Loans and Finance

Loans and Finance

Text

News and information about loans, money, debt, finance and business issues.

Friday, December 23, 2011

Taking The Piss

My bank informs me that a Euro cheque paid into my sterling account may take up to six weeks to clear.

Are they taking the piss?

Thursday, December 22, 2011

La Guerre Est Finie!



France has admitted defeat in the war of words which it started with Britain.

French foreign minister, Alain JuppƩ, told the Telegraph:

"The comments [of the past few days] went further than their authors wished, [but there is] no need for excuses on either side. 

There is not an ounce of doubt that Franco-British relations, that will become excellent once again as we have too much in common to allow them to deteriorate. 

I cannot imagine that we will push Britain out of the European Union."

I wonder if the war will reignite, when France is downgraded; as the head of France's stock market regulator (AMF) believes it will be?

Jean-Pierre Jouyet, is quoted in the Wall Street Journal:

"Keeping the triple-A would be a miracle, but I want to believe it's possible."

Joyeux Noel!

Wednesday, December 21, 2011

Banks Rush For Cheap Loans

Once it was just the hapless individual seeking a personal loan or mortgage who would rush for "cheap" loans.

Now the boot is on the other foot, as banks have been falling over themselves scrambling for the "cheap" three year loan deal offered by the ECB. Rates will be an average of the ECB rate over the next three years.

The ECB has loaned Euro489BN to 523 banks, significantly above the Euro310BN expected by the markets.

This of course has given the markets a temporary pre Christmas "pick me up". However, it does not cure the systemic failings of the Eurozone. The money will be used by banks to buy up sovereign debt and shore up their own finances; it will not be used to lend to companies or individuals in the wider economy.

Tuesday, December 20, 2011

The Dangerous Juncture

IMF chief Christine Lagarde has told a roundtable on Africa's economic future in Lagos that the world economy is at "a very dangerous juncture".

Despite this, as predicted, the European finance ministers failed yesterday to raise Euro 200BN for the IMF.

However, France is not depressed and has issued an upbeat prediction (or is it a wish?) that the UK (the country that it was criticising so publicly a few days ago) will provide funds to the IMF.

The Germans were also displaying a heavy handed attempt at buttering the Brits, up when Guido Westerwelle, the German foreign minister, described the UK as an "indispensable partner" and promising a "hands-off" approach to our financial services industry.

"My main message is for the British people – you can count on us, and we can count on you. There is no doubt that we want to make the next steps in the EU together as 27. I am here to show you that we are willing to build bridges over troubled water."

How the tone has changed, clearly things really are bad!

Monday, December 19, 2011

Lions Led By Donkeys

Another day, another conference in the interminable death mach towards the demise of the Euro.

Today, at 15:30 CET, European finance ministers will hold a conference call to discuss increasing the funding of the IMF by 200 billion euros.

Apparently this was agreed at the summit on 9th December.

However, the Bundesbank has already put the kibosh on anything tangible being achieved today; by stating that is sees "no urgent need" to reach a decision.

Just in case the markets don't get the message, that nothing tangible will be agreed, the German Finance Minister has done his best to undermine any residual confidence remaining.

Last night Wolfgang Schauble said:

"It is clear that the sooner and the more paid-in capital the ESM (European Stability Mechanism) has, the more it gains trust on the financial markets. My priority is to create trust."

"Trust" is not a word that is used very often when describing the feelings that the markets have for the "leaders" of the Eurozone.

However, this morning his colleagues from the Finance Ministry were quick to ensure that "trust" was killed ASAP, stating:

"It is not very likely we will pay the full contribution (in 2012)".

Thus ends the year, not with a bang but with a whimper.

The people of Europe are lions led by donkeys!

Friday, December 16, 2011

Quelle Dommage!



One week on from the "Summit To Save The Euro", and it appears that the much hyped "deal" is already unravelling before it is even signed.

Viz:

- Fitch has downgraded a number of banks, including BNP Paribas and Deutsche Bank.

- The leaders of Hungary and the Czech Republic have stated that they are ready to reject the planned treaty changes and implied move towards a centralised tax system. 

- Mario Draghi, the head of the European Central Bank (ECB), warned that the bond-buying programme was “neither eternal nor infinite”.

- Pedro Nuno Santos, vice-president of the Portuguese Socialist Party told MPs:

"We have an atomic bomb that we can use in the face of the Germans and the French: this atomic bomb is simply that we won't pay.

Debt is our only weapon and we must use it to impose better conditions, because recession itself is what is stopping us complying with the (EU-IMF Troika) accord. We should make the legs of the German bankers tremble."

- Greece has yet to agree a deal with its bondholders etc.

Despite the above, the French appear to believe their own hype. France's finance minister Francois Baroin said:
   
"It's true that the economic situation in Great Britain is very worrying and that we prefer being French rather than British on the economic front at the moment. 
 
