Currency Probe: Barclays Traders Suspended

Sky sources have confirmed traders have been suspended at Barclays in connection with the possible fixing of currency markets as a global regulatory investigation widens.

A Financial Times report suggested Barclays had suspended as many as six foreign exchange staff - some of them London-based.

The paper added that on Thursday RBS suspended two of its traders as part of the probe.

Both banks declined to comment publicly on the suspensions but have confirmed they have been drawn into the investigation surrounding alleged manipulation.

RBS said in its third quarter results today it had been contacted by the UK's Financial Conduct Authority (FCA) and other authorities.

Barclays has reportedly suspended up to six individuals

It added: "The group is reviewing communications and procedures relating to certain currency exchange benchmark rates as well as foreign exchange trading activity and is cooperating with these investigations.

"At this stage, the group cannot estimate reliably what effect, if any, the outcome of the investigation may have on the group."

Ross McEwan, RBS chief executive, refused to comment on the case but said it would "come down very severely on anyone we discover has been breaking the rules."

Fellow banking giant Barclays said alongside its trading update on Thursday it was also co-operating with inquiries from various authorities and was reviewing its foreign exchange trading activities over a period of several years to August this year.

Citigroup told Sky News that a member of staff based in London had left the company under a mutual agreement.

Deutsche Bank, JPMorgan and UBS have also been contacted as part of the probe involving regulators in Britain, Switzerland, the US and Hong Kong.

The FCA revealed last month it had launched its own investigation into the foreign exchange market, which is worth £3trn a day globally - with more than 40% of the market based in London.

Regulators are looking into whether currency traders shared information about their positions and knowledge of client orders through instant messages to rig the foreign exchange market in their favour.

Currency exchange rates are set on a daily basis by analysing actual trading volumes at leading banks during a short time window.

It is thought that traders could potentially influence exchange rates by pushing through large orders during the 60-second window to make a profit.

The investigation threatens to engulf the industry in yet another embarrassing scandal at a time when many financial firms are still battling to restore their reputations following the Libor rigging revelations.

Barclays and RBS were both fined for their part in the Libor scandal, paying penalties of £290m and £391m respectively.

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Sugary Drinks Tax 'Could Raise Treasury £275m'

By Thomas Moore, Health and Science Correspondent

A tax on sugary drinks would reduce the number of obese adults in the UK by 180,000 and raise over £275m for the Treasury, according to doctors.

Researchers from Reading and Oxford universities say a standard 500ml bottle of some drinks contains as many as 14 teaspoons of sugar, or 210 calories; and they warn the drinks increase the risk of obesity, diabetes, cardiovascular disease and tooth decay.

Professor Richard Tiffin, Reading University: 'Taxing food is a big step'

In the most detailed study of its kind, the researchers calculated that a 20% tax on sugary drinks - adding roughly 12p to a can of fizzy pop - would reduce purchases by around 15%.

That would reduce the average calorie consumption by 28 calories a week, enough to reduce obesity by between 110,000 and 250,000, according to results published in the British Medical Journal.

Dr Adam Briggs of the British Heart Foundation Health Promotion Research Group at Oxford University, and one of the researchers, said: "Sugar sweetened drinks are known to be bad for health and our research indicates that a 20% tax could result in a meaningful reduction in the number of obese adults in the UK.

"Such a tax is not going to solve obesity by itself, but we have shown it could be an effective public health measure and should be considered alongside other measures to tackle obesity in the UK."

The researchers say the impact of the tax would be greatest on young people. On average people aged 16-29 drink around 300ml of sugary beverages a day.

But one of the researchers, economist Professor Richard Tiffin of the University of Reading, warned that the tax would not reduce obesity by enough to justify the hardship it could cause.

Researchers at Reading found some drinks contained 14 teaspoons of sugar

"Taxing food is a big step, especially when spiralling bills are already making households poorer, and will make very little difference if people are unable or unwilling to make healthier choices elsewhere in their lives," he said.

