City Investors Vow Fight Over RBS Break-Up

By Mark Kleinman, City Editor

Some of the City's most prominent institutional investors are vowing to oppose any attempt to break up Royal Bank of Scotland (RBS), claiming it would undermine attempts to recover the taxpayer's £45.5bn of rescue funding.

Sky News can reveal that institutions including Royal London Asset Management and Standard Life Investments have begun to express profound concerns about a so-called 'good bank, bad bank' split of RBS.

Their reservations about such a structure emerged on the eve of the publication of a report by a panel of parliamentarians that is expected to recommend an analysis of an RBS break-up.

"I believe the best time to consider splitting RBS has probably passed," said Robert Talbut, chief investment officer of Royal London Asset Management.

A person familiar with the thinking of Standard Life Investments said it was also opposed to a break-up, saying that it would be both counter-productive and potentially destroy value for shareholders.

A number of other big institutions are expected to discuss the issue with Sir Philip Hampton, RBS chairman, in the coming days.

The Parliamentary Commission on Banking Standards (PCBS), which has been examining the industry's culture and ethics, will publish its final report tomorrow.

The institutions' views about a break-up of RBS effectively place them on a collision course with George Osborne, the Chancellor, who is expected to bow to the Commission's demands in his annual Mansion House speech on Wednesday.

Treasury officials said he was likely to signal in his speech that he had commissioned further work on the issue that would explore how to carve out RBS's remaining toxic assets, including large parts of Ulster Bank, its troubled Irish subsidiary.

Mr Osborne is expected to frame the review as facilitating the potential removal of one of the impediments to RBS's reprivatisation.

City institutions oppose the idea on the basis that such a move may have had merit immediately after RBS's bail-out, but that it would now be largely redundant.

External investors now hold roughly 18% of RBS's shares following its rescue in 2008, and would be expected to participate in the multiple phases of share sales by the Government as it seeks to exit its bank investments.

Last week, Stephen Hester, the bank's chief executive, announced that he would leave later this year, a decision triggered by Mr Osborne's desire to have a new leader in place to oversee RBS's eventual reprivatisation.

Mr Osborne is likely to refer to the need to renegotiate the Dividend Access Share, another obstacle to reprivatisation, at Mansion House, insiders said.

The Treasury and RBS declined to comment.

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Young 'Face Decades Of Saving To Buy Homes'

Average First-Time Buyer Deposits

Updated: 1:24am UK, Wednesday 19 June 2013

A regional breakdown of how long it would take average first-time buyers to save for a deposit in their local area:

