The Bank That Lived a Little by Philip Augar

Author:Philip Augar
Language: eng
Format: epub
ISBN: 9780241335987
Publisher: Penguin Books Ltd
Published: 2018-05-28T16:00:00+00:00

There could be no more debate and no more posturing from the banks. The chief executives were told that a government rescue plan would be announced the following day. The package would address both of the issues raised at the previous week’s meeting – long-term capital and short-term liquidity. Inter-bank lending would be encouraged by a £250 billion Bank of England guarantee of the larger banks’ credit and an extension from £100 billion to £200 billion of the special liquidity scheme, the short-term emergency facility which helped the banks to fund themselves day-to-day. This was what the bankers wanted to hear. But there was a sting in the tail. The government was going to insist that they raised more capital and it would be the FSA, not the banks themselves, that would decide how much each bank needed. Those banks that fell short would then have a choice: they could raise extra capital themselves in the markets or accept government money in return for a shareholding. Up to £50 billion of state capital would be available for them to draw on.20

Some of the bankers were furious at the idea of the FSA rather than their own boards deciding whether or not they should raise capital but Varley listened calmly. It could have been worse. There was to be no compulsory government capital provided that Barclays could satisfy the regulators. He had spent four years building a universal bank and had just succeeded in bagging a bulge bracket investment bank more or less for free. Nothing he had heard round the table suggested to him that the authorities would be supportive of a British bank with universal banking ambitions and he thought that keeping them off the shareholders’ register was essential to the realization of his vision.

Over the next few hours, the bankers met at the Treasury discussing the details of the government plan, occasionally consulting with ministers and officials who were waiting in other rooms. Long after midnight, the new minister Myners was sitting in his office waiting for news from along the corridor. The lights were controlled by movement sensors and the room was dark. He began to doze. His mobile rang. Waving his arms wildly to activate the lights, he saw that the call was indeed from the chairman of one of the banks. ‘Paul, could we just check one thing. This is entirely hypothetical but if the government was to take a stake in us, could we assume that we would still be able to pay the chief executive his bonus?’fn1 Myners’ reply was ‘robust’.

It was half-past two in the morning before news finally came through that the bankers had no further objections to the government deal; in reality, they had no choice. Most of them then departed for a few hours’ sleep leaving ministers, officials and their advisers to finalize the morning’s announcement.

Varley briefed his board in a pre-dawn conference call on Wednesday 8 October and the government package was announced as the sun rose at seven.

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