News about banking sector in UK

UK Shares to Excel Past Europe

2012-02-11T21:03:00.000-08:00

LONDON: Britain’s shares should outperform Europe’s, thanks to higher exposure to fast-growing emerging markets, while a boost from central bank liquidity should help banks rally further, according to ING Investment Management.

Stocks have kicked off 2012 on a high note, but investors have been slow to buy into the rally, meaning there is still plenty of cash left on the sidelines and able to push the market higher in the coming months, said Valentijn van Nieuwenhuijzen.

More reports

NAB review UK operation

2012-02-06T16:33:00.000-08:00

National Australia Bank has finally launched a review of its UK business, which is battling a market in the grip of a prolonged recession.

NAB chief executive Cameron Clyne insists the business is still profitable, but margins have been squeezed and lending losses are again on the rise.

The review comes after NAB is said to have rejected a £2 billion ($3.2 billion) offer for Clydesdale last September from private equity firm Sun Capital. Several credit-rating agencies downgraded Clydesdale late last year amid speculation NAB had been planning to offload all or part of the bank

Read more: http://www.smh.com.au/business/nab-launches-review-of-uk-business-20120207-1r2pd.html#ixzz1leTmyfe5

UK inflation falls sharply on cheaper fuel, clothes

2012-01-18T03:21:00.000-08:00

LONDON, Jan 17 – British inflation fell sharply in December as fuel prices dropped and retailers lured customers with hefty discounts for clothes, providing cash-strapped households with some relief and the Bank of England with more leeway to ease policy further.

Policymakers are banking heavily on a steep fall in inflation to ease the squeeze on Britons’ budgets, allowing them to step up spending this year and support an economy that is on the verge of recession due to the euro zone debt crisis.

Consumer price inflation fell to 4.2 per cent in December from 4.8 per cent in November, the Office for National Statistics said today, showing the decline in inflation from its three-year peak of 5.2 per cent in September is gathering pace.

It was the sharpest drop in the annual rate since April 2009, when the economy was deep in recession.
“We expect inflation to be back at the 2 per cent target by this autumn, and – while we’re not convinced that it will fall back as far as the Bank of England forecasts – there should still be plenty of room to loosen monetary policy further in 2012,” said Ernst & Young Item Club economist Nida Ali.

“This will also provide some welcome respite for hard-pressed families who have struggled with falling real wages for much of the past five years,” Ali said.

Inflation is still well above the BoE’s 2 per cent target, but the central bank forecasts that it will be below this by the end of 2012, as economic weakness weighs on prices and the effect of 2011’s rises in sales tax and energy prices fade.

BAY likely to acquire HSBC retail loans pending approval

2011-12-27T03:06:00.000-08:00

UK-based HSBC is reported to have succeeded in divesting its retail banking business here _ worth 30-40 billion baht _ to the Bank of Ayudhya (BAY).

According to a source in the banking industry, BAY is seeking approval from the Bank of Thailand to acquire HSBC's retail business.

The deal is expected to be complete early next year, said the source.

The pact is not a surprise in the banking industry as HSBC's global policy is to restructure, reducing its focus on retail banking business.

Previously HSBC Thailand reported it was continuing retail banking business as http://www.blogger.com/img/blank.gif
usual amid speculation it might sell some units for global restructuring.

HSBC's retail loan portfolio contains total debt outstanding worth 30-40 billion baht. After approval, HSBC will transfer the loan portfolio, including personal loans and around 500,000 credit cards, to BAY.

BAY's head of consumer finance, Philip Tan, refused to comment, saying the bank is unable to discuss the matter.

He stressed BAY's policy is to search for opportunities in retail business expansion to maintain market leadership in credit card and personal loan business. BAY has 4 million credit card holders, tops in the industry.

"Inorganic growth will be the bank's method of expanding in the retail banking sector, and such opportunities could occur next year," Mr Tan said

CORRECT: Virgin Money Looks To Shake Up UK Retail Banking

2011-11-19T20:22:00.000-08:00

LONDON (Dow Jones)--Virgin Money is looking to shake up the tightly knit U.K. banking sector and attract customers fed up with the country's biggest banks, Chief Executive Jayne-Anne Gadhia said Thursday, after agreeing to pay as much as GBP1 billion to buy Northern Rock from the government four years after the lender's near-collapse.

Gadhia told Dow Jones Newswires that Virgin Money will look to take market share from the "Big 5" banks that dominate U.K. retail banking with better customer service and by focusing on online banking. Rather than a hindrance, she said acquiring just 75 branches from the sale means the bank will be more efficient than peers who have "huge overheads" from extensive and often-underused branch networks.

Virgin Money earlier Thursday was named as the new owner of Northern Rock, five months after Chancellor of the Exchequer George Osborne formally put the bank up for sale.

The financial arm of Richard Branson's Virgin empire had narrowly missed out on buying Northern Rock in early 2008, when the government was considering ways to keep it afloat following a dramatic run on the bank and injection of emergency funds several months earlier. Instead, it was nationalized and restructured into a "bad bank" retained by the government and a smaller, "good bank" that will have around GBP14 billion in mortgage loans and GBP16 billion in deposits when its sale to Virgin Money completes Jan. 1.

http://online.wsj.com/article/BT-CO-20111117-710794.html

UK domestic banks offer good reasons for cheer

2011-11-16T04:27:00.000-08:00

As the dust settles on the third-quarter reporting season, what have investors learnt about the UK banking sector? Have its prospects improved? Could the sector enjoy a year-end rally or will it continue to lag the wider market?

Based on what has been said over the past couple of weeks, the outlook remains gloomy. The part-nationalised banks – Lloyds Banking Group and Royal Bank of Scotland – have abandoned key performance targets because of the fragile UK economy. Lloyds has also lost its high-profile chief executive to stress.

Read more

Barclays Quarterly Profit Climbs

2011-10-31T08:07:00.001-07:00

Oct. 31 (Bloomberg) -- Barclays Plc, Britain’s second- biggest bank by assets, reported a quarterly profit that beat estimates as earnings at the U.K. consumer bank more than doubled and investment bank revenue declined by less than European rivals.

Pretax profit before debt valuation adjustments in the three months to Sept. 30 increased by 5 percent to 1.3 billion pounds ($2.1 billion) from 1.27 billion pounds a year earlier, the London-based company said in a statement today. That beat the 1.24 billion-pound median estimate of 10 analysts surveyed by Bloomberg. Revenue at the Barclays Capital investment banking unit fell 15 percent to 2.25 billion pounds in the period.

Little bank benefits as big ones stumble

2011-10-08T22:08:00.000-07:00

s Bank of America and Citibank try to soothe customers fed up with the recent announcement of new banking fees, there’s one group happy to sit back and capitalize on the situation.

Community banks and credit unions say the big-bank fees led to an increased number of inquiring customers at their branches last week, and executives believe the growth will continue to pick up speed over the coming months.

Bank of America announced plans on Sept. 29 to institute a $5 monthly fee, starting next year, for customers who make purchases with their debit cards, and Citibank said Thursday it will raise minimum account balances for its customers, who will be faced with a monthly fee if they fail to meet the new requirements.

Both banks have highlighted options for customers to avoid such fees, but many consumers aren’t buying it.

“They keep shooting themselves in the foot,” said Dick Lavoie, vice president of marketing at Nashua’s Triangle Credit Union. “They keep implementing restrictions on their accounts, so people are finally getting fed up and moving.

“And where are they moving to? They’re coming to credit unions.”

Triangle Credit Union has grown about 7.5 percent in 2011, Lavoie said, and he expects those numbers to rise further after Bank of America’s announcement.

Lavoie even called Bank of America an “ally” because it continues to alienate customers with fees, and those people end up at Triangle or other local banks.

Lavoie said he has witnessed “an awful lot of changes” in nearly 40 years of experience with credit unions, but that the new fee from Bank of America is a blunder of rare proportions.

“Now is not the time to come up with a new fee, in this economy,” he said. “As a personal consumer, I can’t see the justification in it.”

Bank of America spokeswoman Betty Riess said the new fee allows the bank to make ends meet.

“This new fee allows us to continue to offer the service and convenience customers have come to expect from Bank of America,” she said. “We’re making sure customers understand the value and convenience of debit cards and the choices they have to avoid the fee.”

Riess said the fee is “clear and transparent.” It will start in early 2012, and all affected customers will be notified in writing at least 30 days in advance.

“It is a result of the cost of doing business,” said Karen LaPlume, vice president of marketing at Granite State Credit Union. “They’re paying for it on one end, so they have to charge the customer on the other end.”

LaPlume said Granite State Credit Union has seen a “slight influx” in people asking about their checking accounts and fees in New Hampshire over the last week.

“In light of Bank of America being in the news, we are finding that more and more people are coming to us,” she said.

Large regional and national banks are as quick as local banks or credit unions to try to capitalize on the debate.

A TD Bank representative said the bank has “no plans to charge” its customers for the use of debit cards.

“We’re confident in the products we offer now and look forward to the opportunity to take market share,” said Rebecca Acevedo, public relations manager at TD Bank, which is based in Canada.

Still, the organizations with the most to gain are community banks. With a growing presence in small towns and fewer restrictions on customer accounts, local banks believe they offer a viable alternative to large national banks.

Nashua Bank plans to “capitalize with advertising” and will begin a campaign for new customers today by offering a limited-time promotion of $5 to anyone who opens a new checking account, President G. Frank Teas said.

U.K. Bank-Sale Proceeds Should Go to Cut Debt

2011-09-27T10:42:00.000-07:00

Ed Balls, the Treasury spokesman for the U.K.’s opposition Labour Party, said proceeds from selling off state-controlled banks should be used to reduce the national debt rather than in giveaways to voters.

The government took stakes of 41 percent of Lloyds Banking Group Plc (LLOY) and 83 percent of Royal Bank of Scotland Group Plc in late 2008 and early 2009, rescuing the companies from collapse. Both are currently trading at about half the average price at which the government bought the stakes.

In March, four people familiar with talks between the banks and Prime Minister David Cameron’s government said a sale could start as soon as next year. While Deputy Prime Minister Nick Clegg has called for the shares to be distributed to taxpayers, Chancellor of the Exchequer George Osborne may prefer a straight sale to raise funds that could be used to cut taxes before the 2015 election.

“Even as bank shares are falling again, David Cameron and Nick Clegg are still betting on a windfall gain from privatizing RBS and Lloyds to pay for a pre-election giveaway,” Balls told his party’s annual conference in Liverpool, northwest England today. “We will commit instead in our manifesto to do the responsible thing and use any windfall gain from the sale of bank shares to repay the national debt.”

Taming the banks

2011-09-13T20:26:00.000-07:00

The Vickers report is elegantly argued, long and detailed. It has been welcomed in official quarters. But its proposals risk damaging a vital sector of the UK’s economy, hitting tax revenue and employment. Moreover, it does not achieve total bank safety. Its main target is the universal bank model, the combination of commercial and investment banking. But a well managed universal bank can be perfectly safe – something that is not fully recognised – and while the commission recommends increased regulation, relying on regulation without good management does not guarantee safe banking.
See link http://www.ft.com/cms/s/0/b8bc7ffc-ddf3-11e0-a391-00144feabdc0.html

UK banks prepare for inevitable shake-up- sources

2011-09-01T08:59:00.000-07:00

(Reuters) - Britain's top banks have begun preparing for a major shake-up ahead of a government decision, sources with knowledge of the matter said, in an attempt to reassure investors that they can handle expected changes to the way they operate.

The "Big Four" banks - Barclays , HSBC and part-nationalised lenders Lloyds and Royal Bank of Scotland - have stepped up lobbying against excessive new regulation in the run-up to The Independent Commission on Banking's (ICB) final report on Sept. 12.

But analysts say banks have accepted that moves to make them ring-fence retail operations from riskier investment banking activities and hold more capital appear inevitable -- even if the government does not implement the ICB's expected recommendations for several years.

"Typically what will happen is that banks will work out what timeline they need to hit to appease investor and market confidence, and so they may well implement a plan ahead of an official schedule," said Ajay Rawal, senior director Alvarez & Marsal, which specialises in bank restructurings.

The banks have begun preparing for how to deal with ring-fencing their main retail operations rather than hope for the government to delay the reforms, sources told Reuters.

"Work is already under way, based on what we know and what we expect. The banks have already started preparation for what is required," a source at one of Britain's top four banks said on Thursday.

Another source at a second top-four British bank said companies had been analysing various scenarios after the government-appointed ICB first suggested the ring-fencing option in April.

"There is not much you can do until we know for sure what is contained in the ring-fence but clearly people have thought of how it may work and what it may look like," said the source.

Brokerage Seymour Pierce estimates that Barclays and RBS would be hit the hardest by a ring-fencing model, partly because of their large investment banking operations, adding that the industry could not escape from an eventual restructuring.

"The banking system has been on life support and opiates since 2007. There must come a time for the patient to undergo surgery and physiotherapy, in our view," it added.

