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Session 2013-14
Publications on the internet
Treasury Committee - Minutes of EvidenceHC 690
Oral Evidence
Taken before the Treasury Committee
on Tuesday 8 October 2013
Members present:
Mr Andrew Tyrie (Chair)
Mark Garnier
Andrea Leadsom
Mr Andrew Love
John Mann
Mr Pat McFadden
Mr Brooks Newmark
Jesse Norman
Mr David Ruffley
Examination of Witness
Witness: Paul Tucker, Deputy Governor (Financial Stability), Bank of England, gave evidence.
Chair: Thank you very much for coming to see us this morning, particularly since you are in MPC purdah. That means that today we will not seek to probe questions that relate to monetary policy or anything that might be on the MPC's agenda. I will do what I can from this side to make sure that happens and I expect you to do the same.
Paul Tucker: Thank you for that, Chairman.
Q1 Chair: This is your last appearance before the Committee in your current capacity, so it is a particularly pertinent moment to have an opportunity for an exchange. Could I begin by asking you a very general question, which is whether you have yet had a chance to think about the lessons that you think can be drawn by the Bank's handling of this crisis, over the five years that you were at the heart of it?
Paul Tucker: In a way, the reforms reflect those lessons. Never take stability for granted and try to institutionalise memory of the importance of stability in structures rather than just in people. I think that is what the FPC is about, that is what the statutory objective is about, and a terribly important part of that are evidence sessions in front of this Select Committee. Never completely separate banking supervision from the lender of last resort. As I have said in public before, I do not think it is absolutely essential that in every country in the world banking supervision is completely embedded in the central bank. I think it is the right thing to do in this country right now, as we rebuild. But whatever the set-up, there has to be an umbilical cord between the bank's supervisor and the lender of last resort for the simple reason that when things go wrong, the lender of last resort is there.
I would mention two others, if I may. Supervisors-authorities-should not become dazzled by the importance of rules and regulations. The idea that anyone can write down the perfect set of rules for the safety and soundness of banks or dealers or insurance companies, whether it be the Basel Committee or Brussels, Washington, the Bank of England, is absolutely for the birds. In a way, that is the judgment element of what the Bank of England will be doing, and it is what the stress-testing paper is about as well.
The other thing I would say-perhaps in some respects this is the most important thing of all-is that it will always go wrong, and therefore you have to have a regime, which is now called the resolution regime, that can deal with failure. I think that for decades this country, among others, had an approach to supervision where people would focus on minimising the probability of failure, but that does not rule out failure, so you have to be able to handle failure and make it an ordinary part of life. That way, you can let more firms and funds into the financial sector. It is completely consistent with challenger banks and competition. I could go on and on, but I think those are four things to be going on with.
Q2 Chair: Let me ask a couple of supplementary questions, probing a couple of the points you have raised. One is on the institutionalisation of memory, to get to the point where you have a lot of people who have been through big problems. Was it a mistake, therefore, for the Bank to have engaged in the reorganisation that it undertook after 1997, when so many mid-ranking and senior staff with that kind of memory left, particularly on the international side?
Paul Tucker: It has to be seen in the context of what was expected of the Bank at the time. The Bank was expected, in circumstances where it had been given monetary independence, to retreat into focusing on monetary independence. I think everybody now recognises that the Bank should have maintained a wider brief.
Q3 Chair: So that is the explanation for the mistake, but was it a mistake?
Paul Tucker: It was a mistake, yes. I think everyone recognises that it was a mistake. It is part of something else, which is that-I may have said this first in front of this Committee-an architectural structure that has underlaps built into it rather than overlaps is comfortable for bureaucrats, because overlaps give rise to accusations of turf struggles, but it is bad for society. That would be true, by the way, within the Bank going forward. There has to be overlap.
Q4 Chair: A second point you raised was the importance of accountability of the Bank with its enhanced powers to Parliament and to this Committee. Do you think that we now have adequate accountability structures or do you have sympathy with some of the proposals that are still being pressed, both by the Banking Commission and by the Treasury Select Committee, to modernise the Court into something that looks more like a modern board?
Paul Tucker: First of all, I would say I think it is getting there. The fact that you now hold regular financial stability hearings may be-I am not just saying this because I am talking to you-the most important change of all. That public display of concern about stability creates tremendous incentives on officials to try to do the right thing. I think the Court is an important part of this. Whereas in monetary policy we can let more or less everything be transparent, that is never going to be the case on the stability side, because of confidential information about firms. The Court, and in particular the Oversight Committee, which Parliament has created, will play and must play a very important role in overseeing not just the FPC but also the PRA-not second-guessing, but looking at the way they go about what they do.
Q5 Chair: In your view, does the Court's remit extend to the PRA?
Paul Tucker: The statute says the Oversight Committee should cover the MPC and the FPC. The Court has agreed that it will, as the governing body of the whole Bank including the subsidiary, the PRA, oversee the PRA. That is in matters reserved to the Court, which has been published on the Bank's website. The details are still to be worked out-
Q6 Chair: That is well concealed, if that the case.
Paul Tucker: No, it is on the public site.
Chair: It may be on the website-
Paul Tucker: I am telling you now. I am telling you.
Chair: I think we have to take this as new, Paul.
Paul Tucker: I think it is important. At the very least, say a really big bank or insurer fails, you-or society more broadly-are not going to accept the Oversight Committee just looking at the FPC. They are going to say, "What about the adequacy of the micro-supervision?"
Q7 Chair: I have been asking about this PRA question for some time privately without getting much change, and now I discover that it has been sitting on the website as a statement.
Paul Tucker: I believe it is.
Q8 Chair: What it seems to be illustrating is neither of us are quite sure what these accountability structures are. They seem pretty complex-byzantine might not be an inappropriate term. Do you agree?
Paul Tucker: I do not think I would use exactly the same words.
Chair: But you agree?
Paul Tucker: As you all know, this is a structure with a Monetary Policy Committee, a Financial Policy Committee, a PRA board, more as well, in fact-
Chair: A subsidiary of the Bank.
Paul Tucker: A subsidiary of the Bank-and therefore it is somewhat complicated. The virtue of that is it means that each of the three key policy committees has external members on them. That is tremendously important for the legitimacy of what they do.
Q9 Chair: You do not need all this complexity to get to that, do you?
Paul Tucker: It is one way of getting to it. My personal view is that if you ask people around London if they are comfortable with the Bank of England being the bank supervisor again and having financial stability again, the answer is almost universally yes. If you ask the same people, "Do you feel comfortable with the Bank of England having all of this power?" you get the answer, "Hmm…not so sure." I think the structure that we have is one that for the moment underpins legitimacy by having external members on all the three bodies. It leaves it a bit complicated, but it does bring fresh air to all three policy bodies.
Q10 Jesse Norman: Mr Tucker, can you briefly summarise what the Bank's experience has been so far of stress testing?
Paul Tucker: Twofold. Going back a decade, the Bank of England helped the IMF conduct very broad-brush, top-down stress tests of the UK banking system. I think those were rather flawed. I think that is what the IMF concluded as well and they have had no greater success elsewhere in the world.
Separately, in the FSA, since the crisis blew up and over the past year or so, they have done bottom-up stress tests of individual banks sequentially. That is a lot better than doing nothing, it is an improvement on what went on in the past, but it is far short of where the Bank aims to get to over the medium term, which is a systematic framework, which can be publicly understood, for concurrent stress testing of all the key financial institutions in this country. I genuinely believe that this will be of profound importance over the coming decades for all sorts of reasons.
Q11 Jesse Norman: So when stress testing is done of individual institutions, presumably that hitherto has required a kind of learning curve for the Bank and also an awful lot of support from those institutions themselves and transparency?
Paul Tucker: Yes. What has gone on so far has certainly involved learning for the supervisors, now in the PRA. It has most certainly involved reliance on the banks' models, with some checking by the supervisors. Where we want to get to-where we will get to-is a world where there is still a degree of reliance on banks' own models, but with a greater input of the Bank of England's own top-down policy.
Q12 Jesse Norman: What do these things look like? A sheaf of papers saying "HSBC" or "Barclays" or someone and then a series of models plus variations, showing you what would happen under certain circumstances?
Paul Tucker: Yes. Take the mortgage portfolio and how would arrears develop and defaults develop in the light of developments in unemployment, interest rates and things like that. These are basically models for connecting-
Q13 Jesse Norman: If interest rates go up 3%, what happens to the mortgage portfolio?
Paul Tucker: Yes, exactly. Most of those models show the performance of loans is more sensitive to unemployment than to interest rates, but that could be an artefact of the cycles that we have had.
Q14 Jesse Norman: So it will be a very judgment-based exercise as you try to work out what are the right tests for each part of these banks' balance sheets, recognising that the balance sheets of the big ones are enormous and fantastically complicated?
Paul Tucker: That is right. Two things on that: first of all, by doing it concurrently, you can see across the banks and make some peer comparisons. The second is, to give one example, some of the big UK banks have massive businesses in Asia; I cannot see how the Bank of England is ever going to know more about the underlying risks in those portfolios than the authorities on the ground in Asia, so if one looks ahead a number of years, I suspect this will end up being a collaborative exercise among authorities.
