Tony Mitchell
Tony's recent articles
- And then it Snowed
29th October - Coventry is Still Optimistic
1st October - Money Isn't Everything
3rd September
Our Very Own Rock
20th February 2008 09:34
Well the weekend saw the inevitable end to a tale of alleged board level irresponsibility, regulatory failure and Government indecision with the announcement of the Nationalisation of Northern Rock.
So it appears that we are now all going to own a bit of Northern Rock and must it mean, therefore, that by logical extension, we all become supporters of Newcastle United FC, as Northern Rock is one of their principal sponsors. I note that the Club Shop is already giving a 25% discount on the Home Strip, so grab a bargain whilst you can – they may soon become a collectors’ item.
Lessons have already been learnt from this situation:
Firstly, the regulators of banks need to pay far greater attention to the management of liquidity;
Second, the UK deposit insurance system needs to be more generous, and;
Thirdly, the UK must have a special insolvency regime for troubled banks that guarantees insured depositors’ immediate access to their money.
The question still to be answered is shareholder compensation. There appears little sympathy for the large hedge funds that waded in after the first announcement of the troubles and in respect of all shareholders, there is no obvious reason to compensate them at all.
What would have happened if the Government had not been willing to provide the finances to support the business after the private sector refused to offer? The answer, Administration. It is extremely unlikely, after repaying the Bank of England funding support, that the shareholders would then have ended up with anything and therefore I am afraid that many smaller shareholders have learnt what all accountants know – Share Capital is Risk Capital.
This story has a long way to run and the uncertainty for many, particularly the bank’s employees, will continue for some time yet.
