FST Europe

Cuts on banks as Greek economy

Tue, 09 Mar 2010 18:04:00 +0000

Both the National Bank of Greece SA and Alpha Bank SA were cut to "hold" from "buy" at Deutsche Bank AG yesterday after the German firm cited concerns that its European counterpart's economic climate may worsen.

According to a report published by Deutsche Bank analysts today, the belief is that the market's attention will quickly turn to Greece's central risk, for both 2010 and over the long term, "and that is a more prolonged and more severe than previously anticipated economic declaration," they write.

The brokerage cut its 2010 and 2011 earnings estimates for National Bank, Alpha Bank and EFG Eurobank Ergasias SA by 15 percent to 34 percent and also lowered its share-price forecasts for the lenders, saying "earnings normalisation will take longer than anticipated."

More information is expected later this week.

Matthew Buttell

Matt Buttell graduated from Bath Spa University in 2006. Since then he has written for several publications, before moving to the web. He now writes solely for the internet, continuing to cover key business issues while managing his own personal blog.

European version of IMF being considered

Tue, 09 Mar 2010 08:02:00 +0000

The European Commission had confirmed that it may set up a version of the International Monetary Fund to help boost the eurozone's financial stablity. The call comes as part of a series of initiatives aimed at avoiding a repeat of the sort of financial crisis currently engulfing Greece.

Germany and France are leading the calls for the move, having already resisted the IMF's involvement in Greece's financial woes. The IMF monitors the economic policies of member countries and can provide financial aid in the event of a crisis.

According to reports on the BBC by economics correspondent Andrew Walker, "Support for a European Monetary Fund (EMF) seems to have been prompted by the Greek financial crisis, though it could not be up and running anything like soon enough to deal with that problem.

"It is more about dealing with, or preferably preventing, the next crisis within the euro area."

There are concerns, however, that the creation of a new agency, which analysts believe reflects the aversion that euro governments have to the idea of IMF involvement in the Greek crisis, could future worries for the eurozone.

The German finance minister, Wolfgang Schauble, for instance, said at the weekend that, "for the internal stability of the eurozone, we need an institution that has the experience and power of the IMF".

The plan now is for Economic and Monetary Affairs Commissioner Olli Rehn to inform the full commission executive on Tuesday about the talks on the EMF plan. In fact, full details of the EMF, and how the 16 members of the eurozone would fund it, might be ready by early June, according to Mr. Rehn's spokesman.

Protests

However, the emergency action has sparked protests and nationwide strikes that have affected air and ground transport, as well as schools and hospitals - as well as differences in the 27-nation EU between the euro countries and those that have retained their own national currencies.

This is because countries outside the euro have greater leeway in managing their finances as they can devalue their money if they so wish to help balance their books.

Matthew Buttell

Related Articles:

Smart economy targets for EU | Euro rises as Greece announces fresh measures | Deutsche Bank grows in Nordic and Asian regions

Smart economy targets for EU

Thu, 04 Mar 2010 15:35:00 +0000

The European Commission has warned that the eurozone must "foster innovation" if it is to compete successfully over the next decade. The warning comes after the unveiling of the new Europe 2020 strategy, which sets "smart economy" targets for the region.

The Europe 2020 strategy will now replace the EU's Lisbon Strategy, which has failed to make Europe the most dynamic knowledge-based economy by 2010.

Under the terms of the new plan, the commission advises that the EU should invest three percent of GDP in research and development and aim for so-called "smart" growth.

Market share

The call for the new plan comes as Asian competitors continue to take a significant proportion of market share from many European businesses.

"We [now] need to invest in smart, sustainable and inclusive growth," detailed Commission president Jose Manuel Barroso. "We need to concentrate our efforts on the most important levers," he said, highlighting the dangers associated with spreading EU resources too thinly.

He also expressed concern over how the economic crisis over the last two years had literally "wiped away" much of the growth that had previously been generated by the European economy in the decade before.

Now, to combat the recession, the commission - which covers the executive arm of the EU - has placed a number of targets as part of their new strategy to ensure growth returns to the region. Such measures include, 75 percent of the EU population aged 20-64 to be in jobs; share of early school leavers to be under 10 percent and at least 40 percent of younger generations to have a degree or diploma; the quicker roll-out of high-speed internet connections across the EU; and to have 20 million fewer people to face the risk of poverty.

Patent system

"It is not acceptable in the modern age that nearly 80 million people in Europe live under the poverty line," Mr. Barroso said in a statement yesterday, adding that the launch of an EU-wide patent system could save companies 289 million euros annually - though as yet no target date has been set for such a system.

The commission also noted that firms currently face translation costs of about 3000 euros on each patent, making them 13 times more expensive in the EU than in the US, adding that by sticking to the EU's low-carbon energy targets the region would save 60 billion euros in oil and gas imports by 2020.