The ICB is expected to back proposals made in an interim report, when it said UK banks should ring-fence their retail operations from riskier investment banking activities to protect taxpayers from future financial crises.

However, the precise details of how this would work and the time frame given to banks to implement it remain unknown and a topic for political wrangling in Britain.

Shares in Britain's beaten-down bank stocks rose sharply on Thursday on hopes that major new reforms may be delayed. RBS, Barclays and Lloyds all rose by between 5 and 7 percent. The sector has fallen by some 20 percent this year.

U.K. Bank Revamp Is a Leap in the Dark

2011-06-18T17:54:00.000-07:00

George Osborne has taken a major gamble. The U.K. chancellor of the exchequer's decision to endorse a half-formed proposal to force banks to separate their U.K. retail operations from their investment-banking arms is a leap in the dark that could have unintended global consequences.For Mr. Osborne, the gamble is good politics. Last year, he rashly handed control of the bank-overhaul agenda to an Independent Commission on Banking, leaving himself with little choice but to accept its recommendations or risk a clash with his coalition partners. By adopting its central proposal three months before the commission is due to deliver its final report, Mr. Osborne can at least reclaim the initiative, presenting himself as a bold and radical reformer while proclaiming an end to regulatory uncertainty for the banks.

British oil companies and banks in limbo over Egypt protests

2011-02-04T22:18:00.000-08:00

British companies are flying out staff and halting operations as the civil disorder escalates in Egypt but they have also found themselves under verbal attack for being too close to the government of president Hosni Mubarak.

BP has also been accused of working "hand in glove with dictatorship" while Vodafone is under fire for bowing to presidential pressure to shut the mobile telephone network down.

BP, which has sunk $14bn into oil operations and is hoping to double production there, said "hundreds" of employees or their dependents were being evacuated from Cairo and some drilling operations had been halted.

BG, formerly part of British Gas, said it had closed its Cairo office and flown home all non-essential expatriate staff from Egypt, but its production of liquefied natural gas goes on.

Vodafone has flown 25 people and their families back to the UK in recent days, the company's chief executive Vittorio Colao disclosed.

The boss of the world's biggest mobile phone operator added that two of its Egyptian employees are known to have been injured in rioting between supporters and opponents of Mubarak. One of the two is missing, and the company is trying locate him.

And British banks such as Barclays, airlines such as BA and others with exposure to the growing Middle East market have seen their shares hit as investors worry about the damage to UK plc from the turmoil in the region.

BP has been criticised by the non-governmental organisation Platform, which claims the oil company had with other British and American oil companies "worked hand in glove with dictatorship."

The environmental and social justice group also said Hesham Mekawi, the BP Egypt chairman, has praised "the stability of the country" and claimed BP had allowed the American Chamber of Commerce in Cairo - of which it is a member - to put pressure on US Congress not to support a recent motion calling on Mubarak to hold fair elections and respect human rights.

BP said it had played a constructive role in Egypt which had benefited the entire population. "We've been in Egypt for 40-plus years as a major investor in the country's industry, employing a well-trained workforce in quality jobs, supplying significant amounts of energy to meet the rapidly growing population's needs," said a spokesman.

BP has made Egypt one of its top priorities after a major gas find in the Nile Delta last summer. It hopes to more than double its oil and gas production to over 320,000 barrels a day – almost a tenth of its global output.

Meanwhile Vodafone's Collao said: "We have also suffered some 'infrastructure damage'," which he defined as mobile stations out of action due to fuel shortages, or because Vodafone staff are unable to provide essential maintenance.

The British company owns 55% of Vodafone Egypt which employes around 6,000 and has nearly 29m customers.

Colao defended his decision to shut down its mobile phone network in Egypt last week on the regime's orders. "The network was down for 24 hours. We didn't have any option as the government was within its rights under emergency powers that it invoked after the outbreak of demonstrations."

He said disruption to services is continuing with many Egyptian customers unable to send text messages, but that the network was operational for those taking advantage of 'roaming' agreements between different operators.

"Our main concern at the moment is for the safety of the people of Egypt and our colleagues. But we are not telling people to stay at home, some employees can work their shifts. This is a very fluid situation."

Last year, Vodafone was approached by its Egyptian partner, Telecom Egypt, with an offer to buy out the British company's stake. But talks broke down because the two sides couldn't agree a price.

Vodafone reckons its holding in its Egyptian joint venture will rise in value because only around 70% of Egypt's population owns a mobile phone, whereas in Europe there is saturation coverage- GUARDIAN UK

Group: Don’t break up British banks

2011-02-04T22:17:00.000-08:00

LONDON: British banks must not be broken up as a result of a government review on the sector since this could harm the Britain's role at the helm of global finance, the Confederation of British Industry (CBI) said.

The CBI, which is Britain's main business lobby group, added that the sector had to tackle ongoing public anger over large bonuses for bankers, while ensuring that British banks could still attract top talent.

Britain set up the Independent Commission on Banking (ICB) last year to examine a possible shake-up of the industry after the credit crisis, which saw top lenders such as Royal Bank of Scotland and Lloyds needing taxpayer bailouts.

The ICB is currently examining whether or not to split up companies' retail banking operations from their investment banking arms.

It is due to publish an interim report in April before a final report in September.

The CBI said it made a submission to the ICB in which it warned against a full break-up of the banks.

“We believe that breaking up banks would be a mistake. We need a strong banking system to help support the economy and growth,” said CBI director-general John Cridland yesterday.

Despite calls from politicians to cull the investment banking industry, many industry members and analysts say it is unlikely that British banks will ultimately be forced into a full break-up.

Most universal banks, with activities ranging from trading to retail banking, proved stronger in the crisis than many “narrow lenders”, such as mortgage and retail specialist Northern Rock which nearly collapsed and had to be nationalised.

Britain's banking industry is dominated by the “Big Four” of RBS, Lloyds, Barclays and HSBC.

Last month, ICB head John Vickers hinted that the ICB was unlikely to recommend a formal break-up of the banks but could support plans to distance banks' retail arms from their trading units via a form of subsidiarisation.

This would entail “ring-fencing” retail banking operations so that depositors' funds would not be used to subsidise more risky investment banking activities.

The CBI said it backed plans to strengthen the capital of banks and supported moves for companies to have contingent capital securities. These are bonds that turn into equity if a bank hits trouble, thereby bolstering its capital position.

The CBI added that it was vital to address concerns over banks' bonuses, with many members of the public still angry that an industry blamed for causing the crisis could use taxpayers'money to award its staff large salaries.

“Addressing the bonus culture is part of winning back trust,” said Cridland.

“Boards need to be sensitive to public concern over the quantum of pay, a task they must juggle with the need to be able to compete for the world's best talent.” he added. Reuters

The real problem isn't banks, it's investors

2010-11-01T08:51:00.000-07:00

When Mark Zuckerberg announced on the Oprah Winfrey TV show that he was giving a $100m (£62m) grant to disadvantaged schools in Newark, New Jersey, he was accused of turning to charity to improve his image. His image, especially in the light of the Social Network film about his life, was the focus of attention.

There was little discussion of his meagre cash pile and how the donation would be in Facebook shares. Because while the 26-year-old internet tycoon is estimated to be worth $6.9bn, he is a paper billionaire.

The phenomenon that is Facebook is expected to float in 2012. Until that time Newark schools will need to sell the company's shares on the fast-growing market in private shares.

Some estimates put the buying and selling of unlisted privately held shares in the US at the same level as trading in listed shares. In other words, the highly regulated and taxed public markets on the New York Stock Exchange and Nasdaq are being superceded by largely unregulated and lightly taxed private markets.

It is a trend that makes some regulators nervous.

Charles Bean, the Bank of England deputy governor, is aware the next crisis could be triggered by these little understood but highly influential markets. Like a Met Office weather watcher staring at the Gulf of Mexico, he is keen to spot the next hurricane and measure its speed, direction and the potential damage it might cause.

In a speech last week to the Royal Statistical Society, he said there were clues. Instead of a weatherman, he likened himself and his colleagues in the government's new super financial regulator to seismologists. Not for them the easy business of staring at satellite images and tracking storms. Instead, when they take over from the Financial Services Authority in 2012, their job will be more akin to listening for tremors in the financial system. Listening for friction and potential quakes as tectonic plates moved and created explosions. Ultimately they might offer a view on the possible location and severity of a quake. They might even hint at the timing. However, it would all be rather vague. If there was one thing certain, or at least probable, it is the next crisis will come from an area previously unknown to the bank, or one considered a low potential risk, he said.

More commentary here

Finland's accessible education in University World News

2010-10-31T02:04:00.000-07:00

Finland has both the most affordable and accessible system of higher education, according to a study of 17 countries undertaken by Canadian research group Higher Education Strategy Associates (HESA). Norway is a close runner-up.

The country rankings were derived from a composite of six different measures of affordability and four measures of accessibility, in the study by Alex Usher and Jon Medow titled Global Higher Education Rankings 2010: Affordability and accessibility in comparative perspective.

The countries surveyed were Australia, Canada, Denmark, England and Wales, Estonia, Finland, France, Germany, Japan, Latvia, Mexico, Netherlands, New Zealand, Norway, Portugal, Sweden and the United States.

The most 'affordable' higher education was to be found exclusively in Europe: Finland was the most affordable, followed by Norway, Germany, Denmark and Sweden.
English-speaking countries fared less well: Canada, New Zealand, England and Wales, the United States and Australia were ranked 9th to 13th, respectively.

The nations with the most 'accessible' higher education were Finland, the Netherlands, Norway, the US and Australia.

HESA's Alex Usher described Finland's results as "very good" across the board. "They have reasonable education costs, a strong and generous system of both loans and grants, high participation rates and an egalitarian student intake. From a student perspective, there is a lot to like there," he said.

Finland and Norway performed well in both affordability and accessibility, but results for the countries demonstrate that 'affordability' and 'accessibility' are not always related concepts.

Usher said: "Germany fared very well in terms of measures of affordability, but very badly on measures of accessibility. The United States does very poorly on measures of affordability, but does reasonably well in terms of accessibility. That suggests there is considerably more to the issue of accessibility than simple costs."

Even if Finnish higher education is both 'affordable' and 'accessible', it is not exactly 'efficient'. Finland is one of the nations to espouse free and universal higher education, and compared with most countries its student welfare is extraordinarily generous.

However, as previously reported in University World News, its students are also among the world's slowest (and therefore oldest) by the time they complete their studies and enter the labour market.

Leaving the family home to enrol in higher education is a cultural 'rite of passage' in Finland, but the grants and subsidised loans and other services available to students have not kept pace with inflation, particularly rental costs in the capital Helsinki. The result is that students work to support themselves, rather than devoting themselves to their studies. Earning 'too much' leads to cuts in student welfare payments. And so the cycle goes on.

As it stands, there is little incentive for Finnish students to complete their studies in minimum time. Any incentive scheme to improve throughput could depend on the introduction of a fee-free threshold. This might necessitate a fully-indexed student welfare and loan package that actually allows students to cover their living costs (including Helsinki rents) without having to work excessive hours during their studies.

Here are the results: Finland (1st in affordability, 1st in accessibility), Norway (2nd and 3rd), Germany (3rd and 11th), Denmark (4th and not rated), Sweden (5th and 9th), Netherlands (6th and 2nd), France (7th and 10th), Latvia (8th and not ranked), Canada (9th and 7th), New Zealand (10th and 6th), UK-England and Wales (11th and 8th), the United States (12th and 4th), Australia (13th and 5th), Japan (14th and not ranked), Mexico (15th and 14th), Portugal (not ranked and 12th), Estonia (not ranked and 13th).

* Dr Ian R Dobson is an Australian scholar living in Finland. He is editor of the Australian Universities' Review.

Billionaire Emir buying Britain brick-by-brick

2010-10-28T06:02:00.000-07:00

"Thank you for reminding me about Christie's," one of the world's richest monarchs, the Emir of Qatar, said casually on the eve of his state visit to Britain, which began yesterday with a spectacular horse-drawn carriage procession to Windsor Castle.

It is easy to forget about something as trivial as buying one of the world's top auction houses when you have an investment portfolio as big as that of Sheikh Hamad bin Khalifa al-Thani. The Qatari monarch, who owns one third of the world's natural gas reserves, is five times richer than the Queen. In recent times he has been using considerable quantities of that wealth to buy up trophy assets in London. Christie's – if he does decide to buy it – will be added to Harrods, the US embassy building in Grosvenor Square and the capital's most expensive property development, One Hyde Park in Knightsbridge. The Emir acquired the Chelsea Barracks site for a record-breaking price and also owns considerable chunks of Barclays, Sainsburys and Canary Wharf.

But if Sheikh Hamad is the most aggressive and adventurous buyer of British property, he is far from alone. Arabs, primarily from the Gulf states, have tripled their share of investment in UK commercial property in the past five years. Last year they spent £1.48 bn – representing 16 per cent of all foreign investment in the sector.

