Friday, 1 November 2013

RBS places troublesome assets worth £38bn in internal 'bad bank'

RBS chief Ross McEwan and chancellor George Osborne
RBS chief Ross McEwan and chancellor George Osborne at the bank's London headquarters
Royal Bank of Scotland warned on Friday that it was on course for a substantial loss this year, dashing any remaining hopes of a return to the private sector until after the 2015 election.
Announcing that £38bn of troublesome loans would be ringfenced within the bank, the new chief executive Ross McEwan heralded a "resetting" of the often fraught relationship with the Treasury – owner of 81% of the shares – and the Bank of England, which regulates the bank and is poised to impose tougher rules on capital.
McEwan who took the helm only a month ago after Stephen Hester was ousted in the summer, said he wanted to end the "weariness" and "defensiveness" that had crept into RBS. He is embarking on a review of all the bank's operations – including its troublesome Ulster operations in Ireland and the already-scaled back investment bank – which will be announced in February. He will accelerate the sale of the US arm, Citizens.
"The bar for RBS is higher than for any other bank because we got saved by the UK government," said McEwan. A highly critical report into its lending to small business found it turning away three out of every four applications for business loans and acting too aggressively towards customers in difficulty.
Unions feared a new wave of job cuts on top of 30,000 already axed since the 2008 bailout. Dominic Hook, Unite national officer, said: "Management claim that customer service is a priority for the bank and its reputation depends on it but RBS has cut staff numbers to the bone."
RBS shares were the second biggest fallers in the FTSE 100, down 7.5% at 340p – well below the 500p average price the taxpayer spent £45bn buying them for – after the bank reported a third-quarter loss of more than £600m.
Demonstrating a thawing of relations with the new boss, ChancellorGeorge Osborne was at the London office of RBS for the announcement of the result of the review he had commissioned into whether the bank should be split up.
The study by financial advisers Rothschild, estimated to have cost £9m, stepped back from a full break-up and creation of a "bad bank" suggested by senior figures such as former chancellor, Lord Lawson and former Bank of England governor Lord King.
Instead, about £38bn of troublesome loans – including £9bn from Ulster Bank – will be placed into a new non-core division to be known as the capital resolution division, which the bank aims to wind down in three years. This will mean writing off up to £4.5bn of problem loans in the next quarter – driving the bank to a "substantial loss" for the full year. But some £11bn of capital should be released as a result.
McEwan insisted the government had not forced RBS into the new-look non-core bank, saying it had to listen major shareholders. "If you were a hedge fund and had 81% of the business you'd want to be having good conversations," he said.
Commissioned following a recommendation by the parliamentary commission on banking , the review concluded the "effort, risk and expense involved in the creation of an external bad bank is not justified".A 150 page document published by the Treasury said creating bad bank would "do more harm than good".
Labour MP Pat McFadden, who sat on the commission, said the outcome "simply changes the name plate on what was already happening". Lord McFall, also on the commission, said on Twitter it was the "status quo w[ith] frills".
But Osborne said the bank was now set on a "new direction", to focus on the UK and small business lending and become a bank that would be "batting for Britain". A sale of the government's stake was unlikely to happen before the May 2015 election, Osborne said.
Sir Philip Hampton, RBS chairman who had previously indicated a sale could start next year, said that since its bailout RBS had pumped £15bn into Ulster bank, paid out more in compensation to customers and paid fees to the government which should be taken into account when assessing its share performance.
McEwan's aim is "to dispel any suggestions that RBS is travelling light on capital" at a time when the Bank of England is preparing to force all UK banks to hold more capital and more quickly than international regulations require. It is aiming for a 12% ratio in three years. The Treasury said the bank needed to "accommodate any additional headwinds which may adversely affect their capital resources, for example future costs of redress".
The bank took a fresh provision for payment protection insurance mis-selling of £250m – taking its total bill so far to £2.65bn, and admitted it was involved in new investigation into alleged manipulation of foreign exchange markets.
RBS is now in discussions about releasing the dividend access share that would have forced the bank to pay dividends – when it could afford them – to the government before its other shareholders.
An £8bn contingent capital facility which required the government to pump more money into the bank if its capital ratio fell is now being repaid a year early.

