Loans and Finance

Loans and Finance

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

Friday, February 28, 2014

Mt Gox Collapses

As expected, the Bitcoin exchange Mt Gox has gone under and has filed for bankruptcy protection. It has debts of around $63M.

As per Reuters:
"A document circulating on the internet purporting to be a crisis plan for Mt. Gox, said more than 744,000 bitcoins were "missing due to malleability-related theft" and noted Mt. Gox had $174 million in liabilities against $32.75 million in assets. It was not possible to verify the document. If accurate, though, it would mean about 6 percent of the 12.4 million bitcoins minted would be considered missing."

Question For RBS

Why on earth have you more than doubled your lending to Chinese banks?


Ukraine Raids Foreign Currency Deposits

Amid the allegations of an armed invasion by Russia in Crimea, Ukraine's Central Bank has announced that it will return foreign currency deposits in Ukrainian Hryvnias unless the withdrawal requested is UAH 15,000 (approx £800) or less per day; ie Ukraine has raided the foreign currency deposits.

Needless to say the Hryvnia, until that announcement, was collapsing.

Stepan Kubiv, the newly appointed Governor of the National Bank of Ukraine, made the following statement yesterday:
"I have just been appointed as Governor of the National Bank of Ukraine.

The National Bank of Ukraine has professional staff.

The vitally important systems, including the SEP, NSMEP, and operations in the open market, are operating as usual.

We are in control of the situation in the banking sector and maintain two-way communication with all the banks, regardless of their size.

We have analyzed the composition of the gold and foreign exchange reserves of the National Bank of Ukraine, which comprise highly liquid assets.

I feel confident that the situation is under control and manageable.

In my view, the most important tasks facing the banking system are protection of depositors' interests, the resumption of talks with all foreign creditors, primarily, with the IMF, once the new Ukrainian government is formed; development and approval of an ambitious and clear plan designed to reform the economy and the financial sector.

With this in mind, the National Bank of Ukraine shall take the following urgent steps.

The central bank stands ready to provide liquidity, including cash, to banks in the amount required, while ensuring that loans come with tougher conditions on transparency and control over their utilization.

The National Bank of Ukraine is set to take a tough line on those banks that violate the required reserve ratio and arrant speculators in the foreign exchange market. I feel confident that the measures taken by the National Bank of Ukraine will calm the markets and reduce devaluation expectations.

In my view, the resumption of talks with foreign creditors and restoration of investors' confidence in our country are crucial.

With financial assistance provided by foreign creditors, Ukraine will build up a substantial financial buffer that will help stabilize the situation in the financial sector and the entire economy.

The National Bank of Ukraine is ready to actively participate in the development of the reform plan and play a key role in its implementation. This plan based on the principle of transparency should become the key and top priority task of the Parliament, the Government and the National Bank of Ukraine. The above-mentioned measures are bound to translate into key drivers for economic growth.

I feel confident that this plan will receive support from the wise Ukrainian people."
Good luck to him!

Thursday, February 27, 2014

£46BN Down The RBS Toilet


Royal Bank of Scotland (the bank destroyed by Fred Goodwin and his cronies) has, since it was bailed out in 2008, accumulated losses of £46BN. That sum is the same as the amount pumped into it in return for an 81% taxpayer stake in the bank.

RBS made a loss last year of £8.2BN, taking its cumulative losses to £46BN.

Losses at the bank include a £3.8BN charge for customer mis-selling compensation, and a £4.8BN impairment charge against the continued run down of its bad loans.

Ironically, despite continuing to lose money, the bank has set aside £576M to pay staff bonuses for 2013.

Wednesday, February 26, 2014

Growth and Economy Stabilising

The Office for National Statistics (ONS) has stated that the economy grew 0.7% in Q4 2013. However, overall growth for 2013 fell from 1.9% to 1.8%.

Business investment  grew 2.4% in Q4
Exports rose 0.4% in Q4
Consumer grew 0.4% in Q4

These figures indicate that the economy is stabilising, and that growth may be becoming sustainable (until the next economic shock).

Tuesday, February 25, 2014

The Risks of Bitcoin

Bitcoin, the virtual currency used by traders, speculators and those wishing to duck under the watchful gaze of the police and financial authorities, has suffered a few setbacks recently.

Aside from Bitcoins falling in value, not great news for those who speculated that it was an easy way to make money, a major Bitcoin exchange platform (Mtgox.com) has gone offline this morning.

