Freddie Mac will be profitable enough in the coming years to begin helping to reduce the federal budget deficit, observers say.

    Reforming the companies in a way in which their profits do not flow to US taxpayers, therefore, would be seen as increasing the deficit.

    That could further sap the need for reform, say some lawmakers who wish to reform the companies and lessen the role of the state in backing home mortgages.

    In a report on Thursday, Fitch claimed that the fact that Fannie Mae and Freddie Mac continue to play a key role in financing home mortgages limits the political motivation to pursue “far-reaching” reforms.

    More than nine of every 10 new home mortgages is backed by the US government. About half of all new home loans are backed by Fannie Mae and Freddie Mac.

    The rating agency added that uncertainty over pending proposed rules governing lending practices and bank capital “continues to be an important constraint and private appetite for mortgage assets is likely to remain muted”, thus strengthening the case for why Fannie Mae and Freddie Mac will continue to dominate US housing finance in the near-term.

    Banks fear damage from EU bonus cap

    Posted on 28 February 2013 by

    Leading bankers and investors have warned that an EU bonus cap for banks poses a competitive threat to Europe’s finance industry.

    Executives at large European banks said they were at risk of losing key traders and managers to US and other international rivals after the EU provisionally agreed on a 1:1 bonus-to-salary ratio. With shareholder approval, the ratio can rise to 2:1 in what pay experts called the harshest curb on private sector pay globally.

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      “This will seriously harm European competitiveness and have a negative impact on the real economy,” said Simon Lewis, chief executive at the Association for Financial Markets in Europe, a trade body for investment banks.

      The regulatory affairs head at one bank said the curbs had left him “speechless”. “This is big stuff,” he added. “This wrecks the model of keeping salaries low.” Another executive said: “People want to move already.”

      Senior European bank executives have spent the past few weeks trying to persuade EU governments to change the proposal so that it would only apply to banks’ European operations. As drafted, Deutsche Bank staff will be subject to the ratio no matter where they work. The same curb, however, will only apply to Morgan Stanley’s Europe-based bankers.

      Wall Street banks, while also opposed to the cap, are already assessing the benefits of a wider shake-up imposed on their competitors. “It’s going to hurt all of the Swiss and German banks from doing businesses in the US and it’s going to make us all distort compensation in Europe, which won’t be that bad because it’s not a majority of our employees,” said a senior US bank executive.

      In London, Chancellor George Osborne was scrambling to launch a rearguard action against any cap, as senior bankers warned that any proposed legislation threatened London’s competitiveness as a financial centre.

      The proposal triggered anxiety that non-European banks would move their UK-based operations elsewhere. Senior Treasury officials made urgent inquiries around the City’s top institutions as they assessed the fallout from the curbs.

      Britain will have a chance to overturn what it views as the most damaging parts of the curbs at a meeting of finance ministers on March 5. But a clear majority of EU states – including Germany – supports the provisional deal as the best available given the urgency of the need to implement the EU’s capital rules.

      One priority for the UK will be preventing the bonus rules from applying to bankers working outside Europe for London-based banks, such as HSBC or Standard Chartered.

      “We have major international banks that are based in the UK but have branches and activities all over the world, and we need to make sure that regulation put in place in Brussels is flexible enough to allow those banks to continue competing and succeeding while being located in the UK,” David Cameron, prime minister, said.

      London mayor Boris Johnson called the bonus cap “possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman Empire”.

      Additional reporting by Tom Braithwaite in New York and David Oakley and George Parker in London

      US money market funds warm to eurozone

      Posted on 28 February 2013 by

      The amount of money being allocated by US money markets funds to eurozone banks hit the highest level for more than a year, in a sign of how much investor sentiment towards Europe has thawed in the wake of central bank action.

      New figures from Fitch Ratings show that as of the end of January, the exposure to eurozone banks by the 10 largest US prime money market funds hit 14.5 per cent of assets under management, the highest level since October 2011 and a 90 per cent jump on a dollar basis since the low-point last June.