Matthew Buttell

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Euro rises as Greece announces fresh measures | Deutsche Bank grows in Nordic and Asian regions | Iceland's talks of repayment fall down

Euro rises as Greece announces fresh measures

Wed, 03 Mar 2010 16:15:00 +0000

The euro has risen against the dollar today after the Greek government revealed fresh austerity measures to combat their level of debt.

Amid continued concerns over Greece's debt crisis, Tuesday had seen the euro fall to its lowest level against the dollar for 10 months, but today the euro has risen again after the Greek government approved 4.8 billion euros of austerity measures.

The hope is that the new proposals will help to convince financial markets that the struggling nation can pay off its debts and persuade European leaders that it is doing enough to overcome its debt woes.

In fact, according to BBC reports today, Greece officials have now pledged to reduce its deficit from 12.7 percent - a total that is as much as four times more than eurozone rules - to 8.7 percent during 2010.

The new measures that have been announced by Greece's Prime Minister George Papandreou today, include raising VAT to 21 percent from the current rate of 19 percent, and cutting civil servant bonus payments during holidays by 30 percent - which has annoyed union leaders.

Assistance

What's more, the austerity measures proposed so far - such as freezing public sector pay, raising taxes and changing the pension system - have already provoked huge street protests.

Meanwhile, Papandreou is due to visit German Chancellor Angela Merkel in Berlin on Friday, in what could be a key meeting to decide what, if any, European assistance Greece will now receive.

Matthew Buttell

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Deutsche Bank grows in Nordic and Asian regions | Goldman boss defends debt swaps with Greece | Commerzbank struggles as shares fall

Deutsche Bank grows in Nordic and Asian regions

Tue, 02 Mar 2010 15:12:00 +0000

German banking giant Deutsche Bank has announced the creation of a dedicated FX sales team in the Nordic region. The move will see the team covering all institutional, sovereign, public sector, corporate and mid-cap clients in Sweden, Norway, Denmark, Finland and Iceland.

According to reports, the new sales force will be based in Stockholm and will provide multi-product services to the region. Currently the investment bank operates offices in Stockholm, Helsinki and Oslo, with more than 40 professionals providing Nordic clients with financial services.

Local coverage

However, the new team, which began operations yesterday, is made up of long-standing and experienced FX specialists and will help to bolster the German bank's presence in the Nordic region.

Zar Amrolia, global head of foreign exchange at Deutsche Bank, commented in a statement yesterday: "Foreign exchange is a local business with a global product. As the world's leading FX bank, we aim to provide our clients with the most comprehensive and sophisticated local coverage."

He added, "We are pleased [...] the team will be joining us to do this. [The] team will offer clients a direct and personalised service that takes advantage of synergies across client segments."

Banking licence

The news comes on the same day as additional growth for Deustche Bank as the firm also announced that it has receives an international Islamic banking licence from Malaysia's central bank.

The licence will allow the bank to conduct non-ringgit Islamic banking services.

According to reports, Malaysia - which is largely considered as Asia's main Islamic finance hub - mostly conducts its sharia banking business dealings in the local ringgit currency, but the central bank is now keen to encourage foreign investment in the region.

As such, the central bank is planning to award two new Islamic banking licences to foreign firms to set up banks with paid-up capital of at least US$1 billion.

Matthew Buttell

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Santander in Turkish talks | Iceland's talks of repayment fall down | Commerzbank struggles as shares fall

Santander in Turkish talks

Mon, 01 Mar 2010 17:25:00 +0000

Good news for Banco Santander on Friday after rumours that General Electric might sell its 21 percent stake in Turkish lender Garanti Bank to the Spanish firm saw its shares rise exponentially.

Garanti Bank, Turkey's largest listed lender, has long been a favourite of foreign investors because it is around 50 percent publicly-owned in a country where other banks are either run by families or the state. According to analysts, plans to sell the stake by General Electric are likely to attract a number of potential suitors.

But the move is a definite one by GE, and comes as part of its "global reduction strategy" according to GE Money analysts at the weekend.

Stabilisation

GE, the US's largest conglomerate, has been trying to stabilise itself after posting eight straight quarters of falling profits and has been scaling back its heavy GE Capital financial arm, which has led to this sale.

For Santander, the rumours meant that the firm's shares rose 3.4 percent to 9.55 euros on Friday, with analysts saying the deal would be good for Santander as there was huge growth potential in Turkey.

Poor cash position

However, talk of other suitors did follow, including rumours that Turkey's Dogus Group, which already has a 30.5 percent stake in Garanti, might be interested. However, such rumours were largely considered as doubtful as Dogus currently has a poor cash position.

Other potential rumours apparently include Italy Intesa.

Shares in Garanti Bank were down 11.6 percent on the week at 5.70 Turkish lira, in spite of trading higher on Friday.