Seemingly the exchange has been hit by technical issues, and recently (7 February) halted all customer withdrawals of the digital currency after it spotted what it called "unusual activity". MtGox said that it had found a loophole that thieves could use to fool the transaction process into sending double the correct number of Bitcoins.

To add to MtGox's woes, six other major Bitcoin exchanges (including Coinbase and BTC China) issued a joint statement distancing themselves from MtGox. Quoted by the BBC:
"This tragic violation of the trust of users of MtGox was the result of one company's actions and does not reflect the resilience or value of Bitcoin and the digital currency industry.

As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today."
The suspension of the site has exacerbated the decline in value of Bitcoin, as a currency (virtual or tangible) is of no use to man nor beast if it cannot be exchanged for goods, services or other currencies.

MtGox claims that it will resume activities soon. However, wired.com claims that MtGox is "insolvent" and has lost 744,408 Bitcoins (worth about $350M).

As with all tangible currencies, if people lose faith in the currency or the institutions that manage/control the currency then that currency will lose value and people will not wish to hold it or use it.

Bitcoin is unregulated and uncontrolled, ie it is like the Wild West, that is part of its appeal. However, that lack of control and regulation is also its Achille's heel. Those who hold or use Bitcoins do so at their own peril, no central bank will ride to the rescue if people's Bitcoin savings are wiped out.

Monday, February 24, 2014

The Ukraine Powder Keg

Ukraine has issued a warrant for the arrest of ousted President Viktor Yanukovych for mass murder.

Additionally the new interim Finance Minister, Yuriy Kolobov, has said that Ukraine needs around $35BN in urgent foreign aid and asked for an international donors' conference to be held. Ukraine has debts of around $73BN of which $6Bn need to be paid this year.

Russia had recently agreed to provide $15BN. However, Russia is now spitting feathers at the turn of events in Ukraine and has recalled its ambassador. As such it is highly likely that it will withdraw that offer. Indeed, there is a very real danger that it will send troops into the Eastern part of Ukraine to "protect" the ethnic Russians who live there.

Meanwhile the BBC report that the EU is sending Catherine Ashton to discuss EU support "for a lasting solution to the political crisis and measures to stabilise the economic situation". Regrettably she has been a disaster in her role, and is not up to the job of handling this extremely volatile situation.

Friday, February 21, 2014

Rise In Interest Rates In 2015?

Martin Weale, a member of the Bank of England's rate-setting Monetary Policy Committee, has said that UK interest rates are likely to rise in the spring of 2015.

I would take that statement with a pinch of salt, until it is clear that the recovery is sustainable the Bank will not risk raising rates. I would also note that 2015 is an election year, a rate rise in the run up to the election would be politically unacceptable (even if the Bank is "independent").

Wednesday, February 19, 2014

Unemployment falls by 0.4%

The Office for National Statistics (ONS) has published the labour market statistics for October to December 2013:
  • The percentage of people aged from 16 to 64 who were in work (the employment rate) was 72.1%. The employment rate is up 0.3 percentage points from July to September 2013 and up 0.6 from a year earlier. There were 30.15 million people in employment aged 16 and over, up 193,000 from July to September 2013 and up 396,000 from a year earlier.
  • The percentage of the economically active population aged 16 and over who were unemployed (the unemployment rate) was 7.2%. The unemployment rate is down 0.4 percentage points from July to September 2013 and down 0.6 from a year earlier. There were 2.34 million unemployed people aged 16 and over, down 125,000 from July to September 2013 and down 161,000 from a year earlier.
  • The percentage of people aged from 16 to 64 who were economically inactive (the economic inactivity rate) was 22.1%, little changed from July to September 2013 and from a year earlier. There were 8.93 million economically inactive people aged from 16 to 64, little changed from July to September 2013 and from a year earlier.
  • Total pay rose by 1.1% compared with October to December 2012. Regular pay rose by 1.0% over the same period.
The unemployment rate is down, but the rate of decline in unemployment is also slowing (ie for the moment it appears to be bottoming out at around 7% ). This chimes with Mark Carney's (Governor of the Bank of England) recent statement noting that the recovery is not secure.

Thursday, February 13, 2014

Lloyds Returns To Profit

Lloyds bank (which is 33% owned by the taxpayer) returned to profit in 2013, it made a pre-tax profit of £415M in 2013 compared with a £606M loss in 2012.

Antonio Horta-Osorio (its CEO) is entitled  to a deferred shares bonus worth £1.7M, and the overall pool of bonuses for staff has increased to £395M from £365M the previous year.