        For the seventh consecutive month the funds increased their allocations to banks in France, making it the largest single-country exposure in the eurozone for the second month in a row.

        US money market funds have traditionally been a key source of short-term dollar funding for banks across Europe but in 2011 they were one of the first investor groups to withdraw as the crisis in the eurozone escalated.

        Their return to the eurozone banking sector is a good indicator of the renewed confidence in the region in the wake of intervention by the European Central Bank last year.

        A promise by Mario Draghi, president of the ECB, to do “whatever it takes” to save the euro and the launch of a government bond-buying programme by the ECB aimed at ailing eurozone countries last September encouraged international investors back to the region and triggered a months-long market rally.

        Robert Grossman, head of macro credit research at Fitch, said there were indications that US money market funds were becoming less risk averse. Funds are more willing to hold unsecured debt and, in the case of French banks, more likely to hold longer-duration certificates of deposit than time deposits, which typically mature overnight or within a few days.

        Despite the steady upward trend, Mr Grossman said it was unlikely that the amount allocated by US money market funds to eurozone banks would fully regain their May 2011 levels, when nearly a third of their assets under management were invested in the region’s financial institutions.

        Banks were shocked by the speed and scale of the withdrawal of US money market funds in 2011. Since then, faced with regulatory pressures and weak growth, a number of lenders have offloaded or shrunk parts of their business and become less reliant on US money market funding.

        Recent data from the Bank for International Settlements show that French banks cut their international lending across all currencies by more than 25 per cent between June 2011 and the end of September 2012.

        BIS figures also show that Japanese banks over the same period increased their overseas lending. That shift is also reflected in the US money market funds’ allocations – two out of the three largest single bank exposures by the funds were to two Japanese banks, Mitsubishi UFJ Financial Group and Sumitomo Mitsui.

        EU to investigate Chinese solar-panel glass

        Posted on 28 February 2013 by

        The EU has opened an anti-dumping investigation into Chinese-manufactured glass for solar panels, broadening a trade fight with Beijing over renewable energy.

        The European Commission, the EU’s executive arm, opened the probe in response to a complaint filed in early February by a coalition of EU manufacturers known as EU ProSun Glass.

          The companies accused their Chinese rivals of benefiting from improper government subsidies, which allowed them to sell their goods below cost in the EU market. They are seeking duties of more than 100 per cent.

          Europe’s solar glass market only amounts to about €200m, making the case a relatively small one. Yet it comes amid an EU investigation into imported Chinese solar panels that is the bloc’s biggest ever – covering some €21bn in goods in 2011 – and has upset Brussels-Beijing relations.

          That case has also stirred a wider debate about the merits of imposing higher duties on Chinese imports, even if abuses are found. The European retailers that install solar panels argue that such a move would backfire by raising prices for consumers and forcing them to cut jobs.

          The commission declined to comment on the latest case. Under EU rules, its investigation could take up to 15 months.

          Solar glass is a thin film just a few millimetres thick that covers rows of solar cells. It requires higher levels of purity than typical window glass.

          The case is being spearheaded by InterFloat, a Liechtenstein company that opened a German plant in 2008. It claims Chinese competitors have more than tripled their share of the EU market to 27 per cent since 2010 by selling their glass at less than half the break-even point for European companies.

          EU ProSun Glass believes the lower prices were enabled, in part, by the provision of subsidised electricity, which accounts for about one-third of solar glass production costs. Its members are expected to expand the complaint to include allegations of illegal subsidies.

          Arrested GLG analyst is mining and metals head

          Posted on 28 February 2013 by

          The GLG analyst arrested on Wednesday as part of a new Financial Services Authority insider dealing probe is Carl Esprey, head of mining and metals, two people familiar with the investigation said.