NORTH EAST

:: Average first-time buyer house price: £74,981

:: Average first-time buyer deposit: £14,996

:: Years for a couple to save average deposit: 4.5

:: Years for a couple with a child to save average deposit: 8.8

:: Years for a single person to save a deposit: 9.3

NORTH WEST

:: Average first-time buyer house price: £81,193

:: Average first-time buyer deposit: £16,239

:: Years for a couple to save average deposit: 4.5

:: Years for a couple with a child to save average deposit: 8.5

:: Years for a single person to save a deposit: 9.8

YORKSHIRE & THE HUMBER

:: Average first-time buyer house price: £87,599

:: Average first-time buyer deposit: £17,520

:: Years for a couple to save average deposit: 4.5

:: Years for a couple with a child to save average deposit: 8.8

:: Years for a single person to save a deposit: 10

EAST MIDLANDS

:: Average first-time buyer house price: £91,985

:: Average first-time buyer deposit: £18,397

:: Years for a couple to save average deposit: 4.8

:: Years for a couple with a child to save average deposit: 8.8

:: Years for a single person to save a deposit: 10.5

WEST MIDLANDS

:: Average first-time buyer house price: £85,167

:: Average first-time buyer deposit: £17,033

:: Years for a couple to save average deposit: 5

:: Years for a couple with a child to save average deposit: 9.8

:: Years for a single person to save a deposit: 10.3

EAST

:: Average first-time buyer house price: £129,986

:: Average first-time buyer deposit: £25,997

:: Years for a couple to save average deposit: 6

:: Years for a couple with a child to save average deposit: 11.8

:: Years for a single person to save a deposit: 13

LONDON

:: Average first-time buyer house price: £278,417

:: Average first-time buyer deposit: £55,683

:: Years for a couple to save average deposit: 10.8

:: Years for a couple with a child to save average deposit: 20.5

:: Years for a single person to save a deposit: 29.5

SOUTH EAST

:: Average first-time buyer house price: £158,319

:: Average first-time buyer deposit: £31,664

:: Years for a couple to save average deposit: 7

:: Years for a couple with a child to save average deposit: 13

:: Years for a single person to save a deposit: 15.3

SOUTH WEST

:: Average first-time buyer house price: £127,753

:: Average first-time buyer deposit: £25,551

:: Years for a couple to save average deposit: 7

:: Years for a couple with a child to save average deposit: 13.3

:: Years for a single person to save a deposit: 15

ENGLAND

:: Average first-time buyer house price: £139,920

:: Average first-time buyer deposit: £27,984

:: Years for a couple to save average deposit: 6.5

:: Years for a couple with a child to save average deposit: 11.8

:: Years for a single person to save a deposit: 14.3

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Major UK Supermarkets Launch New Food Labels

By Lisa Dowd, Sky News Correspondent

Major supermarkets and food manufacturers are introducing a new traffic light labelling system to help people make healthier choices.

Until now, businesses had different labels on the front of their products to try to explain the nutritional value of meals and drinks, leading to confusion for customers.

This will be replaced by a standardised system across a range of products.

"It's a traffic light system," said Janet Taylor, diet and health manager for The Co-operative Food.

Some common products featuring the new labelling

"This is basically to help customers make an informed choice, you can clearly see how much fat, saturated fat, sugar and salt is in the product.

"A green traffic light indicates a healthy choice, amber indicates an OK choice and red, well, you should eat this product in moderation. So it really is helping customers choose healthier options."

Those who have signed up to the scheme so far account for more than 60% of the food sold in the UK.

As well as The Co-operative, they include Sainsbury's, Tesco, Asda, Morrisons, Waitrose, McCain Foods, Mars UK, Nestlé UK, PepsiCo UK and Premier Foods.

The Government hopes others will join.

Public Health Minister Anna Soubry said: "The UK already has the largest number of products using a front-of-pack label in Europe.

"But we know that people get confused by the variety of labels that are used.

"Research shows that of all the current schemes, people like this label the most and they can use the information to make healthier choices.

"We all have a responsibility to tackle the challenge of obesity, including the food industry.

"By having all major retailers and manufacturers signed up to the consistent label, we will all be able to see at a glance what is in our food - this is why I want to see more manufacturers signing up and using the label."

The new labelling should start appearing over the next few months, with the majority of products made or sold by participating companies re-labelled by the end of next year.

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NSA Chief: Spying 'Foiled 50 Terror Plots'

The US government's sweeping surveillance programmes have foiled some 50 terrorist plots worldwide, the director of the National Security Agency has said.

They included a plan to bomb the New York Stock Exchange and another aimed at a Danish newspaper that had published a cartoon image of the Prophet Mohammed.

In a rare open hearing of the House Intelligence Committee, Army General Keith Alexander said the two recently disclosed programmes are "critical" in the fight against terrorism.

The programmes "assist the intelligence community to connect the dots", he told the committee in the Capitol Hill hearing.

The National Security Agency headquarters in Fort Meade, Maryland

Gen Alexander said just over 10 of the plots thwarted had a connection inside the US and most were helped by the review of phone records.

He said he would provide Congress with details of the plots, but added that those details would be classified.

The NSA programmes aim to gather US phone records and track the use of US-based internet servers by foreigners with possible links to terrorism.

Details of the programmes were leaked to The Washington Post and The Guardian newspapers by Edward Snowden, a 29-year-old former contractor for NSA.