Why England should not waste another chance to build on World Cup success

Lawrence Dallaglio Retires From International Rugby
Lawrence Dallaglio: 'It’s only now under Stuart Lancaster that we see England taking a step forward.' Photograph: Daniel Berehulak/Getty Images
At around 3.15pm on Saturday afternoon a gaggle of increasingly middle-aged men will shuffle around Twickenham in celebration of the looming 10th anniversary of England's 2003 Rugby World Cup victory. Ten years? It does not feel like it, so familiar are the iconic images: Jonny's boot, Martin Johnson holding the Webb Ellis Cup, Manly beach, Trafalgar Square. Those were the days and English rugby smugly imagined they would never end.
So how should we categorise England's subsequent decade as they prepare to be reunited with Australia on Saturday? One Six Nations title, no grand slams, the odd relieving win here and there. That is pretty much it. For the world's wealthiest union, blessed with the highest number of adult players on the planet, it has been a frequent embarrassment. "We wasted the opportunity to build on that success," is the blunt verdict of Lawrence Dallaglio, England's World Cup-winning No8.
Most of his contemporaries concur with their still-combative ex-captain. England are finally perking up under Stuart Lancaster but old-timers still stare at the platoons of coaches and players involved since 2004 and wonder aloud how England's stairway to heaven in Sydney ended up down so many culs-de-sac. "There was no legacy from our win. We didn't pass anything on," laments Mike Catt, now reincarnated as England's attack coach. In terms of the senior team's mixed subsequent fortunes, it is hard to disagree.
As those who were there will tell you, the seeds of self-destruction were sown before England became champions. "I remember being at a meeting of whatever quango was in vogue at the time – I guess it was England Rugby Ltd – in June 2003," recalls Damian Hopley, the long-serving chief executive of the Rugby Players' Association. "It had been a classically dry, boring political meeting and, finally, we got on to any other business. I said I had a minor bit, namely what were we planning if England won the World Cup?" Very little, it emerged. When it happened, hardly anyone bothered about the morning after. "There's no doubt we were ill-prepared, as a game, to capitalise on that epoch-making success," concludes Hopley.
This, in fairness, was not a uniquely English problem. South Africa experienced a similar scenario in 1995 after Joel Stransky's drop goal had killed off New Zealand in extra time in Johannesburg. "I remember sitting with Louis Luyt [the South African Rugby Union's president] and Australia's Leo Williams on the Monday after the final," reflects Edward Griffiths, the chief executive of Saracens who, in a past life, was one of the architects of the remarkable 1995 World Cup. "Leo asked me what we were going to do and I told him we were planning to take the trophy around the whole country. He just said: 'You should get rid of half your squad.'
"It sounds a ridiculous thing to do but I now understand what he meant. The squad has achieved what it's going to achieve. Have the party and celebrate but don't do the lap of honour. South Africa were guilty of that and you could maybe argue England were as well. But in that period your team isn't moving forward. There is a process of renewal that should start fairly soon after winning a World Cup. There is a case for being pretty brutal."
The situation in England was exacerbated by a series of unfortunate events. Wilkinson was destined to be injured for years. Johnson never played for his country again. The side was on the wane even before its finest hour and, soon enough, the head coach, Clive Woodward, was gone as well. "There was almost a void of leadership," recalls Hopley. "In many ways that Johnno leadership figure has never really been replaced. Some outstanding captains followed him but he was such an all-encompassing force and presence on and off the field. It's bloody hard to fill those shoes."
Dallaglio, reunited with the trophy this week in his role as an ambassador for DHL, one of the 2015 tournament sponsors, also reckons the RFU should take their share of the blame.
"Whoever planned for England to go on tour to New Zealand and Australia in the summer of 2004 wants their collar felt. Having taken over as captain, I can tell you it was an extremely difficult tour. We'd been playing pretty much non-stop for five or six years. At some point someone needed to build in a rest period somewhere. You shouldn't be going from winning the World Cup to losing by 30 and 40 points to the All Blacks and Wallabies."
To make matters worse, the next crop of players were not quite as good as those they were replacing. Off-field uncertainty, club v country rows, jerry-built coaching combinations, poor selection, a lack of natural leaders and revenge-seeking opposition also played their part. To a degree a dip was to be anticipated – "It was almost inevitable that success created a monster," says Hopley – but its speed was depressing. "We all appreciate that success comes in cycles but it's only now, under Stuart Lancaster, that we've started to see an England team taking a step forward," suggests Dallaglio. "There seems to have been an obsession with undoing all the work Clive Woodward did in the buildup to 2003. I'm not sure why. He must have really upset people at the RFU."
