John Ward – Nationwide Capital Fund Launch: Is This A Euphemism For The Next Bail-In? – 22 November 2013

nwidetitleThe press reports yesterday had a nonchalant air to them as they described a new fund being launched by Nationwide – the biggest mutual left in Britain. This extract from the Maily Torygraph was typical:

‘Nationwide is launching core capital deferred shares which will help the building society meet its regulatory capital requirements without compromising its mutual status….The company announced today its plans for the first issuance of core capital deferred shares (CCDS) which will count towards regulator’s core tier one banking requirements….However, holders of CCDS will not have proportionate voting rights, unlike its retail members, and the maximum discretionary annual return per CCDS is capped in order to protect reserves over distribution.’

Isn’t it funny how the catch always comes after the ‘However’? In the 1950s there was a game show on the brand new ITV channel called Take Your Pick, with a truly awful presenter called Michael Miles in charge. Contestants chose a box number, and then were tempted by the dreadful Miles to take money instead of opening the box. While this unseemly bargaining unfolded, the audience shouted “Take the money!” or “Open the Box!” to add to the tension. Eventually, Miles opened the box, and the revelation wet something like this:

“You have won a holiday in Bermuda….”

which was greeted by loud “oooooohs” from the audience, until Michael Miles added:

“…..however, you will have to get there by bicycle”.

Lest you think this is just me having a flippant moment, I would ask you to bear in mind an article way back in June at the This is Money site, which read as follows:

‘Britain’s biggest building society, Nationwide, is reportedly drawing up plans to raise at least £1billion to plug a hole in its balance sheet. The mutual was one of eight lenders singled out by the Bank of England recently under plans to strengthen the sector’s reserves of buffer capital and prevent future taxpayer bail-outs.’

At the time, the Maily Telegraph said Nationwide only needed half a billion, although we were told that there was a £1.5bn hole in the not entirely balanced sheet. Now I read that the Mutual giant still has a task on its hands. And that worries me, because the hole was 1.5, the amount to be raised was either 0.5 or 1.0, and now new capital rules dictate that Nationwide needs at least 0.5 more.

Let me declare an interest, while at the same time pointing out that there is no conflict in my interest: around 40% of my cash is with Nationwide. Hence my close attention to detail re this one.

In August this year, it was also widely reported that, ‘Nationwide, the UK’s biggest building society, has put on hold plans to lend to SMEs until 2016 as regulators force it to hold more capital. Plans to boost credit to small businesses have been dealt a blow after Nationwide delayed its launch into the sector until 2016 as the lender is being forced to hold more capital as a buffer against financial crises….’

Er,….right. So, um, holding capital is now more important than making capital work to expand the economy….which, as we all know, is turning a corner and is destined some time not long after 2015 to guarantee a Rolls Royce outside every Council House.

Tell you what I think. I think that, as usual, a financially sound institution is at risk, for the equally usual two reasons: first, mad non-mutual banks pooed in the rainwater, and forced in new regulatory rules that defy every tenet of capitalism’s raison d’etre; and second, desperate politicians have f**ked with Nationwide’s entirely sensible business model….thus forcing it into the hard rock corner in which it now finds itself.

Here’s the evidence supporting that assertion:

In the financial crisis of 2007–2010, the Nationwide acted to safeguard the mutual sector, acquiring the ailing Cheshire and Derbyshire building societies in September 2008, followed by the Dunfermline Building Society on 30 March 2009.While the three building societies currently operate as divisions of the Nationwide under their own brands, it was announced in 2012 that they would start to be integrated into the Nationwide brand. Nationwide say that the integration will be phased and will be completed by mid 2015. The Dunfermline Building Society will be the first of the three regional building society brands to be integrated, with the rebranding to take place over one weekend, expected in Summer 2014.

The Dunfermline Building Society (run by naive folks) was screwed royally by US banking firms that sold it worthless sub-prime toxic derivatives. The actions being taken by Nationwide now are 10% to do with bank tier capital rules, and 90% the direct result of neoliberal f**kwits and headless chicken ministers who forced the Mutual into the same position as Co-Op bank….that of rescuing Titanics.

Trust me – for reasons already stated above – the last thing I want is a run on/the collapse of the Nationwide. Think of this post as not so much me with an axe to grind, but rather a tired older bloke who grinds his teeth too much, and would much rather that Nationwide didn’t find itself in this position. to original article

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