Q15 Jesse Norman: The stress test could be perfectly happily stress testing the UK mortgage portfolio, but the bank gets taken down by some ridiculous piece of punting in the Far East.
Paul Tucker: Yes, so the Bank needs to be aware, which of course it is, that these banks have Asian, Latin American or US businesses and draw on the experience of our peers in those parts of the world.
Q16 Jesse Norman: So a key area is going to be the issue of leverage and leverage ratios. You will have seen that the British Banking Association has entered all kinds of caveats about early adoption of these ratios. What is your view on that?
Paul Tucker: There are two things, perhaps three, going on at the same time. First of all, we took the view in the PRA board that we needed to ensure that some of our banks could meet a 3% equity leverage ratio by roughly the end of this year or the middle of next year. I still think that was the right thing to do and that that could be achieved without damaging lending and the economy.
For the medium term, there is a debate in Basel and elsewhere about what is the best measure of total assets. You can have very broad definitions of total assets where you do not net off derivatives and repos or you can have narrower definitions. My own preference is for a broader definition of total assets and a slightly lower number in terms of the target that has to be hit. The Americans are currently in the opposite position. They have a narrower definition of total assets and a 5%, 6% target. That will all play out in Basel over the next six, nine months.
Q17 Jesse Norman: So there is a genuine issue about a potential crimp on the lending market, there is a genuine issue about how you do the technology of making this work, but otherwise it is special pleading? That is what I am getting from you.
Paul Tucker: Look, we will not have a safe banking system until bankers go into work in the morning capable of saying to themselves, "Hell, my bank is over-leveraged. I don't want to be the first mover. I will go and see the Governor of the Bank of England and say, 'I think we all have a problem here, and to be honest with you, Governor, I think my bank is over-leveraged. I feel very uncomfortable being the first mover because I have put myself at a competitive disadvantage, but I think the other banks are in the same position. Can't you sort that out?'" In a way, special pleading. I think that lobbying is not of great interest, really.
Q18 Jesse Norman: Are you getting a lot of it? Are you seeing a lot of it?
Paul Tucker: I think we have to listen to the technical points and my successors have to listen to the technical points and ignore the emotion around it and just try to reach a view on it.
Q19 Jesse Norman: But just to be clear, are you getting a lot of lobbying from the banking industry on this issue and others?
Paul Tucker: I do not feel that we have, no. I have not personally.
Q20 Jesse Norman: That is interesting. Do you think that the leverage ratios should be a constraint or a backstop? How foregrounded within policy making should leverage ratio be?
Paul Tucker: It should be a backstop. I am absolutely clear about that and I am absolutely confident I can speak for Governor Carney on that, but of course a backstop will occasionally bite, and it is intended to occasionally bite. We would not put it there at all if it was not intended occasionally to bite. I was there in the Financial Stability Board Steering Committee when we decided to do this. It is a backstop, but it will occasionally bite. In the UK it has bitten-if that is the right word-on two of the banks.
Q21 Jesse Norman: It is a fundamental way in which you might take away the punchbowl.
Paul Tucker: That is the other dimension, which is there is then a question about whether the Financial Policy Committee should have as one of its so-called macro-prudential tools an ability to vary the leverage requirement with the cycle. The Government have said that they will come back to that in a few years' time when the international debate is settled and all the definitions are pinned down. That is a reasonable position for this Government or any Government to have, frankly.
Q22 John Mann: If I can draw an analogy, it's a little bit like the response of the building industry to a building with cracks in it: "We will underpin it and we will get clear rules to how it is going to be underpinned," and then there are arguments about how much concrete should go in, because that is expensive. What you want is to ensure that somebody takes good photographs and keeps a record of the underpinning so that everyone can tick the box, but the problem with that underpinning is that if the cracks are caused by damp, the water still has nowhere to go and so it circulates around and in future years the problems emerge in a different way.
Paul Tucker: I agree, and that is consistent with what I said to the Chairman at the beginning, "Do not rely on rules." Do not rely on a rule on leverage, do not rely on a rule on liquidity, do not rely on a rule on the so-called risk asset ratio. What the supervisors have to do is look at banks, individually and collectively, and say, "What is going on? Is this safe? Is it sufficiently safe?" What the stress-testing proposals will do, the plan will do, is put that in daylight once a year for you all to see.
Q23 John Mann: So we can take the photographs, but the problem with it is, to use that analogy with the building industry, that it becomes the norm and that therefore is the solution and you cannot get the insurance without that, whether it is needed or not. You are putting-and you have in recent weeks-huge emphasis on the importance of the role of this Committee. What Committee in Parliament would not want to have more influence? But we are not the shareholders.
Paul Tucker: Of the banks?
John Mann: Of the banks. Well, we are longer term.
Paul Tucker: That is true, but-
Q24 John Mann: That is not the scenario that people are perceiving as a consensus on that for the future. So let's take some examples. Northern Rock: how would this have impacted on Northern Rock?
Paul Tucker: Stress testing?
John Mann: Yes.
Paul Tucker: I think that one of the so-called scenarios that would have been used in 2003-04 would have been around the US housing market. One of the important points for me to make this morning is that I would be amazed if the FPC only chose UK scenarios going forward. That would be absurd, given the international nature of our banks. Had they chosen that, that would have started to expose weaknesses in the asset-backed securities market, in the securitisation market, which would have been one way of leading to Northern Rock's problems. I think stress testing is going to be profoundly important, but it will not be the only tool.
John Mann: But can I home in on-
Paul Tucker: Can I have just one more sentence? The way to spot Northern Rock's problems was that its liquidity mismatch was obscene, and I think good supervisors would have spotted that.
Q25 John Mann: With respect, obviously with hindsight, we all agree absolutely with what you said in relation to that kind of scenario, but the weakness in the model is who creates the scenarios. Where do they come from? Do you see a direct specific role, for example, for this Committee in proposing a scenario?
Paul Tucker: First of all-I will come to that, I promise-I think the big point you are making is absolutely right. The role of the Bank of England's markets area and just knowing what is going on and saying, "Well, we have a feeling, we have some anecdotes, that there is a problem in these areas. Shouldn't you be taking that into account and stress testing?" will be important.
If you go back a decade, just over a decade, when there were all those dotcom and particular telco problems, if you went to buy a cup of coffee in the City, all anyone was talking about in the queue was telco, and actually the telecoms problems did almost blow up the international banking system at that point.
On this Committee, in broad terms, yes, I do. As I said to Mr Thurso the last time I was here, the stress-testing framework is tremendously important in terms of the accountability of the Committee, by which I mean getting feedback. If they set a stress test, "Can the banking system withstand an asteroid half the size of the earth?" it would be quite helpful if you said, "Hold on, calm down. We will not be worrying about the banks in those circumstances." If you think that the scenarios are just too feeble or too weak, it is important you say that, but as you precisely say, if you are hearing concerns about the banking system or the investment banks that you don't think the Bank is taking account of, then that should be raised. All of this starts to sound a bit more like the monetary policy hearings, where we come along and you say, "Hold on. You have not mentioned X. Why are you not thinking about X?"
Q26 John Mann: My final question is about the power of the Bank and non-execs. It is a bit like the power or the potential power of the Court with the Bank of England. The power of the non-execs is to be asking the difficult questions and thinking beyond the groupthink. I suggested last week to Lloyds TSB they ought to put in an industrial chaplain as a non-exec director, not to talk about any of the detail on banking, but to ask difficult questions on the basis on which decisions were being made. Is it the case, in your view, that the role of non-exec directors, because of stress testing, will become more critical than it has been because the outside world is going to be, whether we like it or not, over-reliant on the results of stress testing, and does that mean that the range of non-exec directors, the broadness of experience, does need to change to ensure that banking groupthink doesn't dominate?
Paul Tucker: I agree with one of the broad thrusts of what you are saying. I do not think there will be over-reliance on stress tests, but I think boards are going to be massively important in this. I think the stress-testing framework will help to empower boards. What you say about the composition of boards may be right. If you ask my priority right now, it is to get people on to the boards of banks who can read a bank balance sheet and assess the strength of the banks. One of the things that I think was in the Banking Commission report, and I personally strongly support, is that chairmen of the big banks at least ought to have an office that supports them. They should not need to go via the CEO to get information about what is going on in the banks. We say a somewhat more moderate version of that in the Bank of England's response to the Tyrie Commission report, but my personal view is quite strong on this point. I want to underline that the idea that there is just bank management and then there are supervisors is a recipe for a nightmare. The boards have to step up and do their job; they have to understand; they have to be able to know when they are being bullshitted. They have to be able themselves-or some of them have to be able-to assess the strength of the banks for which they are responsible.
Q27 Chair: I just want to take you back briefly to one point you made earlier, where you were saying, "In the fullness of time, we will have a look to see whether the leverage ratio can be varied over the cycle." That presupposes that you know where you are in the cycle. What confidence do you have that we will be able to find that out at the appropriate time and that the Bank is capable of making those judgments? I set that alongside this punchbowl analogy. The trouble with the punchbowl analogy is that of course when you are at a party, with or without a punchbowl, you generally have at least some idea you are at a party, whereas in this case you wouldn't even know until it is too late in the case of some of these financial crises.
