JP Morgan paid £7m by Co-op Bank for recommending Britannia deal

Regulators should investigate how banks are paid for takeover advice, says Treasury select committee chairman

Regulators should investigate how investment banks are paid for takeover advice, according to the head of the Treasury select committee, after JP Morgan revealedit received £7m for advising the Co-op Bank on its disastrous merger with Britannia Building Society.

The US bank would have received nothing if the deal had not gone ahead, the bank revealed to MPs.

Members of the Treasury select committee said the investment bank had given "a green light" to Co-op'smanagement to do the deal which generated a multimillion pound fee for the US bank.

Tim Wise, one of JP Morgan's top bankers, admitted that the Britannia merger had worked out badly but insisted his bank's advice was sound at the time and that he would never be swayed by the prospect of a large fee.

However, the committee's chair, Andrew Tyrie, said after the hearing that regulators should scrutinise how investment banks are paid for orchestrating takeovers. "A fee structure for the provision of independent advice that heavily incentivises one outcome over others strikes me as inherently problematic. The industry and the regulators will need to look closely at the way such advice is remunerated," he said.

JP Morgan was the financial adviser on the Britannia deal which was announced in early 2009 when the financial system was on the brink of breakdown. Hailed at the time as creating a "super-mutual" to take on the big banks, the deal nearly wrecked the Co-op Bank this year when problem loans surged in Britannia's corporate loan book. Faced with a £1.5bn capital shortfall, the bank is undergoing a restructuring that will see 70% of the business handed to bondholders including US hedge funds.

The investment bank was paid £2m when the Britannia merger was announced and another £5m when the deal completed. Wise admitted the fee was "very significant" but he said clients preferred to pay investment banks success fees instead of smaller guaranteed amounts.

Tyrie told Wise it was "a shed load of money" and added: "It is asking for the objectivity of a saint not to be biased in thinking, as you prepare this advice, that you would like to see one outcome over another."

Stewart Hosie, a Scottish Nationalist member of the committee, read out a letter from JP Morgan to the Co-op board that said: "The terms of the proposed transaction are fair from a financial point of view for the Co-op."

Hosie said: "That is effectively giving the Co-op a green light to proceed."

Wise said it was up to the Co-op's management to use its own commercial judgment in deciding to do the deal.

Under repeated questioning about how large fees might skew investment bankers' advice, Wise said: "I'm afraid I have complete confidence in my own integrity and the impartiality of my advice."

He admitted the public might not agree and said there should be a debate about how investment banks are paid.

Wise said: "I don't think JP Morgan will suffer any reputational damage. Whether we will suffer personal reputational damage … time will tell."

Wise and Conor Hillery of JP Morgan said Co-op's merger with Britannia was undone by the prolonged economic downturn, which hit Britannia's commercial property borrowers, and by the City regulator's decision to tighten its capital rules.

The result was a £1.5bn hole in the Co-op Bank's finances that forced it to raise new cash from its bondholders and to scrap a second proposed deal to buy 631 branches from Lloyds. The group has cleared out its management and its former chairman has been exposed for alleged use of Class A drugs.

Wise admitted JP Morgan "undercooked" its assessment of the Britannia deal's riskiness but he said its tests included stressed scenarios devised by the Bank of England.

Separately, partners from KPMG told the MPs they were paid £1.3m for their work on the Britannia merger.

KPMG's early "due diligence" of Britannia for the Co-op did not include the corporate loans because the information was not available, they said.

KPMG partner Andrew Walker said he told the Co-op to scrutinise the corporate loans in its "phase two" work on Britannia, which the bank carried out itself.

Tyrie said the committee had been subjected to a "straight bat" by KPMG, which has audited the Co-op for 30 years.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike and if u want to Setup ur business in United Kingdom then  its not difficult in this modern age for more info visit our site Azure Global and join us also On Facebook

Banks braced for huge EU fines over Libor rate-rigging scandal

UK's RBS believed to be among at least six banks facing record fines for manipulating European and Asian interest rates

The interest rate-rigging scandal that has damaged the reputation of the banking sector looks likely to be reignited as Brussels is expected to impose multimillion-pound fines on a number of major firms for manipulating crucial benchmarks.

The action by Joaquín Almunia, the EU competition commissioner, will pile further pressure on Royal Bank of Scotland, the bailed-out bank already dealing with the fallout from a major systems meltdownthat left millions of customers without access to cash and allegations – which it denies – of mistreating its small business customers.

The 81% taxpayer-owned bank is reported to be among at least six major players in the financial markets, including Deutsche Bank in Germany and Citigroup in the US, caught up in the cartel investigation. The EU is said to be ready to impose record-breaking fines for alleged collusion for rigging key benchmark rates.

Brussels is thought to have focused on yen Libor, based on Japanese interest rates and priced out of London; Euribor, the Brussels equivalent to Libor; and the Tokyo rate known as Tibor. Almunia has been in discussions with banks for weeks and the resulting penalty is expected to surpass the record €1.5bn (£1.24bn) imposed on a cartel.

Each cartel could face combined fines of as much as €800m, although it was unclear on Tuesday nightwhat the exact penalties would be and how the sums would be divided. Penaltiesfor breaches of antitrust rules can theoretically be as much as 10% of turnover.

The fines are the latest to be levied on banks and financial firms for manipulating key benchmark rates. Five firms have already been fined by market regulators on both sides of Atlantic in an ongoing investigation into the manpulation of the rates, used to set interest rates on loans granted around the world.