Manu Tuilagi's idiotic ferry-jumping in Auckland in 2011 and the subsequent leaking of the toxic post-tournament review also underlined the fault-lines in the relationship between the players and the union. "At the time I felt the damage done was untold," says Hopley, incandescent at the way certain players were made scapegoats for the failings of others. "The lack of collaboration and Dunkirk spirit was appalling." Dallaglio was equally unimpressed. "In 2011, for whatever reason, the team lost its moral compass. Stuart Lancaster had to come in and rebuild from the very bottom up. It's terrible that you have to start your reign as England coach by reminding people what it actually means to play for England. That's not something you can ever imagine happening in New Zealand."
Perhaps even more profligate was the failure to hang on to those who, in 2003, were practically crawling over the walls of their local rugby clubs to practise their Jonny-style clenched-palm goal-kicking. "The groundwork hadn't been put in between 2000 and 2003," says Steve Grainger, the RFU's current rugby development director. "If tomorrow another 10,000 people go through the doors of your local supermarket and there isn't enough food because it hasn't been stocked up in advance, it's too late to do anything about it."
Participation wise, tellingly, there are now fewer people playing rugby – 190,000, according to the RFU's latest count – in England than there were in 2003, down from an estimated peak of around 255,000 in 2005.
While Grainger is now heading a concerted push to boost that figure to 215,000 by 2017, as well as recruiting thousands more coaches, referees and volunteers, Griffiths warns there is no short cut. "Developing the game is something that's really easy to talk about. The International Rugby Board are experts at it. When you break down what they actually do you'll see it's surprisingly little. Development in sport requires a kind of missionary zeal. It's not a normal job. You can do it to a six out of 10 standard pretty easily and collect your salary. Scoring nine out of 10 requires something more. Winning a major tournament strikes a match but unless you've got all the kindling in place it's not going to take off."
The RFU, accordingly, is determined history will not repeat itself.
On this same weekend in two years' time, Twickenham will host the 2015 final. The Sunday morning is already ringed in Grainger's diary. "If we want another 1,000 coaches on 1 November 2015 to coach our kids, there's no point waiting until then to train them. We need to take every possible step to ensure our clubs are as prepared as they can be. The potential is massive. That's the challenge and the slightly scary bit."
Among various initiatives is a desire to install Wi-Fi into more rugby clubhouses, on the basis that modern teenagers won't hang around long there otherwise. A World Cup on home soil is also a perfect opportunity to encourage more women to embrace the sport, both on and off the field. In terms of inspiring the next generation it promises to be English rugby's Olympic moment.
"I remember talking to Sean Kerly after GB won their Olympic hockey gold in 1988," says Hopley. "I think sales of hockey sticks went up 5,000%. There was definitely a golden moment. But after 2003 we were so busy navel-gazing and fighting club v country battles we missed all sorts of low-hanging fruit in terms of opportunities to improve the game."
The widespread view is that those lessons have finally been learned. Financially the RFU is in a position to build strong foundations for the future, as its healthy annual results, due out later this month, will testify. Lancaster, to his credit, has also made a point of reinforcing the "emotional glue" which connects the game in England at all levels. He is seeking to improve training facilities for his elite players, too, while seven wins in his last eight Tests have instilled precious confidence. Dallaglio reckons it is now up to the players to take more ownership of their own futures.
"I think more could be done off the field and that includes the players. You've got to make some pretty vital decisions in your life. Do you want to be remembered as the best player in the world or the best player in England? If it's the latter then carry on following your club fitness programme. If it's the former you've got to start making decisions based on what you want to achieve in your career.
"If England want to become the best side in the world they have to become the fittest side in the world. That's the starting point, so their fitness programmes should be designed by the national team, shouldn't they? They should be world-class, not simply compared to what is the best in the Premiership.
"It's about waking up in the morning and comparing yourself with the best players in the world, not just the best players in your own country."
They will be well rewarded if they can make that physical and mental leap. In 2003 the players earned around £70,000 per man for winning the World Cup, with sponsorship spin-offs on top. This time, it is understood each member of the 30-man squad will stand to pick up at least £150,000 apiece.
"My sense is that, while the England team may not have scaled those 2003 peaks again, rugby has been on a fairly strong upward curve in this country generally via the club game and the grassroots," says Griffiths.
Saturday should give us a further clue as to the future. As Dallaglio points out, the arranged marriage between the clubs and the RFU means player access is restricted and therefore "still not 100% geared towards the success of the national team." There is also the small matter of New Zealand, easily world rugby's current dominant force. "As we sit here it is difficult to look past New Zealand but no one is going to fancy playing the host nation," counters Dallaglio.
"Everyone keeps telling me England are in a tough pool but I keep telling them that Wales and Australia are in a very tough group because they've got to play England. England have got the players, I certainly believe that. They just need to be given the right environment to become the best in the world."