Paul Tucker: It would be extraordinary if the Bank or any other central bank got it exactly right, but I do not belong to the school of thought at all that says, "Bubbles cannot be spotted," because some of the people that are in the bubble in the credit markets, or wherever else, will talk about it. I do not want to rake over history, but we said in the middle of the decade, "There is exuberance, search for yield, in the credit markets." I think there were plenty of signs for that. I think they will get it right occasionally.
Can I say one more thing? I think the Markets Director of the Bank of England is absolutely vital to this. I think you hearing from the Markets Director of the Bank of England over time about what they are picking up across global markets is immensely important.
Q28 Chair: So it is a global issue that we are looking at here?
Paul Tucker: Yes.
Q29 Mark Garnier: Just to follow on that analogy, of course when you are at a party, the drunker you get, the more convinced you are that you are absolutely right about everything, which is slightly worrying.
Paul Tucker: They weren't, actually; they weren't. I agree that that happens occasionally, and of course some were in that position, but not all were. With some bubbles, the people in it are aware that they face a collective action problem; they wouldn't use those words, but they are seized of, "My goodness, we are all hurtling towards the edge of the cliff. Will somebody help?" In my view, this is why central banks exist.
Q30 Mark Garnier: That is very interesting. Moving away from the party analogy, just one question picking up on an earlier point you made. Of course, the results of the stress testing are going to be published on an annual basis, which is very helpful. How much transparency are you going to be giving in that in terms of details of individual banks' stress-testing results?
Paul Tucker: The straight answer is we do not know. This is a discussion paper, not a consultative paper. The distinction is subtle, of course, but it is not "We're going to do this. Attack us if you hate it". This is such a big step that we want the broadest possible debate. I think that most of us feel that without a fair degree of transparency about the results in relation to the system as a whole and individual firms and the actions that those firms will take, if any are needed, would be the best way forward. That is my personal sense of the direction of travel, but I think we have a lot to learn from this through the discussion that takes place. The United States are already doing this and it seems to be to-
Q31 Mark Garnier: This is in terms of per bank transparency?
Paul Tucker: Yes, per bank.
Q32 Mark Garnier: You would like that?
Paul Tucker: I am more at that end of the spectrum, but were I continuing, I would be capable of changing my mind in terms of the response that we get, not just from banks in this country, but from people around the world.
Q33 Mark Garnier: It is quite an interesting point. My personal view is I agree with that, but of course this then brings it on to the big question of funding and liquidity vulnerabilities, and the paper discusses the fact that they are likely to be incorporated only as an amplification mechanism. Do you think that is the right way of approaching it, in terms of amplification mechanism?
Paul Tucker: If I could wave a magic wand, I think it is absolutely not the right way of doing it, because the liquidity strains are perhaps the most important amplification mechanism. We don't know how to do it. The reason we have said this is a medium-term work programme-not just in our central bank, but in others as well-is that people are trying to build up the techniques for doing that. We don't know how to do it quantitatively. I think that people can do it qualitatively. We wanted to be open about that and set out part of the agenda, if you like, of research that people like Andy Haldane will lead to get us further out on the frontier.
Q34 Mark Garnier: It is quite an interesting problem, because of course the more transparency you have in this, the more it becomes a self-fulfilling prophecy. If bank A is deemed by you to be looking pretty dodgy, then people stop depositing with it. Also, in the world of modern media, a well targeted Twitter campaign against an institution, particularly one that takes deposits on the internet, could bring a bank down pretty quickly.
Paul Tucker: Two comments on that. First of all, that is why this paper does not say, "We are definitely going or we are minded to publish this, that and the other." It needs to be a public discussion for precisely the reasons you say. It would be a tragedy if we embarked on something that ended up having the reverse effects of what we intend.
The other thing I would say though is-if I may bring in the EBA stress test of a few years ago-you cannot do something like this, and you certainly cannot have much transparency around it unless you have mechanisms for resolving distressed banks in an orderly way. So these are twin-track processes, if you like: a more thoroughgoing assessment of the resilience of banks, and for those few banks that in the future get into serious trouble, better apparatus, techniques for handling them.
The final thing I would say is in the majority of cases, because the banks are going to be better capitalised and more liquid, the response to a stress test where they don't do well would be recovery action. It is not always dire straits resolution or liquidation.
Q35 Mark Garnier: I think it probably comes on to my next question. The primary purpose of the stress-testing framework is to inform the FPC and the PRA board judgments around bank capital and liquidity, but it does go on to say, "The framework could be expected to deliver a number of additional regulatory benefits". What do you see as a sort of regulatory intervention?
Paul Tucker: At its crudest, finding out how good the banks themselves are at risk management, from relatively mundane but important things such as whether they have a database with integrity on their exposures. Do their own models bear any resemblance to the outside world? Going back to Mr Mann's question, does their board engage seriously in these questions? I think the supervisors will learn quite a lot about individual banks and that will give the banks an incentive to get ahead of the game in terms of the quality of their own stress testing.
Q36 Mark Garnier: That sounds a little bit more like the supervisors' interpretation of how they supervise as a result of that, as opposed to changing rules or indeed getting Parliament to write further secondary legislation with the Banking Reform Act.
Paul Tucker: I agree. That is intended.
Q37 Mark Garnier: So you do not see this coming back to us for us to then create more legislative framework?
Paul Tucker: I do not see that myself at the moment. I think the more important thing there, although it was secondary legislation, would be-and it is part of a broader debate-is whether the re-regulation of banking in this country and elsewhere means that banking-type activity leaves the banks and gets done in so-called shadow banks, in which case the perimeter of regulation would need to be adjusted. The fact that the United States did not do that in the decade leading up to the crisis was one of the causes of the crisis. That would involve legislation, I think mainly secondary legislation.
Q38 Andrea Leadsom: Good morning, Mr Tucker. I wanted to talk to you about the international nature of the stress-testing exercise and specifically what the economist, Wolfgang Münchau, spoke of, and I quote, "The mistakes of the European Banking Authority, which has lost its credibility with farcical stress tests". Obviously British banks have subsidiaries around the world, not just in Europe but everywhere, and they have subsidiaries in the UK. So can you talk us through how stress testing is going to deal with first, of all, our concerns that others' stress tests may not be good enough for our liking-it would be helpful if you could comment on that-and secondly, what we will do given another case like Cyprus banks, where in effect a decision was taken that did not include the UK about Cyprus national banks, but had profound implications for those who banked with Cyprus branches in the UK?
Paul Tucker: There is no doubt if we have anything like the structure of our banking system in the decades to come, we have an intimate interest in the quality and supervision of stress testing elsewhere. As I said to Mr Garnier, I think the original sin in, the EBA stress test, is that they had not thought through what would happen in the face of abject failure. I hope that everyone around the world has learnt their lesson on that. This is not a plan, but what I would envisage is that the United States, Switzerland and the euro area, through the new single supervisory mechanism, will do similar things to this-not exactly the same thing-and there will be co-ordination and openness among the supervisors. This comes back to the question about transparency. The less individual supervisory agencies are transparent about their own domestic results, the more they will need to exchange information behind the scenes. This is something you should come back to, if I may say so, over the years. It will not work if we sit on our island and we just do the UK banks, or at worst just do the UK banks' UK portfolios.
Q39 Andrea Leadsom: Yes. On that point then, has the Bank of England learnt anything specifically from the fact that the EBA have been slated for having ridiculous stress tests where far too many banks pass them? Have you analysed what has happened there and drawn lessons from that for our own stress tests?
Paul Tucker: Yes, absolutely. The simple answer to that is you cannot embark on thoroughgoing stress tests unless you have a resolution regime that can sort out abject failure. It is as simple as that, otherwise you fall back on a fiscal backstop and of course they were in circumstances where the fiscal backstop did not exist because the countries were distressed.
Q40 Andrea Leadsom: So are you saying then that in some way they allowed a sort of lighter stress test to go ahead because they did not like the consequences of properly assessing the likely risk of collapse of European banks?
Paul Tucker: You probably know as much as I do about the inner dynamics of that stress test, but I think there is a widespread perception that they stepped back from the edge of the cliff when they realised that the stress-testing strategy they had adopted was flawed.
Q41 Andrea Leadsom: Okay, so the conclusion that someone might draw from that is that the stress tests effectively under-emphasised the risks in the European banking sector. That being the case-if the stress tests were inadequate, therefore the risks were higher in European banks than the European Banking Authority was allowing-what consequences does that have, bearing in mind how significant many of the European banks are to the UK economy?
Paul Tucker: This was part of the background to why the Financial Policy Committee, going back 18 months or so, said our banks have to build up their capital. We had started off, the previous Governor, Adair Turner, and I, favouring a long adjustment over eight, nine years to the Basel standard. Then the euro area problems developed and we thought, "Actually, our banks have to do some quicker than we had ever thought," for precisely the kind of reasons that you give. That has been happening.
Q42 Andrea Leadsom: But that is our banks. I am specifically wondering what jurisdiction you have over European banks operating in the British economy about which the Bank of England is concerned.
