NEWS,07.01.2013

BoE unlikely to resume printing money

The Bank of England is unlikely to revive its money-printing campaign, a Reuters poll showed on Monday, even though the British economy is teetering on the brink of another recession.Economists in the survey attached a median 45% chance of the central bank resuming the quantitative easing programme which it suspended in November. However, policymakers are likely to pin their hopes on a new scheme to encourage bank lending for reviving the economy as the government makes deep spending cuts."We are going to see a continuation of difficult circumstances of growth remaining weak and inflation staying above target," said Simon Hayes at Barclays Capital.With rates near zero, the BoE has already purchased £375bn of British government bonds meaning approaching half of all conventional gilts belong to the central bank. On top of this exercise to push money into the economy, it has also launched a Funding for Lending Scheme (FLS), providing cheap credit to banks to encourage them to offer loans to customers.While the benefits of the FLS are not expected to filter through to the economy until later this year, data released on Friday showed November mortgage approvals were at their highest monthly total since last January. Banks polled for the BoE's quarterly Credit Conditions Survey said they would increase the availability of mortgages significantly in the first three months of 2013 after a record rise in the three months to December 11. "Signs that the Funding for Lending Scheme is gaining traction hint at some economic recovery over 2013 which we judge makes a further increase in the asset purchase target less likely," said Philip Shaw at Investec.The Bank's hands have been somewhat tied as inflation has held persistently above its 2% target and is not expected to fall below that for a long time. But the poll of 64 economists did not foresee any interest rate rise from the record low 0.5% until July 2014 at the earliest. Only a handful of policy-watchers in the poll, taken over the past week, saw a rate rise before then. One particularly hawkish forecaster is looking for an increase in August but there is no other prediction of higher rates in the poll before the second quarter of 2014.Work in progressGlobal regulators gave banks four more years and greater flexibility on Sunday to build up cash buffers so they can use some of their reserves to help struggling economies grow. Bank of England Governor Mervyn King, who steps down later this year, said the new rules will give the banking system more room to finance a recovery.King will be replaced by Canadian central bank chief Mark Carney in July, who is leaving behind an economy which weathered the global financial crisis quite well to take on one struggling to regain its footing. UK manufacturing activity hit a 15-month high in December, a survey showed last week. However, later figures indicated Britain's dominant service sector shrank for the first time in two years, suggesting the economy as a whole slipped back into contraction in the last three months of 2012. Britain bounced out of its second recession in four years in the third quarter of 2012, supported by London's hosting of the Olympic Games and extra working days, but it is forecast to achieve only tepid growth if any for some time. This is thanks partly to the government spending cuts and tax rises to tackle the budget deficit. The economy has grown little since 2010 when a coalition of Conservatives and Liberal Democrats came to power.Britain has struggled as the chances of recovery in the eurozone, its main trading partner, have faded further into this year. Economists are divided over whether the European Central Bank will cut its policy rate in the next few months.

Sarb appoints Bradlow to head new dept

The South African Reserve Bank (Sarb) said on Monday that it had appointed Daniel Bradlow as the head of the newly-established international economic relations and policy department‚ with effect from February 1.Bradlow’s key responsibilities would include providing strategic direction to the department‚ monitoring and analysing developments in international and regional institutions and forums.Bradlow is currently the South African Research Chairs Initiative professor of international development law and African economic relations at the University of Pretoria and professor of law at American University Washington College of Law.He has worked as a consultant for a number of international and regional development banks‚ international organisations‚ government agencies and foundations and has conducted training programmes for officials from central banks‚ ministries of finance‚ and other government departments from a number of countries in Africa and Asia.His experience includes research and writing about the International Monetary Fund‚ the World Bank‚ G20‚ international financial standard setting bodies‚ the legal aspects of debt and financial management‚ and aspects of negotiating and structuring of international financial and business transactions. He has also served on expert working groups that have been involved in policy-relevant research and advocacy activities related to the governance of various international institutions.He was educated at the University of the Witwatersrand; Northeastern University; Georgetown University; and holds an LLD (international development law) from the University of Pretoria.

French labour deal remains elusive

 

French employers will reject moves to overhaul rigid labour rules unless unions drop demands to tax short-term contracts more heavily than long-term ones, their leader said on Monday, suggesting talks this week could fail.Socialist President Francois Hollande called on employers and unions to strike a deal by the end of 2012 that would grant companies more flexibility in hiring and firing while giving more job security to workers on short-term contracts.Talks between the Medef employers' union and main labour groups spilled into January after talks broke up in December without a deal, with each side accusing the other of making unacceptable demands. The government says it will impose its own deal if the two sides fail to reach an agreement.As talks resume this week, Medef chief Laurence Parisot said employers would be unable to sign a deal imposing higher costs for hiring on seasonal or short-term contracts.French per unit labour costs are currently among the highest in the European Union, above Germany but below Denmark, and are often cited by economists as a brake on growth and a factor in maintaining chronically high unemployment."At this point in our discussions, including talks we had all day yesterday, on Sunday... the Medef will not sign the deal," Parisot said on Radio Classique. "The issue of taxation for short contracts is a vital question."Parisot accused Hollande's Socialist government of indirectly interfering in the talks to the employers' disadvantage.The government is pushing for a deal to address concerns that France has a two-speed labour system, with those on long-term job contracts enjoying too much job security and those on short-term contracts too little.FlexibiltyEmployers want an agreement that will allow companies to adjust their wage burden more nimbly in a downturn, as well as simplifying the rules about firing workers to make the process more predictable and keep costs in check.Two hardline unions reject measures to add flexibility. All five unions represented at the talks want greater job security for workers on flimsy contracts, calling for employers who use them to be penalised by paying higher taxes or more unemployment contributions.Unions reject greater flexibility in work contracts and demand more job security for short-term workers. They want employers using short-term contracts to pay more tax or higher contributions to the national fund that pays out unemployment benefits.Labour Minister Michel Sapin said the government would present a draft law regardless of the talks' outcome. However, he expressed faith in a deal being reached by January 11, when talks are due to conclude."They're negotiating, it's their responsibility, and I'm letting them negotiate," he told Canal+ television.Hollande's government has enough Socialist and allied lawmakers in parliament to pass a labour reform.But without a deal between unions and employers, it will be more exposed to criticism from both sides and unions may influence left-wing lawmakers into watering down any reform.The head of the CGT union, Bernard Thibault, said last week he would oppose more labour flexibility with "all his force".