Professor Sir Stephen O'Rahilly from the Medical Research Council's Metabolic Diseases Unit in Cambridge agreed that sugary drinks are "part of the problem"' but he added that taxation was "politically undeliverable" in most democracies.

He said: "A workable alternative might be to encourage the major companies to switch to the aggressive promotion and marketing of less harmful versions of their products.

Soft drinks firms said there was evidence a tax would not curb obesity

"This could be achieved by balancing a 20% tax on sugared products with a 20% subsidy on artificially sweetened versions of the same beverages."

Any excess calories, whether from protein, carbohydrate or fat, can add on the pounds. Sugar is a carbohydrate.

Gavin Partington of the British Soft Drinks Association said there was "ample" evidence that taxing soft drinks will not curb obesity.

"Trying to blame one set of products is misguided, particularly when they comprise a mere 2% of calories in the average diet."

Mr Partington said: "I challenge the whole basis of this assumption. The truth is we have a problem with obesity because too many people are leading inactive lifestyles and their overall diet is insufficiently balanced. It's not a case of picking on one product or another, that's a really cheap gimmick."

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Payday Loans To 'Fund Xmas For 1.2 Million'

Pressures on family finances are so great that more than one million people plan to take out a payday loan to cover the cost of Christmas, according to a report.

The finding was made by researchers for the Government-backed Money Advice Service (MAS), which also suggested that spending on the festive season will be curbed this year despite predictions to the contrary among retail bodies.

The MAS found that 1.2 million across the UK were thinking about turning to a payday lender to fund their seasonal spending while 32% of those questioned planned to ramp up their credit card debts.

The survey also showed that 9% of people were still paying off their debts from last Christmas at a time when wage increases are failing to keep up with rising living costs such as higher energy and food bills.

The squeeze on budgets was highlighted when separate official figures showed on Friday that personal insolvencies edged up to their highest levels in a year during the third quarter of the year - driven by a sharp increase in individual voluntary arrangements.

The MAS said that people typically expected to spend £487 this Christmas - a fall of £21 when compared to the same study in 2012.

Payday lenders, which typically offer short-term loans, have been blasted for their treatment of customers struggling to keep up their repayments amid soaring penalties.

A crackdown has been taking place on the lending industry to stop consumers sinking into a spiral of debt.

New curbs proposed by the Financial Conduct Authority (FCA) will force lenders to place "risk warnings" on their promotions and advertising, urging consumers to "think" before taking on a payday loan.

The watchdog has powers to ban adverts if it thinks they are misleading while lenders will only be allowed to roll over a loan twice and they will only be able to make two unsuccessful attempts to claw money back out of someone's bank account under proposals due to come into force next year.

Consumer group Which? recently called for tougher action to clean up the whole of the consumer credit market, after research it carried out found going overdrawn with your bank can be as "eye-wateringly" expensive as taking a payday loan.

The research carried out by the MAS, an independent body set up by Government, found that pressure to please other people and loved ones was the top reason for people overspending at Christmas, followed by wanting to give children the perfect Christmas and being tempted by special offers.

Jane Symonds, head of service delivery at the MAS, said: "Christmas is an exciting time to catch up with family and friends but can also be a worry financially, and very stressful if money is tight."

:: The MAS has a guide to help people plan their Christmas budgets at www.moneyadviceservice.org.uk/christmasplanner.

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Wales Offered New Powers To Raise Taxes

By Darren McCaffrey, Sky News Reporter

The Welsh government will for the first time have some control over income tax and borrowing, if it is approved by a referendum, the Prime Minister has announced.

David Cameron and Nick Clegg set out details of how the next stage of devolution will work, with landfill tax and stamp duty also being transferred to Cardiff, bringing in £200m in revenue for the Assembly.

The announcement was in response to the Silk Commission on devolution which recommended giving Wales powers on tax and borrowing, published last year.

"Today we are announcing new powers for the Welsh people and the Welsh government," Mr Cameron told a press conference at the Senedd in Cardiff Bay.

