James Moore: Even going nuclear will not deter powerful banks from ring-fence gaming

Outlook: When the new rules come in they will be obeyed... for a while

As we're all aware to our cost many modern bankers are not bankers at all. They are gamblers. What's more they are gamblers who know that if they back the wrong horse their losses will be covered by someone else. In extremis that means the taxpayer.

It's rather appropriate, then, that there has been much discussion at the Parliamentary Commission into Banking Standards about the potential for banks "gaming" the proposed ring fence that in theory will protect basic banking functions; people's deposits and loans and those of their small businesses, from the gambling.

There's been much discussion about preventing this by giving regulators a nuclear option: the power to forcibly cut the ring-fenced part out of miscreant banks.

Andrew Bailey, the head of prudential regulation at the Financial Services Authority, rather highlighted the problem with this power: a nuclear deterrent is all but impossible to use. As Mr Bailey argued yesterday, Britain's big banks, even in the midst of their current malaise, represent a very powerful lobby. They can and do hire the very best lawyers, and accountants, and lobbyists.

Despite the billions of pounds of public funds diverted from schools, hospitals and the national debt into bailing them out we are only now getting around to imposing genuinely radical reforms to the way they are governed.

It took a change of government, an Independent Banking Commission, now a Parliamentary Commission set up after yet another grotesque scandal (Libor fixing) and we are still not there. That power partly explains why.

The idea of threatening a genuine break-up on banks which try to mess with the ring fence looks attractive.

But would any regulator really dare to use it against such powerful institutions? Even a regulator as powerful as the Bank of England, which has several times called for break-ups. The answer is probably not. And banks are well aware of that. When the new rules come in they will obey them for a while. But what about in a year's time, or in five years' time, when a future chief executive fancies making a name for himself with the aid of an innovative new financing arrangement that will test the ring fence. Will even a nuclear "deterrent" put him off from taking a bet on it? Sadly, it's impossible to say yes.

Ocado won't deliver like John Lewis on tax

It's really quite rare for a company to see its shares rise when it issues a cash call, but such has been the concern about Ocado's financial health that when it tapped its investors for fresh funds yesterday that's just what happened.

The online retailer is raising £36m through the issue of new shares equivalent to about 10 per cent of its market value. It has also managed to extend its debt facility.

Hooray, said skittish investors, despite the new shares being issued at a premium to Friday's closing share price of 60.55p (about a third of the price at which the shares floated). And despite the fact that the cash call will dilute the investments of those who didn't buy in.

Whether the company will ever be sustainably profitable is another matter entirely. Ocado started off as a sort of half-sibling to Waitrose, selling the latter's lines. Even though the two have been loosening their ties, there are still many ways in which they benefit from each other. That situation won't last forever, however, and eventually Ocado will be on its own in a brutally competitive sector. All its fancy technology and market-leading efficiency might not be enough.

Waitrose's owner John Lewis has, of course, recently taken the lead on behalf of corporate Britain over the vexed issue of tax, and the fact that a variety of US-owned multi-nationals don't pay so much. Quite rightly, it highlighted that this puts UK-based businesses at a competitive disadvantage when compared with their transatlantic rivals because they have to pay up.

Just don't expect Ocado to be joining John Lewis on the battleground. For a start Ocado's founders earned their spurs at the US investment bank Goldman Sachs, which knows a thing or two about paying low levels of tax on its international operations. And guess what: Ocado has the small matter of £273m of unused tax losses sitting on its balance sheet. So it won't be troubling Her Majesty's exchequer anytime soon.

Myners' powers over MegaFon may be muted

Is it a bird? Is it a plane? No its Corporate Governance Superman!

Poor MegaFon. The Russian mobile phone company wants to be London's biggest flotation this year but looked to be heading off a cliff thanks to a lot of villainous talk about its governance.

Enter mild-mannered former reporter Lord Myners, above, who took off his glasses and donned his red cape to fly to the rescue. Here's a superhero the City can rely on.

Lord Myners is going to join MegaFon's board as a non-executive director. It's bound to be all right now because he's been chairman of M&S and Land Securities and everything.

If Alisher Usmanov, the Uzbek tycoon who will retain majority ownership of Megafon, decides to upset his fellow investors Lord Myners will be there to fight for their interests. What better person to have in your corner than a former minister from the last Labour government? Who did such a sterling job fighting for taxpayers' when it came to Fred Goodwin's Royal Bank of Scotland, or should that be state, pension?

Goldman Sachs, that's right, Goldman Sachs, passed on a potential gold mine in advisory and other fees up for grabs from this float. So why should we believe that the problems it identified will be addressed by paying Mr Myners a lot of money to sit on the board? Even if he is Corporate Governance Superman.

Suggested Topics
News
The Banksy image in Folkestone before it was vandalised
people
Life and Style
tech

Sales of the tablet are set to fall again, say analysts

Sport
football West Brom vs Man Utd match report: Blind grabs point, but away form a problem for Van Gaal
Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
PROMOTED VIDEO
News
i100
Arts and Entertainment
Bloom Time: Mira Sorvino
tvMira Sorvino on leaving movie roles for 'The Intruders'
News
Brian Harvey turned up at Downing Street today demanding to speak to the Prime Minister
news

Met Police confirm there was a 'minor disturbance' and that no-one was arrested

Arts and Entertainment
George Lucas poses with a group of Star Wars-inspired Disney characters at Disney's Hollywood Studios in 2010
films

George Lucas criticises the major Hollywood film studios

Voices
Chris Grayling, Justice Secretary: 'There are pressures which we are facing but there is not a crisis'
voices

Does Chris Grayling realise what a vague concept he is dealing with?

Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
The charity Sands reports that 11 babies are stillborn everyday in the UK
lifeEleven babies are stillborn every day in the UK, yet no one speaks about this silent tragedy
News
Blackpool is expected to become one of the first places to introduce the Government’s controversial new Public Space Protection Orders (PSPOs)
news

Parties threaten resort's image as a family destination

Life and Style
Northern soul mecca the Wigan Casino
fashionGone are the punks, casuals, new romantics, ravers, skaters, crusties. Now all kids look the same
Life and Style
gaming

I Am Bread could actually be a challenging and nuanced title

News
Nigel Farage has backed DJ Mike Read's new Ukip song
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Customer Service Executive / Inbound Customer Service Agent

£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

ASP.NET Web Developer / .NET Developer

£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Project Coordinator - 12 month contract

£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...

Day In a Page

Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album
Hugh Bonneville & Peter James: 'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'

How We Met: Hugh Bonneville & Peter James

'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'
Bill Granger recipes: Our chef's heavenly crab dishes don't need hours of preparation

Bill Granger's heavenly crab recipes

Scared off by the strain of shelling a crab? Let a fishmonger do the hard work so you can focus on getting the flavours right
Radamel Falcao: How faith and love drive the Colombian to glory

Radamel Falcao: How faith and love drive the Colombian to glory

After a remarkable conversion from reckless defender to prolific striker, Monaco's ace says he wants to make his loan deal at Old Trafford permanent
Terry Venables: Premier League managers must not be allowed to dictate who plays and who does not play for England

Terry Venables column

Premier League managers must not be allowed to dictate who plays and who does not play for England
The Inside Word: Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past

Michael Calvin's Inside Word

Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past