Paul Tucker: We have jurisdiction over subsidiaries but not over branches. This is the passporting system. One of the things that the PRA board is doing, I would like to say partly at my instigation, is thinking through what is the best framework for overseas banks operating in this country. For example, I believe that if you have an overseas bank that has a massive retail presence, then that probably ought to be a subsidiary.
Q43 Andrea Leadsom: So you would change the structure of the European bank operating in the UK rather than try to get some form of oversight of that European bank?
Paul Tucker: Or both. I should probably say, and I think we have said to you before, that we regard the banking union and the single supervisory mechanism as very positive for the UK, because we think we are going to be able to work well with the ECB. The ECB incentive is to do the best job they can and take a tough line where it is appropriate, as strong as ours.
Q44 Andrea Leadsom: Does the EBA co-operate sufficiently? Were you able to have a frank exchange of views about the adequacy of their stress testing?
Paul Tucker: I am not on the EBA board. You could ask Andrew Bailey that. I think points of view were represented, yes.
Q45 Andrea Leadsom: Are you aware that the Bank of England made representations to the European Banking Authority that their stress testing was inadequate?
Paul Tucker: I do not think it was particularly the Bank of England who were saying it. I think there was a voyage of discovery for people planning that stress test that it wasn't going to be quite as straightforward as had originally been thought, but this some years ago. I do think those lessons have been learnt on the Continent and I am confident that the asset quality of the review being planned by the ECB will be an altogether more thoroughgoing exercise, and it is important that it is.
Q46 Chair: One of the morals of the story therefore, Mr Tucker, must be that you, the Bank of England, will be making internal assumptions about the value of eurozone debt country by country, and that those will differ from what the EBA is putting out.
Paul Tucker: No more than for other countries, but I do not want you to take me towards conjecture.
Q47 Andrea Leadsom: But just coming very specifically to the point of the Cyprus banks-we have had a very recent, very clear example that is still on-going where there are people in the UK who fear that they are going to lose money banking with a Cyprus branch-effectively what you are saying is there will not be the ability in the future for that to be any different.
Paul Tucker: I think the most important thing on Cyprus-your question was a very rich one and I did not address all elements of it-the EU euro area initiative is the single resolution mechanism. The problem that Cyprus had and why it had a disproportionate effect on the rest of the world was they had no mechanism for sorting out quite small bust banks. They are now legislating at the level of the EU to provide all the member states with that toolkit-that is a pretty good directive at the moment-and then, as you know, they have plans for a single resolution mechanism. There are European constitutional issues around it that I would not pretend to understand, but if they succeed with it, I cannot see why something like a Cyprus banking problem would create as big a deal for us in the future as it did a couple of years ago.
Q48 Andrea Leadsom: Just one last question, because this is really important. There is not yet, is there, a European single resolution mechanism? That is widely seen by European politicians as politically extraordinarily difficult to get agreement to and would you agree that to achieve that single resolution mechanism requires treaty change? Is that going to happen, because clearly for bank stability right now, if another European country's banking system went bust, there still isn't a resolution mechanism and there is not one in the offing. Would you agree with that statement?
Paul Tucker: First of all, as I say, I am not going to get into constitutional issues. It is very important that the EU member states have a good resolution regime. I think the directive that will apply to all the member states is in very good shape, although it could go wrong in trialogue, I suppose. We feel strongly that the banking union should have a single resolution mechanism and I think that is what the Financial Stability Board feel as well. How they get there and those constitutional issues are not for somebody in my kind of job.
Q49 Andrea Leadsom: But there isn't one, so at the moment another Cyprus could happen?
Paul Tucker: There isn't one at the moment, but even without the single resolution mechanism, if the directive is passed Cyprus on its own, or Malta on its own, would have a resolution regime. The directive on its own would go, or should go, a long way to addressing your concerns.
Andrea Leadsom: Thank you.
Q50 Chair: Have you been advised that treaty change is required?
Paul Tucker: It's not the kind of thing that falls within our remit. That is a question for the Treasury or the Cabinet Office-or the Foreign Office, I suppose.
Q51 Mr McFadden: Just to continue on the theme of credibility, last week you said there are areas where stress-tested banks had been falling short. Do you understand the scepticism about asking the banks about their own health? Why will they not always say that they passed the exam?
Paul Tucker: This partly comes back to boards and, as Mr Mann said, their incentives are slightly cleaner, albeit not completely, I agree. We absolutely share that worry. Put crudely, if we were to rely entirely on the banks' own models or if we were to also use our own models but to publish our own models, there would be a chance that the banks would cheat. The United States are probably furthest ahead in this field at the moment. Quite an important debate there has been whether or not the Federal Reserve should publish its own models.
Ben Bernanke has explained that they don't plan to do so precisely for the reason that you say. We want to get to a world-and it will not be easy-where, on the one hand, we draw on their resources and incentivise the boards to take it seriously, without naively being blind to the kind of risks that you identify. We will address those, partly by peer comparison, which a move into concurrent stress tests helps, and partly by employing our own models as well. But the supervisors in the Bank of England are going to have to be sceptically alert on this.
Q52 Mr McFadden: The amount of information involved is huge, is it not? There would be a question over how much bank boards know about what is going on in these huge complex institutions. How can you, from the outside, get a real feel for their financial health?
Paul Tucker: Sometimes that will be a real problem. Sometimes you can cut through it. When a banker is trying to blind you with the science of their controls around their business and you say, "But you are 60 times levered. That's twice what anyone thinks would be reasonable. We are losing focus here. Let's get the big picture." I think if the supervisors and the management of the bank allow themselves to be drawn into, if you like, a legalistic equation-by-equation granular debate, then the supervisors are doomed. They need to balance a reasonably granular approach with a top-down approach and healthy scepticism. It won't be easy to get right, I repeat.
Q53 Mr McFadden: But your message here, in simple terms, is we are certainly not going to trust the banks to testify to their own financial health.
Paul Tucker: We are not going to wholly trust them, no. We are going to draw on their information. We are going to try and harness the energies of the boards but we are not going to rely on them. This is analogous to the whole business of risk models determining capital requirements. No, this is a paper about the authorities taking back some of the tools for assessing bank capital adequacy.
Q54 Mr McFadden: Can I ask you about sanctions when you think the regime has fallen below what you said? The paper talks about changing banks' management, under what kind of circumstances could that happen?
Paul Tucker: I think two really: outright cheating, and running their bank abysmally badly and revealing that they didn't know what they were doing. There are two. You can imagine a strong bank run quite well in the financial sense but where they are always obscuring your line of vision, rather than being straightforward. I think the Bank has to use its authority to say, "No, that's not the kind of relationship that we want."
Q55 Mr McFadden: I am more interested in the second that you mentioned. It is obvious when somebody is engaged in outright cheating, but the lesson from the crisis is that it wasn't about fraud; it was about recklessness and not understanding risk.
Paul Tucker: Or incompetence, yes.
Mr McFadden: Or incompetence perhaps. In those kind of scenarios, where it is not a question of somebody having their fingers in the till, but it is a question of them running the bank in such a way as to put the taxpayer and the wider economy at risk-let alone their own shareholders-I am trying to get a feel for how this regime that you have set out now would step in and reject a board or reject a chief executive.
Paul Tucker: This isn't a cure all in terms of the question that you raise, but it should reveal more information about the way banks run their business and whether their own story of the health of their business matches what the supervisors find when they do the stress test. I agree with you: ultimately, the senior management-top management of the Bank of England-has to be prepared to say to top bankers, "We don't think you are up to this and it's endangering the stability of your institution." That has happened in the past. It's probably somewhat more difficult in today's world, but the Bank needs to be prepared to do it. This will provide a much richer set of information enabling the Bank to judge how well these banks are run.
Q56 Mr McFadden: John Mann asked you about Northern Rock. Can I ask you about another one, an obvious one, from recent years? If this regime had been in place, would this have empowered the Bank to say to the board of RBS, "We don't care if you want to buy ABN AMRO. That deal is too big and too risky"?
Paul Tucker: In the circumstances in which that deal took place in late 2007-a cash-funded deal when the money markets are closed-I shouldn't think that the stress-testing regime was needed to reach that view.
Mr McFadden: But it went ahead.
Paul Tucker: I say what I say. This would certainly help, yes. In terms of the imprudence in some of those loan portfolios, I think this kind of approach would have certainly helped to expose the weaknesses, but it's only one thing-if you bring the leverage of the bank, the embarking on so called transformational deals, the market intelligence on aggressiveness in certain markets and then stress testing potentially revealing flaws in the portfolio, all of those things, I would like to think, would have helped, yes.
Mr McFadden: Thank you.
Q57 Mr Love: Can I take you back right to the beginning and the response to a question from the Chairman and it related to the supervisory role of the Bank where you said that the public had welcomed a role for the Bank but there was some scepticism about the concentration of powers? Is that a scepticism that you share?
Paul Tucker: No, I think it's healthy actually. It's not a day when I can talk about monetary policy, except perhaps in the following very general sense. We are unelected and we are given lots of powers, and that is a matter of balancing credibility and legitimacy. The legitimacy of it matters as much to me and my colleagues as the credibility that we can generate. The most important thing we do, as I have said to the Chairman before, is appear here-other than the decisions we take, but after the decisions we take the most important thing we do is come here to talk about it, because without that the machinery just wouldn't have the legitimacy that it needs.