We don't want to be given any lessons and we don't give any."

As I said last Friday:

"Cameron, over the coming days, will be vilified by many for his actions. However, time will prove that the Eurozone and its "leaders" are not up to the job of running single currency.

Oh, and by the way, the "new treaty" is not yet a done deal. Member states have to formally sign up to it, and at least Poland and Ireland are already discussing having to hold referendums before they sign up!
"

Thursday, December 15, 2011

BIS To Prosecute Sir Fred Goodwin?

Not everyone is as content and as passive as the Financial Services Authority (FSA) when it comes to the RBS debacle and the stewardship of Fred "the Shred" Goodwin and other members of the board.

The Telegraph reports that the head of the Insolvency Service at the Department for Business Innovation and Skills (BIS), which is already investigating whether RBS's former directors could face civil charges, has asked his legal team to check the criminal allegations too.

The FSA report report into the collapse of RBS noted that:
 
"RBS appeared uncertain of its capital position at critical times.
 
So, at best, compliance was only established on a retrospective basis."
 
In theory this is a breach of the Companies Act, which states that directors must be able to "disclose [their company's] financial position with reasonable accuracy at any time".
The website of BIS says it "often" prosecutes "malpractice by company directors in relation to the keeping and preservation of company accounting records".

Penalties are "punishable by a maximum penalty of 2-10 years imprisonment and/or a fine."

How embarrassing for the FSA, if BIS launches a criminal prosecution.

Wednesday, December 14, 2011

France To Be Downgraded

A week is a long time in politics.

Less than a week ago President Sarkozy of France was crowing over the EU's "historic" summit, that allegedly set in place systems and procedures that might one day resolve the Euro crisis.

The markets were less than impressed, and it is now expected that S&P will downgrade France's credit rating from Sarkozy's much prized AAA.

Why believe this rumour?

Well, Sarkozy seems to know that it is more than just a rumour because he is publicly stating that a downgrade doesn't matter!

BTW, a downgrade does matter, but don't spoil his day by telling him that!

As to the EU agreement fixing the Euro crisis, well it seems it hasn't.

The ECB's Klaas Knot has said that the Euro crisis will drag on for another two years, and that at least Euro 1 Trillion is needed to fix it.

Best not tell Sarkozy that either:)

Tuesday, December 13, 2011

Greece Heading For Default

When Angela Merkel said that there would be no more "haircuts", it seems that she was telling the truth.

Talks between the Greek government and bondholders have broken down.

What does this mean?

Greece is about to default on its debts.

No More haircuts!

Monday, December 12, 2011

The FSA's Report Into RBS

The long awaited, and much delayed, report by the Financial Services Authority (FSA) into the Royal Bank of Scotland (RBS) near collapse has finally been issued.

The FSA concludes there were “underlying deficiencies in RBS management governance and culture which made it prone to make poor decisions”.

The report highlights that Sir Fred Goodwin (the then CEO) lobbied to have a warning letter from the FSA altered, to remove references to the deterioration in his relationship with the FSA along with the FSA's concerns over RBS’s commercial property lending.

Incredibly only 6 members of the FSA were overseeing RBS in August 2007 (when it went ahead with the disastrous "dule diligence light" takeover of ABN Amro).

Lord Turner, chairman of the FSA, attempts to explain why, despite these failings, “no-one has been punished” for this failure of governance and oversight:
 
The fact that no individual has been found legally responsible for the failure begs the question: if action cannot be taken under existing rules, should not the rules be changed for the future.”

Blaming the "rules" is not sufficient excuse for inaction, given that the governance of RBS clearly failed on a spectacular level and that the oversight of RBS by the FSA was woefully inadequate.

Why is the FSA still in existence?

Friday, December 09, 2011

Britain Opts Out

David Cameron gave the EU Summit a hefty kick in the gonads yesterday, when he refused to sign up for the new treaty which, allegedly, will resolve the Euro crisis.


Cameron said:

"I said before coming to Brussels that if I couldn’t get adequate safeguards for Britain in a new European treaty, then I wouldn’t agree to it.  What is on offer isn’t in Britain’s interests, so I didn’t agree to it. 

Let me explain why this matters.  Of course, we want the eurozone countries to come together and to solve their problems.  But we should only allow that to happen inside the European Union treaties if there are proper protections for the single market and for other key British interests. 

Without those safeguards, it is better not to have a treaty within a treaty, but to have those countries make their arrangements separately.  That is what is now going to happen....

...The key question for Britain was: do you allow that to happen within the European Union treaties if you are not happy with the safeguards you are given?  I wasn’t prepared to agree that treaty, to take it to my Parliament in that way, and that is why I rejected signing this treaty today.  The right thing for Britain.  A tough decision, but the right one."