Barclays was fined £290m in June 2012 in a move that led to the resignation of its chairman, Sir Marcus Agius, chief executive, Bob Diamond, and other senior managers. Other banks who have since been fined by US or UK regulators RBS, UBS of Switzerland and the Dutch bank Rabobank. The money broker Icap has also been fined and the FCA's investigations are ongoing.

The Libor investigation has sparked interest in a number of other benchmarks used to price financial products, particularly the foreign exchange markets, which are now being investigated by a number of regulators around the world, including the UK's Financial Conduct Authority.

Reuters reported that UBS had alerted the European Commission to the yen interest rate manipulation and would not be penalised. The Financial Times said Barclays would avoid a fine for Euribor rigging for similar reasons.

Between six and ten banks are reported to befacing fines, including Citigroup, which would be the first US bank to become embroiled in such high-profile penalties for manipulation of key rates.

Deutsche Bank and RBS will be penalised for rigging the benchmark eurozone interest rates known as Euribor. French bank Société Générale is also part of the group facing sanctions for alleged Euribor rigging, according to Reuters.

The news agency said HSBC and the French bank Crédit Agricole had not reached a settlement, while the FT said the US bank JPMorgan had also failed to do. They may face fines later.

Reuters said Barclays, Deutsche Bank, Société Générale, RBS, JPMorgan and Citigroup declined to comment and HSBC and Crédit Agricole were not immediately available to comment.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike and if u want to Setup ur business in United Kingdom then  its not difficult in this modern age for more info visit our site Azure Global and join us also On Facebook

Christmas shopping begins with bumper buildup to Cyber Monday

The Christmas shopping season got off to a bumper start over the weekend, with record takings recorded as a result of last week's American-style "Black Friday" promotions, and a further £450m expected to go through the online tills today, which has been dubbed "Mega Monday".

John Lewis said its online sales on Friday smashed its previous record for a single day's internet trading by more than 100%, with thousands of orders coming in the middle of the night from customers who preferred shopping to sleeping.

The figures suggest that Black Friday, a US retailing gimmick where stores offer big discounts to kickstart the shopping season, could now become a permanent fixture on the UK shopping calendar.

Today, the buying frenzy is expected to move up another notch. The first Monday of December, which in recent years has become known as Cyber Monday, or Mega Monday, is the busiest day of the year for online sales, as shoppers order early to ensure pre-Christmas delivery.

Nearly half a billion pounds is expected to be spent online on Monday – the equivalent of £312,500 every minute – as more than 7m transactions take place. It is likely to be the busiest day ever for online shopping in the UK, with more than 113m visits to virtual stores as shoppers use their last pay cheque before the big day.

Online retailers expect to have raked in more than £1bn between Saturday and Monday night.

Jeremy Nicholds, Visa Europe's director of commercial development, said: "UK consumers' love affair with online shopping will reach its peak on Mega Monday, when we predict that we will process 7.7m transactions – a 16% rise on last year."

Total Christmas sales are expected to be a staggering £72.2bn – or £351 per person – an increase of more than 2% on last year, according to the Centre for Retail Research. Of that, one third will be spent online.

Catalogue and internet retailer Argos is braced for its busiest online shopping day of the year, and is expecting 3m hits on its website. It is prepared to dispatch 2m packages a day in the runup to Christmas from its 11 regional distribution centres.

Last week's Black Friday promotions – established in the US on the day after Thanksgiving, but new to the UK – have led to an exceptionally strong start to Christmas spending. John Lewis, the only retailer to give a detailed trading update, said that last week's Black Friday event conclusively signalled the start of Christmas trading. It recorded sales of £147m for the whole week, up 18.4% on last year and up 31.4% week-on-week. Online trade was up 35.7% on the year and ended 19.4% higher than its previous biggest week.

Mark Lewis, online director of John Lewis, said: "Any doubt over whether UK consumers are interested in Black Friday has been cast aside as record sales were notched up online and via mobile devices for John Lewis. Looking ahead to this week, we predict that today [Sunday] will see customers go online to continue their Christmas shopping."

Sales from mobile phones rose significantly compared with last year. On Friday mobile orders climbed to more than three times the record for a single day, with huge demand from consumers shopping in the early hours. Between midnight and 8am, sales from mobile devices were up more than fourfold on a normal Friday in November, and breakfast-time buyers – placing orders between 7am and 8am – were up 1,340% .

Many were buying iPads, televisions and PS4s, with one selling every four seconds in the early hours of Friday morning.

In unprecedented scenes, shoppers desperate for bargains caused chaos in Asda stores on Friday as the supermarket – owned by US group Walmart – brought the Black Friday experience to Britain. Customers scrambled to snatch cut-price electrical goods after queueing for several hours outside Asda stores around the country.

Asda said it had sold out of virtually everything: "Black Friday exceeded our expectations and was hugely successful. We sold over 11,000 tablets and 12,000 TVs in the first hour."

But traditional shops and retail centres will not necessarily lose out to the boom in mobile shopping. The rise in the popularity of click-and-collect will see footfall to high streets, retail parks and shopping centres boosted by double digits on Mega Monday, retail expert Springboard has predicted. It expects to see week-on-week footfall increase by 15% across all retail locations on 2 December, and by 2.6% year on year.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike and if u want to Setup ur business in United Kingdom then  its not difficult in this modern age for more info visit our site Azure Global and join us also On Facebook