Matthew Buttell

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Iceland's talks of repayment fall down | Goldman boss defends debt swaps with Greece

Iceland's talks of repayment fall down

Fri, 26 Feb 2010 15:36:00 +0000

The talks on how Iceland will repay the more than 3.8 billion euros of debt it owes to the UK and the Netherlands reported broken down today, without agreement.

According to reports on the BBC, the three governments have now been unable to agree on revised payment terms - despite a full week of negotiations. The talks had come to try and resolve the issue that had arisen after the Iceland-based Icesave online bank collapsed back in October 2008. Savers in both in the UK and the Netherlands were majorly affected.

Both UK and Dutch governments have been seeking repayments from Iceland having already compensated savers themselves. According to Iceland's finance minister Steingrimur Sigfusson, the failure to reach an agreement marks a significant blow. "We had had hoped to be able to reach a consensual resolution of this issue on improved terms, but this has not yet been possible," he said.

Best offer

Meanwhile, in a joint-statement, the UK and Dutch governments said they were "very disappointed that despite all the efforts over the past year and a half, Iceland is still unable to accept the "best offer" on the Icesave loan.

The statement added: "We have consistently supported Iceland's economic recovery and our latest proposal built upon this, offering the Icelandic government the same interest rate as their current loan from the Nordic countries and, in addition, an offer to waive interest for the first two years amounting to 450 million euros.

"This money is still outstanding to UK and Dutch taxpayers and we remain committed to reaching a final agreement with Iceland in due course."

Matthew Buttell

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Iceland: economic meltdown 2.0 | Davos 2010 ends with few plans in place | 'Robin Hood' leaks bankers' details

'Robin Hood' leaks bankers' details on Latvian TV

Thu, 25 Feb 2010 16:11:00 +0000

A Latvian man is being hailed as a modern-day version of Robin Hood after he allegedly leaked data about the finances of banks and state-owned firm to Latvian TV.

Adopting the monicker "Neo" - reportedly in homage to the protagonist portrayed by Keanu Reeves in The Matrix movies - the hacker claims that he wants to expose those cashing in on the recession as it sweeps across Latvia.

The BBC reports that "Neo" is slowing filtering information via Twitter to the TV station, leaving audiences hooked. According to reports, the Latvian government and police are no investigation the incident.

Pay details

But the man, who is naming and shaming the fat cats who are cashing in on the expense of others, is being called a hero by Latvarian nationals.

Data that has been leaked so far includes pay details of managers from a Latvian bank that recieved a government bailout and the fact that many did not take the pay cuts they had promised in return for recieving the handout.

"Neo", who's true identity remains a mystery, claims to be art of a group called the Fourth Awakening People's Army, which downloaded more than seven million confidential tax documents from the State Revenue Service.

He is thought to be based in Britain and reportedly, over a three month period, downloaded the private data of up to 1000 companies along with the rest of his group.

Worst crisis in decades

Latvia is currently in the middle of its worst economic crisis since it broke free from the Soviet Union in 1991. Unemployment levels - at 23 percent - are the highest in the European Union and over the last two years economic output has dropped by almost a quarter. As a result, there is great interest from nationals about how the crisis can be turned around.

Ilze Nagla, a TV presenter on the state-owned Latvian TV, told the BBC that the hacker has attained cult status for some.

"A lot of people perceive him as a modern, virtual Robin Hood," she said. "On the one hand of course he has stolen confidential data [...] and he actually has committed a crime. But at the same time there is value for the public in the sense that now a lot of information gets disclosed."

Matthew Buttell

Commerzbank struggles as shares fall

Wed, 24 Feb 2010 16:32:00 +0000

Germany's Commerzbank saw shares continue fall by 3.8 percent at the start of the week after a report in daily newspaper Handelsblatt said the bank needed to raise as much as three billion euros in fresh capital this year.

Commerzbank, which is Germany's second largest financial institution, was first rocked by the reports on Tuesday, leading Chief Financial Officer Eric Stutz to announce in a statement that the bank had "no plans" to repay state aid in the short term.

On Wednesday, a Commerzbank spokesman said to Reuters that the CFO statement "still stands."

Structure remains

But according to reports from yesterday, a research note from UBS says that the capital structure remains the "overriding issue" for Commerzbank.

Reuters reported that the note read: "In order to achieve a core tier 1 ratio of seven percent a level we regard as reasonable) while repaying the 17.2 billion euros in silent participation, the company has to raise more than 12.2 billion euros in common equity, in our view."

More than enough

However, since these reports surfaced, Commerzbank Chief Executive Martin Blessing has said that the financial lender has "more than enough" capital to support its business.

According to Blessing, core capital ratio at the end of 2009 was "a good 10.5 percent". In a news conference yesterday afternoon he said: "That is more than we need for our client-driven, long-term oriented business model."