          Mr Esprey, 33, and two other men who are also associated with UK fund managers were arrested and bailed without charge pending further investigation as part of a sweep that included searches of six London area premises by the FSA and police. He did not respond to a request for comment.

            Man Group, GLG’s owner, has confirmed that it has suspended an employee after his arrest on Wednesday in connection with an insider dealing probe. It declined to identify the employee but said the allegations had to do with his personal trading rather than work responsibilities.

            According to the FSA register, Mr Esprey has worked for GLG since 2008 and became inactive on the day he was arrested.

            GLG said in a press release last summer that Mr Esprey, a materials specialist, would be joining its new Asian equities team but remain based in London.

            He is a director of Laurel Heights, a limited partnership that provides services to GLG. Mr Esprey was ­previously included on a list of top buyside sector analysts compiled by advisory firm Brendan Wood International.

            According to Mr Esprey’s LinkedIn profile, he previously worked for BHP Billiton and Deloitte.

            St James’s Place dividend to boost Lloyds

            Posted on 28 February 2013 by

            Shares in St James’s Place hit all-time highs after the wealth-manager-cum-life-assurer disclosed plans to lift its dividend by a third – a decision that will give shareholder Lloyds Banking Group a £50m annual cash payout.

            The FTSE 250 company, in which state-backed Lloyds holds a 57 per cent stake, told investors to expect a similar dividend increase later this year, on the back of fresh inflows of client money.

              Presenting a 23 per cent rise in annual pre-tax profits to £135m, David Bellamy, chief executive, indicated that the company’s close relationships with wealthy clients had protected it from the woes afflicting the wider financial services sector.

              Vivek Raja, an analyst at Oriel Securities, said that these improving results strengthened the argument for Lloyds holding on to its stake in St James’s Place, which it inherited through its acquisition of HBOS in 2008.

              “The returns are getting better – and they are certainly better for Lloyd’s group returns,” he said.

              For at least two years, analysts have been speculating that Lloyds was preparing to offload its holding. The bank discloses annual results on Friday.

              Funds under management at St James’s Place, which sells a range of financial products to more than 200,000 people, rose more than a fifth in 2012 to £34.8bn.

              On the back of rising income garnered from the assets it manages, the group generated £92m worth of cash in 2012, up 37 per cent on a year ago.

              St James’s Place was benefiting from business written in previous years, said Mr Bellamy, explaining that distribution costs and other overheads tend to minimise initial cash generation.

              The company said it would pay a final dividend of 6.39p a share, giving a payout for the year of 10.64p – up 33 per cent on a year earlier. This is payable from diluted earnings per share, which were steady at 21.2p.

              Mr Bellamy indicated that the company might consider setting up a limited overseas distribution capability to serve wealthy British expatriates in places such as Hong Kong.

              St James’s Place said it was well placed to benefit from this year’s regulatory shake-up in the market for financial advice, as it has been hiring former independent financial advisers whose business has been by a new ban on commission payments.

              The number of St James’s Place partners – in effect sales agents – rose 8 per cent to 1,790 last year.

              Shares in St James’s Place rose 1.78p to 486.48p.

              Bankers fear Chinese push to head ADB

              Posted on 28 February 2013 by

              It has long been convention that an American heads the World Bank, a European runs the IMF and a Japanese sits atop the Asian Development Bank in Manila.

              But now that Haruhiko Kuroda will leave his position at the top of the Asian Development Bank to become governor of the Bank of Japan, western central bankers and academics are braced for the Chinese to launch efforts to install one of their own as Mr Kuroda’s successor.

                “The Chinese have long wanted [control of] the ADB,” said Eswar Prasad, a senior professor at Cornell University and a senior fellow at the Brookings Institution.

                Taro Aso, Japanese finance minister, made clear this week that Tokyo planned to fight any attempt by any other country to take the top job at the Manila-based ADB. “Japan will have to carry out election activity in order to secure the position to succeed ADB president Kuroda,” he told reporters. Mr Aso also said that Takehiko Nakao, Japan’s top currency diplomat, was among the candidates for ADB chief.