"Power that is about building this country up. Power that's about ensuring what I want and what I know the Deputy Prime Minister wants and the First Minister wants, which is a strong Wales inside a strong United Kingdom."

Mr Cameron said borrowing powers would help the Welsh government finance improvements to the M4.

The Prime Minister also revealed the 2014 Nato summit, which the UK is hosting, will be held in Wales at Newport's Celtic Manor.

Sixty heads of state and government would attend the summit, which the UK last hosted in 1990.

"It'll be good for jobs, it'll be good for investment, it'll be good for business. It'll be a great advertisement for the success that Wales and the Welsh economy is," he said.

Wales First Minister Carwyn Jones welcomed the announcement, saying: Today is an important day for Wales. We are now being treated like equals in the UK."

Westminster will now provide for a referendum to ask people whether tax should be devolved in the same way it is in Scotland.

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RBS Confirms Plan For £38bn 'Bad Bank'

By Mark Kleinman, City Editor

Royal Bank of Scotland (RBS) has confirmed plans to hive off nearly £40bn of toxic assets into a new division as part of an effort to accelerate its recovery that will be treated with scepticism by advocates of a more radical break-up.

Announcing a third-quarter pre-tax loss of £634m, RBS said £38bn of impaired loans would be placed into an 'internal bad bank' to be called RBS Capital Resolution Division.

The new arm of the bank is designed to provide a clearer distinction between the clean parts of the business and the tens of billions of pounds of legacy loans that critics say have hampered its ability to play a role in aiding the recovery of the UK economy.

Ross McEwan, RBS's new chief executive, conceded that quickening the run-off of these assets - with a target of up to £25bn of the £38bn being shed by the end of 2015 - would incur steeper losses.

The outcome of the four-month review commissioned by the Chancellor, George Osborne, and conducted by City firms BlackRock and Rothschild will see the rebranding of RBS's existing non-core wing, which has already offloaded hundreds of billions of pounds of toxic loans since the bank's £45.5bn bail-out by UK taxpayers in 2008.

Price correct at 09.43 GMT

Sky News exclusively revealed details of the internal bad bank plan and the broader restructuring of the bank, which is 81%-owned by taxpayers, last weekend.

Alongside the new bad bank, RBS will also bring forward the disposal of its US retail bank, Citizens; further shrink its investment banking business; resolve the issue of a dividend-blocking instrument that RBS will need to acquire from the Government; and target new cost-cutting measures that could lead to thousands more job cuts.

Mr Osborne said the reforms were part of a broader objective of "creating a banking system that works for Britain".

"Under this new direction RBS will deal decisively with the problems of the past by separating out the good from the bad, and putting the bad loans in a bad bank.

Stephen Hester left RBS amid his support for investment bank operations

"Our independent analysis shows that the bad bank should be an internal one, funded by RBS, rather than an external one funded by the taxpayer."

In a pointed remark highlighting divisions between the Treasury and Mr McEwan's predecessor, Stephen Hester, the Chancellor said that the new strategy was jointly-supported by RBS's management, the Government and the regulator.

The Bank of England said that it welcomed "the development of a more focused strategy for RBS and the commitments of the Board to specific actions that will bolster its capital position in the next three years".

"These actions should create a more resilient institution that is better able to support the real economy without any expectation of further Government support," it said.

"Given these developments, the Bank of England fully supports the conclusions of the review published today by HM Treasury."

While there was a consensus about the reforms within Government, Mr Osborne may have to brave a more hostile response from figures who wanted a more radical split of RBS.

Among their ranks were Lord Lawson, the former Chancellor; Lord  King, former Governor of the Bank of England; and Andrew Tyrie, chairman of the Parliamentary Commission on Banking Standards.

Alongside the new measures aimed at boosting RBS's recovery, a report was published condemning the bank's attitude to lending to small and medium-sized businesses (SMEs).

Mr McEwan pledged to implement the recommendations, and said RBS would target becoming the best SME bank in the UK.