Gen Alexander said Mr Snowden's leaks have caused "irreversible and significant damage to this nation" and undermined the US relationship with allies.

Snowden is believed to be in Hong Kong

In one of the few examples given to the panel, Deputy FBI Director Sean Joyce said the NSA was able to identify an extremist in Yemen who was in touch with a man in Kansas City, Missouri, named Khalid Ouazzani.

This enabled authorities to identify co-conspirators and thwart the plot to bomb the New York Stock Exchange, he said.

Ouazzani pleaded guilty in May 2010 in federal court in Missouri to charges of conspiracy to provide material support to a terrorist organisation, bank fraud and money laundering.

However, he was not charged with the alleged plot against the stock exchange.

Mr Joyce also said a terrorist financier in San Diego was identified and arrested in October 2007 because of a phone record provided by the NSA.

Many on the panel have been outspoken in backing the programmes.

Representative Mike Rogers, the Republican chairman of the committee, said: "It is at times like these where our enemies within become almost as damaging as our enemies on the outside."

President Barack Obama vigorously defended the surveillance programmes in a lengthy interview on Monday.

Mr Snowden, meanwhile, accused members of Congress and administration officials in an online interview of exaggerating their claims about the success of the data-gathering programmes.

The American citizen, believed to be in Hong Kong, said he planned to release more details on how he says the NSA can gain direct access to internet data on private servers.

In an interview with Fox News, Mr Snowden's father, Lon Snowden, has defended his son's integrity and said he hoped he would not do anything that might be considered treasonous.

He said: "I would like to see Ed come home and face this. I shared that with the government when I spoke with them. I love my son."

He added: "I would rather my son be a prisoner in the US than a free man in a country that did not have ... the freedoms that are protected" in America.

The US has launched a criminal investigation to prosecute the whistleblower for lifting and exposing the classified material.

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Cable Presses For RBS Bonus Link To Lending

By Mark Kleinman, City Editor

Vince Cable is to push for the new boss of Royal Bank of Scotland (RBS) to have his pay more closely-tied to its small business lending amid intensifying debate about its future.

Speaking to Sky News, the Business Secretary said he was also considering the case for reinstigating formal lending targets for the state-backed bank for the first time since 2010.

"I am keen for RBS to have very clear incentives and targets to increase lending to the real economy and SMEs [small and medium-sized enterprises]," Mr Cable said.

By singling out RBS, his remarks will raise the prospect of the bank remaining in majority public ownership for some time, dashing any expectations that the Government will begin to sell its 82% shareholding in the near future.

Mr Cable said the departure of Stephen Hester as RBS's chief executive later this year provided an opportunity to negotiate a new deal with his successor that emphasised RBS's role in supporting the UK economy.

His comments come on the same day that a panel of MPs and Peers published a report recommending that the Government explore the possibility of breaking RBS into separate good and bad banks.

George Osborne, the Chancellor, will accept the recommendation on Wednesday in his annual Mansion House speech, placing him on a collision course with leading institutional investors in RBS.

A return to formal lending targets for RBS would spark renewed allegations of excessive state interference in the running of the bank.

RBS and Lloyds Banking Group, which is 40%-owned by taxpayers, were forced to agree lending targets with the then Labour government during the two years after they were rescued by taxpayers in 2008.

However, the targets were seen as meaningless because of the way that lending was calculated and the absence of sanctions against the banks when they failed to hit them.

In 2011, the major banks struck a wider agreement with the Coalition - known as Project Merlin - that imposed targets on overall business and SME lending, pay and tax.

Initiated at the behest of then-Barclays chief executive John Varley, the deal was seen as problematic for banks and politicians and was quietly abandoned after a year.

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Bankers Should Face Jail Terms, Report Says

By Mark Kleinman, City Editor

A new criminal offence punishing bankers for "reckless misconduct" while running their institutions is the centrepiece of proposals unveiled by a group of MPs and peers aimed at reforming the industry.