                Any such Chinese push would be likely to add to tensions between the two countries, already locked in a dispute over control of the Senkaku Islands in the East China Sea. It would also reinforce growing regional anxieties about China’s behaviour, with Beijing taking an increasingly prominent role in multilateral institutions in recent years.

                The International Finance Corporation, the private sector financing arm of the World Bank, recently recruited Cai Jinyong as its chief executive in an indication of Beijing’s growing profile.

                One likely Chinese candidate to head the ADB is Jin Liqun, at present the chairman of the supervisory board of China’s sovereign wealth fund and a vice-president at the ADB and the World Bank earlier in his career. Zhu Min, now a deputy to Christine Lagarde at the IMF and extremely well regarded, is also seen as qualified although he is likely to prefer to remain in Washington.

                While China has long used its teeming foreign reserves and its own policy banks, particularly the China Development Bank, to help its neighbours build their energy and transport infrastructure, there has been a backlash to this approach in recent months.

                “Nobody [in the region] believes in the peaceful rise of China anymore,” said the head of one local bank in Hong Kong.

                Beijing’s increase in military spending is part of the reason for those concerns. But so is the feeling that China’s economic relations with its neighbours are often colonial in nature, sucking in raw materials at cheap prices and then selling finished goods in return with little local investment.

                Some bankers worry that if China took the top job at the ADB, it would use its position to pursue its political agenda. In the past, China has lobbied against loans to places where it has territorial claims, such as in the province of Arunachal Pradesh in northeast India, which it claims does not belong to India at all.

                Staffers at the ADB respond that the Japanese used the bank to further their own agenda at a time when many Asians with memories of the second world war were uncomfortable dealing with Japan directly.

                The Japanese finance ministry has regarded the post as its preserve, staffing it with senior officials from its international side who have retired, leading to complaints in many cases that the occupant was too bureaucratic. At the same time, many potential candidates for the job have been reluctant to move to Manila, regarding it as a dangerous backwater.

                Lloyds to take ‘final’ £1.4bn PPI provision

                Posted on 28 February 2013 by

                Lloyds Banking Group will today take one of its highest quarterly charges to cover the mis-selling of payment protection insurance as it seeks to draw a line under the affair in its 2012 accounts with a £1.4bn provision.

                The number has doubled in the past three weeks as directors have decided to be extra cautious, people close to the bank said.

                  Lloyds has already set aside more than £5.3bn in PPI provisions, far more than any other UK bank, and the latest charge risks alienating investors.

                  In November, after Lloyds announced a £1bn PPI provision in third-quarter results, one leading shareholder warned: “We are reviewing our holdings in Lloyds. If PPI costs rise further, then that could tip the balance in our decision on whether to hold or sell our shares in the company.”

                  However, Lloyds chief executive António Horta-Osório is expected to signal that the £1.4bn provision for the fourth quarter of 2012 should be sufficient to cover any future PPI mis-selling costs, with no provisions anticipated for 2013.

                  In total, Britain’s biggest lenders have now set aside nearly £14bn to cover compensation for mis-selling PPI.

                  The rate at which new PPI mis-selling claimants are coming forward has slowed markedly in recent months, bankers said.

                  Lloyds is also expected to take a significant charge for mis-selling interest rate swaps to small businesses, with the total charge for 2012 rising to as much as £400m, although that is about half the level booked so far by Barclays and Royal Bank of Scotland, the other two big UK banks to have reported annual results so far.

                  RBS took a £450m PPI charge with its fourth-quarter results on Thursday, taking the total provision to £2.2bn.

                  Last month, the Financial Services Authority fined Lloyds £4.3m for delays in compensating customers for mis-sold PPI.

                  FSA rules say that compensation must be paid promptly. However, between May 2011 and March 2012, almost a quarter of customers who received decision letters on PPI redress received payment after the target of 28 days.