Yesterday, at 1013 GMT, Commerzbank shares were down 2.8 percent at 5.485 euros. The DJ Stoxx index of European banks .SX7E was down 1.2 percent.

The bank, which plans to start repaying part of its 18.2 billion euros of government bailout money by 2012, had attempted on Tuesday to brush aside a disastrous 2009 with a pledge to do better in 2010.

Matthew Buttell

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Goldman boss defends debt swaps with Greece | French Finance Minster speaks out over recovery | Billion-pound bonus plans spark new fears

Goldman boss defends debt swaps with Greece

Tue, 23 Feb 2010 15:39:00 +0000

The Chairman of Goldman Sachs Bank USA, the Wall Street giant's holding company, has today defended the bank's 2001 debt-swap deal with Greece - a deal that reportedly allowed the nation to hide the extent of its debt.

According to Gerald Corrigan, the deal was "consistent" with the regulations at that time, highlighted that while such a deal has since been prohibited it was legal when it was carried out. His defence of the deal comes as the European Union (EU) launches an investigation into the financial deal between Greece and Goldman Sachs after it was discovered by the EU statistics agency, Eurostat.

The so-called "currency deal", which it is being claimed reportedly allowed Greece to hide the extent of both its public deficit and national debt, has also been defended by Greece's Finance Minister George Papaconstantinou, who insisted last week that his country was not the only one using such financial arrangements back in 2001.

EU rules

Mr. Corrigan, meanwhile, said that since EU rules on the matter were modified in 2007, it suggested they "were more liberal than they could have been back in 2001". Speaking before the UK's Treasury Committee of MPs, Mr. Corrigan also suggested that the deal was far from unique at the time.

"It is true that a family of currency swaps that were entered into jointly by Greece and Goldman Sachs were of a nature that they did produce a small, but not insignificant reduction in Greece's deficit and debt," he said.

"They were very much consistent and comparable with the standards and behaviour of measurements used by the European Community [at the time]," he added.

Mr. Corrigan was giving evidence to the Treasury Committee as part of its enquiry into the global banking sector and - as part of the ensuing investigation - the EU has now given Greece until the end of February to give details of how it affected its accounts.

Matthew Buttell

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Lloyds exec feels the heat | French Finance Minster speaks out | Billion-pound bonus plans

Lloyds exec feels the heat

Mon, 22 Feb 2010 13:54:00 +0000

Royal Bank of Scotland (RBS) chief, Stephen Hestler, yesterday rejected a GBP£1.6 million bonus, increasing the pressure on Eric Daniels, Chief Executive of Lloyds Banking Group, to do the same.

Theoretically, Daniels is entitled to a maximum bonus of GBP£2.25 million for 2009, but given that both Lloyds and RBS are now government backed financial institutions - both supported by masses of taxpayers' funds - accepting a bonus for 2009 is likely to anger consumers.

In fact, according to reports in British newspaper The Times, accepting "any sum would put [Daniels] in an uncomfortable position". That's because, already, along with Hester, Barclay's Chief Executive John Varley and Bob Diamond, its President, have declined their bonuses, despite the fact that Barclays have received no government funding.

"Depoliticise"

Meanwhile, in the case of Hester, his decision to waiver his bonus came amidst a flurry of media attention on the bonus issue, with the issue coming to a head yesterday after Business Secretary Lord Mandelson's appearance on BBC One's The Andrew Marr Show. Speaking of Hester, Lord Mandelson said, "If in years to come he has done well and he has turned RBS around, he deserves something back for it [...] but not for now."

Interestingly, Hester had said that his decision to forgo his bonus was a conscious choice set to "depoliticise" the issue. In fact, reports show that at the end of last week Hester had told both RBS Chairman Sir Philip Hampton and UK Financial Investments (UKFI), the government body that oversees state-supported banks, that he was willing to waive his bonus "in the interests of [the bank]".

Either way, whether Hester's decision to not receive his 2009 bonus came off his own back, or as a result of Lord Mandelson's advice yesterday morning, the fact he will not receive the pay-out is likely to make the next few days a critical time for Daniels.

Judgement day

Reports suggest that Friday is crunch time for Daniels, when Lloyds will announce its full-year results, although the bank's remuneration committee has made no decision on his bonus. The results are expected to show that it has lost as much as GBP£11 billion, despite Mr Daniels presiding over a GBP£13.5 billion rights issue and keeping Lloyds out of the Government’s asset protection scheme.

Daniels is understood to recognise that forgoing an award would make it easier for the bank to offer bonuses to front-line staff. In fact, reports suggest that some Lloyds investors have balked at a large bonus for Daniels, citing his acquisition of HBOS at the height of the financial crisis. The concern is that they draw a distinction between him and Hester, who was brought in after RBS fell into crisis to get the bank back on its feet.