Joe Hart dropped by Manchester City after catalogue of errors in goal

Joe Hart
Joe Hart has suffered a series of mistakes which have led to Manuel Pellegrini dropping him from the Manchester City team. Photograph: Martin Rickett/PA
Joe Hart has been dropped by Manchester City for Premier Leaguegame against Norwich City but the goalkeeper is determined to win his place back and is not considering his future with the club, despite the decision potentially having consequences for the Englishman's World Cup hopes next summer.
Manuel Pellegrini's decision gives Costel Pantilimon the chance to establish himself as City's first-choice goalkeeper, with it being understood that the Romanian may have otherwise made a formal transfer request in January.
Hart was informed that he would be dropped by Pellegrini after training at the Etihad, with the 26-year-old understood to be disappointed and at the same time appreciative of the manner in which the Chilean explained his decision.
This follows the issues Hart had with Pellegrini's predecessor, Roberto Mancini, and his man-management style.
With Hart aware that this is a major season for club and country asEngland are also preparing for the summer tournament in Brazil, the goalkeeper is intent on rolling with the metaphorical punches.
Hart has paid the price for a catalogue of errors while Pantilimon impressed during City's Capital One Cup win at Newcastle in midweek, keeping a clean sheet. Although Pellegrini refused to confirm who will start, Pantilimon trained behind the starting defence in the buildup to the game.
The manager remained coy when asked at Friday's press conference which keeper he would pick: "Tomorrow you will know the XI that starts. It's a decision I have to take every week." The England No1 has been under intense pressure because of high-profile mistakes this season, the latest of which came in the loss at Chelsea last weekend.
Regarding whether Hart would have been disappointed to be dropped for the midweek win at Newcastle, the manager said: "You must ask Joe, I can't answer for him how disappointed. All of you saw what happened [against Chelsea]."
Asked if he has to be careful with Hart because of his perceived fragile confidence, Pellegrini added: "I am very careful with all the players, not only Joe. I think tomorrow we will see what happens with Joe Hart. I don't want to continue talking about Joe Hart. I don't want to continue with Joe Hart because I have not told the players who will play. Tomorrow we will see and after I can answer your question."
However, Pellegrini admitted he is concerned at points dropped due to defensive errors this campaign. "Yes, of course [we] are conscious about that. We lost at least four points away that we deserve more, but football has these things and we must recover those points. I think we are in a good way."
Pellegrini added: "Every player of the squad has his right to play and I have to decide every week who will play. Maybe you ask Costel because he does not play too often, but I always see the players every day."
Pantilimon would have contemplated his future had he not been selected to face Norwich as the Romanian believes he has been patient enough awaiting a chance and having now lost his place in his national squad, the 26-year-old wants regular first-team football.
City's captain Vincent Kompany, who has a thigh injury, may not now be available until after the international break in three weeks' time, Pellegrini added.