In response to today's announcements, Shadow Chancellor Ed Balls said: "After the firesales of Royal Mail and Northern Rock, we will scrutinise George Osborne's plans for the future of RBS very carefully.

"As we argued when, earlier this year, the Chancellor flirted with the idea of a quick sale of RBS to a political timetable, the taxpayer interest must come first.

"The tests for these changes at RBS are whether they see the taxpayer ultimately get its money back and whether they actually boost business lending and radically transform this bank to put an end to business as usual.

"On the banking system more widely, business and the public are right to be concerned that lending to business is still falling while the radical reforms we need are being watered down.

"For example, he is still refusing to implement the Parliamentary Commission's call for a backstop power that would allow for full separation of all the banks, not just one or two, if ring-fencing proves ineffective and does not deliver the cultural change we need."

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Co-Op: US Hedge Funds Reassure Watchdog

By Mark Kleinman, City Editor

A group of American hedge funds is trying to reassure the Bank of England about their role in the restructuring of the Co-operative's troubled banking arm ahead of a formal deal to be announced on Monday.

Sky News has learnt that the LT2 Group, a coalition of funds which has forced Britain's most important mutual to cede majority ownership of its troubled lender, has held talks with regulators to reassure them that they do not intend to cross a crucial bank ownership threshold.

Under Prudential Regulation Authority (PRA) rules, any party owning more than 10% of the shares in a regulated bank must receive approval from the banking watchdog.

The stipulation is designed to prevent undue influence being exercised over important financial institutions by unregulated entities.

The rule also applies to a group of investors acting in concert, which hedge funds including Aurelius and Silver Point have been doing as they sought to win a better restructuring deal for bondholders from the Co-op Group.

Last week, it emerged that the bondholders would gain control of 70% of the Co-op Bank's shares as part of a debt-for-equity swap, leaving the Co-op Group still as the largest individual shareholder, although holding just a 30% stake.

Advisers to Aurelius, Silver Point and other bondholders have informed the PRA that none of them plans to individually hold a stake of 10% in the Co-op Bank, and that they should not be deemed to be acting collectively despite their months-long campaign to restructure the bank.

People close to the situation said on Friday the PRA was expected to be sympathetic to the hedge funds' argument, but that the issue was the subject of strict legal tests and would be closely monitored.

The funds are anxious to avoid having to be approved by the PRA because of the length of time the process can take.

The restructuring of the Co-op Bank will involve listing its shares on the London Stock Exchange next year, as it seeks to raise £1.5bn to fill a capital hole in its balance sheet.

Next Monday's financial restructuring is expected to be accompanied by the publication of a revised business plan for the Co-op Bank, which will entail significant cost cuts and job losses.

The news that the Co-op Bank would no longer be majority-owned by a mutual has sparked fury among many customers, prompting the bondholder group to acknowledge the lender's ethos.

"The Co-Operative Bank is unique for its ethics, mission and heritage which are an essential component of the Bank's differentiated approach," LT2 said in a statement last week.

"It is important to us that the Bank will maintain its unique characteristics and ethos.

"The Co-operative Group Ltd. will remain the Bank's largest shareholder by far and the Bank will benefit by this connection to the Co-operative movement."

Spokesmen for LT2 and the Co-op declined to comment.

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Billionaire Feels Guilty About Being So Rich

Billionaire California financier Bill Gross has apologised for the wealth he has amassed at the expense of workers.

In a lengthy blog on the website of his company Pacific Investment Management Company (PIMCO) he labelled fellow tycoons who complain about taxes "Scrooge McDucks" after a Disney character.

Calling for tax reform, 69-year-old Mr Gross, ranked 641 in the Forbes list of billionaires, said the top 1% of earners should pay more tax.

He writes: "Having gotten rich at the expense of labour, the guilt sets in and I begin to feel sorry for the less well-off, writing very public Investment Outlooks that 'dis' the success that provided me the soapbox in the first place.

"If your immediate reaction is to nod up and down, then give yourself some points in this intellectual tête-à-tête."