Matthew Buttell

French Finance Minster speaks out

Thu, 18 Feb 2010 17:31:00 +0000

Economic recovery - or lack thereof - seems to be the word on everyone's lips at the moment. Yesterday, France's Finance Minister Christine Lagarde commented that the fourth quarter German growth data released earlier in the week had been disappointing, suggesting concerns that the eurozone economy will struggle to recover.

In an interview on France Inter radio, Lagarde described the German results as "surprising and disappointing", before adding that she didn't believe in a W-shaped scenario - referring to the so-called 'double-dip recession', a current concern of many analysts.

Concerns

She also spoke about her growing concerns over the situation in Greece and the nation's growing deficit. She told reporters that she believes "light should be shed" on the dealings between US investment bank Goldman Sachs and the Greek government over a currency swap deal struck in 2001.

"We need to know whether it was book cooking and whether it was legal or not at the time it was done," Lagarde said. "We need to know whether it was good for stability- probably not - and, in this case, how we can avoid this situation repeating itself."

Her concerns may be unfounded however, given that earlier in the week Greek authorities explained that the currency swap undertaken in 2001 was "completely legal and compliant with Eurostat," adding how the deal had had no bearing on the country's eligibility for entry into the single currency because Greece was already a member at that time.

Eurostat, meanwhile, has said it wasn't aware of the 2001 transaction, and asked Greece for more information about it by Friday of this week.

Talking about economic recovery specifically, Lagarde added that instead of a double-dip recession, it's more likely that eurozone pickup will be "fragile and arduous, and that growth [...] will plateau."

Billion-pound bonus plans spark new fears

Mon, 15 Feb 2010 14:56:00 +0000

The question over whether so-called super-banks should be broken up has long been at the centre of policy-makers' debate. And yesterday, the news of record profits at Barclays - which this week will pay out bonuses of more than GBP£2.3 billion - has reignited the outrage of investors.

Barclays, however, isn't alone in being scrutinised. Royal Bank of Scotland (RBS), which is more than 70 percent owned by the British taxpayer, is also coming under heavy criticism as it finalises its GBP£1.3 billion bonus pool.

For Barclays though, it is the expected record profit of GBP£11.2 billion that has led to such a huge bonus fund, with payouts expected to go to 23,000 Barclays Capital (BarCap) investment bankers.

Volcker rule

The move has since caused UK Political party, the Liberal Democrats to call for big banks to be broken up. In fact, according to the Lib Dems, the government needs to match the so-called Volcker rule that was unveiled by US President Brack Obama earlier this month. Under the ruling, banks are unable to use customer deposits to engage in risky activities, including things such as bet-taking on markets through activities like proprietary trading or hedge fund management.

Liberal Democrat Treasury spokeman Lord Oakeshott told UK newspaper The Guardian yesterday that his party believes, "Obama is dead right about breaking up the banks. [UK Prime Minister] Gordon Brown is now lagging behind the curve. All the government is offering is the laughable bonus tax."

Pressure cooker

Over at RBS, the issue is equally touchy. The taxpayer-majority owned institution has already been forced to pledge that it will not to pay cash bonuses to anyone earning more than GBP£39,000 and is likely to argue that its proposed GBP£1.3 billion bonus pool barely covers 25 percent of revenues.

As it stands, the ailing bank must have its bonus plan approved by UK Financial Investments, which controls the taxpayer stake in the bank, and will pay bonuses in shares, although some of these could be sold quickly to crystallise cash payments.

In addition, the pressure cooker seems to have been cranked up even more today, as reports that two of RBS's senior staff have quit, sparking fears the state-controlled bank could suffer a talent exodus as a result of the bonus crackdown.

According to reports today, while both exiting staff members had jobs to go to, their decision to leave has ultimately been blamed on the bonus rules that have been enforced at RBS.

And it is a genuine concern: last month, at a Treasury Select Committee meeting, RBS chief executive Stephen Hester, said: "The government's 84 percent stake in RBS is making it hard for the bank to attract talent.

"People are worried about working for RBS because of the problems it faces, such as the extra rules [it is subjected to]."

Matthew Buttell

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RBS and Lloyds failure to lend | Robin Hood Tax | Bank freezes quantitative easing

Robin Hood Tax

Wed, 10 Feb 2010 16:28:00 +0000

In an open letter to UK Prime Minster Gordon Brown, almost 50 groups, including charities such as Oxfam, Comic Relief and Save the Children, and unions such as the TUC, have rallied together to demand a "Robin Hood" tax on UK banks.

According to the campaign website, the Robin Hood Tax would see a tiny tax placed on bankers that would have the power to raise hundreds of billions of pounds every year. This money could then be used to give vital boosts to NHS funding, to schooling budgets and to help fight the good fight against global issues such as poverty and climate change.

And the tax really is tiny: experts say that 50p levy on every GBP£1000 traded by big money institutions (that's a 0.05 percent tax), could raise as much as GBP£250 billion a year to help Britain and the rest of the world get back on its feet in the wake of a global recession.