Lloyds expects to apply to the regulator in the second half of this year to pay a dividend in 2015, its first since 2008.

The return to profit and the resumption of dividend payments means it likely that more shares will be returned to the private sector in the near term, all the more so because George Osborne has said he wants to sell more shares before the next election in 2015.

Wednesday, February 12, 2014

Whistleblower Alleges RBS Deliberately Destroyed Viable Businesses


For the first time a whistleblower has revealed how the Royal Bank of Scotland allegedly deliberately destroyed perfectly viable small businesses - in an effort to save the bank during the credit crisis.

Barclays Cuts 12,000 Jobs

Barclays is to cut 12,000 jobs from its 140,000 global headcount. The UK will bear the brunt of the cuts, with 7,000 expected to lose their jobs.

Bank of England's Forward Guidance

Mark Carney, Governor of The Bank of England, is due to issue the Bank's inflation report at 10:30 today.

Mr Carney is expected to alter the Bank's forward guidance, and adjust the rate of unemployment that will trigger a rise in rates.

Six months ago Mr Carney unveiled the Bank's policy, that stated that interest rate rises would only be considered after unemployment fell to 7% (this was not expected until 2016. However, unemployment is now at 7.1%.

Pundits expect the trigger rate of unemployment to be reduced to between 6% and 6.5%.

Monday, February 10, 2014

Theft of Barclays Database

Barclays has once again hit the headlines, this time its moment of fame comes from allegations that a database of 27,000 customers has been stolen and sold to rogue City traders.

Seemingly the files contain details of customers' earnings, savings, mortgages, health issues and insurance policies.

The leak was exposed by an anonymous whistleblower who passed the Mail on Sunday a memory stick containing files on 2,000 of the bank’s customers.

A Barclays spokeswoman is quoted by the Guardian:
We are grateful to the Mail on Sunday for bringing this to our attention and we contacted the information commissioner and other regulators on Friday as soon as we were made aware.

Our initial investigations suggest this is isolated to customers linked to our Barclays financial planning business which we ceased operating as a service in 2011.

We will take all necessary steps to contact and advise those customers as soon as possible so that they can also ensure the safety of their personal data.

A spokesman for the information commissioner’s Office said it was seeking further details and working with police on the case.

Friday, February 07, 2014

German Court Refers Complaint Against ECB to European Court

The German Federal Constitutional Court has decided to refer a complaint against the ECB's "unlimited" bond-buying programme to the European Court.

The German Federal Constitutional Court stated:
"In the view of the Senate, there are important reasons to assume that it exceeds the European Central Bank’s monetary policy mandate and thus infringes the powers of the Member States, and that it violates the prohibition of monetary financing of the budget."
It will rule on the legality of the eurozone's permanent bailout scheme, the European Stability Mechanism (ESM), on March 18.

Thus the Euro continues to endure a period of uncertainty, which needless to say negatively impacts on its "value" when measured against other currencies, and plays into the hands of the monetarist hawks in the Northern region of the eurozone who wish to increase rates at the expense of the millions who are unemployed in the Southern region of the eurozone.

Thursday, February 06, 2014

Whither Rates?

Today sees both the Bank of England and ECB announcing their decisions on their respective interest rates.

Whilst it is more or less certain that the UK's rates will remain unchanged, there are some expectations of a reduction in ECB rates given the dire levels of unemployment in the Southern region of the eurozone.

However, those in the Northern region of the eurozone (who are in effect in charge of the ECB) are more than content with their lot and a strong Euro; ie they will not be pushing for a cut in rates or quantitative easing anytime soon.

Wednesday, February 05, 2014

Tube Chaos

Businesses in London are suffering today, as a result of the chaos brought abut by the Tube strike.

Further chaos is expected on Friday when there is a second strike.


Monday, February 03, 2014

Lloyds Banking Group's £10BN PPI Bill

Lloyds Banking Group's bill for PPI mis-selling claims has risen to almost £10BN, after the group raised its provision for compensation payments by another £1.8BN.
However, the group still expects to make a "small" profit for 2013; the projected "underlying" profit being around £6.2BN.

By happenstance it is now preparing to sell some of the 33% shareholding that rests in the hands of the taxpayers, back to the taxpayers. The earliest the sale could be would be March this year, as and when the 2013 audited results are released.

Antonio Horta-Osorio, chief executive of Lloyds, is quoted by the Telegraph:
"Our profitability, despite legacy issues, is testament to the strength of our business model and the commitment of our people, and has enabled the UK government to start to return the bank to full private ownership."