2012 London jobs nosedive

The number of new jobs created in the City of London fell by more than a third last year as financial firms focused on cost-cutting, research by recruitment agency Astbury Marsden shows.The agency estimates that 35 115 new City jobs were created in 2012, down 35% on the year before. Only about 800 new jobs were created in December, it said, compared with 1 490 in December 2011.Banks worldwide are shedding jobs as stricter regulations and eurozone worries take their toll on trading income and investment banking operations."2012 was a busy year for HR departments across the City as cost-cutting remained a key focus for senior management and board members throughout the year," Mark Cameron, chief operating officer at Astbury Marsden, said."Tighter regulation including higher capital requirements forced up costs at a time when revenues dipped due to a number of factors, including a continued weak economy and less trading activity," he added.Cameron said that cuts had been particularly significant in 2012 because banks had implemented major restructuring, including the winding down of entire business units. Swiss bank UBS axed 10 000 staff and wound down its fixed-income business. On a more optimistic note, Cameron said that most of the obvious and immediate cuts have already been made and the worst may be over.The recruitment company also said that hiring prospects could be improved by signs that lawmakers are getting to grips with the euro zone crisis and by the deal struck by US politicians to delay budget spending cuts and avoid hefty tax increases.

China starts building nuclear power plant

A Chinese state news agency says the country has begun building a new nuclear power plant after lifting a construction moratorium imposed following Japan's Fukushima disaster.The Xinhua News Agency says the 3 billion yuan ($475m) power plant in Rongcheng, an eastern coastal city in Shandong province, will incorporate advanced safety features developed by Chinese researchers. China is the world's biggest energy consumer and nuclear power is a key element in official efforts to curb surging demand for fossil fuels.Beijing suspended approval of new nuclear power plants to carry out safety reviews following the Japan's 2011 earthquake and tsunami that wrecked the Fukushima plant. That moratorium was lifted in October.

 

Liquidity rules for banks eased

The world's top banking regulatory body on Sunday eased the first global liquidity rules scheduled to start applying to banks in 2015 and aimed at improving their ability to survive financial crises.The Basel Committee on Banking Supervision said at a press conference here that it had widened the definition of the easy-to-sell assets that banks will have to hold to survive periods of stress.The Basel III standards had been initially proposed in 2010 but banks and financial institutions have since lobbied intensely to make the rules more flexible and result in lower costs for the sector. The details of the Liquidity Coverage Ratio (LCR), which was drafted to avoid a repeat of the 2008 banking crisis and unanimously endorsed on Sunday by the Basel group's top oversight body, give the banks a reprieve. Its provisions include a much broader definition of the minimum assets every bank needs to hold, making it less costly for them to maintain the required buffer. "The changes to the definition of the LCR, developed and agreed by the Basel Committee over the past two years, include an expansion in the range of assets eligible as HQLA (high quality liquid assets)," the committee said. The new LCR's full details will also be fully implemented only in 2019, instead of 2015 as initially proposed."Specifically, the LCR will be introduced as planned on 1 January 2015, but the minimum requirement will begin at 60%, rising in equal annual steps of 10 percentage points to reach 100% on 1 January 2019," the Basel group announced. Mervyn King, Chairman of the Basel group's top oversight body and Governor of the Bank of England, described the agreement announced Sunday as "a very significant achievement.""For the first time in regulatory history, we have a truly global minimum standard for bank liquidity," said King.The Basel Committee brings together representatives regulators from 27 nations."Importantly, introducing a phased timetable for the introduction of the LCR, and reaffirming that a bank's stock of liquid assets are usable in times of stress, will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery," King said.Stefan Ingves, chairperson of the Basel Committee and of Sweden's Sveriges Riksbank, said the global regulator could now focus on the Net Stable Funding Ration, another pillar of the Basel III reforms."The completion of this work will allow the Basel Committee to turn its attention to refining the other component of the new global liquidity standards, the Net Stable Funding Ratio, which remains subject to an observation period ahead of its implementation in 2018," he said.

Big banks pay billions over foreclosures

Ten mortgage servicers agreed on Monday to pay $8.5bn to end a case-by-case review of foreclosures required by US regulators. Banks including Bank of America, Citigroup, JPMorgan, Wells Fargo and six others will pay $3.3bn directly to eligible homeowners, and will also pay $5.2bn in loan modifications and forgiveness, regulators said. The Office of the Comptroller of the Currency and the Federal Reserve Board said they accepted the agreement to get relief to consumers more quickly than through the reviews. In April 2011 the agencies required the servicers to review foreclosure actions from 2009 and 2010 to evaluate whether borrowers had been unlawfully foreclosed on or otherwise suffered financial harm due to errors in the foreclosure process.