The Parliamentary Commission on Banking Standards (PCBS), which was set up after last summer's Libor-manipulation scandal led to Barclays being fined £290m, said in its final report that all areas of British banking required urgent change.

Citing "a profound loss of trust born of profound lapses in banking standards", the commission said a string of measures were needed to repair the industry's reputation.

In its 553-page report called Changing Banking For Good, the PCBS argued that individual accountability among senior bankers was lamentable, that industry pay schemes required a radical overhaul, and that executives should face a new sanctions regime that would dish out appropriate penalties, replacing a system that "looked good but achieved little".

It also said, as expected, that the Treasury's strategy for managing its 82% stake in Royal Bank of Scotland (RBS) was not working adequately and that options, including analysis of a break-up of the bank, should be conducted in the coming months.

The commission's hard-hitting recommendations underline the scale of public anger that so few British bank executives have faced punishment over the crisis that led to hundreds of billions of pounds of public money being put at risk to rescue them.

Only a small handful of senior bankers have been sanctioned by regulators for their roles prior to the bailouts of 2007 and 2008, while relatively few have been hit in the pocket despite mis-selling scandals such as the one involving payment protection insurance.

Andrew Tyrie, the Conservative MP who chaired the commission, said that senior bankers had hidden "behind an accountability firewall" but warned that governments and regulators had also been culpable for the decline in standards.

Among the concrete measures recommended by the PCBS are:

:: The introduction of a new criminal offence for reckless misconduct that would carry a custodial sentence.

:: Bankers' pay should be deferred for up to 10 years and should be more closely aligned to the safety and soundness of a firm.

:: Regulators should gain powers to cancel the pay and pensions of executives at banks which require taxpayer support.

:: UK Financial Investments, the body responsible for managing taxpayers' stakes in Lloyds and RBS, should be scrapped.

:: New senior persons and licensing regimes to ensure that regulators can take tougher action against bankers whose actions damage their employer's reputation or finances.

:: Reforms aimed at bolstering competition in retail banking, including, as Sky News revealed this month, a review of the costs and benefits of full current account portability.

Parts of the banking industry, whose main lobbying group the British Bankers' Association refused to respond on camera to the report, are expected to argue that some of the proposed reforms would undermine the City's international competitiveness.

Measures to defer pay for up to a decade would go further than any other major banking centre, but the PCBS argued that it was essential to do so if the industry's culture was to be genuinely reformed.

"The scale of remuneration in banking, the way it has been set and the form in which it has been paid have all incentivised misconduct and excessive risk-taking. The rewards for fleeting, often illusory, success have been huge, while the penalties for failure have been much smaller, or non-existent," it said.

"Many bankers were on to a one-way bet. Unlike unlimited liability partnerships, they had little or no skin in the game."

The Government is expected to consult on the PCBS recommendations that would require legislative change.

In a statement, the Treasury welcomed the commission's report, saying there were "many recommendations in it which will help the government's plan to create a stronger and safer banking system".

"The Government publicly welcomes the commission's recommendations on increased personal responsibility especially at a senior level, increased professional judgement by regulators and better functioning markets.

"We will now get on with a swift response and will report before the summer recess."

In his annual Mansion House speech on Wednesday night, George Osborne is likely to back the commission's call for a review of the options for the Government's stake in RBS, according to Treasury aides.

Vince Cable, the Business Secretary, also welcomed the report, backing calls for banks to relinquish ownership of the payments system and for a new approvals regime for bank staff.

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Dreamliner Diverted In Latest Boeing Setback

A Boeing 787 Dreamliner has landed safely after being diverted when pilots were made aware of a potential oil filter problem.

In the latest of a series of setbacks for the new model, United Airlines said a Dreamliner on its way to Tokyo from Denver was forced to land in Seattle as a precaution.

The planes were only recently returned to the skies after regulators grounded them worldwide due to overheating in lithium-ion batteries.

There was no initial indication that any problem with the plane on Tuesday was related to batteries.

"United flight 139 from Denver to Tokyo diverted to Seattle due to an indication of a problem with an oil filter," United said in a statement.