Pakistani Taliban leader Hakimullah Mehsud killed in CIA drone strike

Hakimullah Mehsud photographed in 2008
Hakimullah Mehsud, photographed in 2008. Photograph: A Majeed/AFP/Getty Images
The CIA's secret drone campaign claimed one of its highest profile scalps on Friday with the killing of the chief of the Pakistani Taliban by an unmanned aircraft in the country's lawless tribal areas.
Hakimullah Mehsud, the feared leader of an alliance of militant groups attempting to topple the Pakistani state, was killed when a missile struck a compound in the village near the capital of North Waziristan, according to militant, US and Pakistani sources.
Although his death has been misreported in the past, informants in the tribal area said they were confident one of the country's most vicious militant leaders was dead.
"He was targeted as he was returning to his home from a nearby mosque where he had been holding discussions with his comrades," said a military officer based in a city close to the semi-autonomous Federally Administered Tribal Areas, which is home to many Islamist terrorist groups.
"He was right at his front door and at least three missiles were fired."
A senior US intelligence official told the Associated Press the US received positive confirmation on Friday morning that he had been killed.
Militant and official sources added that Mehsud's driver and bodyguard were also among a total of five people killed.
Although Mehsud's four year tenure as head of Pakistan's most feared militant group has been marked by horrific attacks that have killed scores of soldiers, government officials and civilians, his death looked set to spark fury among some politicians who believe the Tehreek-e-Taliban Pakistan (TTP) should be brought in to peace talks.
All political parties unanimously supported government attempts to negotiate with the TTP at a meeting in September. Just this week Prime Minister Nawaz Sharif announced that talks between the two sides had finally begun.
Pakistan mapCredit: Guardian graphics
A government official claimed Mehsud had been discussing the matter with fellow fighters just before he was killed, while the Taliban said a government peace delegation was in Miran Shah at the time of the attack.
The country's rightwing religious parties are likely to interpret the drone strike as a deliberate attempt by the US to scupper peace talks with an organisation that swears allegiance to Mullah Omar, the leader of the Afghan Taliban, which fights against Nato troops in neighbouring Afghanistan.
Sharif, who held meetings with US president Barack Obama in Washington DC last week, has repeatedly called for an end to drone strikes, despite persistent suspicions that Pakistan continues to give secret backing to the attacks.
But the US was never likely to turn up an opportunity to kill Mehsud, the mastermind of a devastating suicide bomb attack on a CIA station in Khost province in eastern Afghanistan in 2009 in which seven CIA officers died.
The ingenious plot involved a Jordanian triple agent who the CIA believed was working for them but was in fact taking orders from Mehsud. The suicide bomber was ushered into the military base to brief CIA officers on al-Qaida, and detonated his explosive vest once he had reached the inside of the base.
Mehsud later appeared in a video alongside the Jordanian, who said he carried out the attack in retribution for the death of another former Pakistani Taliban leader, Baitullah Mehsud, who was killed in an American drone strike in August 2009.
Saifullah Mahsud, director of the Pakistani thinktank FATA Research Centre, said the movement was unlikely to be overly affected the killing of its leader.
"It's a very decentralised organisation," he said. "They've lost leaders to drone strikes before."
A burly man in his mid-30s who wore shoulder length hair, Hakimullah Mehsud became leader of the TTP following the killing of former leader and fellow tribesman Baitullah Mehsud.
Hakimullah Mehsud's death comes just weeks after the TTP chief took the risky and unusual step of granting an interview to a BBC cameraman who had travelled to Pakistan's lawless north-west.
The interview was conducted in open air despite the non-stop presence of drones in the sky.
Earlier on Friday Pakistan's foreign ministry condemned the drone attack as a "violation of Pakistan's sovereignty and territorial integrity".
In May, a drone strike killed Mehsud's second-in-command, and one of his most trusted lieutenants was captured in Afghanistan last month.