Event to strengthen ties between lebanon and UK banking communities

2010-10-28T06:01:00.000-07:00

In recent years, Lebanon has enjoyed positive transformation in its banking industry, coming through the recession relatively unscathed and now focused on reclaiming its position as the key Middle Eastern banking hub. A tighter regulatory regime together with a growing number of banks has led to the Lebanese banking industry leading the fast growth Lebanese economy. With 66 independent banks and a population of just over 4 million people, the Banking sector in Lebanon currently employs 20,000 individuals in 780 branches and manages the equivalent of $90bn in assets nationwide1.

To mark this fast growth transformation, the Arab Bankers Association is hosting an event in on November 10th to showcase the Lebanese banking community and its strategic expansion into Europe, MENA and beyond. Eminent speakers from both Lebanon and the UK will discuss how Lebanon's financial strength and future expansion goals highlight the investment potential available in Lebanon's national banking industry, and present an opportunity to UK banks for reciprocal investment and strengthened ties.

Speakers include:

· Riad Salame, Governor of the Central Bank of Lebanon

· Dr. Joseph Torbey, chairman of the Association of Banks in Lebanon

· Ussama Mikdashi, President of the Lebanons Banking Control Commission

· Angela Knight CBE, Chief Executive, British Bankers' Association

· The Rt. Hon. Lord David Howell of Guildford, Minister of State (Foreign & Commonwealth Office)

· Lady Olga Maitland, CEO, Money Transfer International

George Kanaan, CEO of the Arab Bankers Association, commented:

"The Lebanese banking sector has created a blueprint showing how sound regulation, strong leadership and structure can withstand global financial instability. In our position, as a mouth piece for Middle East banking sector, we are eager to highlight this and offer the Lebanese banking sector an opportunity to engage with London, the financial centre of the world. With so many high profile and influential speakers, the day promises to be of great interest and an ideal platform for the UK and Lebanese banking sectors to create closer ties. We are extremely excited about the event and firmly believe it is a strong platform for the Lebanese Banking sector to showcase its financial strength and future expansion goals, whilst highlighting the investment potential available in Lebanon's national banking industry."

Penalty for graduates who pay off student loans early

2010-10-26T09:06:00.000-07:00

Graduates who wish to avoid being burdened with decades of debt could be hit with mortgage-style redemption penalties if they pay off their student loan early.

The fees, likely to run to thousands of pounds, would also be levied on parents who opted to pay upfront for the cost of putting their child through university to save them from being saddled with long-term debt.

In last week's spending review, George Osborne, the Chancellor, confirmed that university fees would rise from their current rate of £3,290 from start of the 2012 academic year. Any new upper limit has yet to be set, but Nick Clegg, the Deputy Prime Minister, confirmed the Government would reject the recommendation of the recent review of university financing that the cap on university fees be lifted altogether.

Ministers are understood to be looking at a new cap of about £7,000-a-year. This would be funded by loans with tiered rates of interest depending on how much the graduate earns in future.

A redemption penalty would stop the better-off avoiding higher interest rates by paying off a loan early – and would be seen as a sop to Liberal Democrats who have been criticised over the tuition fees rise after signing a pre-election pledge to scrap them altogether.

Lord Browne, the former head of BP who led the review, had suggested that no redemption penalty be imposed.

But Vince Cable, the Business Secretary, confirmed that ministers were examining ways to make the new system more "progressive".

He said: "High-earning graduates will be paying more later in their life, but in a progressive way relating to their ability to pay.

"There is an issue about people who go on to very high-earning jobs and who therefore pay off relatively quickly and we do have to think about how to find a way by which they make some sort of contribution towards low-earning graduates.

"It's a tricky technical problem but we're working on it.

Mr Cable confirmed that ministers had already decided not to proceed with Lord Browne's suggestion that universities be permitted to charge unlimited amounts, with a levy on any fee above £6,000 to be paid to the Government to spend on bursaries and grants.

"I don't think there's any prospect of having unlimited fees – that simply isn't going to arise," he told Sky News.

"We're looking at this very carefully, what Browne had to say – but I think that particular approach was one we're not going to pursue."

His words echoed those of fellow Liberal Democrat Mr Clegg, who told The Andrew Marr Show: "I am uneasy about the idea that you, in theory, have unlimited fees. So we are looking at something which would be more restrained."

The Lib Dem leadership is braced for a sizeable rebellion by the party's backbenchers when the plans come before Parliament.

Simon Hughes, the deputy Lib Dem leader, suggested that he would be prepared to back a rebellion if the Government applied the penalty to less wealthy students.

He told Channel 4 News: "The internal debate in the party has not finished and the debate within Government has not finished

Payday loans bad credit is provided at competitive rates

2010-10-26T09:03:00.000-07:00

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Families need savings to ease pain of spending cuts

2010-10-25T08:04:00.000-07:00

As the Chancellor swings his axe, households must assess their spending to cope with the squeeze on their finances, writes Jeremy Gates

IT’S TIME to start saving again. That was the message this week when the Chancellor ushered in a “sober decade” ahead with £81bn of spending cuts outlined in his Comprehensive Spending Review (CSR).

Millions of households face a steep drop in income – and savings painstakingly collected by older people are already being rescued.

While the bank of mum and dad gives sons and daughters a deposit for their first home, the Financial Times says some grandparents are offering to pay the child benefit which better-off families will lose from 2013 – worth £88 per month for the first child, and £57 for each subsequent child.

As the FT explains: “Up to £3,000 per year can be passed on to grandchildren without becoming liable to inheritance tax, although larger regular payments are permitted if they are made from income.”

With vouchers for Child Trust Funds set to end in January, older people are also investing in monthly investment plans, savings accounts and pension schemes for grandchildren.

By so doing, they may cut the potential inheritance tax payable on their estates when they die.

But how will the great majority of households, who can’t rely on money handed down the generations, cope with the squeeze?

Households on £50,000 a year could lose about £10,000 in the next four years.

Kevin Mountford, head of banking at finance website moneysupermarket.com, says: “The CSR will have a huge impact on consumers’ finances; purse strings across the country will inevitably have to be tightened.

“The threat of unemployment will weigh heavily on the minds of many families, working in both public and private sectors.

“While it might be too late to take out specific insurance to cover unemployment, consumers can plan to reduce the impact of a sudden loss of earnings. If you have any debts, look at ways you can pay them off or at least reduce your outgoings by consolidating existing debts.

“Consumers should also build a rainy day fund – ideally three months’ worth of earnings, but anyone worried about job security should consider increasing this amount to six months to tide them over.”

However, with the Bank base rate probably stuck at 0.5% for months to come, too much money is left in low-paying accounts.

Always check the return your money earns and know when bonus interest on new accounts is taken off.

Next, look closely at mortgages, a major outlay for most families.

As lenders chase new borrowers in a shrinking market, fixed rate and tracker mortgages are getting cheaper and fixing for five years could head off rate rises which must come eventually.

Chelsea BS has cut its three-year fix to just 3.49% and applicants with a 25% deposit get free valuation, with assisted legal fees for remortgagers. The product fee is only £495.

Ray Boulger, senior technical manager at broker John Charcol, says: “If you hold at least 25% of the equity in a home, and you are paying more than 3% on your existing mortgage, consider remortgaging.

“With many lenders willing to pay valuation and legal costs, the only stumbling block in switching is the arrangement fee, ranging from nothing to nearly £2,000.

“If you have 40% equity in your home, a tracker costs 1.99% (for two years) at NatWest and 2.19% (for life) at HSBC. With 30% equity, Woolwich’s lifetime tracker costs 2.58%.

“If you are remortgaging, and might at some stage need to move for a new job, avoid a mortgage which imposes a heavy early repayment charge.”

“Some lenders allow these mortgages to be portable, subject to meeting the lender’s criteria which might be more onerous than when you first took the mortgage out. It is generally better not to have this penalty lurking over your head.”

Next, pensions: Mr Osborne’s confirmation of the rise in the state retirement age for men and women to 66 by 2020 makes it more important than ever to build a private pension, not least to cover that gap for many workers between retirement and when their state pension kicks in.

Tom McPhail, head of pension research at financial advisor Hargreaves Lansdown, says: “We knew retirement ages needed to rise, but this still won’t be a popular move. To retire earlier, you’ll need to boost private savings.”

McPhail reckons a 55-year-old worker needs to save another £40 to £45 per month for 10 years to have an extra £6,600 at age 65.

Younger workers, in their mid-forties, might need to save an extra £20 to £30 per month in their pension pot to make up the loss.

Private pension savings, however, are fairly inflexible, because they can only be accessed at age 55. People unlucky enough to lose their jobs might want to get their money earlier than that.

Catherine Penney, vice president at Barclays Stockbrokers, says: “The rise in retirement age reinforces the need for each of us to make provisions for retirement.

“By making regular contributions to personal pensions, including self-invested ones, and ISAs which offer a tax-free wrapper and are usually easily accessible, confident investors can build up savings to supplement their core pensions and provide them with increased flexibility to move to part-time working in the run-up to retirement or possibly to stop work altogether before they reach 66.”

Andy Gadd, head of research at Lighthouse Group, a national network of financial advisors, says: “In simple terms this means individuals in their late 50s have only eight or 10 years to prepare for a delay in receiving their state pension.

“Meanwhile, younger individuals should prepare for the likelihood of getting a state pension even later than 66 in future government proposals.”

In the next few weeks, of course, consumers ought to carry out their own household CSR with websites available to keep prices of standard products as low as possible.

Areas of obvious potential saving, says moneysupermarket.com, include: credit cards (saving £258); car insurance (£237); home insurance (£127); energy bills (£300-plus); and personal loans (possibly £600 if all loans are rolled into one with Nationwide BS at 7.6% APR).

INFORMATION: Chelsea BS (0800 341 341 and www.thechelsea.co.uk/mortgages); Hargreaves Lansdown (0117 980 9926 and www.h-l.co.uk); John Charcol (0845 034 2100

London 2012- a shattered dream?

2010-09-22T04:15:00.000-07:00

A footbridge being built for the main stadium collapsed, injuring 27 people and highlighting the raft of problems that have so far blighted the event, meant to showcase the emerging global power.

And after world triple jump champion Philipps Idowu, Olympic 400m gold medallist Christine Ohuruogu and Commonwealth 1500m champion Lisa Dobriskey pulled out of the competition, the head of England's team has demanded guarantees for competitor security.

Idowu's withdrawal was based on security concerns while Ohuruogu, plagued by injury problems this year, suffered cramp in a training session over the weekend and decided to pull out as a precaution from the event starting in New Delhi on October 3. Dobriskey said she had run out of time after struggling with injury earlier in the season.

Preparations for next month's Commonwealth Games, intended to be the coming out party for India the way the Olympics were for China, are down to the wire and the event risks descending into farce.

The shooting of two foreign visitors by suspected militants in Delhi on Sunday has combined with a dengue fever epidemic, heavy monsoon rains, delayed construction, graft scandals and traffic chaos to give the Games that sinking feeling.

Police said the collapsed bridge was just outside the main stadium, putting India's sometimes lax construction standards again in the spotlight.

Head of the England team Craig Hunter said the team remains "committed to participating", but added: "It's hard to cancel an event of this magnitude but we are close to the wire, and teams may start to take things into their own hands. Athletes will start getting on planes soon and decisions will have to be made. We need new levels of reassurance."

Concerns over security and health forced discus world champion Dani Samuels of Australia to pull out of the Games, another blow to organisers at pains to assure participants of complete safety.

Commonwealth Games Federation president Michael Fennell said the two-week event, starting October 3, was seriously compromised by conditions at the Games village that have "shocked the majority."

But officials remained upbeat.

"I am as confident and as cool as ever about our organising. These are all minor hiccups," Urban Development Minister S. Jaipal Reddy said.

Dismal preparations have, for many, underscored the out-of-touch, slow-paced leadership of Prime Minister Manmohan Singh and his Congress government, raising questions how a graft-ridden, inefficient state can hope to compete with China.

The government's pro-poor voter image may suffer from tales of billions of wasted dollars. A perception of India's entrepreneurial prowess threatening Western jobs may slip if roofs leak and journalists wonder where the Wi-Fi is.

"Fingers crossed, India may pull off a miracle," said Boria Majumdar, a sports historian who has written the book 'Sellotape Legacy: Delhi and the Commonwealth Games'.

"But it will have to be a miracle. No doubt about that".

The Games village and security - construction delays mean venues have been locked down by police only two weeks before the Games - are the two major weakness of the Games, Majumdar said.

Some four or five accommodation towers at the Games village are still unfinished, lacking facilities such as wireless Internet, fitted toilets and plumbing. Rubble, unused masonry and discarded bricks litter the unfinished gardens.

A crude cement slope appeared to be an unplanned fix for disabled athletes requiring access to one apartment block.

The athletes' training centre was still to be fitted out.