Q58 Mr Love: If I may say so, if you accept that that is an important role, this Committee has expressed some scepticism about the way the Bank has gone about addressing this issue about the number of powers, yet there does not seem to be a response from the Bank. Would you have been more sympathetic to the concerns of this Committee recognising that behind them lies the public scepticism that you have talked about?
Paul Tucker: I am sorry, I apologise. You would have to remind me about which set of powers you mean. As I said at the beginning, I think that in this country right now it is a good thing that banking supervision is back in the Bank of England.
Mr Love: I think that is widely accepted.
Paul Tucker: I don't believe that the macro-prudential role could sensibly go anywhere else either. In all the Bank does it needs to increase transparency year by year so that you can see what's going on. I think in my mind this paper has a lot to do with improving transparency on the prudential side of the Bank.
Q59 Mr Love: This is your last appearance before our Committee, so it gives you an opportunity to reflect on your time at the Bank and activities. I would like to ask you what work you think remains to be done to strengthen the financial system in this country and internationally?
Paul Tucker: I think that it's very easy, in this country and in other countries, to think all of this is going to be about central banks and bank supervision, and that securities' regulators-or the Conduct Authority as we call it here-is about mainly conduct. I think that they have a huge role to play in stability in the years ahead, for the simple reason that as we regulate banks, as I said before, some of the activity of banking will move elsewhere. That is why the chief executive of the FCA is on the Financial Policy Committee. It's why the Financial Policy Committee can make recommendations to the FCA.
I think if, in the next five or 10 years, you never have an evidence session with the FCA about stability, about their prudential oversight of hedge funds or asset managers, that will be a grave mistake. I have put that in a domestic context, I think this is also, in some respects, one of the big challenges globally that people are wrestling with.
Q60 Mr Love: I want to come back to the international situation but the question I was asking you I think-
Paul Tucker: Sorry.
Mr Love: What I was looking for was a response to strengthened regulation in the Financial Services Act a year ago. There is an Act currently going through Parliament that will carry out the Vickers proposals for ring fencing. The Parliamentary Commission has attempted to address standards and culture in banking, although we recognise that is a long-term initiative. Are there any other areas that we glaringly missed in terms of strengthening the financial system in this country?
Paul Tucker: Shadow banking, but it's hard to point to which bits of shadow banking. We are working on central counterparties. We are in an extraordinary position. Banks became too big to fail by accident. Central counterparties have almost been mandated by the G20 leaders as too important to fail. We need to make sure these institutions are sound and well regulated and could recover in distress. This is a personal view, but I worry that they are either for-profit institutions or embedded in for-profit institutions.
I think if ever a CCP does fail anywhere in the world, people will say-I can almost hear the response immediately-"What on earth were we doing allowing them to be for-profit institutions?" I don't subscribe to the view that banks are purely utilities, but central counterparties are purely utilities. I don't think that is necessarily inconsistent with them being part of broader groups but the governance around them needs to be looked at and shored up so that they focus on their core mission.
Q61 Mr Love: You believe that the lack of regulation in the shadow banking sector will inevitably lead-you mentioned it in an earlier response-to the perimeter of regulation needing to shift and you think that is a broad thing that is already in progress. Is there evidence that that has happened?
Paul Tucker: No, but there are straws in the wind-more in the United States perhaps than in this country. My point isn't that right now I can see an immediate threat; it is that the Bank, the FCA, and you are going to have to be alert to this. I do not think it requires legislative change. One of the pieces of legislation gives the Financial Policy Committee a duty to make recommendations to the Treasury when the perimeter needs to be changed. I think it's immensely important that the FPC addresses that systematically, which I believe it will. I think it's just as important that you ask the FPC questions about that from time to time.
Q62 Mr Love: Can I now turn to the international issues? You, as the representative of the Bank, have been really hooked in to some of these as a member of the FSB and Chair of various committees. Is there a lot left still to do at an international level, or are we confident that is all coming together adequately to respond to any future massive crisis?
Paul Tucker: A bit in between. There is a big implementation job to be done and I think it is likely that after the Brisbane G20 leaders summit next November, all the emphasis will be on implementation, but in the meantime I think the international authorities need to fill out their policies on shadow banking; they need to fill out their policies on the type of bonds that banks need to issue from the holding company to make them resolvable; and they need to ensure that a regime is in place for the recovery and resolution of central counterparties. I would think those are the three most important things. I think those are the things that in his letter to the summit, Mark Carney, as Chair of the FSB, highlighted.
Q63 Mr Love: I take your point about implementation and you said this had been a challenge around for all international bodies to make sure their recommendations are implemented across the board in all countries. You have been chairing the group on resolving large and complex financial firms-a major challenge. Do you think we are edging towards some confidence that we will be able to resolve the most complex international banks, which are large even by the standards of governments?
Paul Tucker: Yes, I do and, what is more, I think there will be no excuse if the key national authorities do not get there over the next few years. I have said before in public that were some of the biggest US banks to fail now, I can't see how the Administration could persuade Congress to give them the resources for a bail out because they have the powers and, by an accident of regulatory history, the banks are organised in a way that lends themselves to resolution by the powers that the FDIC now has in that. It would probably be pretty messy today and in the United States there is a lot of work to do over the next few years, but I think they have taken a big leap.
Q64 Mr Love: Would you be confident that they would be able to ensure the continuation of essential banking services through this period of resolution?
Paul Tucker: Certainly looking ahead, I would be confident of that, provided the will is there.
Q65 Mr Love: But not in the present day?
Paul Tucker: I don't want to mislead you. There are things that still have to be done. We set out in the FSB a big agenda of technical changes and the summit said to us, "Get on with it". In the EU, the key thing will be passing the resolution directive, which will give the UK, among others, more powers. I believe-and, again, I have said this before-most of the big banks in Europe will have to be reorganised on a scale going beyond the ring fencing in the UK to make themselves amenable to resolution; that will have to happen.
Q66 Mr Love: That gives us some confidence that Europe is addressing the banking issues with the banking union. What about internationally? You showed a lot more scepticism about the United States' preparedness. What about other jurisdictions, are they prepared?
Paul Tucker: No, and if I may say so, that is a great question. I think that as Europe catches up with the United States, as I believe it can-not necessarily that it will, but it definitely can and I think most probably it will-then the pressure needs to be on Asia to do the same. My successors have to look forward to a world in which Asia provides some of the biggest banks and dealers in the world. This is the last global financial crisis where the international financial system will be redesigned as a transatlantic effort. This is the last time it will be Washington and London and key capitals on the continent. Next time round it will be Asia, and we need to see that coming by ensuring that they have the right regimes in place as well.
Mr Love: That is a tough message to get across.
Mr Ruffley: Mr Tucker, this being your last appearance in front of us, I would just like say that I and other colleagues, I know, will miss the sagacity and the intellectual heft that you have brought to hearings when you have been in front of us.
Paul Tucker: Thank you.
Q67 Mr Ruffley: On CCPs, the discussion paper says the Bank will separately consider the need for stress testing for central counterparties operating in the UK. Could you just clarify this? Will the Bank push for stress testing of CCPs in the UK?
Paul Tucker: It is not decided yet. I hope it will. The reason-I wouldn't say for hesitation but for the slightly different tone-is that it is quite hard to devise a stress-testing regime for the central counterparties until the international work on loss allocation if one of them fails is completed. What does a stress test do? If a CCP is in distress, the first question you would ask in the stress test is, "Where are the losses going?" That work is not complete. I would be personally disappointed if, as that work is completed, the Bank and others around the world don't apply stress testing to CCPs and I hope you will maintain an interest in it, if I may say so.
Q68 Mr Ruffley: Sure. We have heard that the FCA has responsibility for some parts of a shadow banking system. What is the work that the Bank and the FCA has to do on scenario design to cover the shadow banking system?
Paul Tucker: Work of two kinds, I think. One would be where the banking systems' exposures to the shadow banking system were large and that would have been the case, by the way, in the run up to the latest crisis. We talked earlier about that scenario-it might involve the UK mortgage market, or the US housing market, but it could be about other parts of the financial system. The other and more demanding bigger step would be to say, "The shadow banks have become such an important part of intermediation here that we are going to make them subject to the stress test themselves."
I talk about shadow banks as though they are a monolith but they are not, of course. They come in all shapes and sizes and they are constantly morphing so as to step round the rules that any regulator lays down. This is an area where I should say co-operation between the Bank and the FCA is very good. You will have seen in the latest record of the FPC's policy meeting there was a discussion on whether we know enough about leverage in hedge funds. The FCA came to us and said, "We don't really, we all need to find out more, don't we?" The answer is, "Yes, let's please find out more." That is not to say we think there is now a problem in the hedge fund sector; it is that there is a bit too much opacity there for us to tell.
Q69 Mr Ruffley: The Bank of England record of the FPC, the last one, notes that, and I quote, "Over time, the [stress-testing] framework was intended to play a central role in the Committee's deliberations. It would however take a few years to build up the Bank's capabilities; the exercise planned for 2014 would, therefore, be more limited in scope." How limited?