Hacking phones of royal staff led to story on Prince Harry essay, court told

Prince Harry, pictured here at the start of his training at the Sandhurst military academy
Prince Harry, pictured here at the start of his training at the Sandhurst military academy. Photograph: Daniel Berehulak/Getty Images
Hacking the phones of royal staff led the News of the World to run a story that Prince Harry had broken the rules at Sandhurst by asking an aide for help with an essay, the jury in the phone-hacking trial has been told.
Clive Goodman, the former News of the World royal editor, told the paper's then-editor, Andy Coulson, that Harry had asked his private secretary Jamie Lowther-Pinkerton, a former soldier, for help on an essay about the Iranian embassy siege while studying at the military training academy.
Andrew Edis QC, leading the prosecution, said Lowther-Pinkerton's voicemail messages had been hacked by Glenn Mulcaire a private investigator working for the now defunct paper. One message was from Harry asking the aide if he "had any information at all" about the 1980 siege, "because I need to write an essay quite quickly on that but I need some extra info. Please please email it to me or text me".
The court heard that Goodman was seeking a response from Clarence House on the allegations, but did not want to be "too precise" and mention the embassy siege because it might might expose their source.
When Clarence House told them it was not against the rules for cadets to seek advice on websites and books, Goodman and Coulson were in email exchange on December 5 2005.
Edis read aloud the emails in court: "What's happening on your story?"
Goodman replied: "Just finished the calls. Need to go through the tapes … as we know that's not exactly what he asked for but I couldn't press forward on that without exposing the source. As we know Harry wasn't only asking for websites. He was asking for information which is a different thing altogether."
Edis said: "It means that if they say that what he was asking about was information about the Iranian embassy siege, everyone would know that they hacked his voicemail."
Other royal stories obtained through hacking included one about Prince William being shot during a night exercise at Aldershot, Edis said.
On another occasion, in April 2006, Coulson emailed Goodman about a story concerning Harry and a woman, asking: "How do we know Harry true?"
Goodman replied that it was from "the same source we had on a retainer". The email read: "We absolutely know it to be true, but I have to blag a confession out of Paddy [Harverson, Clarence House PR] tomorrow. That might not be too difficult because I know from the info that his worst nightmare is that this woman is so upset she'll start making a fuss."
It continued: "We can't get to her ourselves because there's no full name, no address … but Paddy doesn't know that and will hopefully walk straight into the snare."
On another occasion, Goodman emailed news editor Ian Edmondson that a story about William had come "from William himself". When asked to explain, Goodman wrote back: "Not on email."
Edis said Goodman and Coulson "knew what was going on. These are really quite explicit emails. Although they are not as explicit as they might be". They were being "careful and guarded", he told the jury.
"They are being as careful as they can be but the truth, I'm afraid, is still there to be seen despite that. That's what we suggest."