The water in the training and recreational swimming pools was dirty, with insect larvae breeding on the surface.

"There have had some delegations staying there and they have been reporting constantly about the filth in the village," Fennell told CNN-IBN TV.

Organisers say there is no question the Games will be put off, but the nightmare is that one delegation exits and that leads to an avalanche. And the problems are not receding.

With the $6 billion Games way behind schedule, there have been worries stagnant puddles in construction sites have proved breeding grounds for mosquitoes. Hundreds of Delhi residents are hospitalised in one of the worst dengue epidemics in years.

With costs running 17 times more than original estimates, the government's anti-corruption watchdog identified 16 projects with suspect financing.

The insistence to hold the Games in October has led to some athletes pulling out due to conflicts with Olympic qualifiers.

October also means the opening ceremony may be ruined by rains.

Triple Olympic sprint champion Usain Bolt of Jamaica is the most high profile of a bunch of top athletes who have decided to skip the event.

But many venues, including the main Jawaharlal Nehru stadium have been praised as world class.

Other events like the 2004 Athens Olympics were dogged by problems but turned out fine. Beijing was hit by worries over the torch relay and Tibet protests but ended in media glory.

Some officials say foreigners do not understand how India works. Sport Minister Manohar Singh Gill said it is like an Indian wedding where chaos ends in a well-planned ceremony.

But scandals have sent shivers down the government that since the summer has effectively replaced many organisers with top civil servants, giving the Games access to more funds.

However, the Congress government was late getting involved, highlighting its slow pace in dealing with issues ranging from economic reforms to separatist violence in Kashmir.

"It's just one of so many goof-ups," said Paranjoy Guha Thakurta, a political economist. "This will not do the government any good. When you have a big bash and benefits are minimal it sharpens and widens the inequalities in India. People notice."
Reuters

Oil Deepens Losses After Fed Announcement

2010-09-22T03:47:00.000-07:00

(RTTNews) - Oil prices slumped Tuesday, with losses accelerating after the Federal Reserve's monetary-policy announcement.

The US central bank kept interest rates unchanged at a record low, and hinted at further quantitative easing measures to support the economy. However, no concrete steps were unveiled.

November crude oil, the most active contract, dropped $1.22 to $74.97 a barrel on the New York Mercantile Exchange. The front-month October contract settled down $1.34 at $73.52 a barrel.

Earlier today, the Commerce Department said US housing starts rose 10.5% to an annual rate of 598,000 in August from 541,000 in the previous month, exceeding economists' expectations for a more modest increase to 550,000. The report also said building permits grew 1.8% to an annual rate of 569,000 in August, higher than consensus forecasts of an increase to 560,000.

Meanwhile, the dollar extended losses after the Fed announcement and fell to a six-week low versus the euro. Successful bond auctions in Ireland, Greece and Spain underpinned the European single currency.

Speculation making UK government Bonds sell like hot cakes

2010-09-22T03:42:00.000-07:00

U.K. Government Bonds Soar on Speculation Central Bank May Ease With Fed

U.K. government bonds jumped on speculation that the Bank of England will ease monetary policy after the Federal Reserve said yesterday it is prepared to do more to support the economy.

Ten-year gilt yields fell the most in more than a year after the Fed signaled it may restart purchases of government debt with new money, a policy known as quantitative easing. Central bank policy makers voted 8-1 to keep rates on hold this month, and some officials said the probability the economy will need more stimulus has risen, minutes of the Sept. 9 meeting showed today. The economy will grow slower than previously forecast next year and the central bank won’t raise rates until the second quarter, the Confederation of British Industry said.

“The Bank of England and the Fed have been closely related in their policy response, so the market is now speculating as to whether they will do further quantitative easing,” said Mohit Kumar, a fixed-income strategist at Deutsche Bank AG in London. “That is not my central scenario.”

The yield on the 10-year gilt fell 16 basis points to 2.96 percent as of 10:23 a.m. in London, The 4.75 percent security due March 2020 rose 1.425, or 14.25 pounds per 1,000-pound face amount, to 114.705. Two-year yields slipped 8 basis points to 0.63 percent.

The Monetary Policy Committee, led by Governor Mervyn King, overruled Andrew Sentance to keep the benchmark interest rate at 0.5 percent and the bond-purchase plan at 200 billion pounds ($313 billion). Sentance pushed for an increase in the rate to 0.75 percent, reiterating that it should be raised “gradually.”

‘Further Action’

“Most members thought that the current level of bank rate and stock of asset purchases financed by the issuance of central bank reserves remained appropriate to balance the risks,” minutes of the Sept. 9 meeting released by the central bank today in London said. “For some of those members, the probability that further action would become necessary to stimulate the economy and keep inflation on track to hit the target in the medium term had increased.”

The pound rose 0.3 percent to $1.5676 and 0.4 percent to 85.25 pence per euro.

The Fed said yesterday after its policy meeting that it’s “prepared to provide additional accommodation if needed to support the economic recovery.”

U.S. 10-year Treasury yields fell 4 basis points to 2.54 percent after plunging 14 basis points yesterday. German 10-year yields were 10 basis points lower at 2.35 percent.

NBNK Invest Starts Trading As It Eyes UK Bank Assets

2010-08-22T03:53:00.000-07:00

By Patricia Kowsmann Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--A new vehicle set up by two London financial-sector heavyweights to buy U.K. banking assets has raised GBP50 million from an initial public offering, marking yet another new entrant in the country's changing bank sector.

NBNK Investments PLC (NBNK.LN) issued 50 million shares at 100 pence a share, and is now trading on London's AIM, the company said Friday. The shares were around 105 pence in early trading.

Peter Levene, chairman of Lloyd's of London, the insurance market, will be chairman of the company while City guru David Walker, who recently led a corporate governance review of the banking sector, will hold a non-executive role.

Levene and Walker weren't available for comment Friday.

In a statement, Levene said NBNK "will now establish a dialogue with a number of sellers of assets which would fit our acquisition profile."

NBNK said it will initially focus on the retail banking and small-and-medium enterprise sectors. Over time, it intends to expand into retail wealth management, it added.

The two assets the new group is initially eyeing are 600 branches Lloyds Banking Group PLC (LYG) is putting up for sale in coming years, and 75 branches from nationalized bank Northern Rock. Combined, they represent a 7% market share of the U.K. retail banking market.

NBNK is expected, however, to face fierce competition from other new entrants, including Richard Branson's Virgin Money, U.S. entrepreneur Vernon Hill's Metro Bank PLC and retailers like Tesco PLC (TSCO.LN).

The U.K. banking sector is restructuring after its near collapse during the financial crisis, which forced two of the country's largest banks to seek government help.

Lloyds is now 41%-state owned, while Royal Bank of Scotland Group PLC (RBS) is 83%-state owned.

The two banks have been forced to sell assets by the European Union following their state bailouts. Lloyds has until 2013 to sell the 600 branches. The sale process hasn't begun.

Once it does, NBNK is expected to do a secondary fund raising and list on the larger London Stock Exchange.

In the filing, NBNK Investments said it wants to establish a network of 400 to 600 branches across the U.K., which would operate under a traditional service-based banking model.

The company won't operate in wholesale, international or investment banking, it added.

Its listing comes a few weeks after another new entrant, Metro Bank, opened the doors of its first London branch. Like NBNK, Metro bank has also advocated back-to-basics banking, offering services including long opening hours, speedy account set-ups, and water bowls and biscuits for dogs that customers bring into branches.

Analysts, however, said new entrants will face tough competition from established heavyweights, including RBS, Lloyds and HSBC Holdings PLC (HBC), which are better equipped to deal with regulatory changes and funding hurdles.

NBNK has received the backing of well-known investors, who are expected to help the company raise more capital for acquisitions.

Invesco Asset Management owns 29.5% of the vehicle's shares, followed by Aviva Investors, with 11.5%. BlackRock Investment Managers and JP Morgan Asset Management are also shareholders, owning a combined 13% of the stock.

Hedge funds Moore Europe Capital Management LLP and Och-Ziff Capital Management hold 9.4% of the vehicle each.

Lehman Brothers $10m art sale to include early Damien Hirst

2010-06-05T16:48:00.000-07:00

Art collectors will get another chance to snap up remnants from the office walls of the world's most notorious failed bank in an auction by Sotheby's in September of over 400 items from Lehman Brothers' once renowned hoard, including work by Damien Hirst, Gerhard Richter and Félix González-Torres, following a smaller sale from the company's collection last October.

Liquidators to the defunct Wall Street firm announced today that a large slice of Lehman's collection will go under the hammer in September in an auction expected to raise $10m (£6.89m). The proceeds will go to creditors who are still owed billions of dollars following the bank's spectacular collapse in September 2008.

Kelly Wright, an adviser to Lehman's estate, described the lots as a "visionary" collection: "Many of the works were acquired from cutting-edge and emergent artists who have since evolved into the vanguards of the contemporary art world."

Lehman inherited a significant chunk of the collection when it bought a US asset management firm, Neuberger Berman, in 2003. Neuberger's founder, Roy Neuberger, had been an enthusiastic corporate acquirer of art and Lehman subsequently built on his stockpile.

Following Lehman's bankruptcy, employees bought out Neuberger Berman, which survives with 1,600 employees and $180bn of assets under management. Neuberger exercised an option to purchase several hundred works from Lehman but the items left behind are to go on the block.

An early Damien Hirst wall piece called We've Got Style (The Vessel Collection – Blue) ( is set to be the biggest seller with an estimated price tag of $800,000 to $1.2m. A cabinet full of ceramic objects, the piece was produced before Hirst's art hit the headlines when work such as his shark preserved in formaldehyde attracted record multimillion-pound prices.

read more here

Tiger Woods tries to repair damage to his marriage, and his golf brand

2009-12-05T18:43:00.000-08:00

In a lakeside Florida mansion, marriage counsellors, lawyers and public relations advisers are engaged in a bizarre and expensive round of shuttle diplomacy between the world's richest athlete and his furious wife.

For Tiger Woods, a control freak accustomed to calling the shots both on the fairway and in his private life, the unravelling of an image as carefully manicured as a country club green is both agonising and self-inflicted.

The scandal of his philandering is so damaging to his "Mr Clean" brand that the publicity-averse superstar is even considering an invitation to appear on the sofa of talk show queen Oprah Winfrey, The Sunday Telegraph has learnt.

For that interview to work, quite possibly with Elin Nordegren, 29, the wife on whom he cheated, by his side, Woods, 33, would have to engage in the sort of public confessional that has previously been anathema to him.

His minders have not granted such access since a 1997 interview with the men's magazine GQ backfired badly when the young sportsman was quoted telling dirty and racial jokes.

That profile also hinted that when he was not playing the fairways, he was playing the field from what some in the sport call the real PGA - the "Party Groupie Association" (rather than the Professional Golfers' Association).

read more..

Dubai is in a 'nasty mess of its own making' – but so are we

2009-12-05T18:29:00.000-08:00

Dubai has already given the world some of its biggest buildings (see below) and biggest indoor ski slope, says Alistair Osborne in The Daily Telegraph. Now it has produced "the biggest debt-market cock-up".

Last Wednesday, the Emirate's government suddenly asked creditors of Dubai World, a large state-sponsored conglomerate with $60bn of obligations, to agree to a standstill on debt repayments until next June at the earliest. This included the $3.5bn Islamic bond issued by the group's Nakheel property subsidiary – the company behind the palm island land reclamation project – and due to be repaid in mid-December. Then it shut up shop for a four-day Islamic holiday.
Dubai shocks the markets

The announcement left investors feeling "wronged and wrong-footed", says The Economist. Only three weeks before the government had insisted it would meet all current and future obligations on its $80bn or so of debt (although some analysts reckon about the same sum is hidden off balance sheet).

read more

U.A.E. Leaders Try to Ease Concerns Over Dubai

2009-12-01T04:23:00.000-08:00

By MARIA ABI HABIB And MIRNA SLEIMAN

DUBAI--The leadership of the United Arab Emirates tried Tuesday to steady the nerves of investors after concerns over Dubai's debt crisis sent stock markets across the Gulf sharply lower for a second day.

In a public statement, Dubai's ruler stressed federal unity across the U.A.E. amid concern that oil-rich Abu Dhabi will remain on the sidelines as it struggles to restructure the debts of its government-owned companies.

The country is working on "enhancing integration between the federal and local frameworks," said Sheik Mohammed bin Rashid Al Maktoum, who is also Prime Minister of the U.A.E.

read more...

In Dubai, refusal amid market selloff

2009-12-01T04:12:00.000-08:00

An eerie calm engulfed Dubai's financial centre, even as the city-state's two stock exchanges and another down the road in Abu Dhabi took a hammering.

Investors rushed to unload shares of several corporations expected to bear the brunt of a sharp downturn in Dubai's economy, the result of the announcement last week that the powerful holding company Dubai World needs a break from making payments on its $59-billion (U.S.) in debts.