Sarkozy may well feel rather pleased with himself at the moment, as it means that in the new "two speed" Europe France will have greater sway. However, France and the Eurozone may care to consider that David Cameron's refusal to sign up was based on a shrewed assessment of whether the Eurozone and its "new treaty" is capable of resolving the Euro crisis.

Cameron has judged that the crisis will not be resolved by this course of action, and that signing up would be a disaster for the UK.

Here's what the others signed up to:

- Eurozone states' budgets should be balanced or in surplus.

- A similar rule will also be introduced in eurozone member states' own national legal systems; they must report national debt issuance plans in advance.

- As soon as a euro member state is in breach of the 3% deficit ceiling, there will be automatic consequences, including possible sanctions, unless a qualified majority of euro states is opposed.

None of the above will resolve the Eurocrisis, the ECB needs to act as a buyer of sovereign debt (ie print money); a role that it refuses to accept.


Cameron, over the coming days, will be vilified by many for his actions. However, time will prove that the Eurozone and its "leaders" are not up to the job of running single currency.

Oh, and by the way, the "new treaty" is not yet a done deal. Member states have to formally sign up to it, and at least Poland and Ireland are already discussing having to hold referendums before they sign up!

Thursday, December 08, 2011

Another Day, Another Euro Crisis Summit

As the "leaders" of the Eurozone gather in Brussels for yet another "crisis summit" to save the Euro, the markets are waiting expectantly for the ECB to announcer a rate cut today.

Live streaming of the ECB press conference (14:30 CET) can be viewed here.

As and when the summit is over, and the rate cut (if there is one) announced, will the crisis be over?

No.

There is no coherent plan in place or in draft to resolve the inherent flaws with the Eurozone structure.

We can expect many more "crisis summits", as such the best option is for people to invest in the firms that provide the catering and accommodation for the participants!

Wednesday, December 07, 2011

A Bank Run on a National Scale

Greece is currently experiencing a bank run on a national scale, as savers pull their funds from Greek banks.

Speigel Online quotes Georgios Provopoulos, the governor of the central bank of Greece:

"In September and October, savings and time deposits fell by a further 13 to 14 billion euros. In the first 10 days of November the decline continued on a large scale."

Adding:

"Our banking system lacks the scope to finance growth."

Will things improve for Greece, and the rest of the Eurozone, after this week's "make or break" European summit this Friday?

Probably not.

Reuters quote a German official, who claims that the German government is "not sure if summit will reach conclusion on using IMF funds in eurozone crisis" and "can't forsee running EFSF and ESM simultaneously". They are "more pessimistic than last week on overall summit deal".

Well then!

Tuesday, December 06, 2011

Athens December 2011 - The New Europe


Source The Telegraph

The Eurozone's Death by a Thousand Cuts

As Angela Merkel and Nicolas Sarkozy held a press conference yesterday, in which they rehashed the vague and unconvincing aspirations about the reform of the Eurozone that they have issued before (note as per usual, there was absolutely nothing said about what they will do to address the current crisis), economic reality slapped the Eurozone in the face.

Standard and Poor's issued a warning that 15 out of 17 Eurozone nations may suffer a credit downgrade. There is now a 50/50 chance that France and Germany will lose their AAA ratings.

Does this matter?

Yes it does, the much hyped busted flush aka the EFSF relies for its non existent funding on the ratings of the Eurozone. In the event that these are downgraded, funding for the EFSF (if any actually ever materialises) will become more expensive and harder to obtain.

Suffice to say, the political "leadership" of the Eurozone is foaming at the mouth with indignation that their political aspirations are being blown off course by economic reality. However, as we know, the politicians who claim to be "leading" the Eurozone don't care much for reality.

Meanwhile, according to @FGoria (an Italian financial journalist) Greece is about to exit the Eurozone:

"A Cleary Gottlieb lawyer to me: "We're almost ready to advise Greece in an exit from Eurozone. We began our job over one year ago"." 


Thanks to the inaction of the politicians, the Eurozone is suffering a long and protracted death of a thousand cuts.

Monday, December 05, 2011

HSBC Fined £10M

The UK financial services industry has yet again blotted its copybook. This time HSBC's name has been added to the "wall of shame".

The Financial Services Authority (FSA) have fined HSBC £10.5M, and ordered it to pay £30M in compensation, for mis-selling investment products to elderly customers needing long term care.

The FSA said that between 2005 and 2010, a subsidiary of HSBC, NHFA (previously known as the Nursing Home Fees Agency) advised 2,485 customers to invest in investment bonds, and other asset-based products, to fund long-term care costs.

The average age of these customers was 83, a sample review suggested that almost 90% of these cases were mis-sold.

The average amount invested per customer was about £115K.