GCHQ and European spy agencies worked together on mass surveillance

BND NSA GCHQ DGSE
In this photo illustration, the logos of intelligence agencies the NSA, BND, GCHQ, DGSE are displayed on folders. Photograph: Ulrich Baumgarten via Getty Images
The German, French, Spanish and Swedish intelligence services have all developed methods of mass surveillance of internet and phone traffic over the past five years in close partnership with Britain's GCHQeavesdropping agency.
The bulk monitoring is carried out through direct taps into fibre optic cables and the development of covert relationships with telecommunications companies. A loose but growing eavesdropping alliance has allowed intelligence agencies from one country to cultivate ties with corporations from another to facilitate the trawling of the web, according to GCHQ documents leaked by the former US intelligence contractor Edward Snowden.
The files also make clear that GCHQ played a leading role in advising its European counterparts how to work around national laws intended to restrict the surveillance power of intelligence agencies.
The German, French and Spanish governments have reacted angrily to reports based on National Security Agency (NSA) files leaked by Snowden since June, revealing the interception of communications by tens of millions of their citizens each month. US intelligence officials have insisted the mass monitoring was carried out by the security agencies in the countries involved and shared with the US.
The US director of national intelligence, James Clapper, suggested to Congress on Tuesday that European governments' professed outrage at the reports was at least partly hypocritical. "Some of this reminds me of the classic movie Casablanca: 'My God, there's gambling going on here,' " he said.
Swedenwhich passed a law in 2008 allowing its intelligence agency to monitor cross-border email and phone communications without a court order, has been relatively muted in its response.
The German government, however, has expressed disbelief and fury at the revelations from the Snowden documents, including the fact that the NSA monitored Angela Merkel's mobile phone calls.
After the Guardian revealed the existence of GCHQ's Tempora programme, in which the electronic intelligence agency tapped directly into the transatlantic fibre optic cables to carry out bulk surveillance, the German justice minister, Sabine Leutheusser-Schnarrenberger, said it sounded "like a Hollywood nightmare", and warned the UK government that free and democratic societies could not flourish when states shielded their actions in "a veil of secrecy".

'Huge potential'

However, in a country-by-country survey of its European partners, GCHQ officials expressed admiration for the technical capabilities of German intelligence to do the same thing. The survey in 2008, when Tempora was being tested, said the Federal Intelligence Service (BND), had "huge technological potential and good access to the heart of the internet – they are already seeing some bearers running at 40Gbps and 100Gbps".
Bearers is the GCHQ term for the fibre optic cables, and gigabits per second (Gbps) measures the speed at which data runs through them. Four years after that report, GCHQ was still only able to monitor 10 Gbps cables, but looked forward to tap new 100 Gbps bearers eventually. Hence the admiration for the BND.
The document also makes clear that British intelligence agencies were helping their German counterparts change or bypass laws that restricted their ability to use their advanced surveillance technology. "We have been assisting the BND (along with SIS [Secret Intelligence Service] and Security Service) in making the case for reform or reinterpretation of the very restrictive interception legislation in Germany," it says.
The country-by-country survey, which in places reads somewhat like a school report, also hands out high marks to the GCHQ's French partner, the General Directorate for External Security (DGSE). But in this case it is suggested that the DGSE's comparative advantage is its relationship with an unnamed telecommunications company, a relationship GCHQ hoped to leverage for its own operations.
"DGSE are a highly motivated, technically competent partner, who have shown great willingness to engage on IP [internet protocol] issues, and to work with GCHQ on a "cooperate and share" basis."
Noting that the Cheltenham-based electronic intelligence agency had trained DGSE technicians on "multi-disciplinary internet operations", the document says: "We have made contact with the DGSE's main industry partner, who has some innovative approaches to some internet challenges, raising the potential for GCHQ to make use of this company in the protocol development arena."
GCHQ went on to host a major conference with its French partner on joint internet-monitoring initiatives in March 2009 and four months later reported on shared efforts on what had become by then GCHQ's biggest challenge – continuing to carry out bulk surveillance, despite the spread of commercial online encryption, by breaking that encryption.
"Very friendly crypt meeting with DGSE in July," British officials reported. The French were "clearly very keen to provide presentations on their work which included cipher detection in high-speed bearers. [GCHQ's] challenge is to ensure that we have enough UK capability to support a longer term crypt relationship."

