Banking inquiries show the extent of risk taking
February 26, 2009 | Leave a Comment
Paul Moore has been in the news this week claiming he had been sacked by the HBOS boss, Sir James Crosby, for arguing that the bank was taking too many risks. Sir James resigned from his role assisting the Financial Services Authority arguing that, whilst he feels these claims are unfounded, he does not want to make the FSA’s role any harder in these challenging times.
Earlier this week several bank leaders publically apologised for their role in the financial crisis. For many of us it is a relief after watching the horror of the world banks’ decisions unfold around us to witness some degree of culpability for their decisions…however sincere or not those apologies. Whilst the silence was almost deafening in the immediate aftermath of the global finacial crisis, it was hard to have any respect for those who were still rewarded with bonuses for spectacular failure.
Could setting up a “bad bank” thaw out the money markets?
January 17, 2009 | Leave a Comment
Gordon Brown has recently suggested to German chancellor Angela Merkel in Berlin that the setting up of a “bad bank” (to take on all of the risk and bad debts of the high street banks and so free up money markets) may be an option. It has even been suggested that Northern Rock may be used for this purpose.
This suggestion has come hot on the heels of the news in the US this week, that the government has injected $20 billion into Bank of America, and guaranteed bad assets to the tune of $118 billion, as the US Treasury took a stake in the bank. Clearly, argued Brown, the banks are not going to lend freely again until they know what to do with all of these bad debts.
Partial or complete nationalisation is becoming a growing trend in trying to resolve the global financial crisis. This has also been seen in Ireland last night when the Irish government nationalised Anglo Irish Bank to protect it after a recapitalisation plan was felt to be insufficient to resolve its problems.
It is evident that much more stringent monitoring of the financial institutions is going to be vital in protecting against any recurrence of this financial crisis. Perhaps partial or complete nationalisation is a good step towards the increased accountability of banks?
Global banking crisis deepening further
January 15, 2009 | Leave a Comment
Well, who’s enjoying the 2% bank interest rates? They seem to be at an all time low (even though the U.S and Japan are “enjoying” 0% interest rates) but there still seems to be a crisis over whether money will be loaned to medium and small businesses in order to get tham over the cash flow crisis that the recession and credit crunch have brought.
A big part of the problem of the global banking crisis deepening further is that global inter-bank lending has ground to an all time low and that was an important part of the availability to funds to lend to consumers and businesses. There also seems to be a lot of debate in the U.K as to who should shoulder the risk for future bad lending decisions…the banks or the government. If the risk is to be shared, the public are concerned that tax payers will be carrying the can for bad lending decisions by the banks.
In the U.S, JP Morgan Chase have announced a 76% drop in quarterly profits due to writing off bad debts and re-directing funds to buffering themselves against the worst of the global financial crisis. Mitsubishi UFJ Financial Group (Japan) have meanwhile reported $3.2 billion loss on its securities portfolio in the third quarter of its financial year ….mainly due to the challenges being faced in the Japanese stock market. Their situations seems typical of major financial institutions globally….so it seems hardly surprising that international inter-bank lending has ground to an all time slow.
Central bank drops interest rates again. What does this mean?
December 9, 2008 | Leave a Comment
Central banks drop interest rates again.
The Central Banks dropped interest rates again (having only left a very short period since the last interest rate cut). What does this mean? Whilst we are used to occasional announcements saying the central bank has dropped / increased interest rates by X %, we are used to just thinking about it in terms of “Great! That changes my mortgage payments by $x or £y.” then forgetting about it.
So why should alarm bells be ringing when interest rates are cut this fast?
For a start, this is totally unprecedented and shows the extent to which the banks are scared stiff by the nightmare that they have caused. They are not passing on these interest rate cuts to the extent that was hoped which means they are covering their own backs first.