                  In 8,800 cases, Lloyds took more than six months to pay compensation.

                  The PPI mis-selling issue dates back to the time before Mr Horta-Osório was chief executive. Last month, his predecessor Eric Daniels infuriated current Lloyds management when he told the Parliamentary Commission on Banking Standards that the bank’s PPI behaviour had been unfairly criticised. The company had “best in class” controls and provided “the most generous product on the market”, he said.

                  RBS moves closer to privatisation

                  Posted on 28 February 2013 by

                  RBS©Getty

                  Stephen Hester has sent the strongest signal yet that
                  Royal Bank of Scotland could be ready for reprivatisation next year as the state-owned bank announced that a series of scandals had helped push it into losses of more than £5bn for 2012.

                  “The time when it can be privatised … is coming much closer,” the RBS chief executive said on Thursday.

                  The bank warned that it faced further fines for its role in the Libor rate-rigging affair and that it was struggling to dispose of the more than 300 branches it is required to offload under EU state-aid rules. It said it had informed Brussels it would probably need an extension to an end-of-year deadline to sell the branches.

                    The bank, which is 82 per cent taxpayer-owned following its £45bn bailout during the financial crisis, said it was moving closer to reprivatisation and the resumption of dividends to shareholders after four years of aggressive pruning of its activities. It also confirmed it was planning a partial flotation of Citizens, its US bank.

                    “Our target is for 2013 to be the last big year of restructuring,” Mr Hester said, admitting that 2012 had been a “chastening” year.

                    He would not be drawn on whether he had a preference over which form a privatisation should take, but said anything that returned value to taxpayers was good. However, chairman Sir Philip Hampton expressed little enthusiasm for distributing shares to the public due to the practical reasons of communicating with so many potential shareholders.

                    The 2012 loss, which compared with a loss of £1.19bn in 2011, reflected a fresh £450m provision to compensate customers mis-sold payment protection insurance. RBS has now set aside £2.2bn to resolve its share of the industry-wide scandal.

                    It had also set aside an extra £650m at the end of the year to cover the cost of compensating small and medium-sized businesses mis-sold interest rate hedging products, bringing its total provision for the matter to £700m.

                    The group’s £381m settlement with US and UK regulators over the Libor scandal was another headwind. “The group continues to co-operate with other bodies in this regard and expects it will incur some additional financial penalties,” it said.

                    Those still looking at the matter included the European Commission and Japanese authorities, it added.

                    The biggest factor in RBS’s full-year loss was an artificial £4.65bn “own credit” loss linked to the fluctuating value of its own debt and derivative liabilities.

                    At an operating level – which excludes the mis-selling and the “own credit” charges, as well as other items – the bank posted a profit of £3.46bn, up from £1.82bn in 2011.

                    RBS has to sell a chunk of its UK retail business as a condition of the European Commission’s endorsement of its rescue by the UK government. A planned sale to Spain’s Santander, initially valued at £1.65bn, fell apart in October.

                    Mr Hester said: “There aren’t a lot of buyers for UK banks right now. I think that will change over time.”

                    RBS said turning the branches into a standalone business, with a float under the Williams & Glyn’s brand, was the most likely option. It also raised the possibility of an investor taking a stake in the business before an IPO.

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                    Mr Hester said he was hopeful the group could put its legacy of past misconduct behind it this year. The date of its reprivatisation was entirely up to the government, he added.

                    “The clean-up of the company should be much more evident as we go through into 2014,” he said.

                    More job losses were likely amid a further shrinking of RBS’s investment banking activities, he added.

                    Mr Hester suggested that about a quarter of Citizens could be sold, adding that an IPO could be a useful source of capital for the British group.

                    The subsidiary employs 14,700 and serves 5m customers in the northeast of the US. RBS is aiming to float the business in the US in about two years’ time.