The FSA ruled that this advice was unsuitable, because these products were designed to be held for a minimum of five years. However, many of these customers were not expected to live this long!

Coupled with the disgraceful mis-sale of this unsuitable product was the fact that the product had charges.

The Telegraph quotes Tracey McDermott, acting director of enforcement and financial crime said:

"NHFA was trusted by its vulnerable and elderly customers, It breached that trust to sell the unsuitable products. This type of behaviour undermines confidence in the financial services sector.

This penalty should serve as a warning to firms that they must have the right systems and controls in place to manage and identify risks when they acquire new businesses. A failure to do so can lead not only to detriment to their customers but to significant reputational and regulatory cost."

Well done HSBC for "enhancing" the reputation of Britain's financial services industry!

Saturday, December 03, 2011

The Naked Greed of Banks

Banks still seem to be operating with their heads in the sand.

"A customer borrowing £100 for 28 days without the consent of Santander would repay £200, for example.

That is the equivalent annualised percentage rate, or APR, of 819,100%.

Comparisons between banks and so-called payday lenders showed that the annualised percentage rate charged for borrowing £100 over 28 days varied from 969% to 819,100%.....

No payday loan lender charged an APR of more than 5,000% but two banks - Santander and Lloyds TSB - charged an equivalent APR of more than 300,000%. 

Santander told the BBC: "It's is confusing to compare payday loans with overdrafts on current accounts because an unauthorised overdraft charge is for unauthorised use of a current account while a payday loan is an agreed loan facility."

Barclays would charge a customer using a personal reserve - a pre-agreed emergency borrowing facility - £22 for every five consecutive working days they were in it. This means customers would pay £88 on top of the £100 capital after 28 days - an equivalent APR of 366,000%."

Source BBC

Friday, December 02, 2011

Merkel Nixes Eurobonds - Again!

Angela Merkel has again adamantly stated her opposition to Eurobonds as a means of saving the dying Euro experiment.

Quote: "Null and Void"

For good measure, Chancellor Merkel also gave a fulsome "Nein!" to the ECB acting as a lender of last resort.

She noted that the Euro crisis will take years to "sort out".

In terms of treaty adjustments and EU politics, she is correct. However, the Eurozone and global economy will not wait for years.

In the short term, whilst the politicians of Europe attempt to change treaties etc the markets need to be assuaged, otherwise the markets will tear the Eurozone apart.

Merkel and German politicians fret about "moral hazard". However, as I have stated on this site many times before, if your neighbour deliberate/carelessly sets fire to his house you help put the fire out first (lest it engulf your house as well) before you give him a kicking for being so careless.

Merkel et al need to bite the bullet and put a line under this issue now, with a major financial intervention by the ECB, new treaties in the coming years can address the issue of "moral hazard".


Thursday, December 01, 2011

Absent Without Leave

Nine crucial days to save the Euro. Emergency swap lines put in place overnight by the world’s top central banks. A new captain taking over a huge, recently-built ship in the middle of a raging storm. If there was ever a time when publicly-elected representatives should be grilling the head of the European Central Bank, this is it.

So when Mario Draghi arrived at the European Parliament Thursday, your correspondent was amazed to see the former Goldman Sachs executive playing to a virtually-deserted house. A rough leaning-over-the-balcony headcount gave 35 MEPs out of 736, as per the attached photo (Draghi is just to the right of the blue lectern in the centre, sitting in the front row).

Source The Wall Street Journal

The Threat from Europe

Sir Mervyn king, Governor of The Bank England, has spoken forthrightly this morning about the threat from Europe.

Using phrases such as:

- "Exceptionally perilous conditions";
- "Major solvency concerns";
- "Systemic crisis"

Clearly shows that he is very worried, and that the threat to the UK from the Eurozone crisis is worsening.

Sir Mervyn has called for UK banks to increase their capital reserves (via cutting dividends and bonuses, not cutting lending), not because they are under capitalised (they are better capitalised than European banks) but because it is "sensible and desirable to build resilience to threats to UK stability."

The "threat" of course comes from Europe.

How will this all end?

Here are six possible scenarios:

1 The Euro is devalued in order to keep all member states together and ease the pain on PIIGS.

2 PIIGS leave the Euro en masse, and in an "orderly" fashion. The Euro remains relatively stable as remaining countries in it are stable

3 PIIGS leave the Euro one by one in a disorderly fashion, as markets push Euro down and yields up.

4 Eurozone leaders create a "big bazooka" to deal with the short term confidence issue, and move towards full fiscal/political union in medium term (the Euro stabilises).

5 Eurozone leaders fail to create big bazooka but continue to work towards medium term fiscal union, markets tear Eurozone apart.

6 Germany leaves Eurozone and the remaining members devalue Euro.

To my view options 3, 5 or 6 are the most likely.