"The aircraft landed normally and without incident and we are working to re-accommodate customers."

Boeing said it was aware of the issue and was working with United and General Electric Co on the problem.

Regulators and investors are keenly following the progress of the 787 Dreamliner, Boeing's first predominantly carbon-fibre aircraft, which was more than three years late getting into service after a number of production setbacks.

Introduced by airlines in late 2011, the Dreamliner was grounded in January after batteries overheated on two Japanese jets in quick succession.

It resumed commercial service in May after Boeing installed a redesigned battery system on the 50 jets in service.

Two other planes are known to have suffered technical problems with engines since - but none of those were understood to be serious.

One Singapore-bound Dreamliner, operated by ANA, had to turn back in mid-flight because of a problem with the anti-icing system.

Thomson Airlines and British Airways are among UK operators buying the planes, attracted by the promise of lower fuel costs.

While Boeing has announced billions of dollars in deals at the Paris Air Show as well as the launch of a stretched version of its next-generation Dreamliner 787, it is still trailing behind Airbus in new plane orders.

So far, Boeing has racked up $29.2bn (£18.7bn) in firm orders or purchase agreements against $36bn £23bn) for the European aircraft manufacturer.

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Auditor Agrees 'Fine And Ban' In New York

A US division of British-based auditor Deloiitte has been fined $10m by New York state for its actions in advising Standard Chartered Bank over money laundering.

In addition to the fine, the equivalent of £6.4m, Deloitte's Financial Advisory Services arm was also banned for one year from taking new work in the state after officials ruled it did not carry out its duties independently.

The settlement between Deloitte and New York was announced months after Standard Chartered was handed a $667m (£440m) penalty in the US for permitting hundreds of billions of dollars to be laundered through its US branch by clients from Iran, Burma, Libya and Sudan, in violation of US sanctions on the countries.

The transfers took place mainly between 2001 and 2007.

In 2004 the New York Department of Financial Services (DFS) required the London-based bank to contract an independent adviser to help it comply with money-laundering statutes.

But even after Deloitte Financial Advisory Services took that role, the laundering continued.

The department said the fine, which the company agreed to, was to cover its "misconduct, violations of law, and lack of autonomy" in advising Standard Chartered.

Benjamin Lawsky, New York superintendent of financial services, said in a statement: "At times, the consulting industry has been infected by an 'I'll scratch your back if you scratch mine' culture and a stunning lack of independence.

"Today, we are taking an important step in helping ensure that consultants are independent voices - rather than beholden to the large institutions that pay their fees."

Deloitte has emphasised that its advisory unit was not accused of participating in the laundering.

In a statement it said: "We are pleased that, as the agreement states, a thorough investigation by DFS found no evidence that Deloitte FAS knew of, or aided, abetted or concealed any alleged violation of law [by Standard Chartered].

"Deloitte FAS looks forward to working constructively with DFS to establish best practices and procedures that are ultimately intended to become the industry standard."

The accounting industry has been under scrutiny worldwide since coming under heavy criticism for failing to raise the alarm ahead of the banking crisis.

An investigation into the UK's audit market by the Competition Commission (CC) released earlier this year found that competition is restricted because it is hard for listed companies to switch accountants.

It concluded that the so-called "big four" audit firms - Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers - dominated the market but it did not find sufficient evidence of collusion between the accountancy giants to recommend breaking them up.

The watchdog said it was looking into a host of measures that could increase competition - including mandatory tendering for audits and mandatory rotation of firms by companies.

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Chancellor Orders RBS To Accelerate US Sale

By Mark Kleinman, City Editor

George Osborne is putting pressure on Royal Bank of Scotland (RBS) to accelerate its exit from the US retail banking market, Sky News understands.

People familiar with discussions between the RBS board and the Chancellor say he has urged the bank in recent weeks to accelerate a stock market flotation of Citizens, one of the largest retail banks in the US, which has been pencilled in for 2015.

