The Star Online: Business
The Star Online: Business |
- UK banks face profit hit from proposed reforms
- World bank to invest in new hedge fund
- New Zeland's Q2 wholesale sales rise
| UK banks face profit hit from proposed reforms Posted: 11 Sep 2011 05:54 PM PDT LONDON, Sept 11 (Reuters) Britain's banks would face tough new measures that could hit their profits, although the reforms could take years to implement, under proposals to be finalised in a key government-sponsored report on Monday. The final report from the Independent Commission on Banking was expected to back protecting ordinary savers and customers by ringfencing banks' retail divisions from riskier investment banking and trading arms. Analysts have said the new measures could cost the industry 10 billion pounds ($15.9 billion). The Financial Times reported in its Monday edition that it could cost British banks 6 billion pounds. Britain set up the ICB last year after the global credit crisis saw the government having to fully nationalise Northern Rock and partnationalise Royal Bank of Scotland and Lloyds . The government now has stakes of 83 percent and 41 percent in RBS and Lloyds, respectively. Finance minister George Osborne has already backed the idea of ringfencing banks' retail operations deemed to be vital to the broader economy, and a Treasury source said Osborne was pleased with the ICB's final report. "He thinks it is a very good report and regards it as an important step in reforming our banks so that we do not repeat the terrible mistakes of the last few years," the source said. Yet the banks could be given years to implement the reforms after recent financial market turmoil and a deepening euro zone debt crisis raised fears over the impact of swifter change. Britain's "Big Four" banks Barclays , HSBC , Lloyds and RBS have fought hard against excessively tough new regulation and were expected to continue lobbying after the ICB's report is out. GOVERNMENT TENSIONS OVER BANK REFORM Differing opinions over how to tackle the banks in the wake of the credit crisis have caused tension in the Conservativeled coalition government formed with the Liberal Democrats. Liberal Democrat Business Secretary Vince Cable has been alone in seeking a full splitup of retail and investment banking operations into two new companies. Labour's opposition finance minister, Ed Balls, has said he would like a "tough but fair" ringfencing mechanism. "Banks must be left under no illusion that reform is coming. The recession is not an excuse for postponing banking reform. Indeed our economic recovery depends on it," Cable wrote in the Mail on Sunday newspaper. The ringfencing approach would get lenders to form separate subsidiaries for retail and investment banking operations while keeping the same parent holding company. The reforms would likely hit banks' profit because of the implications for their funding costs, which could, in turn, make it harder for them to lend to businesses. The ICB is still to define how the separation should occur how much retail capital and deposits the banks should be able to use to fund their investment banking arms. The ICB, headed by Oxford University academic John Vickers, was also expected to confirm a request for banks to hold more capital targeting core Tier 1 capital of 10 percent of riskweighted assets. Analysts expected Barclays would face the biggest hit to its profit from the ICB's proposals. Lloyds could be affected if the ICB reiterated a recommendation to sell more assets than it has already been told to do by regulators, although Lloyds's progress on the sale of some 630 branches could mean it might avoid this. After the final report is issued, the government will choose what to implement into law, probably starting late this year or early in 2012. However, banks could have years to bring in the reforms, perhaps until 2019 for full implementation, since the ongoing financial market turmoil has raised concerns over the impact of swifter change. British banking stocks all fell sharply on Friday. Barclays fell 9.4 percent, Lloyds closed down 5.7 percent, RBS fell 5.5 percent while HSBC ended down 3.4 percent. ($1 = 0.629 British Pounds) |
| World bank to invest in new hedge fund Posted: 11 Sep 2011 05:48 PM PDT LONDON , Sept 12 (Reuters) The World Bank is investing in a hedge fund in order to help banks reduce capital that new rules will force them to set aside against loans to small companies in emerging markets, the Financial Times reported on Monday. The International Finance Corp, the World Bank's privatesector lending arm, is putting $100 million into a new fund being set up by Christofferson Robb & Co, which is based in London and New York. The firm's New York founders are raising another $300 million (189 million pounds) from private investors. The hedge fund will put up cash to cover unexpected loan losses in return for a cut from a bank. The fund's cash will lower the bank's requirements under the Basel rules and reduce the impact of planned tighter rules The FT said the IFC fund will operate mainly with big international banks and will encourage an extra $2.5 billion to $4 billion of lending to developing countries. Involved banks will be required to recycle the money freed by the "bilateral synthetic capital release securities" that the fund creates back into developing markets. |
| New Zeland's Q2 wholesale sales rise Posted: 11 Sep 2011 05:46 PM PDT WELLINGTON, Sept 12 (Reuters) New Zealand's seasonally adjusted wholesale sales rose 2.2 percent in the three months to June, according to official data on Monday. It was the seventh consecutive quarterly increase and was driven by a 9.8 percent rise in the 'other goods wholesaling' sector that includes textiles, footwear and pharmaceuticals, with a 4.5 percent increase in motor vehicle sales, Statistics New Zealand reported. Basic materials wholesaling was the only fall in the June quarter, down 0.7 percent. The value of sales in the quarter was NZ$20.7 billion ($17 billion). The level of wholesale stocks fell a seasonally adjusted 0.5 percent, from the previous quarter's 0.2 percent fall. The survey monitors the level of activity in the wholesale trade sector, which supplies retailers. In a separate release, the agency said guest nights in short term commercial accommodation rose 2.0 percent in July from a year earlier, the third monthly increase. The increase was driven by a rise in domestic tourist activity, with the number of local guest nights up 8.5 percent. The number of nights spent by international tourists fell 8.9 percent, pulled down by a drop in South Island regions. International visitor arrivals have fallen in the past four months, which has been attributed to the aftermath of the Christchurch earthquakes and the disruption to air travel from the eruption of a volcano in Chile. Tourism accounts for around 10 percent of New Zealand's gross domestic product. New Zealand's economy is expected to have grown by 0.6 percent in the three months to June 30, according to a preliminary Reuters poll. The economy grew an unexpected 0.8 percent in the March quarter, shrugging off the devastating Christchurch earthquake and reflecting a resilient domestic economy. Second quarter GDP will be released on September 22. ($1=NZ$1.22) |
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