Cable Viewer

Currently released so far... 4955 / 251,287

### Articles

Brazil Sri Lanka United Kingdom Sweden Editorial United States Latin America Egypt Yemen Jordan

### Browse latest releases

2010/11 2010/12 2011/01 2011/02
2010/11/28 2010/11/29 2010/11/30
2010/12/01 2010/12/02 2010/12/03 2010/12/04 2010/12/05 2010/12/06 2010/12/07 2010/12/08 2010/12/09 2010/12/10 2010/12/11 2010/12/12 2010/12/13 2010/12/14 2010/12/15 2010/12/16 2010/12/17 2010/12/18 2010/12/19 2010/12/20 2010/12/21 2010/12/22 2010/12/23 2010/12/24 2010/12/25 2010/12/26 2010/12/27 2010/12/28 2010/12/29 2010/12/30
2011/01/01 2011/01/02 2011/01/04 2011/01/05 2011/01/07 2011/01/09 2011/01/10 2011/01/11 2011/01/12 2011/01/13 2011/01/14 2011/01/15 2011/01/16 2011/01/17 2011/01/18 2011/01/19 2011/01/20 2011/01/21 2011/01/22 2011/01/23 2011/01/24 2011/01/25 2011/01/26 2011/01/27 2011/01/28 2011/01/29 2011/01/30 2011/01/31
2011/02/01 2011/02/02 2011/02/03 2011/02/04 2011/02/05 2011/02/06 2011/02/07 2011/02/08 2011/02/09 2011/02/10 2011/02/11 2011/02/12 2011/02/13 2011/02/14 2011/02/15 2011/02/16 2011/02/17 2011/02/18 2011/02/19 2011/02/20 2011/02/21 2011/02/22

### Browse by creation date

66 72 73 75 79 86 88 89 90 00 01 02 03 04 05 06 07 08 09 10
1966/12
1972/02 1972/08
1973/04
1975/03
1979/08
1986/05
1988/01
1989/12
1990/01 1990/07 1990/08
2000/06 2000/09 2000/11
2001/02 2001/03 2001/07 2001/10
2002/02 2002/03 2002/11
2003/03 2003/04 2003/05 2003/06 2003/07 2003/08 2003/09 2003/10 2003/11 2003/12
2004/01 2004/02 2004/03 2004/04 2004/05 2004/06 2004/07 2004/08 2004/09 2004/10 2004/11 2004/12
2005/01 2005/02 2005/03 2005/04 2005/05 2005/06 2005/07 2005/08 2005/09 2005/10 2005/11 2005/12
2006/01 2006/02 2006/03 2006/04 2006/05 2006/06 2006/07 2006/08 2006/09 2006/10 2006/11 2006/12
2007/01 2007/02 2007/03 2007/04 2007/05 2007/06 2007/07 2007/08 2007/09 2007/10 2007/11 2007/12
2008/01 2008/02 2008/03 2008/04 2008/05 2008/06 2008/07 2008/08 2008/09 2008/10 2008/11 2008/12
2009/01 2009/02 2009/03 2009/04 2009/05 2009/06 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12
2010/01 2010/02

### Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z
Embassy Athens Embassy Asuncion Embassy Astana Embassy Asmara Embassy Ashgabat Embassy Ankara Embassy Amman Embassy Algiers Embassy Addis Ababa Embassy Accra Embassy Abuja Embassy Abu Dhabi Embassy Abidjan Consulate Amsterdam American Institute Taiwan, Taipei
Embassy Bujumbura Embassy Buenos Aires Embassy Budapest Embassy Bucharest Embassy Brussels Embassy Bridgetown Embassy Bratislava Embassy Brasilia Embassy Bogota Embassy Bishkek Embassy Bern Embassy Berlin Embassy Belgrade Embassy Beirut Embassy Beijing Embassy Banjul Embassy Bangkok Embassy Bandar Seri Begawan Embassy Bamako Embassy Baku Embassy Baghdad Consulate Barcelona
Embassy Copenhagen Embassy Conakry Embassy Colombo Embassy Chisinau Embassy Caracas Embassy Canberra Embassy Cairo Consulate Curacao Consulate Casablanca Consulate Cape Town
Embassy Dushanbe Embassy Dublin Embassy Doha Embassy Djibouti Embassy Dhaka Embassy Dar Es Salaam Embassy Damascus Embassy Dakar Consulate Dubai
Embassy Freetown
Embassy Guatemala Embassy Gaborone Consulate Guadalajara
Embassy Helsinki Embassy Harare Embassy Hanoi Consulate Hermosillo Consulate Hamburg
Iran RPO Dubai Embassy Islamabad Consulate Istanbul
Embassy Jakarta Consulate Jerusalem Consulate Jeddah
Embassy Kyiv Embassy Kuwait Embassy Kuala Lumpur Embassy Kinshasa Embassy Kigali Embassy Khartoum Embassy Kampala Embassy Kabul
Embassy Luxembourg Embassy Luanda Embassy London Embassy Ljubljana Embassy Lisbon Embassy Lima Embassy Lilongwe Embassy La Paz Consulate Lagos
Mission USNATO Embassy Muscat Embassy Moscow Embassy Montevideo Embassy Monrovia Embassy Minsk Embassy Mexico Embassy Maputo Embassy Manama Embassy Managua Embassy Malabo Embassy Madrid Consulate Munich Consulate Montreal Consulate Monterrey
Embassy New Delhi Embassy Nassau Embassy Nairobi Consulate Naples
Embassy Ouagadougou Embassy Ottawa Embassy Oslo
Embassy Pristina Embassy Pretoria Embassy Prague Embassy Port Au Prince Embassy Phnom Penh Embassy Paris Embassy Paramaribo Embassy Panama Consulate Peshawar
Embassy Quito
REO Basrah Embassy Rome Embassy Riyadh Embassy Riga Embassy Reykjavik Embassy Rangoon Embassy Rabat Consulate Rio De Janeiro Consulate Recife
Secretary of State Embassy Stockholm Embassy Sofia Embassy Skopje Embassy Singapore Embassy Seoul Embassy Sarajevo Embassy Santo Domingo Embassy Santiago Embassy Sanaa Embassy San Salvador Embassy San Jose Consulate Strasbourg Consulate Shenyang Consulate Shanghai Consulate Sao Paulo
Embassy Tunis Embassy Tripoli Embassy Tokyo Embassy The Hague Embassy Tel Aviv Embassy Tehran Embassy Tegucigalpa Embassy Tbilisi Embassy Tashkent Embassy Tallinn
USUN New York USEU Brussels US Mission Geneva US Interests Section Havana US Delegation, Secretary UNVIE Embassy Ulaanbaatar
Embassy Vilnius Embassy Vienna Embassy Vatican Consulate Vladivostok
Embassy Windhoek Embassy Wellington Embassy Warsaw
Embassy Yerevan Embassy Yaounde
Embassy Zagreb

### Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
AF ASEC AM AE AG AR AS AU AORC AJ AMGT AGMT AFIN APER ABUD ATRN AL AEMR ACOA AO AX AMED ADCO AODE AFFAIRS AC ASIG ABLD AA AFU ASUP AROC ATFN AVERY APCS AER ASECKFRDCVISKIRFPHUMSMIGEG AEC
BR BA BM BRUSSELS BL BK BO BILAT BTIO BEXP BH BE BX BU BIDEN BY BG BF BB BC BBSR BMGT BTIU
COUNTER CH CO CG CE CA CASC CU CLINTON CI CVIS CDG CIA CACM CDB CS CBW CD CV CMGT CJAN CF CN CAN CIS CM CONDOLEEZZA COE CR CY CTM COUNTRY CLEARANCE CPAS CWC CT CKGR CB CACS COM CJUS CARSON COUNTERTERRORISM
DA DJ DEAX DR DHS DOE DEA DK DISENGAGEMENT DS DTRA DOD
ECON EG EAID EFIN ELAB EUN ETRD EU EXTERNAL ENRG ETTC EPET EINV EMIN ECIP ECPS EINDETRD EAGR EN EZ ER ET ES EUC EI EAIR EIND EWWT ELTN EREL ECIN EFIS EINT EC ECONEFIN ENVR ECA ELN EINVETC ENIV EINN ENGR EUR ESA ENERG EK ENGY ELECTIONS ECUN EINVEFIN
FR FJ FINR FAO FTAA FREEDOM FI FARC FBI FMLN
GTMO GOI GM GG GV GH GA GE GT GR GTIP GCC GAZA GZ
HILLARY HA HU HR HUMAN HO HYMPSK HURI HK HSTC
IS IR IZ INRB IAEA IN IT ID IO IV ICTY IQ ICAO INTERPOL IPR IRAJ INRA INRO IC IIP ITPHUM IWC ISRAELI IRAQI ICRC IMO IF ILC IEFIN INTELSAT IL IA IBRD IMF INR IRC ITALY ITALIAN
JAMES JO JA JOSEPH JP JOHNNIE JUS
KDEM KJUS KCOR KOLY KIPR KNNP KU KWBG KPAL KN KS KZ KAWK KISL KPAO KCRM KSEC KGHG KIFR KTFN KDRG KV KSUM KWAC KAWC KDEMAF KFIN KGIC KTIP KOMC KHLS KSPR KGCC KPIN KG KBIO KHIV KSCA KE KFRD KPKO KNUC KMDR KPLS KUNR KIRF KIRC KACT KRAD KCOM KMCA KHDP KVPR KDEV KWMN KMPI KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG KCFC KTIA KPRP KCIP KCFE KOCI KTDB KMRS KLIG KBCT KICC KGIT KSTC KPAK KNEI KSEP KPOA KFLU KNUP KNNPMNUC KO KTER KHUM KRFD KBTR KDDG KWWMN KFLO KSAF KBTS KPRV KNPP KNAR KWMM KERG KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG KTBT KCRS KRVC KSTH KREL KNSD KPAI KHSA KR KPWR KMIG
LY LE LG LH LU LI LO LOG LT
MARR MOPS MCAP MNUC MZ MO MASS MY MEPP MA MR ML MX MIL MTCRE MPOS MOPPS MTCR MAPP MU MG MASC MCC MK MTRE MP MDC MAR MEPI MRCRE MI MT MQADHAFI MD MAPS MUCN MASSMNUC MERCOSUR
NATO NI NZ NG NU NO NL NIPP NPT NE NS NAR NPG NK NSG NA NT NASA NGO NP NSF NATIONAL
OTR OVIP OVP OREP ODIP OPDC OPRC OIIP OFFICIALS OSAC OAS OEXC OFDP OTRA OSCE OPIC OECD OPCW OSCI OIE OIC
PREL PGOV PTER PHUM PINR PAK PREF PL PBTS PHSA PARM PO PINS PK PINT PROP PE POGOV PINL POL PBIO PSOE PKFK PGOF PA PARMS PORG PM PMIL PTERE PF PALESTINIAN PY PGGV PNR POV PAO PFOR PHALANAGE PARTY PRGOV PNAT PROV PEL PINF PGOVE POLINT PRL PRAM PMAR PGOVLO PHUMBA POLITICS PEPR PSI PU POLITICAL PARTIES PECON
QA
RS RU RO RW REGION RP RIGHTS RICE ROBERT RF RFE
SP SY SOCI SCUL SNAR SA STEINBERG SENV SF SO SR SG SW SU SL SMIG SN SHUM SZ SYR ST SANC SC SAN SIPRS SK SH SI
TIP TERRORISM TI TU TC TRGY TX TS TBIO TW TSPA TH TR TT TO TFIN TD TSPL TZ TPHY TK TNGD
UN US UK UG UNSC UP USEU UNMIK UV UZ UY UNGA UNO USUN UNESCO UE UAE UNEP USTR UNHCR UNDP UNHRC USAID UNCHS UNAUS UNCHC
VZ VT VE VTPREL VN VM
WTRO WTO WA WI WMO WTRQ WHO WWARD WB WBG WEU
XF XA XG XT XM XR XS XL XK XH XY XC XZ XW XD XE
YE YM YI
ZI ZU ZP ZR ZB ZF ZK ZANU ZOELLICK ZA ZO ZJ

### Browse by classification

CONFIDENTIAL CONFIDENTIAL//NOFORN SECRET SECRET//NOFORN UNCLASSIFIED UNCLASSIFIED//FOR OFFICIAL USE ONLY

### Community resources

Follow us on Twitter Check our Reddit Twitter this Digg this page Contact us on IRC

courage is contagious

### Viewing cable 09LONDON2121, MEMBERS OF CONGRESS DISCUSS BONUSES, BAIL-OUTS AND

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:

- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.

To understand the justification used for the classification of each cable, please use this WikiSource article as reference.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #09LONDON2121.

Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09LONDON2121 | 2009-09-11 14:02 | 2011-02-04 21:09 | UNCLASSIFIED | Embassy London

`

    VZCZCXRO3583
    PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
    DE RUEHLO #2121/01 2541451
    ZNR UUUUU ZZH
    P 111451Z SEP 09
    FM AMEMBASSY LONDON
    TO RUEHC/SECSTATE WASHDC PRIORITY 3470
    INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
    RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
    RHEHNSC/NSC WASHDC PRIORITY

` `

    UNCLAS SECTION 01 OF 03 LONDON 002121

    SIPDIS
    EO 12958 N/A

    TAGS ECON, EINV, EFIN, UK
    SUBJECT: MEMBERS OF CONGRESS DISCUSS BONUSES, BAIL-OUTS AND

    OTHER REFORM MEASURES WITH UK OFFICIALS

    ¶1. (SBU) Summary. Bonuses, regulatory structures, and EU legislation led the discussions of Senators Richard Shelby (R-Ala) and John Cornyn (R-Texas), and Representatives Paul Kanjorski (D ) PA), Scott Garrett (R ) NJ) and Luis Gutierrez (D ) Ill) during their recent meetings in London. During the September 2-7 visit, the two Congressional delegations jointly met with Members of Parliament from the Treasury Select Committee; with Lord Adair Turner and his staff from the Financial Services Authority, and with leading banking executives. A constant theme was the need for regulatory convergence and for changes to occur methodically, not hastily. End Summary. Parliament’s Treasury Select Committee ) Bonuses and Brussels Top Concern

    ¶2. (SBU) MPs from both the Labour and Conservative Parties cited the “group think” of bankers and lack of oversight from boards of directors as one of the root causes of the economic crisis. John McFall, Committee Chairman and Labour MP, criticized the board of directors of Royal Bank of Scotland for not questioning RBS’s purchase of ABN Ambro at the height of the market and without doing due diligence of the Bank. Michael Fallon, Conservative MP, highlighted the failure of corporate governance and ineffective self-regulation by the industry.

    ¶3. (SBU) In response to Senator Shelby’s query about how we move beyond the crisis and fix the problems, McFall suggested that bank salaries and bonuses had to be a top priority. He said, however, that the Financial Services Authority’s proposed guidelines on remuneration are weak, and what already is being seen, with the latest news about bonuses being paid out, is that “the punch bowl has moved to the center of the table, with a bigger ladle.” He was disquieted by the “business as usual” mentality that seems to be emerging once again in the banking industry.

    ¶4. (SBU) The MPs expressed concern about actions in Brussels.  Fallon said the draft EU Alternative Investment Fund Managers directive was protectionist and would erect a wall around Europe and disadvantage non-European investors. The UK should strongly oppose this directive, since it would weaken London as a global financial center. The French, he said, were taking the hardest line on the AIFM, though curiously he noted that France has no real hedge fund industry. He surmised that the French were taking such a hard line to be able to do some horse-trading later, and get UK acquiescence on issues that matter to them, like bonuses and compensation. Mark Todd, Labour MP, commented that Brussels saw the crisis as an opportunity to challenge the Anglo-Saxon model of markets. Andrew Love, Labour MP, noted that there was a great communality of interests between the UK and the U.S., and that our two governments need to work together more effectively in influencing Brussels ) a comment echoed by all the other MPs. Todd and Sally Keeble, Labour MP, noted the need to have international coordination especially when dealing with large, systemically important firms. Though, she wryly mused, that if there had been an international effort to save Lehman Brothers, the French would have gotten involved only if they received the “glory,” and the Germans only if they could get jobs out the rescue plan. All MPs expressed concern that the UK’s financial services interests could be undermined by actions in Brussels.

    ¶5. (SBU) Fallon also noted the international debate has centered on the questions of systemic risk and financial stability, but both terms, in his view, have not been adequately defined. Without a proper understanding of what real objectives were meant to be reached under this rubric, any regulatory structure created would be inadequate. Financial Services Authority (FSA) ) More Capital, More Accountable Boards

    ¶6. (SBU) Lord Adair Turner, Chair of the FSA, identified several causes to the crisis: too much leverage, insufficient liquidity, too low reserves, too much focus on mark-to-market accounting rules, too much risk-taking, too little oversight by boards of directors. A multi-tiered approach was needed to prevent such crises in the future, he said. Among the steps required: higher capital reserves, including, perhaps, a capital surcharge on the biggest banks ) the systemically important firms; greater oversight by boards and shareholders of pay and bonuses; greater accountability of boards; and “living wills” for systemically important firms.