In short, then, the plan is to tax all bank transactions not involving members of the public by approximately 0.05 percent and use the resulting revenue "to tackle poverty and climate change."

Speaking out in support of a tax on financial transactions already are government officials such as UK Premier Gordon Brown, German Chancellor Angela Merkel and French President Nicolas Sarkozy.

And the politicos are reportedly joined by some hefty business bigwigs too, including the likes of Lord Turner from the FSA and US investor extraordinaire Warren Buffett.

In fact, the Robin Hood Tax campaign website boasts that this "isn't some crazy pipedream," instead insisting that it [the campaign] is a "simple and brilliant idea which transcends party politics and which can become a reality."

And according to the letter sent to PM Gordon Brown today, campaigners believe this "unique, popular tax" will guarantee that the banks, who played such a large role in causing the economic crisis in the first place, do more than just pay back the bailouts and insure against future crises. They write: "It is time for a new, practical contract with banks to improve the society they serve. We are confident the Robin Hood tax is based on sound economic foundations."

What's more, the campaign, which was officially launched today, has been bolstered by a massive online promotional film written by acclaimed-screenwriter Richard Curtis, the writer of films such as Four Weddings and a Funeral and Love Actually, and featuring long-time Curtis compatriot Bill Nighy.

The film runs with the tagline "it sounds complicated, but it isn't", and helps to define exactly what the proposed tax would mean.

Several issues

Of course, this isn't the first time this proposal has been bandied about. Previously it was known as the Tobin Tax - before that the financial transaction tax. And the fact that neither of those proposals ever made it to fruition is just one of myriad issues facing the reality of the Robin Hood Tax.

Analysts are already discussing the very real possibility that the actual cost of collecting a 0.05 percent tax would be greater than the amount of revenue it raises, not to mention the debate over who would actually decide how the raised capital gets spent.

On top of that is the stalemate theory, which proposes that if a country were to introduce such a tax, its own banking sector would be put at a competitive disadvantage. In other words, if, for instance, Britain introduced a Robin Hood Tax, the international banks that are headquartered in the City would simply relocate to a country in which their transactions aren't taxed. The theory basically states that: unless countries adopt the tax unanimously, no country will adopt it at all.

So while the Robin Hood Tax might seem like a simple and brilliant idea, the reality of it seems far more lucid, far more complicated and - ultimately - insatiably more "pipedreamy."

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RBS and Lloyds failure to lend | Bank freezes quantitative easing | Obama's banking proposals effect Europe

RBS and Lloyds: failure to lend

Tue, 09 Feb 2010 16:25:00 +0000

A committee of MPs have criticised two of the UK's biggest banks for failing to lend enough to homeowners and businesses.

The banks being scrutinised, Royal Bank of Scotland (RBS) and Lloyds Banking Group, are both part-nationalised and have come under fire as the Committee of Public Accounts argues that both institutions would fall short of a pledge to lend a total of GBP£39 billion by the end of February 2010.This commitment, which was legally binding, was made by the two banks in exchange for taxpayer support received in 2008.

Now the committee wants the government to do more so that the banks will be forced to lend.

"Widespread dismay"

According to reports by the BBC, Edward Leigh, Chairman of the Committee of Public Accounts, has the bailed out banks' lending performance had caused "widespread dismay."

He added that, "The Treasury does not seem to know why the banks are not lending and has few sanctions available to make them change their minds."

The concern is that the government, which currently has an 84 percent stake in RBS and a 43 percent stake in Lloyds, will fail to force the banks to hit their respective targets.

Commitment

RBS is committed to lending GBP£25 billion in mortgage and business loans, while Lloyds has pledged to lend GBP£14 billion, however, total taxpayer support for the UK banking sector has now topped GBP£850 billion according to a recent report by the National Audit Office

And, as the BBC reports, Lloyds spokesman Stephen Pegge admitted it was "unlikely" that targets for business lending would be met, saying that there was insufficient demand from companies.

"We are still saying yes to 80 percent of businesses who want to borrow, but there will be some businesses that it will be difficult to provide that extra finance for," he said instead.

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Sarkozy sparks new debate | Trichet shrugs off ECB concerns | Bank freezes quantitative easing

Trichet shrugs off ECB concerns

Mon, 08 Feb 2010 16:37:00 +0000

As investors continue to express concern over Greek, Spanish and Portuguese indebtedness to the EU, analysts debate whether the crisis is highlighting the fundamental weakness of the European monetary union.

Analysts are concerned that the European Central Bank (ECB), who's sole responsibility is to keep inflation within the EU in check, will suffer because it technically holds almost no formal policy tools to help an ailing member country such as Greece.