John Kingman, a senior Treasury official, wrote to Sir Philip Hampton, the RBS chairman, in the last few days to spell out the department's views about the bank's strategy, insiders said.

As well as an accelerated flotation of Citizens, these include analysis of a potential split of RBS into separate good and bad banks, with Ulster Bank, its troubled Irish subsidary, being examined to see whether its can be carved out of RBS.

Mr Osborne is expected to refer to RBS's previously-announced plans to offload Citizens and the structural review of the group, including the assets held in Ulster Bank, in his Mansion House speech tonight, although he is unlikely to say publicly that he wants the Citizens sale to be sped up.

The Chancellor will point out that the bank has already been radically reshaped, but that further work is necessary in order to prepare it for eventual privatisation of the stake that cost taxpayers £45.5bn in 2008.

He will also reiterate his view that RBS should become a UK-focused retail and commercial bank.

Aides said that Mr Osborne's speech was still being finalised and that the directness of the language relating to RBS "could be toned down" between Wednesday morning and the speech.

RBS announced a decision in February to begin selling Citizens in 2015, saying: "The board has decided it is now the right time to begin work on a partial flotation of Citizens, our US banking business, targeted probably at around two years from now.

"Citizens is a good business, serving around five million customers in the north-east of the United States where it is has a strong market position.

"It has been substantially improved since 2009 and a local public listing will help to highlight its growing value. This provides a positive opportunity for Citizens and its 14,700 employees, as well as being a sensible move for RBS as a whole."

Mr Osborne's Mansion House speech will come a week after Stephen Hester, RBS chief executive, said he would step down later this year, with a search now under way for his successor.

The chief executive was effectively forced out by the Chancellor after it was made clear that the Government wanted a replacement to oversee the eventual sale of its 82% stake in the bank.

Mr Osborne is understood to have become frustrated with Mr Hester's resistance to Treasury interference in the bank's strategy, such as repeated demands to shrink its investment banking operations.

Sources say the review of the 'good bank, bad bank' structure, including the Ulster Bank operations, will be undertaken by the Treasury with the assistance of external advisers from an unnamed investment bank.

Mr Osborne will be more positive about the state's involvement in Lloyds Banking Group, saying that the time is approaching when a sale of the Government's 40% stake would be possible.

He will, however, emphasise that value for money will be the principal consideration ahead of any share sale.

RBS and the Treasury declined to comment.

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Chinese Go On UK Luxury Spending Spree

A Chinese conglomerate is to spend £1bn to buy British yacht maker Sunseeker and develop an upmarket London hotel on the major Nine Elms regeneration site.

Dalian Wanda Group is taking a 91.8% stake in Sunseeker for £320m.

The yacht builder, which employs 2,300 staff in Dorset, has been told its base in Poole and the workforce will be retained.

Management is to purchase the remaining shares.

More than £700m is to be spent, the firm said, on a 160-room luxury hotel and apartment complex overlooking the River Thames at Vauxhall.

The Nine Elms development site, which stretches to Battersea along the south bank of the Thames, will also house the US embassy and other office and residential developments and be served by the extension to the Northern Line tube, due to open in three years' time.

Boris Johnson says the Nine Elms development will deliver thousands of jobs

The project includes two 200m (660ft) towers - billed as the tallest of their kind in the city - which have been granted outline planning approval.

London Mayor Boris Johnson welcomed the investment and said it was part of ongoing plans to "dramatically transform" Nine Elms and provide thousands of new jobs and homes.

The complex will also be the first luxury hotel opened by a Chinese firm overseas, Dalian Wanda said.

Sunseeker's biggest boats have a starting price of £400,000

Chinese companies have started to acquire top international brands as a shortcut to global success.

There is also growing demand for luxury in mainland China, where new marinas line the country's southern coast.

Dalian Wanda, which last year bought US cinema chain AMC Entertainment for $2.6bn (£1.66bn), said it expected the Sunseeker deal to be completed in mid-August.

Its new top of the range 155 Yacht costs £20m, with former Formula One team boss Eddie Jordan the first customer.

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