Paul Tucker: It's more a question for my colleague, Andrew Bailey, than for me, but, for example, it is going to be focused only on the main eight domestic banks. The scenarios will be largely around domestic portfolios. It will probably rely-going back to Mr McFadden's question-a bit more on the banks' own models than we are determined to get to in the steady state. It is not yet clear-for me, most importantly-about the degree of disclosure of the results, but you have to learn to walk before you run.
The big change next year is it will be concurrent for the first time. It has never been concurrent before. It has been a sequence of idiosyncratic stress tests, so just making it concurrent for the first time will be very important. I think it is important-and I think my colleagues agree with this-that as each year passes there is a lessons-learned exercise and the Bank announces what it is going to do in the next couple of years. We have said in here that we aim to get to the medium-term vision by the end of five years, which nicely coincides with Mark's term and so I think there's a determination to do that, but I think the Bank will need to let the banking community and you know what the milestones are.
Mr Ruffley: Thank you.
Q70 Chair: Before we close, is there anything that you feel, having watched them develop, that you would want to tell the Committee about macro-prudential tools that are new to the Bank-an important innovation that may be crucial to implementing policies in the light of stress testing?
Paul Tucker: This is the other great dimension. I would say that the great dimensions are stress testing, resolution and then this. It comes back to what I was saying earlier. No rule book is going to be proof against all circumstances. You have to be able to adapt. A macro-prudential policy is essentially about adapting. I think that there is one big gap that the FPC flagged a year or so ago. At the moment, all the macro-prudential tools being contemplated-capital requirements, sector capital requirements, the leverage ratio when that comes-are about banks' own balance sheets. I think the real revolution in this area will be in being able to set and vary minimum margin requirements for derivative contracts and minimum haircuts for repo contracts.
Cutting through the detail, what that means is the macro-prudential authority would be able to influence the degree of leverage in the shadow banking system and other parts of the financial system. That could not be introduced today because the international policies on margins and haircuts are not complete. This is one of those technical areas that I and Mark have, individually, been flagging for three or four years, which I think, eventually, will be immensely important to global finance. Personally, I think would be a great pity if down the road the FPC did not have that tool, because it will be what gives it some traction over the inevitably complex financial system beyond banks.
Q71 Chair: You have given a huge amount of valuable evidence today and not only today but over many sessions over many years, and you have shared not only a grasp of the detail but also the relevance of that for the wider picture. Many of us will feel that today you have hardly scratched the surface, or we could hardly have been able to scratch the surface of tapping into all the ideas and thoughts you have. One of the ideas that the Committee has considered is asking those who leave the Bank at a very senior level, in the fullness of time and in their own time, to write a valedictory note setting down what they think the lessons are for the future so there is guidance for further policy. Would you be prepared to consider doing that, Mr Tucker?
Paul Tucker: I would like to consult with the Governor and the Chairman of Court as, what you are describing is an innovation in the relationship between the Select Committee and the Bank, but I am flattered that you should ask.
Chair: Whether or not we secure that valedictory, I very much hope you will continue to contribute to public life in one way or another. You have made a huge contribution over the years, so we are very grateful to you for all the evidence you have provided. Thank you very much, in particular for coming today, bearing in mind that there were some difficulties that, as we discovered, did not prevent an extremely full and helpful exchange of views.
Paul Tucker: Thank you very much, Chairman.


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Story & photos by Deborah Horn
The senior trip for many young men who graduated high school in the late '60s was no Miami Beach tropical paradise, but rather a hot, humid combat spot near Saigon.
The U.S. was mired in the Vietnam War for almost 11 years with more than 2.7 million Americans serving there. On average more than 17 military personnel died each day. That's nearly 122 per week. The death total was 58,148.
One stitch at a time
Kay Hester, of Pine Bluff, remembers that era well because of the strife and anti-war sentiment sweeping the nation, "The guys didn't really get a welcome home."
Nearly five decades later, these Southeast Arkansas women along with many others are working to change that by joining forces with the national nonprofit, the Quilts of Valor. The goal of the foundation is "to cover service members and veterans touched by war with comforting and healing Quilts of Valor," according to their website.
There are 13 Arkansas groups under this organization's umbrella, including the Pine Bluff branch, "Never Forgotten With Honor," which is only about a year old.
Hester, the group's leader and a founding member, says there are branches in every state and as of June 1, they had presented 182,702 quilts to vets around the country. That's about 1,828 per month or 637 per week.
As of April, Never Forgotten With Honor's 27 members had presented handmade quilts to 50 veterans, no matter the war they served in.
Marine Corporal Patsy Brown was one of those recipients.
Brown, who served during the Vietnam area, is now a Pine Bluff resident. She says she was surprised by the quilt and left teary-eyed.
"I was very humbled and honored…I am so proud to have been in the Marine Corps and receiving a Quilt of Valor was wonderful," she says.
Air Force SSgt. Dianna Winfree, of Redfield, was also honored with a quilt for her service, and both she and Brown have now joined the Pine Bluff group that honored them.
Brown says, "What a honor it is for us to honor our veterans."
Hester expresses a similar sentiment, "It's all about the veteran."
Sewing with honor
Winfree says she quilts with a reason. Originally, she had planned to make a quilt for C.A. Archer, a U.S. Army helicopter pilot who did three tours in Vietnam and one for her uncle Bobby Wofford, who served in the Navy during the Korean War.
She never got around to it before their deaths.
Winfree says, "This is where my heart is. I can't makeup for not making those quilts for them but I can make them for others. I'm very emotional about the mission of the Quilts of Valor."
Hester has her reasons as well.
"I didn't do anything to recognize my father, U.S. Army Lt. Col. Howell O. Richardson. This is my way of honoring him, and my uncles and brothers who also served."
The Quilts of Honor Foundation has certain requirements of the red, white and blue quilts presented under their name, including size, fabric choices and more.
According to Hester, each quilt usually costs about $250 to make.
Between fabric selection, cutting, piecing and stitching it all together — a creative, labor–intensive process that's often underappreciated by the non-quilting public — it takes 50 hours to complete each one.
Of course, "the work is spread out among the group," and the friendships the women are making are priceless, Hester says.
Each quilt is encased in a handmade pillowcase and each is marked with an embroidered label.
They often work at Hester's quilt studio and the second Monday and Tuesday of each month at the Trinity Lutheran Church at 4200 Old Warren Rd. in Pine Bluff.
The church allows the quilters to hold their presentation services and quilt workdays there at no charge.
They start working around 9 a.m. and anyone interested in checking out their group is welcome, Hester says.
Honoring our military heroes
On Saturday, May 5, the Pine Bluff chapter awarded 14 veterans with quilts. "It's more than just handing them one," Hester says. Unless a medical emergency or other reason, the quilts are presented with a military-worthy ceremony at Trinity Lutheran Church.
The church's Pastor Stewart Marshall, who served in the U.S. Army Reserves during the 1990s, was honored with a quilt.
"It validated the service I committed," he says.
"The ceremonies are meaningful to the recipients," and Marshall adds, "It's personal, each quilt is made for the individual person. It's wonderful when someone is recognized."
There is a scripted presentation, including the reading of Mary Welch's poem, "Quilts of Valor", the National Anthem, and the American Legion in Pine Bluff presents the Military Colors. Refreshments are also served.
They also honor the nation's MIA/POWs (Missing in Action/Prisoner of War). As of May 2015, more than 1,600 who served in Vietnam remain unaccounted for.
Winfree explains that this includes "an empty chair and a setting for one. We've done it four times but not once without tears rolling down my face."
For all the women, it's about not forgetting the individual's service to the country.
"You see these big guys, who served in Vietnam, with tears in their eyes…Some of them have never been welcomed home. Never even gotten a thank you." Winfree says.
Hester adds, "We thank everyone for their service during the ceremony…their reaction touches your heart."
For more information about joining the Quilts of Valor Pine Bluff chapter, Never Forgotten With Honor, or about making a donation to the national organization that will benefit local veterans, call Kay Hester at 1(870) 536-5640 or go to: qovf.org for more information or to request a quilt for a service member.

subset: commoncrawl


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We know that a healthy balanced diet, including nutrient rich, fresh, unprocessed food is essential for good health. However, if we experience problems with digestion and absorption, have other health problems or we are stressed, this will affect how the body utilizes the food we eat. If our gut (digestive tract) is not functioning well, due to bacterial imbalance, inflammation, food intolerance or insufficient digestive enzymes & poor digestion, We can experience uncomfortable symptoms. Small changes can often make a big difference to how we feel and these are discussed with the client in a caring and relaxed non-judgemental environment.
Symptoms of sub-optimal health often manifest in the digestive system. Inefficient gut health and an unbalanced diet can lead to a variety of symptoms such as skin issues, pain and inflammation, digestive problems and mood disorders. These symptoms can be further increased by lifestyle choices, stress and genetics. Using a functional medicine approach produces a complete picture rather than focusing on a particular symptom. This enables us to address health concerns from several perspectives to suit the client.