In fact, the concerns go even higher, speculating that, with no strong political arm to ensure that members observe debt limits set by treaty, the responsibility falls to ECB Jean-Claude Trichet to try to resolve an ensuing crisis.

Tough new goals

The concerns surfaced after Trichet's discussion with reporters at the weekend, where he said he was confident that Greece would meet tough new belt-tightening goals. His words, which came as part of a meeting in Canada of the Group of seven finance ministers and central bank presidents, went on to explain how, "we [the ECB] expect and are confident that the Greek government will take all the decisions that will permit it to reach that goal.”

Trichet had previously lectured European governments on the need to swiftly pare their budget deficit just days earlier. "When you share a single currency with others, the counterpart is that you have to have a sound fiscal policy," he said.

However, according to reports in the New York Times, Trichet also pointed out that the overall deficit level among euro countries, at about six percent of GDP, was still well below that of the United States and Japan, which are each set to borrow more than 10 percent of their GDP's this year.

In fact, Trichet seemingly maintains that that problems with individual euro nations should be of no greater concern to Europe's central bank than the fiscal problems of an individual state are to the Federal Reserve in Washington.

Yesterday, in an effort to quash fears over a possible crisis, he chirpily retorted, "I doubt that, in a press conference, Ben Bernanke would have a question on Alaska or Massachusetts."

Bank freezes quantitative easing

Thu, 04 Feb 2010 15:55:00 +0000

The Bank of England has made the decision that there will be no more quantitative easing (QE) to stimulate the growth in the UK.

Under QE, the Bank has pumped new money into the economy by buying assets such as government bonds as a way to boost lending by commercial banks.

Last week it revealed it had spent all of the GBP£200 billion put aside for QE.

For the eleventh consecutive month, the Bank also kept interest rates on hold at a record low 0.5 percent.

While halting QE, the Bank said the GBP£200 billion already injected into the economy through the programme would "continue to impart a substantial monetary stimulus to the economy for some time to come."

The Bank hasn't closed the door on further spending though.

The Bank started QE in the depths of the recession last March in an effort to ward off the threat of deflation and to try and strengthen the economy.

"[The Bank] will continue to monitor the appropriate scale of the asset purchase programme and further purchases would be made should the outlook warrant them."

"Inflation is considerably stronger than the Bank had expected and there are concerns that it won't get back within target [if QE continued]," Jason Simpson from Royal Bank of Scotland told the BBC.

January figures

Official figures in January showed that UK consumer prices rose in December by 2.9 percent, which was the fastest annual pace for nine months and above the Bank's two percent target.

Bank Governor Mervyn King warned last month inflation was "likely to rise to over three percent for a while", and could go even higher if energy prices and indirect taxes were to increase further, but added that it "should return to target in the medium term."

Although the UK did officially come out of recession in the fourth quarter of 2009 - ending six consecutive quarters of economic decline - the growth was just 0.1 percent, which was much less than expected.

Most analysts expect rates to stay at 0.5 percent until at least the second half of 2010 for fear of the UK falling back into recession.

Greece to get EU backing

Wed, 03 Feb 2010 14:38:00 +0000

As Greece attempt to reduce their deficit, the European Commission will ask finance ministers to endorse the Greek measures to reduce the European's biggest budget.

Greece's Prime Minister George Papandreou has promised more action to reduce the deficit, including a freeze on state workers' pay.

"Greece is in the center of a speculative game aimed at the euro," Papandreou said in a televised speech in Athens. "It is our national duty to stop the attempts to push our country to the edge of the cliff."

Papandreou has pledged to raise fuel taxes in a move that will boost income immediately, and said an overhaul of the tax system, which will increase 2011 revenue, would be targeted at the wealthier to protect poorer Greeks. He said it is time for Greece, like other EU countries, to take "brave decisions" and raise the retirement age, Business Week reports.

No state worker will receive a wage increase this year, a reversal of a pledge Papandreou made before his October election victory. Greek unions have called on workers to join a strike already planned for 10 February to protest against the government's cuts.

The commission, the Brussels-based EU executive, has warned that Greece may need to take further steps to shore up the budget even as it prepares to support the government's program to rein in its deficit. The three-year planPapandreou outlined last month includes measures to cut spending and raise revenue by 10 billion euros this year.

Correction by 2012

The planned correction of the deficit by 2012 "s feasible but subject to risks," commission President Jose Barroso said. The commission will recommend in a report that European finance ministers endorse the Greek program at a meeting in Brussels later this month.

Papandreou has urged Greeks to support the new measures, saying the country can't afford strikes and blockades which may derail the attempt to get the economy back on track. He has sought backing in a series of meetings with political party leaders.

Greece, which had the EU's widest deficit at 12.7 percent of gross domestic product last year, has struggled to convince investors it can bring the budget shortfall within the bloc's limit of three percent. Greek 10-year bonds declined yesterday, sending the yield up 14 basis points to 6.75 percent.