But, he said, he would ask the "Scrooge McDucks of the world who so vehemently criticise what they consider to be counterproductive, even crippling taxation of the wealthy in the midst of historically high corporate profits and personal income" to think again.

"Consider this: instead of approaching the tax reform argument from the standpoint of what an enormous percentage of the overall income taxes the top 1% pay, consider how much of the national income you've been privileged to make.

The headquarters of PIMCO in Newport Beach, California

"In the United States, the share of total pre-tax income accruing to the top 1% has more than doubled from 10% in the 1970s to 20% today.

"Admit that you, and I and others in the magnificent '1%' grew up in a gilded age of credit, where those who borrowed money or charged fees on expanding financial assets had a much better chance of making it to the big tent than those who used their hands for a living.

"Yes, I know many of you money people worked hard, as did I, and you survived and prospered where others did not.

"A fair economic system should always allow for an opportunity to succeed.

"Congratulations. Smoke that cigar, enjoy that Chateau Lafite 1989. But (mostly you guys) acknowledge your good fortune at having been born in the '40s, '50s or '60s ... and having had the privilege of riding a credit wave and a credit boom for the past three decades."

He continued: "If you're in the privileged 1%, you should be paddling right alongside (Scrooge McDuck) and willing to support higher taxes on carried interest and certainly capital gains readjusted to existing marginal income tax rates."

After referring to fellow US billionaires Stanley Druckenmiller and Warren Buffett, who recently mooted similar proposals, he said: "The era of taxing 'capital' at lower rates than 'labour' should now end."

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Office Technology 'Boosts Productivity By 500%'

By Katie Spencer, Sky reporter

Worker productivity is nearly five times greater than it was in the 1970s and could increase by another 22% by 2020, according to a report.

Researchers at the Centre for Economic and Business Research say mobile phones, cloud computing, email and business software are making it easier for people to communicate than ever before.

The report's author, Colm Sheehy, says employers will expect even more.

"Essentially you'll be able to get more productivity from the individual within the hours that they're working," he said. "It will become a personal choice where the barrier is between the office and home life."

Worker productivity could increase by 22% by 2020

But some critics argue the rapid pace of change is also making it harder to rest our brains, and office employees need to slow down before they have a meltdown.

Microsoft's chief envisioning officer, Dave Coplin, admits many of the big-brand tech companies are trying to find alternatives that could prevent inboxes overflowing.

"Technology has become the prison in many cases," he told Sky News. "It was meant to release us, to liberate us, and somehow it's just become a constraint on what we do.

Google's Roger De'Ath says social media could be used in a business context

"Many people feel chained to their email [and feel they] must empty it - when in reality that's just the process of work, it's not work itself."

Carl Honore, author of In Praise Of Slowness, a book analysing the cult of speed, believes more companies should consider giving their employees longer breaks from technology.

"If you never have a moment of silence to sit back and wonder, then you never get into that richer, more nuanced moment of slow thinking," he said.

"All you're doing if you're stuck in that technology carousel is you're always reacting, you're never reflecting."

The study authors also believe that between now and 2020, productivity could increase by another 22%.

At Google, testing out new ideas to improve workplace performance is equally important.

Enterprise manager Roger De'ath believes using social media in a business context could be one way of making our lives easier in the future.

"Rather than just updates about your personal life, why not updates about the latest product launch, but doing that in a flexible way so you don't have to feel like you have to review every single email you receive?" he said.

Staying in touch with the office is easier than ever. Getting the balance right and knowing when to switch off is becoming harder.

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Water Bills: Crackdown On Costs Expected

Water bills may be "rolled back" after the Government vowed to get tough on the rising cost of living.

David Cameron's spokesman indicated that an announcement on water bills would be made next week.

The spokesman said the Department for Environment, Food and Rural Affairs (Defra) would be making the announcement.

He said: "There will be some action next week from Defra with the intention of looking at water bills.

