The ghost of Lehman's past still haunting operations of non-US banks

Outlook: The successor will have a lot to live up to. Not least because the outlook is looking less tasty
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The Independent Online

Lehman Brothers is the ghost at just about every party involving watchdogs from both sides of the pond. And it still scares them.

Just before the unloved investment bank's ugly demise almost tipped the world into financial Armageddon, its management performed what is now infamously known as the "sweep" which vacuumed up all the cash at its UK subsidiary.

As a result the Bank of England had to forward an emergency loan to the UK arm so it could handle basics like redundancy payments. Hardly surprising, then, that the bankruptcy has been an almighty mess involving multiple receivers and regulators and court battles in each territory where Lehman had operations.

Preventing a repeat of that is what was behind yesterday's joint paper between the Bank of England and America's Federal Deposit Insurance Corporation on how future collapses will be handled.

Amid a certain amount of mutual back-slapping, the paper outlines how a single "home" regulator will take charge at the level of the parent company, assigning losses to shareholders and unsecured creditors and packaging viable subsidiaries off to new owners without the need for the intervention of taxpayers.

In other words, no repeat of the Lehman fiasco. If another US bank bites the dust the FDIC will handle the fallout and the Bank will be off the hook. And vice versa.

Why then, is Daniel Tarullo, a Governor of the US Federal Reserve planning to heap fresh capital requirements and leverage rules on the US operations of non-US banks?

Ah well, this is US approach to regulation. When a US company does something disgraceful new rules are formulated which seem to hit foreign operators far more than the "home team". Remember Enron? It led to the Sarbanes-Oxley accounting reforms which disproportionately impacted on non-US firms with US stock market listings. Mr Tarullo's plans seem to do the same thing, regardless of any agreements between the Bank of England and the FDIC.

We want to be quite sure Uncle Sam's covered if your guys do to us what our guys did to you is what Mr Tarullo is saying. If this provokes reciprocal sanctions, even a trade war with the EU? So be it.

Perhaps we shouldn't criticise Mr Tarullo's naked nationalism too much, though. Given the Bank of England's history (Barings, BCCI) he might have his reasons for wanting extra insurance in case it can't pull off an "orderly wind up" as its paper proposes.

It's something the FDIC might struggle with too.

If another mega-bank hit the wall would any of the new "safeguards" regulators have dreamed up really work? In private, you can be sure that none of them will be willing to say "yes" with any certainty. Nor are any of them really convinced that taxpayers on either side of the Atlantic can sleep easy.

Shareholders at Greggs lose a man with bite

Ta-ra then, Ken McMeikan. There are a lot of shareholders at Greggs who are very sorry that he has announced his departure to take over Brakes, which distributes food to pubs and restaurants.

Under Mr McMeikan, the predominantly Northern banker marched south then overseas.

Greggs is a no-frills operation and its impact on customers' wallets, if not their waistlines, is light. Which helps explain its resilience and the fact that people have taken so readily to it wherever it has set up shop. Mr McMeikan might have tried adding olive sticks and walnut bread to the Greggs stable but they'll never replace those famous low-cost sausage rolls that are so bad they're good.

Nonetheless, he's had more than his fair share of wins, notably an instrumental role in giving the Government a bloody nose over its attempt to impose VAT on hot takeaway food – the hated pasty tax.

There are a lot of people who'll thank him for that. His shareholders, however, will thank him more for the 50 per cent rise in the value of their investments under his tenure.

His successor will have a lot to live up to. Not least because the outlook is looking less tasty. Underlying sales have started to slip and competition is rising from the supermarkets' aggressive move into convenience. They too are benefiting from the decision to bin the pasty tax and they too offer sausage rolls (and microwaves) not to mention walnut bread and olive sticks at appetising prices.

Mr McMeikan's greatest achievement may be pulling off the trick of leaving at the right time.

Green with envy over Heineken? Not likely

Heineken's going green, quite literally. It's going to stop using brown bottles, found only in its Dutch heartland.

As a result they're chinking glasses at Shanks, the waste management group which has won the contract to recycle the nine million in circulation.

If the Dutch are anything like as silly as we Brits they'll be protesting at this outrageous assault on their traditional brown bottles which have been used for 80 years.

Attitudes like that sometime hold back the adoption of sensible policies.

Like Canada's approach to beer bottles. There, for the most part, beer is sold in bottles of the same dimension. So once it is drunk, they can be cleaned up, recycled and used again by any brewer. We'd never see the same thing happening here. Companies would gripe about how terrible such a restriction on their packaging would be, there'd be a big fuss, lots of outrage from commentators and the idea would be dropped. Regardless of the fact that the beer tastes the same whatever the receptacle. Or doesn't taste of much, going on the quality of the stuff one finds in some of the fancier bottles dreamed up by marketing men to disguise the deficiencies of corporate brewers.