Abu Dhabi's market was down a record 8.3 per cent Monday, and the Dubai Financial Market fell 7.3 per cent, with several banks, transportation and construction firms at or near the daily allowable loss of 10 per cent. Over at the more modern Nasdaq Dubai, DP World, a major subsidiary of Dubai World and one of the few subsidiaries listed on an exchange, lost 14.88 per cent of its value, hovering all day just above the exchange's 15-per-cent loss limit per day.

Global markets have been gyrating wildly since Dubai World first announced plans for a debt standstill last Wednesday, just before holidays began. Emerging markets and Asia were hard hit last week, but largely bounced back Monday as investors hoped Dubai's problems would remain largely contained.

In Dubai, government and private offices had almost all been given a 10-day holiday with the religious festival of Eid al Adha, ending later this week with the celebration of the United Arab Emirates independence day.

Eid al Adha commemorates the sacrifice the patriarch Abraham was about to make of his son Ishmael. This year, however, the holiday might also be said to mark the sacrifice of those holding stocks in vulnerable Dubai companies.

Together, the Dubai and Abu Dhabi markets shed about $10-billion in capitalization yesterday. They would have shed more, but for the exchanges' strict limits. In both cities, there were many orders to sell; almost none to buy...read more

Households in UK better off than a year ago: Ernst & Young news

2009-06-21T06:12:00.000-07:00

According to an Ernst & Young survey, families in UK that have not been affected by job losses have enjoyed a 25 per cent increase in spending money over the past year after mortgage costs and energy bills dropped.

The average UK household income of families that did not suffer job losses rose by £200 a month, the business consulting firm says in a report. Homeowners benefited with the Bank of England cutting the key rate to a record low level of 0.5 per cent that helped curb mortgage costs. Gasoline, gas and electricity bills also fell sharply it says.

Rising unemployment and the worst recession in a generation will likely encourage people to pay back their debt as they cut spending from their disposable wealth in the shops according to the report. Meanwhile, according to the Office for National Statistics UK retail sales for May have unexpectedly dropped for the first time in three months.

The average UK household has a higher percentage of its gross income left after paying bills as compared with last year. The £1,075 that the household has left to spend after paying bills amounts to 27 per cent of gross income as compared with 22 per cent last year.

Unemployment is at the highest since 1996 in the quarter through April and the Confederation of British Industry has predicted the up to 3 million consumers would likely be out of work by middle 2010.

Sir Fred might have gone away, but the issue of bankers' bonuses sticks with us

2009-06-21T06:07:00.000-07:00

The timing of Sir Fred Goodwin's decision to hand back some of his pension is fascinating. Why now, when the furore over his gilt-edged retirement fund had more or less died down?

The official reason was that he was waiting for the results of an internal inquiry into his conduct and his expenses. Having been completely exonerated of expenses misdemeanours, despite his use of the company jet and his suite at the Savoy - which puts him one up on hundreds of MPs - he decided to do a deal. It means that his gesture cannot be interpreted as an admission of guilt, but being given the all-clear after an exhaustive investigation might just as easily have bolstered his earlier insistence on not handing a penny back.

He may have been daunted by the prospect of being sued by RBS, though the bank had little chance of winning a case, fighting a legal action would still have been expensive and bruising for him and his family. Presumably Fred would like to be able to come back to Scotland without being lynched, though exile in the South of France, where he was discovered by the News of the World last weekend, does not sound so bad compared with, say, the banishment of former Yukos oil executive Mikhail Khodorkovsky to a Siberian jail after he upset Vladimir Putin.

Perhaps a more pertinent question is why winning the Battle of Fred's Pension was so important to RBS, or rather to UK Financial Investments Ltd (UKFI), the body set up by the government last November to run its bank shareholdings, which has been pulling the strings.

One reason is that pay and bonuses will be a hugely sensitive issue from now on. As a major shareholder with a public mission, UKFI has a responsibility to make sure the banks are better run, that their capital bases are rebuilt, their risk management is far more prudent, their boards are restocked and that pay and bonus structures are far more intelligent. At the same time, the scale of its task in extricating the British taxpayer is enormous; the exit process from the broken banks will be bigger than all the 1980s and 1990s privatisation programmes put together. At its peak, RBS's balance sheet, courtesy of Fred, was bigger than Britain's.

So if RBS's new chief executive, Stephen Hester, and his counterpart at Lloyds Banking Group, Eric Daniels, are to get us out of this mess, then UKFI reckons they deserve to be paid a lot of money. It has been in talks with RBS about a new bonus scheme for Hester, which is expected to be announced shortly. Having the issue of Goodwin's pension still festering would have been unhelpful, to say the least.

If Hester and Daniels do achieve a profitable exit for the taxpayer, they will deserve our gratitude, but it still feels jarring to be dangling super-sized rewards in front of them, even if they are payments for success; as taxpayers, most of us want a new kind of banking, so why endorse old-style rewards?

The cultural problem for the finance industry is that bloated bonus structures proved to be a lure not for the most talented but for the greediest. One senior director aptly calls pay-obsessed investment bankers the "compensation Taliban". There seems little chance of changing that ethos if there are no public-spirited bankers out there who can be persuaded to save Britain's financial sector without further enormous and unnecessary self-enrichment.

The task of reining in pay is made harder by the fact we see Goldman Sachs resurgent; it and the likes of JP Morgan Chase could see a further concentration of power and wealth in their hands now that the competition has been felled.

Bankers' pay is a problem in itself, but it is also a symptom of an underlying issue about ownership. We can have boardroom rejigs, or beefed-up regulation, but the missing link is much more activist owners, who hold companies and their executives to account.

Extravagant pay awards were one sign that the short-term interests of senior executives took precedence over those of long-term owners; UKFI is in a powerful position to reverse that by making sure that new structures are proportionate and that directors' and owners' interests are wholly aligned.

Big banking bonuses were also a sign that the sector had become far too large and powerful. As Bank of England governor Mervyn King said at the Mansion House last week, it is not sensible to allow large banks to combine high-street operations with risky investment banking or funding strategies, and then provide state underwriting: if banks are too big to fail, then they are too big.

The way that New Labour, with its sucking-up to the City and neglect of manufacturing, allowed our economy to become so unbalanced has put us in peril: the size of our banking sector in relation to GDP is five times that in the US, so the risks to taxpayers are correspondingly greater. Thanks to the bankers, in five years, our national debt will be more than double its level before the crisis.

Were they worth it? Most taxpayers, I suspect, think not. Banks - and bankers - still need to be cut down to size.

-Ruth Sunderland, The Observer-

Iceland to repay UK depositors

2009-06-06T09:14:00.000-07:00

Britain has secured agreement from the Icelandic authorities to repay the £2.3 billion paid out by the Government in compensation to UK depositors in the failed Icesave bank, the Treasury said.
Under the terms of the agreement, the money paid out by the Government will be treated as a loan to the Icelandic Financial Compensation Scheme which will be repaid over 15 years.

The deal was announced in a joint statement by the governments of Iceland, Britain and the Netherlands which has struck a similar agreement with the authorities in Reykjavik.

There will be an initial seven year "period of grace" in which payments will be made only from the UK assets of the Icesave's parent bank, Landsbanki, which the Government froze following the collapse of the Icelandic banks last October.

A Treasury spokesman said that the agreement was "good news" for both Britain and Iceland.

"The Government welcomes Iceland's commitment to recognise its obligations under the EC Deposit Guarantee Scheme to repay depositors in Icesave," the spokesman said.

"The actions we took in October last year following the collapse of Landsbanki protected UK financial stability and ensured that no UK retail depositor lost any money.

"Today's announcement is a positive step forward for relations between our countries. It will ensure the taxpayers interests are protected and that the Icelandic economy can continue in its recovery after very difficult times."

U.K. House Prices Reverse Decline

2009-06-05T06:52:00.000-07:00

LONDON -- U.K. house prices posted their strongest monthly rise in six and a half years in May and there are indications activity in the residential property market may be stabilizing, mortgage lender Halifax said Thursday.

House prices rose 2.6% from April, the strongest gain since October 2002, but were still 16.3% below year-earlier levels, Halifax said. In April prices dropped 1.7% from March and 17.7% from a year earlier, Halifax -- which is owned by the Lloyds Banking Group PLC -- said. Economists were expecting a monthly decline of 0.6% and an annual drop of 17.2%.

The gain in the house-price indicator helped boost the pound against the dollar and weaken gilt prices as the market waited for a Bank of England policy decision later Thursday. The bank's Monetary Policy Committee is expected to leave interest rates unchanged at 0.5%.

"This latest Halifax reading is not an isolated case. There are clear signs emerging that the U.K. housing market has turned the corner," Alan Clarke, an economist at BNP Paribas, said in a note.

The positive data chime with other indicators that suggest the downturn in the U.K.'s housing market is beginning to bottom out after sharp drops in prices and interest rates. Nevertheless, with unemployment rising sharply, the outlook for demand and prices remains very uncertain.

"There are some tentative indications of a possible stabilization in activity, albeit at a low level," Nitesh Patel, housing economist at Halifax, said in a statement.

Last week, the Nationwide Building Society said house prices rose 1.2% in May, the strongest monthly gain by that measure in 19 months, although they remained 11.3% below their year-earlier level. The Royal Institution of Chartered Surveyors has also reported that increased buyer interest over the past six months is beginning to lead to an increase in sales.

Even though Mr. Patel noted that Bank of England data had shown that mortgage approvals, a good indicator of market activity, were 19% higher in the first quarter of the year than in the final three months of 2008, he cautioned against reading too much into one month's figures.

"House sales remain substantially below their long-term average and market conditions are expected to remain difficult, with housing activity continuing at low levels over the coming months," he said.

Lloyds has confirmed it is cutting 500 jobs from its retail banking division.

2009-06-05T06:40:00.000-07:00

Many of the jobs will go from Chatham in Kent, which will see 210 positions cut with the closing of a processing centre.

Positions will also be axed in London and Birmingham.

The cuts will hit staff in regulated sales, mortgages and network support and will take effect by the end of the year.

"The Group's preference is to use natural turnover and to redeploy people wherever possible so it retains their expertise and knowledge within the Group," a Lloyds spokesman said.

The union Accord, which represents former HBOS workers at Lloyds, said staff should be offered the chance of redeployment within the company.

Unite said it was opposed to the Kent closure, adding that Lloyds had now cut almost 3,000 jobs this year.

National officer Rob MacGregor said: "Unite is extremely disappointed that the Lloyds Banking Group is to cut a further 510 roles.

"We have already seen over 2,400 job losses announced by the bank since its formation in January.

"Unite has made it plain that the union will not accept a situation where the LBG makes weekly announcements of hundreds of job losses.

"Staff must be told the company's plans for the future of the organisation and not be left with the uncertainty that they could be the next to lose their jobs."

Lloyds shareholders get their chance to question the direction of the bank at the company's AGM later this week.

The prospect of a rebellion, though, has receded since the body that manages the government's stake in Lloyds, UKFI, announced it would use its votes to back the board.

UK commercial property: The banking sector albatross

2009-05-30T13:12:00.001-07:00

LONDON (Reuters) - Europe's banks are ready to pull the plug on faltering UK commercial mortgages to limit losses on a 225 billion pound loan book in a bid to prevent a dramatic next turn of the banking crisis.

More than 10 billion pounds of commercial mortgages have so far breached their terms, a recent study shows, and banks are running out of patience with problem borrowers.

"Compared to a couple of months ago, there are clear signs the banks are becoming more organised as to how they approach their commercial property exposures," said Mark Creamer at real estate consultants CB Richard Ellis (CBG.N).

"Instead of working on no-hope situations, banks will get rid of those and move onto properties where they have a real prospect of getting their money back," Creamer said.

In 2009 alone, 43 billion pounds of property loans mature, according to the De Montfort University study, posing a much larger risk than commercial mortgage-backed securities CMBS.L, which have largely been sold on.

Lenders have long turned a blind eye to borrowers in breach of covenants -- when the value of a property drops too low relative to the size of the loan -- as long as they met interest demands by collecting rents.

But they are now abandoning this softly-softly approach as the British economy worsens, planning foreclosures on a scale not yet seen in this cycle.

Industrial landlord Brixton (BXTN.L) and FTSE 100 heavyweight Land Securities (LAND.L) are two of many UK landlords sweating over possible loan-to-value covenant breaches.

"At the moment, banks are big hostages to fortune," said Solly Benaim, head of real estate and construction at restructuring firm BDO Stoy Hayward.

"It is unrealistic for some of them to hope that this laissez-faire approach will carry them safely through the downturn, a certain number of repossessions need to happen to truly rehabilitate the market," he said.

Banks including Lloyds Banking Group (LLOY.L) unit Bank of Scotland, HSBC (HSBA.L), Commerzbank (CBKG.DE) unit Eurohypo and Royal Bank of Scotland (RBS.L) lent vast amounts to the British property sector during the boom years.