David Cameron says he wants to see household costs cut

"The Prime Minister takes household bills across the piece seriously and wants energy prices to be rolled back and wants various things done, whether it's council tax being frozen, the flex on rail fares being brought down, MoT costs being frozen, these sorts of measures to protect household bills."

He added: "The Prime Minister wants to see household costs across the piece being reduced as low as possible. The intention is to try to reduce the burdens on hard-pressed families."

Mr Cameron "wants regulators to look at the industry they regulate and make sure that they are robust and delivering what they need to deliver for consumers", the spokesman added.

Concerns have been raised that consumers are being ripped off

The move comes after Labour leader Ed Miliband said the market needed to be scrutinised to ensure it was working for consumers.

The soaring cost of living has rocketed up the political agenda since Mr Miliband's pledge to freeze energy prices if his party wins the 2015 General Election.

Mr Cameron, seeking to win back the political initiative on energy policy from Labour, said last week he wanted to "roll back" environmental taxes that bump up energy bills, promising more details in Chancellor George Osborne's Autumn Statement on December 4.

Speaking on Friday at an event for regional newspaper journalists, Mr Miliband said: "I think we should be looking at all markets to make sure they are working properly - and that includes the water industry."

The Western Morning News quoted the Labour leader as saying: "Some people will say this is an anti-business agenda. I think it is a pro-business agenda that you have got to reform markets that are not working properly.

"I think the water industry is something that should be scrutinised to make sure it is working properly, and make sure it is working properly for the benefit of consumers, because I know concerns have been raised.

"I'm proud Labour is championing this agenda and I think it is consistent with believing what a market economy can do, and water is part of that."

Labour's environment secretary Maria Eagle said the party would look to amend existing draft legislation, review the need for tougher regulation, and push for new ways to help reduce bills for low-income households.

MPs are set to consider the reform and infrastructure of the water industry on Tuesday next week after Tory Robert Buckland secured a backbench debate.

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Co-op To Axe More Than 1,000 Banking Jobs

By Mark Kleinman, City Editor

The Co-operative Group is to axe more than 1000 jobs at its troubled banking arm as part of a complete overhaul of its business and finances.

Sky News understands that the job cuts, which could be detailed as soon as Monday, will account for well over 10% of the Co-operative Bank's workforce.

The redundancies will underline the human toll of the lender's mismanagement in recent years as it finalises a plan to fill a £1.5bn hole in its balance sheet.

As expected, the deal, which will have the approval of the Bank of England, will involve Britain's biggest mutually-owned organisation relinquishing ownership of the Co-op Bank.

Insiders said a decision had yet to be taken about whether the scale of the jobs cull would be made public on Monday by Euan Sutherland, the Co-op Group chief executive.

"It's unlikely he'll want to go public with it at this stage," said one.

The final number was still being decided this weekend but sources said that well over 1000 of the roughly 9000 people who work for the mutual's banking arm were expected to lose their jobs.

The axe will fall principally on those working in the Co-op Bank's corporate lending business, with a revised strategy focused on retail and small business customers.

Senior managers, led by Niall Booker, the Bank's chief executive, had also been examining a relaunch of Smile, its internet brand, one insider said.

Retail bondholders are likely to receive a better deal than one presented as a fait accompli by Mr Sutherland until last week.

People close to the deal said that ordinary investors would probably be handed a combination of bonds and a new instrument guaranteeing income.

The biggest institutional bondholders - two US hedge funds - fought to overturn the original deal and will emerge as big shareholders when the bank's shares are listed on the stock exchange next year.

The news that the Co-op Bank will no longer be majority-owned by the mutual has sparked fury among many customers, prompting the bondholder group to praise the lender's ethos.

"The Co-Operative Bank is unique for its ethics, mission and heritage which are an essential component of the Bank's differentiated approach," LT2 said in a statement last week.

"It is important to us that the Bank will maintain its unique characteristics and ethos.

"The Co-operative Group Ltd. will remain the Bank's largest shareholder by far and the Bank will benefit by this connection to the Co-operative movement."

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