"The commission will be in charge of monitoring the implementation of the program through a very intense surveillance," Barroso said yesterday. "The successful correction of its very excessive deficit is not only important for Greece, but for the euro area and the EU as a whole."

Greece's financial problems has sparked talk about a possible bailout by the EU and fears about the stability of the 16-country euro area if markets' doubts about Greece spill over to other euro zone countries with large deficits.

Davos 2010 ends with few plans

Mon, 01 Feb 2010 13:58:00 +0000

This year's World Economic Forum, which came to an end yesterday, is already being described by some as nothing more than a damp squib on the financial services' calendar - at least compared to last year, when the annual meeting in Davos dominated global headlines.

For many, the annual meeting - this year its 40th - which manages to gather some of the world's most powerful business leaders and politicians, was this year something of a failure, especially given that the four day event failed to form any new plans or reach real achievements. In fact, according to the BBC, the only real achievement that sparked any furore in the news was the agreement that job creation and free trade had to be key ingredients of any economic recovery.

Blindsighted

Admittedly, the meeting came during the same week when headlines were dominated by both ex-UK prime minister Tony Blair's questioning at the Irag Inquiry and the ongoing struggle in Haiti, but considering the crazed attention global economic recovery seemed to be getting as little as six months ago, it seems odd that the Forum in Davos didn't generate more coverage.

Then again, perhaps "business as usual" was just what the forum needed. According to BBC News Editor Tim Weber, "One forum old-timer told me, 'Davos has not many politicians this year, and the better for it', and his comment was echoed by other executives."

In fact, a late cancellation from German Foreign Minister Guido Westerwelle left something of an embarrassing gap in the Saturday schedule, reports said. What's more, this (now empty) prime speaker slot - once dominated by the likes of UK Prime Minister Gordon Brown, Vice President Dick Cheney and Secretary of State Condoleezza Rice - was just one example of a lack of "presence" at the forum.

And, for all the business talk being bandied about, the general opinion about this year's meeting was that it was "less about politics and more about people." Larry Summers, economic advisor to US President Barack Obama, summed the feeling up best of all: "The world is not experiencing a statistical economic recovery, but a human recession."

Lack of results

Ultimately though, it is the lack of results from the forum that are most likely to make headlines this week. That's because much of the discussions held over the four day event seemed to centre on the failings of the financial system and (not) how to fix it. In fact, meetings often seemed to descend into nothing more than a denouncing of high-paid banking executives, reports the BBC: an issue that has heavily been covered by both the press and the financial services industry already.

Perhaps most worryingly, Davos also highlighted that so-called regulators are not anywhere near to agreeing the actual details of any form of "regulation" - only that another financial crisis could only be averted if there was some kind of global framework for financial regulation, a topic that had already been touched on at the meeting in 2009.

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Davos 2010

Thu, 28 Jan 2010 11:25:00 +0000

The 2010 World Economic Forum in Davos, Switzerland, officially got underway yesterday, and is already causing bankers and regulators to clash over certain proposals. French President Nicolas Sarkozy has already called for the restoration of a "moral dimension" to free trade.

In his keynote speech to attendees of the forum, Sarkozy called for a "fundamental rethink" of capitalism. "We need deep profound change," he warned, saying that in the aftermath of the global financial crisis, anything but change would merely show "tremendous irresponsibility" from world leaders.

The call from Sarkozy, which got the World Economic Forum (this year in its 40th year) off to a particular quarrelsome start, doesn't come as a massive surprise. In fact, France has long supported proposals that would force banks to hold more capital and curb bonus payments.

Limiting size

Sarkozy's hopes for reform did get a boost at the end of last week though, after US President Barack Obama made proposals that would limit the size of US banks. Under his plan, key financial institutions would be prevented from owning hedge funds, and US banks would also be barred from proprietary trading - the act of investing to make a profit for themselves, rather than on behalf of their consumers.

However, after Sarkozy's speech yesterday, which was met by scattered applause, reports began to surface that bankers in Davos were less than pleased with the ideas being put forward. In fact, the BBC highlights that, earlier in week - on Wednesday - Barclays boss Bob Diamond had warned that there was "no evidence to suggest that shrinking banks and making banks smaller and narrower [was] the answer."

Sarkozy, meanwhile, continues his protests undeterred: "We are not asking ourselves what we will replace capitalism with, but what kind of capitalism we want?

"We must re-engineer capitalism to restore its moral dimension, its conscience. By placing free trade above all else, what we have is a weakening of democracy."

The French President also once again hit out against huge bank bonuses that have caused public outcry in the US and UK - though he did admit that those who ran companies that made money deserved to be compensated well.

"There are remuneration packages that will no longer be tolerated because they bear no relation to merit," he said.The debate on renumeration and reform then, it seems - much like the annual meeting in Davos - goes on.

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