Fresh opportunities

In the case of the Spanish intelligence agency, the National Intelligence Centre (CNI), the key to mass internet surveillance, at least back in 2008, was the Spaniards' ties to a British telecommunications company (again unnamed. Corporate relations are among the most strictly guarded secrets in the intelligence community). That was giving them "fresh opportunities and uncovering some surprising results.
"GCHQ has not yet engaged with CNI formally on IP exploitation, but the CNI have been making great strides through their relationship with a UK commercial partner. GCHQ and the commercial partner have been able to coordinate their approach. The commercial partner has provided the CNI some equipment whilst keeping us informed, enabling us to invite the CNI across for IP-focused discussions this autumn," the report said. It concluded that GCHQ "have found a very capable counterpart in CNI, particularly in the field of Covert Internet Ops".
GCHQ was clearly delighted in 2008 when the Swedish parliament passed a bitterly contested law allowing the country's National Defence Radio Establishment (FRA) to conduct Tempora-like operations on fibre optic cables. The British agency also claimed some credit for the success.
"FRA have obtained a … probe to use as a test-bed and we expect them to make rapid progress in IP exploitation following the law change," the country assessment said. "GCHQ has already provided a lot of advice and guidance on these issues and we are standing by to assist the FRA further once they have developed a plan for taking the work forwards."
The following year, GCHQ held a conference with its Swedish counterpart "for discussions on the implications of the new legislation being rolled out" and hailed as "a success in Sweden" the news that FRA "have finally found a pragmatic solution to enable release of intelligence to SAEPO [the internal Swedish security service.]"
GCHQ also maintains strong relations with the two main Dutch intelligence agencies, the external MIVD and the internal security service, the AIVD.
"Both agencies are small, by UK standards, but are technically competent and highly motivated," British officials reported. Once again, GCHQ was on hand in 2008 for help in dealing with legal constraints. "The AIVD have just completed a review of how they intend to tackle the challenges posed by the internet – GCHQ has provided input and advice to this report," the country assessment said.
"The Dutch have some legislative issues that they need to work through before their legal environment would allow them to operate in the way that GCHQ does. We are providing legal advice on how we have tackled some of these issues to Dutch lawyers."

European allies

In the score-card of European allies, it appears to be the Italians who come off the worse. GCHQ expresses frustration with the internal friction between Italian agencies and the legal limits on their activities.
"GCHQ has had some CT [counter-terrorism] and internet-focused discussions with both the foreign intelligence agency (AISE) and the security service (AISI), but has found the Italian intelligence community to be fractured and unable/unwilling to cooperate with one another," the report said.
A follow-up bulletin six months later noted that GCHQ was "awaiting a response from AISI on a recent proposal for cooperation – the Italians had seemed keen, but legal obstacles may have been hindering their ability to commit."
It is clear from the Snowden documents that GCHQ has becomeEurope's intelligence hub in the internet age, and not just because of its success in creating a legally permissive environment for its operations. Britain's location as the European gateway for many transatlantic cables, and its privileged relationship with the NSA has made GCHQ an essential partner for European agencies. The documents show British officials frequently lobbying the NSA on sharing of data with the Europeans and haggling over its security classification so it can be more widely disseminated. In the intelligence world, far more than it managed in diplomacy, Britain has made itself an indispensable bridge between America and Europe's spies.

Diego Costa: better than Ronaldo

Diego Costa: better than Ronaldo
Diego Costa has not had an easy time of late. Away from his Atlético duties, he has had to deal with the tough decision of abandoning the Brazil national side to join the 'La Roja' cause. Despite this difficult time, the Atlético striker has still managed to produce the goods in every game.
Apart from Costa's spectacular record for Atlético, the striker is beating records for fun and only two players this century have been able to score more goals in as many games. Costa is the current Pichichi in La Liga and his record of 11 goals in 10 games has only been achieved by Leo Messi and Samuel Eto’o. The Argentine, who has scored eight goals this season, scored 13 in the first 10 games in the last two seasons. Cameroon international Eto’o achieved the same feat playing for the Catalan side.
Diego Costa's record of 11 goals is something that even Cristiano Ronaldo has not been able to better since he joined Real Madrid. However, the Portuguese did manage to equal the tally on two occasions – 2010/11 and 2012/13 -, but this is somewhat surprising given that we are talking about a player who has been considered one of the best in the world for some time.
Another superstar player, Radamel Falcao, who is now at Monaco, has also failed to beat Costa's record. The Colombian netted 10 times in as many games last season, also for Atlético.