Nutrition Therapy Consultation:
"Intú Health run practical nutrition workshops where you can learn how to create nutritious meals which are easy to prepare and support your health"


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According to Rohan Anderson, people from the city are so used to trusting food from the supermarket that on his weekend workshops in the country – where students gut and skin rabbits, pick wild mushrooms and smoke trout – the consumption of wild food feels counterintuitive.
"We eat so much food from the supermarket that is treated with the worst shit you can think of – fungicides, pesticides, herbicides and fertilisers – that people have this freak out when they pick something from the forest that is absolutely wild, with no chemical impurities," says Anderson, sitting behind the wheel of a truck on the freeway towards Melbourne. "But it is really safe to eat, because it is picked and eaten within an hour," he continues. "This is a big part of the weekend. It's not just 'This is the right or wrong kind of mushroom to eat', it's about changing our views on food."
Anderson is best known as the writer, chef and photographer behind Whole Larder Love, the enigmatic blog and subsequent book that introduces city folk to some back-to-basics food principles. Anderson has been successful because his message is unpretentious, cutting through the hyperbole and urging that we dedicate ourselves to reducing food miles, growing produce locally, harvesting our own plants and preparing our own meat. He's extraordinarily resourceful when it comes to spreading his message, but most of all, he's a genuine man on a mission to enlighten.
A household name in the culinary world (and turning down regular spots on television shows because, as he asks, "Why do we always feel the need to keep expanding?"), Anderson has recently taken a more personal path, running a series of workshops at a homestead in Springmount, 20 minutes outside Ballarat.
At the workshops, Anderson teaches people to skin rabbits, forage for wild mushrooms and set up their own fly-fishing kits. While there's a technical element, it's also an important lesson in life. He's been reduced to tears by the end of a session and says that watching people change the way they think about food is almost too much for him emotionally. "The food takes a backseat at the workshops. It's people wanting to change their lives," he says. "That's what has had a big effect on me. It starts off as a workshop, but people aren't here to be judged about their lives, they're just here to learn what I've learned.
"People come as individuals with the same problems and same questions and they're leaving as friends, trying to help each other answer those questions. That's why it became so bloody emotional for me," he urges. "I said to my partner Kate, 'Stop reading the bloody emails to me', because I can't handle all these beautiful words that people are writing."
Anderson's next workshop, Wild Mushroom, Rabbit, Trout + Fly Fishing takes place this weekend, May 24–26. For more information, visit here.


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Stay on target
Humans aren't the only ones curious about their ancestry.
Basepaws is bringing its at-home DNA test for cats to next week's Consumer Electronics Show (CES) in Las Vegas.
Available for $95, the kit helps owners better understand their pet's ancestry, health, traits, and habits by providing disease markers and breed characteristics, among other information.
Simply tear some hair out of your cat's back using the included adhesive tape ("a little bit like waxing your cat," according to Basepaws CEO and founder Anna Skaya), or request a swab kit for hairless felines.
Then send your sample to the lab and sit tight for eight to 12 weeks (possibly up to five months) while analysts process your pet's DNA.
"Genetics will revolutionize the way we take care of our cats, but we're just getting started," the website said.
Sign up now for an initial report about your pet's breed and ancestors; future documents will focus on its health and other traits.
"DNA research has revealed a vast amount of useful, often life-saving information for humans. We want to facilitate those same kind of breakthroughs for cats," Skaya said in a statement.
"Our reports connect owners with insights about their cat's breed," she continued. "The technology is there to change how we approach our beloved pets' well-being."
Direct-to-consumer (DTC) genetic testing means anyone (or, in fact, anything) with DNA can acquire their ancestral and genealogical history. Even man's best friend.
Dogs, mice, and humans share a core set of chromosomes—so much alike that at least one DTC testing company couldn't distinguish between person and pooch.
As part of an investigation into the accuracy of home testing kits, NBC Chicago reporter Phil Rogers last year submitted his genetic code for testing by multiple companies. He also shipped off DNA of Labrador Retriever Bailey.
Keep in mind, though, the potential perils of at-home DNA testing, as highlighted in a study by diagnostics company Ambry Genetics.
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One week Room Only, FLT & Transfer around £ 1,300 p.p. Prices are as a guide only, assuming UK flights (we offer worldwide departures), over low seasons. Please call for an immediate accurate quotation, or use our 'Quick Quote' tool for a better guide price based on your dates.
Why You'll Love Kitesurfing With Beach House Witsand!
Beach House Witsand Overview
This luxurious self catering beach villa is ideal for the discerning luxury traveler. The home is situated directly on the beach in the safe seaside village of Witsand, Western Cape, the gateway to the Garden Route. The home is rented as a unit and sleeps up to 10 guests in 5 individually decorated bedrooms. Various outdoor entertainment spaces, including a splash pool, large open plan living with everything to make your stay unforgettable.
Amenities And Facilities
The home is tastefully and luxuriously decorated in a relaxed seaside theme with art from across the African continent. The home has 5 double bedrooms of which 3 are en-suite and 2 bedrooms share a full bathroom. There is an additional guest WC.
All the bedrooms are individually and tastefully decorated in shades of blue, turquoise and grey and the beds are fitted with 100% cotton linens. The Main Bedroom Suite offers you a freestanding bath with sea-views and separate en-suite shower room with twin vanities and a rain shower head. Extra blankets and swimming towels are also provided.
The villa has 2 entertainment areas, 3 decks of which 1 is on the beach side and one directly adjacent to the main living area that features a gas barbecue, beautiful sea views, lounging and dining. The main living area features a LED TV with HD premium DSTV channels as well as a blue ray player with surround sound, Downstairs you will find a library/reading room stocked with various titles, magazines and some games for your enjoyment.
A fully enclosed courtyard area features a splash pool and fire-pit. The home has 1 extra long garage and has a generator for power outages. Off-street parking is also available for 4 vehicles.
This is an eco-friendly property with hot water on demand systems and a water purifier for drinking water. The chef's kitchen is fully fitted with all the mod-cons including a water purifier, ice maker and the separate scullery has a dishwasher. Laundry facilities on site.
Near the Home: Restaurant within 2 min walking distance, boat and/or fishing charters, guided or unguided walks, birdwatching, paddle boarding, excellent kite surfing etc......
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Vehicle Maintenance Specials
Look for those Fall and Winter Blowout Specials
If you are like most people fall means so much more than just getting the kids off to school or dealing with increased traffic jams after the summer vacation months. Those little seasonal changes can become quite a drastic departure from the routine that summers often bring in the south. Lazy days filled with hot humid nights will soon give way to manageable temperatures. Automobiles also go through a change and transition as the lingering heat takes its toll on engines, brakes, coolant systems and of course that ever present running auto air conditioning system. Fall is a good time to have your automobile, truck, pick-up truck, commercial truck or van or RV serviced at your local garage. Preventative maintenance is one of the most important tasks one can perform to avoid costly repairs down the road and now that things are starting to get back to normal one should make time for a good mechanic to give your precious car the once over. So now you have to ask yourself the question, do you have a certified mechanic and a reputable automotive service center you can trust to review your cars performance and make the necessary repairs or do the routine maintenance required. Often times settling on a garage is determined by where you live or work and not on how equipped and trained the mechanics are to do the best job possible at an appropriate and fair price. This time of the year is also a good time to take advantage of those fall and winter specials you see advertised everywhere. Muffler City Auto Repair is one such garage offering fall specials to take advantage of. We are so much more than the name would imply. We are a centrally located auto repair facility equipped to handle any automotive job, from our location on Sunbeam Road between San Jose Blvd and Philips Highway (US1). We are your one-stop-shop for any foreign or domestic vehicle preventative maintenance, diagnostic trouble shooting resolution or repair. ASE Certified Mechanics holding over 350 factory authorized service training certificates who specialize in complete, bumper to bumper automotive care. We are also, as the name would imply a custom exhaust and muffler replacement center with over 30 years of exhaust design, fabrication and installation experience. Ron Evans, owner and operator of Muffler City Auto Repair together with his Chief Mechanic Scott Brown, manage a group of automotive repair experts and custom exhaust specialists all under one roof. We specialize in the repair and replacement of brakes, transmissions, electrical and ignition systems, radiator and coolant systems, auto air conditioning, suspension, engine rebuilding and replacement, exhaust systems, custom exhaust design and installation, routine engine maintenance including oil changes, system flushes, preventative maintenance and so much more.
Fall Specials to take Advantage Of
Muffler City Auto Repair is having their annual Fall and Early Winter Automotive Specials for new and existing customers. Stop by or call for an appointment and take advantage of these price savings offers for your vehicle. Muffler City Auto Repair is offering for "most vehicles" the following automotive specials. Check our website for complete details.
$30.00 Off AC Tune-ups, Custom or Dual Exhaust Systems, Fuel Injection Systems, Brake Specials (most vehicles)
$20.00 Off Coolant System Flushes
$10.00 Off Oil Changes (see our website for complete details)
Also see our Mint Magazine advertisement in the August, Sunbeam Road/San Jose edition or visit our website at AutoRepairJax.com for complete details. Give us a call at 904-739-0091 for appointments or stop in any time at our location at 4435 Sunbeam Road, Jacksonville Florida


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Four Leaf Macrame Necklace
The four leaf macrame necklace has a focal cabochon of varying sizes and colors. In each instance the cord colors and accenting seed beads are selected to enhance the center cabochon. The leaves are nestled along the right side of the stone. This allows the beauty of each stone to be seen. The neck cords are the same color as the bezel setting. They are tied in a half hitch sennet which creates a flexible yet sturdy cord with a raised spiral. The length of the necklace is about 19 inches in total. It fastens with a magnetic clasp allowing for easy on and off of the piece. Specific color combinations are possible upon request by contacting us here.