    ¶7. (SBU) Specifically, he argued, banks needed a large buffer of equity capital, and that capital requirements should increase in step with the risk involved with their activity. He stated that regulators were still struggling with the concept of what was “too big to fail” ) and why financial services firms did not, or could not, fail as other major corporations did by following such procedures as declaring bankruptcy and going to court to deal with holders of credit and of debt. He supported “living wills” for failing firms, but cautioned about the practicality of such wills, since business activity was not stagnant and wills would be
    LONDON 00002121 002 OF 003
    outdated the minute they were completed. Nevertheless, wills would force an examination of complex corporate structures that could enable authorities to better understand the institutions they regulate. He also thought such wills could improve corporate governance by increasing transparency. On pay, he agreed with Representative Garrett’s (R-NJ) observation that the issue was turning into a “red herring.” Bonuses, he said, had not been at the heart of the crisis, but the political pressure was mounting to place limits on bonuses. Regulators, he said, should not mandate levels of pay, but they could address the structure of how people were paid; whether, for example, there were immediate cash payments or payments deferred until profits/losses were cleared from the books. The issue should be the nature of incentives; employees should not be rewarded for “bad behavior.” He said he supported a “claw back” provision on bonuses should activity later come to light that would be deemed as too risky. He stressed that boards of directors and shareholders need to take on greater oversight of pay.

    ¶8. (SBU) Negligent boards of directors bore much of the responsibility for the crisis, he argued, failing to provide oversight or check risky activity. As a direct result of the crisis, the FSA has ramped up its review of the composition and qualifications of directors and was interviewing, in many cases, non-executive members of boards, and turning them down if they did not have the appropriate competency levels. In its oversight of financial services, the FSA will ask boards whether they are looking at the whole range of business activity and what guidance they are providing on pay.

    ¶9. (SBU) Hedge funds also were at risk of becoming a populist issue, Turner noted. He said that hedge fund activity was not a cause of the crisis, and most funds were significantly less leveraged that many banks ) on average two to one for hedge funds versus twenty to one for investment banks. But in continental Europe, hedge fund managers were being perceived as the villains. He argued that regulators should have the absolute right to gather information about funds to review their systemic risk. And if there were concerns, regulators could impose greater capital requirements, but he did not believe that a regulation of the industry itself was necessary.

    ¶10. (SBU), Turner said institutional architectures were the least important issue. The key issue was not structure, but philosophy ) that market forces would guarantee stability. He argued that changing the overall regulatory architecture in the UK was not necessary, but increasing the competency of and funding for regulators were essential. When asked about the “Tobin tax” (tax on all trade of currency across borders), Turner said the idea has generated much comment and criticism, but said such a tax was impractical and could not be implemented. Bankers Speak Out ) “Help Us Help Ourselves”

    ¶11. (SBU) A single systemic risk regulator was needed, the bankers unanimously agreed. The banking industry can not regulate itself sufficiently to prevent any future crisis. The regulator must be able to check the industry’s worst impulses, said Gary Lynch, Executive Vice President and Chief Legal Officer, Morgan Stanley, at a Embassy-hosted roundtable.

    ¶12. (SBU) In the U.S., the bankers agreed it should be the Federal Reserve Board, which already has authority for price stability and economic growth. Adding authority for financial stability would enable the Fed to monitor systemic risk. In the UK, they were mixed about whether the Bank of England should be granted greater authority, or whether the current tripartite structure ) with the BOE, Treasury and Financial Services Authority having different oversight obligations ) should remain intact. Stephen Green, Chairman HSBC, argued that under the current system in the UK, the public armor lacks “weapons.” The BOE has been traditionally focused on inflation; neither the Bank nor the FSA was watching the flow of money in and out of the financial system. They were not concerned with capital reserves or liquidity. He argued that there needed to be a single regulator in the UK and that it must have a broad oversight mandate. The BOE, he said, should be able to control the flow of credit, manage capital ratios ) and have responsibility over all systemically important firms.