                    George Osborne, chancellor, said he wanted RBS to be “focused on serving British businesses and consumers, with a smaller international investment bank to support that activity rather than to rival it”.

                    He added: “I welcome RBS’s announcement today to accelerate that strategy.”

                    Shares in the group closed down 6.6 per cent at 323.9p.

                     

                    Bank faces pension funding deficit

                     

                    Yet another legacy issue has come back to haunt Royal Bank of Scotland, in the form of its pension fund. Just at the moment when RBS is under pressure from regulators to boost its capital, the funding deficit at the UK bank’s £30bn defined benefit pension scheme has ballooned, writes Patrick Jenkins.

                    Bruce van Saun, the lender’s finance director, is now faced with the prospect of having to inject yet more top-up funding, following a triennial review by actuaries due in March
                    . With the funding deficit having jumped from £2bn to £3.7bn over the past year, experts estimate that could mean nearly £200m more a year needs to be injected into the fund – a figure that comes straight out of the bank’s precious core capital. That is on top of a current annual injection of £650m.

                    RBS is not alone. Any big pension fund will find its liabilities jumping in the current low interest rate environment, as future projected “discount rates” – the income that assets are projected to generate for prospective pensioners – move lower. However, the gap at RBS and the size of the scheme are unusually large.

                    “The underlying pension liabilities are almost 150 per cent of RBS’s market capitalisation of £21bn, so the scheme is very large in relation to the company,” said John Ralfe, an independent pension consultant. “Within the FTSE 100 it is in the top five for liabilities to market cap.”

                    SFO asks for more time in Tchenguiz case

                    Posted on 28 February 2013 by

                    The Serious Fraud Office has asked for more time to prepare its defence against the £300m damages claim being sought by the Tchenguiz brothers, the property tycoons.

                    In a move that is likely to irritate the judge presiding over the damages hearing, the UK’s main fraud-busting agency asked just hours before the Thursday deadline if it could have until Monday to file its defence over the largest total damages claim in its 25-year history.

                      In an earlier hearing in front of Mr Justice Eder in December, the judge said he had “a golden rule . . . that is that all my orders, save in exceptional circumstances, all take effect at 5pm on Thursday. That is not some eccentricity”.

                      A spokesperson for the SFO confirmed that the agency would not file its defence until Monday but declined to comment further.

                      The request for more time, made to lawyers representing the Tchenguizs, comes just over a week after the SFO notified the courts that it was swapping its usual, government-provided solicitor for Slaughter and May, one of the City’s most prestigious and expensive legal firms. It also marks the latest delay in a protracted legal battle in which the SFO come under criticism for failing to stick to an agreed timeframe.

                      In April last year, when the SFO asked to be given an extra six weeks to prepare its defence to a judicial review into its original investigation into the Tchenguizs, Lord Justice Thomas slammed the agency for “sheer incompetence”.

                      Vincent and Robert Tchenguiz were the most recognised names in the SFO’s wide-ranging investigation into the collapse of Kaupthing, the Icelandic bank at the centre of the country’s financial crisis.

                      However, the case against them deflated last year as the UK’s fraud-busting agency conceded a multitude of errors in the way it had interpreted evidence used to obtain search warrants. In January, Vincent and Robert filed damages for £200m and £100m, respectively, alleging extensive wrongdoing, including malicious prosecution and false imprisonment.

                      Damages would be ultimately paid by the taxpayer, but a bill for £300m could not come at a worse time for the SFO, which has had its budget steadily cut from £52m in 2008 to the current £32m.

                      It was the thinness of the agency’s resources that prompted the Lord Justice Thomas to call for better funding for the agency.

                      The SFO has recently repaired its relationship with the Treasury, after initial progress in the Libor probe. The Treasury ringfenced £3.5m of extra funds to investigate the fixing of the benchmark interest rate.

                      Both Vincent and Robert Tchenguiz declined to discuss the issue.