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Most people make resolutions to improve themselves every year. These usually include losing a few pounds, giving up a vice, or improving their appearance. I'm no better; I usually come up with something that I could improve. So I've reexamined my usual promises and added a few new interesting resolutions for 2004.
Eat healthier
Okay, this is one of the more usual ones. I started out really well earlier in 2003 by avoiding fast food and eating more nutritiously at home. But I haven't been watching what I ate in general over the last couple of months. Lately, I've noticed more meals eaten out, and fewer meals with any real nutritional value at home. I'm not suggesting that I become a vegetarian; instead I should limit my sugar and fat intake. I'm not trying to lose a few pounds; rather, I'm trying to keep myself from gaining it back.
Be more active
In conjunction with eating healthier, I also need to keep the juices flowing. I work in an office, so I spend a lot of time sitting. That doesn't keep the muscles toned. So, 2004 will be the year in which I take up something more than just hitting golf balls (which I only did a few times in 2003). Perhaps just more walking in general would be a good start. Again, the goal isn't weight loss; it's just to remain healthy to avoid problems in the future.
Spend more time playing guitar
As an aspiring guitarist (well, one with a real job to fall-back on), I really need to devote more time to practicing and learning how to play this cool instrument. In 2004, I plan on expanding not only my song repertoire, but also my understanding of the instrument and of music theory in general. I just hope the neighbors don't complain when I start cranking up the amp while playing Metallica's "Seek and Destroy." Also, since I'm working on becoming more active, it should become easier to thrash (head-bang) while rolling through a few metal riffs. This should help justify my next guitar purchase, too!
Be more assertive
I hate when I'm shopping and I suddenly can't get past a couple of people that park their shopping carts in everyone's way. I usually just say, "Excuse me," but either I have such a quiet voice or people just don't hear me. 2004 will be different. Forget the niceties; I'm going to push people out of my way or just hide their shopping carts on them.
I'm also a pretty shy person, so I need to be more vocal. So I also plan to meet and befriend more people. This will include going out and seeing more around town.
Save for a house
I don't dislike where I live now, but there are so many more benefits to owning my own house. For example, I can actually paint my walls whatever color I want, I can crank up my guitar amp and not bother so many people (well, usually), and I don't have to wait for a washing machine. Furthermore, I would like more room to spread out. The apartment complex in which I live has been wonderful, thanks to some really good neighbors and great management staff. But I need to think about the big picture… including writing off those mortgage interest payments on my taxes.
Keep the apartment clean
Since I want to move into a house, I should make this a priority. It will make moving easier. Included among the things I need to do this year are finding a better spot for my guitar effects pedals and keeping the dining room table clutter down (which will become easier once the desk is home and in place).
Be less cynical
In case you haven't noticed by reading most of the stuff I publish on here, I'm pretty jaded. I would like to see the good in people, but I usually let some little bits of reality sneak in and take hold of my world view. So I'm going to start giving more people the benefit of the doubt and try to be nicer in general. That should go over really well with my heavy-metal reputation.
Meet that special someone
As you've probably read and gathered from reading other things on this site, I'm single. Hey, I'd like to meet a special woman, fall in love, and offer her everything I can (uh, within reason). So I've made that a priority in 2004. No more cynicism and becoming more assertive may lead to me meeting someone nice enough to go on a date or two with me. However, I do have some criteria: she must accept that I like playing metal guitar (or any guitar); she must accept that I like the Green Bay Packers; and she must be able to help out with cooking and cleaning (help out means that I will also cook and clean). Speaking of cooking, she can't be overly fussy about what she eats (still wondering why I'm single?).
Finish my desk
Okay, this is something I've been working on for almost two years. Yes, it probably would have been completed if there wasn't a miscommunication about the lumber order. But great progress was made over the past year, thanks mostly to my great friends Chuck and Emil. Now that most of it is stained, sealed, and varnished and we only need to install hardware and give it a test-fitting, this should probably be the most achievable resolution for 2004. However, if I'm still writing about working on it a year from now, I'm giving up on it altogether!
Read more
I purchased a lot of books last year, but I haven't read them yet. I'm only on Chapter Three of the latest Harry Potter book, and I bought it right after it was released this past summer. So I'm going to put aside an hour or so every night just for reading. I plan on finishing about one book a month this year, depending on the size and the topic (if it turns out to be a clinker, though, I'll stop reading it and move on to the next book). I don't have a list of what I'll read yet, but I'm sure I've got enough material to keep me busy throughout the year. Maybe I'll even get a newspaper just to keep up with the news… then again I have access to most articles through the Internet.
Finish my web site redesign
As you may be aware, I started redesigning this site again recently. I don't expect it to be active soon, but I would like to have it ready by the summer. So I want to spend some time learning more about web site design and putting what I learn into practice. Speaking of which, I also would like to keep more current on my site… I know, I know; you're still waiting for those pictures from England. And speaking of which…
Complete my 2003 England Vacation scrapbook
I took a series of classes this past summer to learn how to effectively put together a scrapbook. Since then, I've purchased enough material for the first four or six pages. Yet all I have is materials… no cutting, no pasting, no planning. So I would like to at least start on my scrapbook in 2004; I'd even like to finish it as soon as possible, assuming it doesn't drive me nuts.
As you can see, I've actually spent some time really thinking about areas where I need to make improvements and strategizing how I can achieve these resolutions. I hope to write next year with positive results. I don't know if I'll achieve all of my goals in 2004, but there are a few that are worth focusing my energy. So, if you find this kind of thing worth reading and learning about, I'll go through this process again next year.


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Food is really one of the most successful business this decade as more and more food establishments replaces establishments in malls. In this article, we will share with you a quick feedback and review of AMOR SBREAD YOUR LOVE located at SM City Baliwag in Baliwag, Bulacan.
I am a judge for a cosplay event at SM City Baliwag which starts later in the afternoon when I felt a bit hungry. Since I had eaten lunch already, I looked for something which is delicious but not heavy on the stomach and there I saw Amor Sbread Your Love.
Amor Sbread Your Love which is the mall branch of Amor Bakery looks like an ordinary bread store in the mall similar to other of its kind. I decided to order the famous Floss plus another bread.
Though the floss was not as tasty as the one from a different brand it is satisfying and delicious while the other one has pork in it. Bread here is affordable which means good value for your money. They also offer bread and drink combination.
If you ever pass by SM City Baliwag be sure to visit Amor Sbread Your Love.
Don't forget to browse more FOOD REVIEWS and UPDATES.
Thanks for reading!


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Barrow RNLI Station Receives Donation of £300
Mr Mike Mills, organiser of the recent 'Poker Run' which took place in the Walney and Piel Channels, has presented a cheque for £300 to John Falvey, Barrow's Lifeboat Operations Manager.
John Falvey, Barrow Lifeboat Operations Manager, said "We really appreciate the efforts of Mike Mills and his team in organising the event and would like to thank Mike and all the participants for making this donation from the Poker Run."
The RNLI relies upon donations to support its vision to end the preventable loss of life at sea. Some 95% of RNLI people are volunteers.
Key facts about the RNLI
The RNLI charity saves lives at sea. Its volunteers provide a 24-hour search and rescue service around the United Kingdom and Republic of Ireland coasts. The RNLI operates over 238 lifeboat stations in the UK and Ireland and more than 240 lifeguard units on beaches around the UK and Channel Islands. The RNLI is independent of Coastguard and government and depends on voluntary donations and legacies to maintain its rescue service. Since the RNLI was founded in 1824, its lifeboat crews and lifeguards have saved over 142,700 lives.
Learn more about the RNLI
For more information please visit the RNLI website or Facebook, Twitter and YouTube. News releases, videos and photos are available on the News Centre.
Contacting the RNLI - public enquiries
Members of the public may contact the RNLI on 0300 300 9990 (UK) or 1800 991802 (Ireland) or or by email.


text: The New VelaShape contours, shapes and slims the body by improving cellulite and reducing circumference in as few as 1 treatment session. The New VelaShape provides dramatic results without downtime or significant discomfort. It is the first and only technology that combines Elos with Vacuum and tissue manipulation to reduce the volume and appearance of fat tissues.


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Attention Seamless Bra
Add a touch of style to your activewear wardrobe! Perfect for low impact workouts like yoga, gym and pilates. This soft and feminine bra features a plunging V-neck and a stylish knitted logo to motivate you to get closer to your dreams!
Pair it with the matching Attention Seamless Tights. <3
Product Details
FABRIC: 70% Polyester, 22% Nylon, 8% Elasthan
- Seamless knitted
- Removable cup inserts
- Adjustable shoulder straps
- Double knitted rib at bottom for extra comfort