    ¶13. (SBU) Regarding pay and bonuses, the bankers all agreed that bonuses structures should be reviewed, and that pay and performance should be closely linked. They cautioned however about letting political pressures dictate such structures or any reform efforts. Angela Knight, President of the British Bankers’ Association, argued that the industry was facing political risk; that political leaders were responding to public anger but were not addressing real issues. Some continental European leaders, she said, dislike hedge fund managers and their personal wealth, and see this crisis as an opportunity to get a grip on greed. This was part of the motivation behind a seriously flawed draft EU directive on
    LONDON 00002121 003 OF 003
    hedge funds. She commented that the incoming European Commission would want to be seen as tougher on bankers than the outgoing Commission.

    ¶14. (SBU) On prospects for global economic recovery, the bankers also offered mixed views. UK exports were up and unemployment continued to rise but at a slower rate. Glenn Earle, Chief Operating Officer, Goldman Sachs, cited an increase in corporate bond issuances and a reduction in corporate debt, especially in terms of short-term debt. These were signs that the economies are healing, but the long-term prognosis was still uncertain, he said. He said that rising unemployment and savings rates would repress consumption; for how long was unclear. J. Eric Daniels, Chief Executive, Lloyds Banking Group, stated that consumer confidence was up in the UK, and noted that lower interest rates had reduced mortgage payments (by an average GBP 200 pounds per month) and raised consumers, disposable income. He also observed that inventories were being re-stocked and some delayed capital purchases were now being made. But he pessimistically noted that he did not see a real engine for growth in the UK or the U.S. It was a debt-fueled boom before, and without real gains in productivity, he said he did not expect a return to real growth anytime soon.

    ¶15. (SBU) Global imbalances ) between saving and borrowing cultures ) also still need to be addressed, argued Sir Win Bischoff, who takes over as Chairman of Lloyds Banking Group later this month. He noted that Asian growth remained dependent on the U.S. market. Green observed that Asia was rescuing global growth once again, with both China and India expected to have growth rates of eight percent or higher in the next 12 months. Agreeing with Bischoff, he said there was a real risk for Asia if the U.S. did not really start to recover until end of 2010. Growth in China was being driven by greater domestic spending on infrastructure, timetables for which were moved forward to pump money into the economy. These projects will be completed by summer 2010. The question, he asked, was what will take its place as a driver of growth? Royal Bank of Scotland ) Mistakes were Made

    ¶16. (SBU) In a separate meeting with Representatives Kanjorski, Garrett and Gutierrez, RBS Chairman Sir Philip Hampton (who was appointed by the UK government in April) acknowledged that RBS had made several enormous mistakes. Top among them was its heavy exposure in the U.S. subprime market and the bank’s purchase of ABN Ambro, which occurred at the height of the market and without RBS doing proper due diligence prior to the purchase. The board of directors never questioned this purchase, which Hampton termed a failure of their fiduciary responsibilities.

    ¶17. (SBU) Hampton spoke about RBS’s de-leveraging. It has set up a non-core bank with GBP 250 billion in capital to absorb its toxic and non-performing assets; it has a three-year plan to get all its toxic assets off its balance books. It will also eliminate less profitable business activity, such as marine and aviation lending ) in which RBS had been the global leader. It will retain the U.S.-based Citizens Bank, but will likely reduce the number of branches. (As an aside, Hampton noted that RBS is the number one broker/dealer of U.S. Treasuries, and that the USG should be interested in RBS’s health, given the anticipated increase in sales of U.S. Treasuries.) RBS has raised GBP 50 billion in capital in the past 12 months, though two-thirds of that was from the government. He expected the government would retain its stake in RBS for several years and would only begin to reduce its holdings once the market recovery is certain. He predicted the government would sell RBS off in several tranches over the next three-to-five years.

    ¶18. (SBU) On industry-wide issues, Hampton supported some regulatory oversight of pay and bonuses but said he preferred a light touch ) otherwise, the most talented people might leave and go to non-regulated industries. He argued that there needed to be one global accounting standard; the lack of uniformity played to the advantage of those who knew how to exploit the differences. He also supported higher capital reserves requirements, even among mid-sized banks. One lesson to be learned from the crisis is that regional players can become global players, like RBS did, in a matter of years, and regulators need to anticipate this potentiality.
    Visit London’s Classified Website: http://www.intelink.sgov.gov/wiki/Portal:Unit ed_Kingdom
    SUSMAN

`