While some of this was parcelled out to bondholders via commercial mortgage backed securities CMBS.L, much of it remains on their balance sheets.

GRIM OUTLOOK

Average UK commercial property values have tanked 43 percent since peaking in June 2007 and the worst may not be over. Rents are in freefall, compromising cash flows and putting landlords' ability to pay interest on their debts in jeopardy.

First-quarter data from business rescue specialist Begbies Traynor showed an 87 percent year-on-year increase in the number of UK companies with critical financial problems.

"Commercial property will be a huge burden on the UK banking sector. Unless there is a bottoming-out of banks' exposure to sector, no-one will start lending again," said Gareth Davies, a restructuring expert at Close Brothers.

Until now, banks have only repossessed as a last resort because they feared they would be unable to sell assets in the debt-starved investment market.

But a flurry of fund launches and opportunistic rights issues has ratcheted up competition among buyers in the sector, stoking hopes for less costly exits.

They have already hired hundreds of workout specialists, many of which used to originate loans.

Leading property lenders HSBC, Lloyds Banking Group and Royal Bank of Scotland declined to comment on their strategies.

A wave of repossessions is likely to begin once banks know what they can offload into the UK Asset Insurance Scheme, details of which are due to be announced in July, said David Swan, managing director of real estate advisor WW Advisors.

"Banks know they cannot possibly hope to re-emerge from the most intense UK commercial property downturn in generations without any blood-letting in their loan portfolios," he said.

A key economist at the Federal Reserve on Friday expressed confidence that U.S. banks can survive similar default pressures on their $1.3 trillion (804 billion pounds) commercial mortgage and bank portfolio loan book.

Banks maintained some CMBS debt on their balance sheets, though Barclays Capital estimates that it totals less than 10 billion euros (8.7 billion pounds) across Europe, a fraction of the amount of their non-securitised property lending.

And only 12 billion pounds of CMBS secured by UK properties will mature before the end of 2011, giving time for values to recover, according to data from ratings agency Standard & Poors.

Still, investors in CMBS -- largely pension funds and insurers -- face years of uncertainty over their commercial property exposures. The market is dominated by intercreditor fights and complex funding structures that have never been tested," Close Brothers' Davies said.

Bonus Pay, Lax Oversight Led to Bank Crisis, U.K. Lawmakers Say

2009-05-16T18:37:00.000-07:00

By Gonzalo Vina

May 15 (Bloomberg) -- British bankers are guilty of self- pity and Treasury minister Paul Myners displayed naivete over the pension awarded to the former chief executive officer of Royal Bank of Scotland Group Plc, a panel of lawmakers said.

Feeble oversight by regulators allowed executives at RBS and Lloyds Banking Group Plc to bring the banking system close to collapse in October, Parliament’s Treasury Committee said today in a report that calls for sweeping changes to the way financial firms compensate workers.

“Bonus-driven remuneration led to a lethal combination of reckless and excessive risk-taking,” said John McFall, a lawmaker from the ruling Labour Party who leads the committee. “The design of bonus schemes was not aligned with the interests of shareholders and the long-term sustainability of the banks.”

The report is aimed at influencing Prime Minister Gordon Brown and officials at the Financial Services Authority and Bank of England as they tighten up bank regulation to prevent a repeat of the crisis that froze credit markets and plunged the economy into its worst recession since World War II.

The Treasury Committee, drawn from each of the three main political parties, took aim at the culture in the City of London that allowed bankers to award Fred Goodwin, the then chief executive of RBS, a 3 million-pound ($4.5 million) payout as taxpayers took on liabilities of 1.4 trillion pounds for bailing out the banking system. It will next turn its fire on regulators in a report due by July.

Lawmakers expressed frustration that bankers testifying to the panel “betrayed a degree of self-pity, portraying themselves as the unlucky victims of external circumstances,” according to a statement accompanying the 120-page report.

Insufficient Priority

FSA Chairman Adair Turner in March proposed an overhaul of the regulatory system and changes to bonus payments. The Treasury Committee said the FSA hasn’t given bonuses “sufficient priority” and called for rules forcing banks to disclose such payments below board level, for remuneration committees to be more open and for a code of ethics for pay consultants.

Turner has said that the last 12 years of “light touch” regulation under Labour helped trigger the financial crisis. The FSA said bonuses should not be a high multiple of salary and should be based on profit, not revenue, of a bank.

Chancellor of the Exchequer Alistair Darling is studying proposals to overhaul supervision and will put out his recommendations by the time Parliament begins its summer recess on July 21.

‘Naivete’

The Treasury Committee said Myners didn’t do enough to limit payouts to Goodwin, noting that he could have asked for the executive to be fired instead of merely telling the RBS board that it should not “reward failure.”

Myners has said he didn’t know Goodwin’s payout could have been withheld. The government had no legal right to intervene in the negotiations between the RBS board and Goodwin about the terms of his departure, a Treasury official said in response to the report.

The report pointed to Myners’s “City background” and his “naivete as to the public perception of these matters” for placing too much trust in the former RBS board.

“We were given two accounts of what happened, and we just didn’t trust Myners,” said Michael Fallon, a Conservative lawmaker who serves on the committee. John Thurso, a Liberal Democrat, said that Goodwin “didn’t come out of this covered in any glory.”

As for the executives at RBS and HBOS Plc, the bank absorbed by Lloyds in a government-brokered deal, lawmakers said their apologies had a “polished and practiced air,” betraying an air of “self pity.”

Management Failure

The government, which also nationalized Northern Rock Plc and Bradford & Bingley Plc last year, boosted its share in RBS to as much as 84 percent and has 43 percent of Lloyds. Bankers deserve “a large share of the blame” for the crisis, the panel said.

“The charge of management failure is impossible to resist,” McFall said. “The banks that have failed did so because those leading and managing them failed.”

Non-executive directors were also to blame for their lack of oversight. Many of them lacked the right skills and were spread too thinly by taking on too many jobs. Committee members urged banks to look to a “broader talent pool,” cap the number of posts any one director can hold and communicate better with shareholders.

Shareholders should take a more active role in scrutinizing their investments to prevent banks from operating “outside the bounds of accountability,” the committee said. Auditors should be banned from doing non-audit work for banks and the FSA needs to improve the clarity of financial reports, it said.

The British Bankers’ Association urged the authorities to show restraint when drawing up new rules for the industry.

“Other countries are watching us, and none uses quite such pejorative language in its scrutiny of financial institutions,” Chief Executive Angela Knight said in a statement. “Our financial services sector is a significant employer which pays significant taxes: we do not want to lose it to a competitor.”

UK rejects calls to cap executive pay

2009-03-27T21:35:00.000-07:00

Australian Associated Press | AAP

Britain's Treasury chief Alistair Darling rejected calls to cap the pay of executives in banks that were part of the government's multi-billion pound (dollar) bailout package, arguing that Britain has already done more than the United States to curb excessive bonuses.

As angry US lawmakers prepared to levy heavy taxes on employee bonuses at insurance giant American International Group Inc. and at other companies that received bailout money, Darling said it was essential that the banks were able to retain key staff for the government to eventually return them to the private sector.

"We have ... got to make sure that we don't end up with a situation where other banks start attracting people who are key to making, say, RBS and the Lloyds Group work in the future," he told lawmakers, referring to the banks that have received substantial government funds.

"Whatever we do, we've got to manage these banks in such a way that we can get them back into the commercial sector," he added. "I don't think anyone wishes us to be running banks for ever and a day."

However, he acknowledged that it will be "tough" to return nationalised and part-nationalised banks to the private sector.

"I think we are going to have these banks for a while yet," he said during questioning by the cross-party Treasury committee. "It will take time to work through. There is no quick fix on this."

In the U.S., the Democrat-led House voted for a bill to slap punishing taxes on big employee bonuses from AIG and other firms bailed out by taxpayers.

Britain's own banking bailout has come under fire after it was revealed that former RBS Chief Executive Fred Goodwin, who many analysts blame for overextending the bank, will receive a STG16.9 million ($A35.49 million) pension pot.

Darling stressed that bankers' pay will be subject to an imposed code in the future.

A government-commissioned report by Britain's financial services regulator released on Wednesday which proposed sweeping changes to the way banks are regulated recommended that remuneration policies be designed to discourage bankers from "taking excessive risks with other people's money."

Darling, who is due to present the country's annual budget next month, added that it was positive that excesses in the banking sector were brought to an end, but noted that government revenues from taxes will suffer as a result.

Darling said he remained upbeat about the longer term prospects for the British economy.

"We are facing a very, very turbulent period," he said. "But if you look at the position at the moment, provided we maintain our support for the economy and provided too we make it clear that in the medium term all countries have to live within their means, I believe we can get through this."

Barclays master of its destiny as John Varley’s gamble pays off

2009-03-27T21:20:00.000-07:00

By Philip Aldrick
Last Updated: 9:24PM GMT 27 Mar 2009

John Varley, Barclays chief executive, should put away his beloved table tennis bat and take up poker.

No UK bank has played a more high-risk game during the financial crisis and Mr Varley has cleaned up. The Financial Services Authority's (FSA) decision on Friday to green-light the lender's capital levels was the banking equivalent to a royal flush. Mr Varley's gamble has paid off.

Barclays is now the master of its own destiny. Unlike Royal Bank of Scotland and Lloyds Banking Group, it will only participate in the Government's toxic debt insurance scheme if the price suits. There will be no B-share issue and no state ownership. As Mr Varley said when he turned down the offer of state capital last October: "We want to protect the right of self-determination." For Britain's embarrassed financial sector, it is a fig leaf of sorts.

It is an outcome few expected as recently as January. The shares hit a low of 47.3p that month and the credibility of the management appeared sunk when the markets ignored mollifying comments from the board. Sceptics said Barclays was simply hoping "to trade through the crisis" by denying what many analysts reckoned was a massive capital shortfall and by adopting questionable accounting procedures that concealed all sorts of toxic sub-prime losses.

Barclays also tore up the rule book on rights issues, going last – after the equity markets had been drained by RBS and HBOS – and angering shareholders by taking money from Middle Eastern governments rather than its own. By contrast, RBS chief executive Sir Fred Goodwin played a straight hand. He adopted conservative accounting practices and was the first out of the blocks with a £12bn fundraising last April. Sir Fred is now public enemy number one and Mr Varley the respectable face of UK banking. As a bluff, there has rarely been one better.

Barclays was not just bluffing, of course. Mr Varley knew he held some strong cards while RBS always had a dead hand. Barclays' big risks are in its investment banking business Barclays Capital, where it took £8bn of gross writedowns in 2008, but its UK arm is relatively robust. RBS and HBOS, now owned by Lloyds, have been crushed in the vice of collapsing credit markets and UK bad debt.

To assess the banks' financial strength, the FSA stress-tested their capital against a UK recession deeper and longer than the 1980s. According to sources, it assumed a near-halving in house prices and over 5pc collapse in GDP from peak to trough. Under such a scenario, the asset classes that suffered most were commercial property and housing. Both RBS and Lloyds, following its acquisition of HBOS, had that in droves.

At Lloyds, lending to property companies totals £89bn and at RBS £62bn, but at Barclays just £5bn. Barclays' mortgage book is also better-looking. Some 16pc of Lloyds' home loans are in negative equity while only 6pc of Barclays' mortgages have a loan-to-value of more than 90pc. The FSA's stress-test played to Barclays' strength because it is less exposed to a downturn in the real economy.

At the same time, state bail-outs came to the rescue of Barclays' credit market assets. The aggressive accounting treatment Barclays took on its leveraged loan portfolio, which allowed it to avoid billions in potential writedowns, was standardised by regulators – vindicating Mr Varley's bold decision and punishing those who had been more prudent. Britain's toxic debt insurance scheme and its US version, the $1 trillion Term Asset-Backed Securities Loan Facility, have since put a floor under falling asset prices.

Concerns about certain credit market exposures remain, but the FSA has deemed that Barclays 6.7pc core tier one capital is enough to meet the FSA's new recommendations that the ratio be above 4pc at the bottom of the cycle. According to analysts, the lender has room to absorb £17bn of losses. "I think there will be more asset market writedowns but they will be lower than last year," Ian Gordon, banks analyst at Exane BNP Paribas, said.

At the same time, Barclays is rebuilding capital internally. The planned sale of its exchange-traded funds business i-Shares is expected to raise £3bn-£4bn of capital and, unlike RBS and Lloyds, the bank is forecast to be profitable this year, generating even more.

There are other ways of improving the bank's financial strength. Lloyds and RBS are currently offering to buy back their own debt from bondholders at a fraction of the issue price but a premium to the distressed levels at which it is trading in the market. If Barclays were to follow suit and exchange £10bn for new unsecured senior debt the deal would improve its core tier one ratio by about £2.5bn, Credit Suisse estimates.