This global financial crisis that we find ourselves in has not even begun to reveal its full enourmity yet. On the front line in industry and retail we are hearing of long standing businesses that are leading brands going to the wall. A recent survey of recruitment consultants has revealed that the job market is heading downhill at a terrifying pace. U.S manufacturing is at a 26 year low. In Italy, industrial electricity consumption is down by almost one third. $70 trillion of cash has been injected into economies world wide and virtually disappeared into thin air!
Whilst interest rates being cut can have a positive impact by preventing this vicious circle from travelling deep into the economy, they are certainly not going to stop the process. It feels we are all on a rollercoaster ride and, like kids unable to determine the path of the ride and scared by the prospect, we are yelling “Stop the ride I want to get off!” But it can’t happen. The switch to start the ride was pulled by the banks that started selling dud mortgages. As we keep doing loop the loop past the same horrors revealed in different countries, even the engineers of this ride don’t know where it will end or how to stop it. We all have to just hold onto our hats and hope for the best. The world will seem quite a different place when we get off.
“Woollies” – that great high street institution – in receivership. I can’t believe it!
November 27, 2008 | 1 Comment
I don’t know about you, but I was shocked yesterday by the announcement that Woolworths was going into liquidation with an enormous £385 million of debts that have been prevented from getting any larger and have forced them to look at their options.
Everywhere I went this morning, people were talking about it. Generations have bought their pick and mix and bargain toys there as well as those weird and wonderful household items that you just didn’t seem to be able to find anywhere else. I salute you Woolworths for all that you have been over the years. You will be a sadly missed presence in our town centres!
As the news was announced last night, there were other casualties of the credit crunch fallout looking like they were heading the same way – MFI, Dolcis, Ethel Austin to name but a few AND THIS IS BEFORE CHRISTMAS!!!! If businesses that have weathered out many a recession are going to the wall now, where will it all end as the post Christmas slump in spending comes around.
I don’t know about you but I think the enormity of this global financial crisis is starting to sink in. Yes. I have been watching the news. I know about the extent of the financial crisis. It is the hidden depths of its impact that is starting to reveal itself….and, as I meet people in the North of England who have been laid off from different jobs more than once in the last few months, I don’t think I’m alone in wondering where it will all end.
Is the U.S. about to lose its financial super-power status?
September 25, 2008 | Leave a Comment
We are living in remarkable times. Who would have expected President George Bush to call an unprecedented emergency meeting with his prospective sucessors, John McCain and Barack Obama. In their time of aspiring to the U.S. Presidency, the eyes of the world are upon these two men to see how they operate in consultation with the President examining what can be done to minimise the acute financial shockwaves travelling through the world with their epicentre on Wall Street.
George Bush has a cunning 700-billion-dollar Wall Street rescue plan. The question is, will Congress buy it? “Without immediate action by Congress , America could slip into a financial panic,” the president said. “Ultimately, our country could experience a long and painful recession.” We are talking major impact here….nest eggs wiped out, pension plans becoming worthless, millions of unemployed, home prices in freefall….the list goes on.
The European perspective….
Meanwhile, German Finance Minister Peer Steinbrueck has highlighted his belief that the responsibility for the global financial crisis rests firmly at the United States’ feet. Huge bonuses and the drive for massive profits in order to achieve them have meant a lack of financial regulation followed by an almighty freefall as the credit crunch hits hard.
“The United States will lose its super-power status in the world financial system. The world financial system will become more multi-polar,” he said. So what will this mean for the average person on the street? Clearly, newly tightened controls will make borrowing for a mortgage or other household purchases will become even harder to come by. This, in itself, will have the knock on effect of making house prices fall (with negative equity issues for many home owners) and reducing consumer expenditure – especially on larger items. However, as we invest in pensions and savings for our futures, greated financial control and security are going to be what a very skittish market is looking for. We are on the brink of a major world recession and it is starting to look as if there is no avoiding it what we can do, however, is learn by out mistakes and try to prevent this from ever happening again..