Barclays share price surge on Friday said it all. At 173.8p, up 24pc, the stock has more than trebled in two months. It may yet choose to insure a couple of asset portfolios with the Government or even hold on and raise capital in the markets later this year. Either way, Mr Varley has swept the chips from the table. That's got to be a lot more rewarding than ping-pong.

UK recession will drag into 2010 as others recover, says IMF

2009-03-18T02:43:00.000-07:00

Gary Duncan, Economics Editor

Britain’s economy is set to keep shrinking well into next year, even after all or most of its leading competitors have begun to enjoy renewed growth, the International Monetary Fund will warn this week.

In a severe blow to Gordon Brown’s hopes for an economic revival to take hold by Christmas, the IMF will predict that the UK economy will shrink in 2010 by a further 0.2 per cent.

It now expects that to come on the heels of a brutal 3.8 per cent contraction this year that would be the sharpest since 1944 — and much worse than the 2.8 per cent that the fund forecast only in January.

The new, even harsher forecast comes ahead of official unemployment figures today that are set to show that numbers out of work soared above 2 million during January.
Mervyn King, the Governor of the Bank of England, last night warned of the danger of a return to an era of mass joblessness.

Speaking to bankers at the Mansion House in London, he highlighted the “extraordinarily sudden, severe, and simultaneous downturn of activity and trade in every corner of the world economy” since last autumn.

“Most of us have come from the generation that grew up believing that mass unemployment and world recession were things of the past, relevant to the history books but not the textbooks ... That assumption is under threat,” he said.

The leaked IMF projections, outlined by a top adviser to Dominique Strauss-Kahn, the IMF’s managing director, will be greeted with consternation in Number 10 and the Treasury.

Government alarm will be heightened as the leak indicated that Britain is likely to be shown as the only leading economy not tipped to stage a recovery from recession next year.

The IMF is expected to project that while Britain’s GDP will keep falling over 2010 as a whole, the US economy will grow by 0.2 per cent, the 16-nation eurozone will eke out modest gains of 0.1 per cent, and the Group of Seven (G7) leading industrial economies will, as a whole, also grow by 0.2 per cent. The leaked forecast showed that Japan’s economy expected to stagnate during next year.

The scale of the toll from the global recession was underlined by the leaked details of the fund’s forecast, which officials in Washington said are set be further amended before release.

The updated projections show that the IMF now expects the world economy to suffer an outright contraction of 0.6 per cent this year, making this the bleakest since the Second World War. Britain is set to bear much of the brunt, with its economy now tipped to shrink by 3.8 per cent over 2009. That compares with predicted contractions of 2.6 per cent in the United States, 3.2 per cent in the eurozone, 5.0 per cent in Japan, and 3.2 per cent for the G7.

“This is a true global crisis, impacting all parts of the world,” Teresa Ter-Minassian, Mr Strauss-Kahn’s adviser, who outlined the new forecasts, said.

Mr King insisted that the Bank had taken drastic action to counter the impact of the crisis. “In its entire history, the Bank has never acted so swiftly or extensively in response to an economic downturn,” he said.

But he called for the Group of 20 key economies to agree decisive new measures at their London summit next month. He warned of a danger that, without collective commitments, countries could fail to factor in big gains from joint action, and so adopt an “excessively cautious approach”.

Mr King said that in the build-up to the present crisis, all forms of regulation, both light-touch and heavy-handed, had failed. Any overhaul of regulation faced the problem that “it is unlikely that there is a simple answer”. “We should not expect too much of regulation,” he argued.

The Governor said a new regime should “aim to be simple and robust” and avoid overly complex rules that would leave those in charge “lost in a morass or unnecessary detail”.

“We need to build into the system some simple and robust impediments to excessive risk-taking ...” he said.

Condemning a huge build-up of leverage in British banks before the crisis that saw them lend more and more against ever less capital, Mr King backed expected moves for banks to be forced to build-up a safety margin of capital in good times to cushion them in tougher periods.

Enormous risks had been allowed to pile up in banks before the present crisis, the Governor said. He blamed this on a “massive increase in complexity” of financial products, and skewed incentives that had encouraged a lax attitude to the dangers.

“Banks felt that they had to keep on dancing while the music was playing,” he noted.

In future, banks should be forced “to bear the true cost of the risks they take”, he added.

Banking IT budgets plunge by $40bn

2009-03-14T05:26:00.000-07:00

By Jo Best

IT is set to feel the brunt of hard times hitting the financial services industry - according to new research, tech budgets in the global retail banking sector could be slashed by billions.

The picture is especially bleak in the UK, where banking IT budgets will fall by seven per cent year on year in 2009, compared to a fall of two per cent worldwide, a report by Datamonitor predicts.

The fall could result in $40bn being wiped off projected IT budgets over the next five years, according to the research company.

While the first green shoots are expected to appear for banking IT at some point in 2010, Datamonitor expects spending to remain flat until 2012.

Some areas of spending will defy financial services' spending crunch: in-branch tech will remain resilient as banks attempt to maintain service levels following job cuts.

Outsourcing and hardware should also bear up, according to the report.

"IT outsourcing spend will be more resilient in the short term, as banks are tied to longer term deals. In the medium term, there will also be a pick-up in spend as banks adopt broader sourcing strategies, with IT outsourcing as part of business process outsourcing (BPO) deals likely to be a particular growth driver," it said.

Bank of England lent banks £185bn under Special Liquidity Scheme

2009-02-03T08:49:00.000-08:00

By Heather Stewart

Britain's battered banks have borrowed a total of £185bn from the Bank of England in just nine months under the Special Liquidity Scheme, the emergency measure set up last April to relieve them of some of their toxic debts and unblock the credit markets.

The SLS, which was designed to remove the need for further bank bail-outs, allowed financial institutions to swap hard-to-value securities, including "toxic" mortgage-backed debt, for more liquid government bonds, over a term of up to three years.

Because taxpayers' money is at stake under the scheme, the Bank has demanded "haircuts", insisting that the 32 participating banks pledge securities worth considerably more than the gilts they received.

The SLS closed at the end of January, and in a statement published today, the Bank reported that, as a result, it is now sitting on a pile of securities with a face value of £287bn. Most of these are mortgage-backed securities, or residential mortgage covered bonds.

"The haircuts are designed to protect against the risk of loss in the event of a counterparty defaulting, and are therefore set taking into account uncertainty about possible valuations of the Bank's collateral, including in the event of default," the Bank said.

It estimates these securities are now worth £242bn; but the difficulty of valuing toxic debts has been at the heart of the credit crunch, and crisis-hit banks have been forced to take repeated writedowns over the past 12 months as they acknowledge that they are worth far less than first thought.

However, the Bank insists that if the value of assets continues to fall over the next two years, eroding its safety cushion, it will "call for margin" – demand that the participating banks hand over more securities.

The Bank will release more details this week of how it will spend a £50bn "asset purchase facility", a fund set up to buy corporate bonds and other assets, in yet another attempt to free up lending to firms, and drive down interest rates – and the first tentative step towards the radical measures known as "quantitative easing".

The Bank's monetary policy committee will gather on Thursday for its two-day meeting to set interest rates, and is widely expected to vote for another cut, taking borrowing costs below their current historic low of 1.5%.

TheGuardian.co.uk

Levels of belonging 'lowest in UK'

2009-01-24T00:36:00.000-08:00

Researchers said the UK's poor performance on the "key element of social well-being" was indicative of a "highly individualistic culture".

And the UK did not fare much better across the population as a whole, coming 20th when it came to levels of trust and well-being. Only Slovakia and Bulgaria were worse.

The report, by the independent think-tank the New Economics Foundation (nef), also found that the UK performed poorly on combined measures of social and personal well-being, coming 13th out of the 22 European nations surveyed.

The group called on European governments to adopt the National Accounts of Well-being - released for the first time today - as a way to improve public policy-making and said a nation's Gross Domestic Product (GDP), a measure of national income, "fails as a meaningful measure of social progress".

Nic Marks, founder of the group's Centre for Well-being, said: "It is clear that our obsession with GDP has failed to deliver better quality of life for all. We need a better compass to guide us."

He went on: "Governments have lost sight of the fact that their fundamental purpose is to improve the lives of their citizens. Instead they have become obsessed with maximising economic growth to the exclusion of other concerns, ignoring the impact that this has on people's well-being.

"The UK's long hours culture and record levels of personal debt, have squeezed out opportunities for individuals, families and communities to make choices and pursue activities that would best promote personal and social well-being."

Denmark, Switzerland and Norway showed the highest levels of overall well-being in the survey, while central and eastern European countries such as the Ukraine, Bulgaria and Hungary had the lowest.

A Communities and Local Government spokeswoman said: "We recognise that young people are a key part of society and play a crucial part in addressing issues facing their communities. That is why the Government is working hard to give younger people greater influence over the local decisions that affect them and more opportunities to get involved in their communities." http://www.neweconomics.org/gen/(New Economics Foundation)

What Mr Brown has to say about UK recession

2009-01-24T00:30:00.001-08:00

Gordon Brown said today that the recession now gripping Britain was unlike any others since the Great Depression, caused not by domestic economic mismanagement but by a "complete market failure" set off by the sub-prime crisis in the United States.

As statisticians confirmed the UK's first recession since 1991 and the largest quarterly contraction in 28 years, Mr Brown - who spent ten years as Chancellor under Tony Blair before taking over as Prime Minister - said co-ordinated international action would be the key to lifing the global economy quickly out of the downturn.

And he insisted that he and his Chancellor, Alistair Darling, had had no choice but to commit billions of pounds of public money to shoring up the banking system because the "cost of inaction" would have been much greater.

"Every recession in the last 60 years in Britain has been caused by inflation, domestically generated, caused by wages getting out of control on some occasions, by interest rates having to rise," Mr Brown told BBC Radio 4's Today programme.

UK stocks rose amid financial worries

2008-12-23T07:10:00.000-08:00

U.K. stocks rose for the first time in three days as investors bought shares of companies whose earnings are less dependent on growth amid signs the economy is deteriorating.
The U.K.’s FTSE 100 rose 1.1 percent as Imperial Tobacco Group Plc rallied. Imperial Tobacco Group Plc, Europe’s second-largest cigarette maker, added 2.6 percent, while Diageo Plc, the world’s biggest liquor company, gained 2.5 percent.

I’m favoring “companies that aren’t completely economically insensitive but are a lot less sensitive,” Jane Coffey, head of equities at Royal London Asset Management Ltd., which manages about $10.5 billion, said in a Bloomberg television interview.

BAE Systems Plc, Europe’s biggest defense company, climbed 5 percent to 359.5 pence as the brokerage said “defense stocks offer good visibility for the next two years,” predicting “strong” earnings-per-share growth in 2009 and further growth in 2010. Goldman has a “buy” recommendation on BAE shares.

The U.K. economy shrank more than expected in the third quarter as service industries including financial companies, hotels and restaurants declined the most since 1990.

Gross domestic product dropped 0.6 percent from the second quarter, the biggest decline in almost 18 years, the Office for National Statistics said today in London. The result was lower than the previous estimate for a drop of 0.5 percent, which economists had expected would be confirmed.

Toyota feels the pinch of the world economic turmoil

2008-12-23T06:55:00.000-08:00

TOYOTA, the world's biggest car company, yesterday laid bare the extent of the global financial crisis when it warned that it was expecting to make its first full-year loss since the Second World War- the evidence that the global economic meltdown, not strategic mistakes, is the primary reason behind turmoil in the U.S. automotive industry.

"This is not an issue where the Japanese are doing fine and the domestic automakers are struggling," said Aaron Bragman, automotive analyst for HIS Global Insight in Troy. "This is an issue where everyone is struggling."
In last financial year, Toyota had an operating profit of ¥2.27 trillion (£17 billion) but now is projecting an operating loss of $1.7 billion, 150 billion yen, for its fiscal year ending March 31, and it slashed its global vehicle sales forecast by 700,000 cars, 8.5 percent fewer than the previous year. The UK has seen even more severe falls of Toyota vehicles, down 11 per cent in a year.

According to the Times, Toyota could cut up to 800 jobs in the UK, or 15% of its workforce, adding to the 40,000 positions expected to be shed from the UK car industry's 200,000 total over the next three years.

The Times said declining demand was "likely" to trigger redundancies across Toyota's business.

The car maker has not made any of its permanent staff redundant, but it is understood to have already cut an unspecified number of temporary workers.

Toyota promised to do all it could to retain permanent British workers, but has reportedly not ruled out the possibility of redundancies.

HSBC unveiled largest losses due Ponzi scheme

2008-12-16T07:33:00.000-08:00

One of the largest and almost invincible UK financial institution during the pre financial meltdown this year, HSBC has revealed its losses due to exposure to New York conman Bernard Madoff. The UK giant unveiled that its losses is estimately around $US1 billion, making it the largest exposure unveiled by UK firm so far.

This is based from the statement made ealier by the firm yesterday regarding its exposure to the alleged fraud.
"It confirms that it has provided financing to a small number of institutional clients who invested in funds with Madoff. Also, in the context of its normal global custody business, HSBC has custody clients who have invested with Madoff. HSBC does not believe that these custodial arrangements should be a source of exposure to the Group. "

Shares in Santander, the biggest bank in Spain and the second-largest in Europe after HSBC, plunged after the lender said it had an exposure of more than three billion dollars to Madoff Investment Securities in New York. British, French, Japanese and Spanish banks and funds said investments totalling billions of dollars (euros) could be wiped off their balance sheets by a scandal that is set to affect some of the richest people in the world.

Biggest Ponzi scheme fraud exposed

2008-12-13T20:43:00.000-08:00

The recent exposure to $50 billion Ponzi scheme fraud by the former NASDAQ chairman, Bernard Madoff caused a stir in financial and investment world. Most of the Spanish and Swiss banks lost over a billion US dollars each.
The UK asset manager, Bramdean Alternatives Ltd headed by well-known fund manager Nicola Horlick, said almost 10 percent of its holdings were exposed to Madoff. Bramdean said it had two holdings that maintain trading accounts with Bernard L. Madoff Investment Securities that represented 9.5 percent of its net asset value at the end of October. A UK real estate investor, Vincent Tchenguiz is also reported to have his asset invested in Madoff scheme.

Some people familiar with the case said that Bernard L. Madoff Investment Securities, which he founded in 1960 was never inspected by U.S. regulators after he subjected it to oversight two years ago. The Securities and Exchange Commission hasn’t examined Madoff’s books since he registered the unit with the agency in September 2006, two people said, declining to be identified because the reviews aren’t public. The SEC tries to inspect advisers at least every five years and to scrutinize newly registered firms in their first year, former agency officials and securities lawyers said.

Madoff was charged on 11 December 2008 by federal prosecutors with a multibillion- dollar securities fraud. He is currently free on a $10m bond.

The Rise of Islamic Banking in a Time of economic Crisis

2008-12-10T20:56:00.000-08:00

By Thomas K. Grose

Posted December 10, 2008

Shopping for a business loan during a global credit crisis is tough work even if you're a fast-growing start-up like Ireland's Blue Ocean Wireless. And the scrutiny can cut both ways. Blue Ocean, which supplies wireless communications for merchant shipping, was giving a closer-than-normal look at whether possible lenders could be counted on amid the ongoing financial shakeout.

When the company got a $25 million loan this fall, it came from what might seem an unusual source: the Bank of London and the Middle East, or BLME, which strictly follows Islamic sharia law rather than conventional western banking practices. Read more

Banking competition still strong in Scotland

2008-12-10T20:35:00.000-08:00

LONDON, Dec 10 (Reuters) - Competition among banks in Scotland will remain strong despite the likely disappearance of the Edinburgh-based HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) following its merger with Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz), businessmen told lawmakers on Wednesday.

Iain McMillan, director of the Scottish Confederation of Business Industry (CBI), said there was still a vibrant banking sector.

"Clearly there is going to be one less high street bank if on Friday the HBOS shareholders vote in favour of the merger," he told the Scottish Affairs Committee.

"But there does seem to be that there is quite a lot of competition there, certainly in the big cities."

HBOS shareholders are due to vote on the government-brokered deal to create Britain's second-biggest bank on Friday. More than 95 percent of Lloyds investors have already voted in favour of the newly-named "superbank" Lloyds Banking Group.

The deal would leave the Royal Bank of Scotland, the Clydesdale and the Airdrie among the surviving Scottish banks.

The banks and financial services sector have been a key driver of the Scottish economy during the past decade, boosting growth by more than 90 percent since 1998 -- more than 7 percent a year.

Up to 14,000 jobs are predicted to go as part of the shake-out of the Scottish financial services sector, a report by the Ernst & Young Scottish Item Club said on Wednesday.

"The knock to our previous star performer in financial services makes this recession unprecedented," Hywel Ball, managing partner of Ernst & Young's Scottish practice, said.

Scotland is entering its first ever services sector-led recession, with its weakest performance since the early 1980s, the report added.

The growth rate is expected to be 0.9 percent in 2008, contracting to -0.4 percent a year later.

But in 2010, growth should recover to 1.5 percent and in 2011 to 2.5 percent.

The recession should be less severe in Scotland than the rest of the UK because of the country's reduced exposure to the housing market and a larger public sector, the Item Club said.

"Scotland's critical mass of banking, insurance and fund management skills, along with a reputation for low rates of labour turnover, may provide the base to retain or attract activities north of the border, with beneficial impacts to the wider services economy," Ball said.

"The key for all businesses is to be outward-looking and competitive. Those that can innovate and diversify will come out the other end of this recession tunnel in a stable or even better position than when they went in."

(Editing by Elaine Hardcastle)

Best balance transfer

2008-12-10T20:28:00.000-08:00

This is the no-hassle route; simply get the card, move your debts, then put the card away and pay it off, knowing it’s cheap. Most people will be better off going for a long term cheap ‘stable relationship’ rather than trying to be a credit card tart; as it only takes a few mistakes to make tarting very costly.

The gold standard for long term cards is a ‘life-of-balance' transfer deal; here the cheap rate lasts until the debt you've shifted is repaid in full.

BARCLAY PLATINUM
The current cheapest is barclay platinum card at 6.5% life of balance. You must shift your debts to it within 60 days of opening the account to get this rate, and anything over £5,000 is charged at 6.9%. Do beware though, this card operates a rate for risk policy.

CAPITAL ONEAt the same rate is Capital One Low Rate card locks in debts at 6.5% until your statement date in January 2011, so if you've already got a Barclaycard and can pay off within two years, this is a good alternative. The link provided takes you to a special deal via comparison BeatThatQuote; apply elsewhere and you might get a worse deal.

Alliance n leicester

2008-12-08T05:15:00.000-08:00

What we should be looking for in an easy-access savings account is:

A good interest rate. Typically, these days, that’s around 6%.

A great guarantee. These are almost impossible to find now.

True easy access.This means you can withdraw your money at any time without penalty.

Relatively safe from a possible bank collapse. This has become more important for many people these days.

Great guarantees used to be linked to the Base Rate, but with the best savings accounts now paying around double the Base Rate, these guarantees are redundant. Now a more attractive guarantee is a fixed rate. Problem is, these are not a common feature of an easy-access account. However, we can improvise an account that ticks all these boxes, and has the best interest rate:

Improvise yourself a perfect, table-topping savings account

We do this using Alliance & Leicester’s Premier Direct account. I say improvise, because it’s not a savings account at all, but a current account. However, it fulfills all our criteria:

A good interest rate. In fact it’s an outstanding interest rate at 8.5% AER. This wallops all the best easy-access savings accounts, which, with many rates falling 1.5% last week, are more like 6%.

A great guarantee. The rate is fixed for one year. That’s great when rates are expected to fall. What’s more, it’s extremely rare that the best easy-access interest rate available is fixed!

True easy access. Like just about any personal current account, you can take money out whenever you like without charge or penalty.

Relatively safe from a possible bank collapse. Alliance & Leicester is probably one of the safest banks in the UK at present.

Catch # 1

Of course there’s a catch. Two rather. Catch one is that you get this rate just on the first £2,500 in the account. Anything over this attracts a pathetic rate that’s not worth mentioning in a savings article. However, we can all still use this account to boost our average savings rate:

If you have no savings, or savings of £2,500 or less

If you have savings of £2,500 or less, you can earn the full 8.5% AER. Here’s how it works for you:

Interest earned on £2,500 in the Alliance & Leicester Premier Direct account

	Interest earned on £2,500	Interest rate after tax
Basic-rate taxpayer	£170	6.8%
Higher-rate taxpayer	£128	5.1%
Non-taxpayer	£213	8.5%

So, that’s between £170 and £213 interest in a year, depending on your tax status.

Even if you have no savings, you can still boost the interest you get by switching to this bank account. If you’re paid, say, £1,200 per month, you could expect maybe £6 or £7 interest per month, or £70 or £80 in the year. (It varies because the amount in your current account does.)

If you have £5,000 in savings

If you have £5,000 in savings, you could still boost your savings-interest rate from, say, 5.5% (most of you won’t be earning more than that at present) to 7% by moving half your savings to the Alliance & Leicester account. With inflation likely to fall somewhat over the next months, this switch should see you actually making a little money, rather than simply slowing the negative impact of rising prices.

Here’s how your earnings would look in a year:

Interest earned on £5,000

	Interest earned in an account paying 5.5%	Interest earned if you split savings between one account paying 5.5% and A&L’s paying 8.5%
Basic-rate taxpayer	£220	£280
Higher-rate taxpayer	£165	£210
Non-taxpayer	£275	£350

A further advantage for the safety conscious is that you’ve split your savings between banks. If one goes down, you’ll still have immediate access to the other half of your cash.

slashed base interest rate

2008-12-08T05:12:00.000-08:00

Base interest rates at 2%.

The Bank of England has slashed its base rate to 2%, matching the lowest level in its 314-year history. The last time the base rate was this low was in 1951, when Winston Churchill was in power, and the country was recovering from its massive war effort.

The battle of 2008 is The Great Credit War or The First World Recession. Individuals and businesses have too much debt. Banks are not willing to lend, for fear of exposing themselves to yet more bad debts. People are not spending, instead they are hoarding whatever spare cash they have. (Ed: It’s called saving, stupid, an ancient pastime last seen in the early 1980s!)

House prices continue to fall, plunging an annualised 16% in the year to November, the fastest rate in 25 years. With unemployment on the rise, banks unwilling to sell, some house prices being temporarily propped up by the government’s ridiculous emergency rescue for middle-class mortgage defaulters package.

But think ahead. Think ahead to the days when the economy gets back to some level of normality. Believe it or not, it will happen. Think about mortgage rates of maybe 4%. Think about how attractive the dividend yields on shares are compared to savings rates.

4 swindles to avoid that could save your money

2008-12-04T10:54:00.000-08:00

4 annoying swindles by banking sector.

1) ‘No interest' savings accounts

An ‘easy access' savings account should provide just that: easy, no-strings access to your cash when you need it. However, a growing number of so-called easy-access accounts actually have a nasty sting in the tail. If you withdraw any amount in any particular month, then you earn no interest at all on your entire balance for that calendar month.

So, if you withdraw £1 and leave, say, £49,999 in your account, then you earn no interest whatsoever during that month. Therefore, each monthly withdrawal costs a twelfth of your annual interest rate. Hence, three withdrawals (in three different calendar months) per year will reduce your savings rate by a quarter, taking a rate of, say, 6% a year to a more modest 4.5% a year. For the record, I've never opened an account of this kind -- and I suggest you think twice before doing so.

2) 118 numbers (directory enquiries)

In 2003, a whole host of competing 118 services were introduced by telecoms and other firms in a move thought to reduce the BT 192 monopoly. Alas, the outcome was tiresomely predictable: forced to spend millions on advertising, these companies enormously increased the cost of directory enquiries.

NEVER use rip-off 118 services; instead, try finding telephone numbers using google or BT's online Phone Book.

3) Bogus jobs

One remarkable ad claims, "I earn £14,775 per week and so can you". Yeah, right! This amounts to a salary of almost £770,000 a year, the sort of money earned by top sportsmen, financiers and business folk.

In reality, these adverts promise the earth and deliver very little. Some rely on multi-level marketing techniques which appear to offer unlimited potential, but usually fall short. All these ads ask you to send money upfront to learn the ‘secrets' of success -- money which usually disappears into a black hole. If you really want a better-paid job, ask for a pay rise, get some career counselling, or visit well-known recruitment websites.

6) Foreign-currency conversion fees

99% of credit cards charge a handling fee of 2.75% of the value of non-sterling transactions, such as overseas purchases and transactions on foreign websites.

In total, these sneaky ‘currency conversion charges' cost the Brits around £300 million a year. To dodge foreign-currency loading fees, stick to using plastic cards which don't charge extra for non-sterling purchases.

A tracker mortgage not a tracker mortgage?

2008-12-04T10:32:00.000-08:00

This isn’t a trick question. Worryingly for borrowers, there are conditions written into some tracker deals which mean they don’t always work the way you might think.

Typically, mortgage lenders offer a tracker at a set margin above or below the Bank of England base rate. So your tracker rate might be 2% higher than the base rate (BBR +2%). That means, today, when the base rate is 3%, your mortgage interest rate would be 5%.

If the base rate fell to 2.5%, the interest rate on your tracker should, in theory, drop from 5% to 4.5% and you’ll be quids in!

But, on the downside, if the base rate increased to 3.5% instead, your tracker rate would rise from 5% to 5.5% making your mortgage repayments more expensive.

Not surprisingly, tracker mortgages are pretty popular right now because it looks like further base rate cuts are on the cards. Experts certainly agree reductions are likely with some predicting the rate could fall as low as 2% -- or even 1% -- next year. (But, of course, there are no guarantees.)