The Great Debate UK
– Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own. –
Supporting Ireland to the tune of a few billion quid must look like a no-brainer to the British Government. We should not make the same mistake as the Germans, who managed to get the worst of both worlds over Greece – forced by the scale of their bank exposure to support Greece, but providing the money with ill will, causing bitterness rather than gratitude – and now repeating the error in the Irish case.
Our wonderful British banks are more exposed than those of any euro zone member to the Irish debacle, with, at the front of the queue, the usual suspects: RBS and Lloyds-HBOS, the two big nationalised banks. So the answer to those who ask why we are contributing to the rescue package is that it is nothing more than the latest (and probably not the last) instalment of the cost of the bank bailout.
This is something to remember next time you hear one of the banking sector’s apologists crowing about how little the bailout is actually costing and how great a killing we taxpayers are ultimately going to make on our bank shares – and don’t forget to add in the cost borne by us all as bank customers, with the gap between borrowing and lending rates at their highest level in history.
By Andrew Kakabadse
–Andrew Kakabadse (www.kakabadse.com) is Professor of International Management Development at Cranfield School of Management. The opinions expressed are his own.–
Over the last 18 months I have interviewed a number of high-level city executives, including chairmen and CEOs, for a research paper to be published in the Journal of Strategic Review early next year. What was surprising was the general consensus that there is £450 billion in ‘Lazy Funds’ waiting to be invested in the City. That is more than twice the upper estimates of national debt. This enormous figure is not being invested because managers cannot see clear opportunities for realising gains.
– Richard Saunders is Chief Executive of the Investment Management Association. The opinions expressed are his own. –
Last week I was among a number of people asked to appear before the House of Commons Treasury Select Committee to talk about the Government’s plans for reorganising financial services regulation. It was an opportunity both to see the new Committee in action and to set out how I see the plans affecting the investment management industry.
from Global News Journal:
Irish literature and legend is full of boasts, like the claim by Christy Mahon in Synge's "Playboy of the Western World" that he has killed his da with a loy (Irish for spade), only to have the old man track him down in another town.
Perhaps that's the way to view Irish Finance Minister Brian Lenihan's announcement two years ago that the state-backed guarantee scheme to rescue the country's troubled banks, hit hard by the collapse of the property market, was "the cheapest bailout in the world so far".
It seemed too good to be true. And it was.
On Thursday, Lenihan, who has spent the last two years scrambling from one fiscal crisis to another, announced that, actually, the cost for cleaning up years of reckless lending was "horrendous" and in a worst-case scenario the price tag would be over 50 billion euros ($68 billion).
The bill will shackle Ireland, once the EU's fastest growing economy, with a public debt burden of nearly 99 percent of gross domestic product.
Ireland's now crippled economy, meanwhile, has done everything but recover. Unemployment is stubbornly high, property prices remain depressed, taxpayers face years of cutbacks and, in the second quarter, growth again went into reverse.
Maybe what Lenihan said two years ago was wishful thinking, or perhaps it has taken this long for Ireland to wake up to just how colossal a hole its one-time high flying property tycoons have dug for themselves, and for every Irish taxpayer, even though much of what they were up to is so big as to be unmissable.
Take, for example, the Battersea Power Station in London, which is Europe's largest brick building and has been derelict since it was decommissioned as a coal-burning power plant about a quarter century ago.
In 2006, a firm controlled by two Irish property magnates, Johnny Ronan and Richard Barrett, bought the building and land surrounding it for a staggering 400 million pounds ($750 million) -- even though previous plans to develop it had all come to nought.
The boys, as they are referred to in some of the Irish press, had ambitious plans for a new, exclusive, "Knightsbridge"-class development for office, commercial and residential space, including an extension of the Northern Line branch of the London Underground.
Four years later, the site is still derelict, promoted, perhaps a bit desperately, as a location for lavish weddings held inside a marquee, and most recently as the venue for a Red Bull-sponsored high-jinx, daredevil motorcycle show.
Ronan and Barrett's property empire, meanwhile, has seen some of its loans earmarked for the Irish government's National Assets Management Agency (NAMA) -- Ireland's "bad bank scheme", which was established to purge lenders of commercial property loans, many of them non-performing.
Battersea is at the top end of the scale of Irish property investment during the decade of the Celtic Tiger boom, but replicate it at a lesser level all the way from Eastern Europe to the holiday beaches of Spain and out to Asia, and it becomes clear why Lenihan has had to change his tune.
A historical footnote: a Reuters feature informs us that the Battersea Power Station was used during World War Two to burn 120 million pounds worth of banknotes that had to be disposed of to stop enemy forgeries.
Something to boast about then. Comparatively small change now.
- Kathleen Brooks is research director at forex.com. The opinions expressed are her own. -
The euro’s resilience in the third quarter has been astonishing. Since reaching a low against the dollar in June, the single currency has appreciated by an impressive 14 percent. This has coincided with the Irish financial crisis reaching boiling point, culminating in the announcement on Thursday by the Irish authorities of the final bill for winding down Anglo Irish Bank.
-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own and do not constitute investment advice. -
I have just reread the blog I wrote for this column last September. A year has gone by, and neither the title – “It’s All Over: the Banks Have Won” – nor the rest of it seem out of date. In fact, last weekend’s Basel III deal looks very much like the final surrender by the authorities.
– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –
By Peter Thal Larsen
Investment banks have reined in their worst pay excesses. But inconsistent enforcement of bonus rules in the United States and Europe means some are still getting away with bad behaviour. If banks and regulators can’t agree common standards, they risk another political backlash.
Rachel Mason is public relations manager at Fair Investment. The opinions expressed are her own.
A recent survey by Moneysupermaket.com has found that the zero per cent introductory offers on credit cards are getting longer while the rates that kick in once the period is over are getting higher, and now consumer groups are arguing that banks should be held accountable for luring poor innocent people into debts they cannot repay.
from The Great Debate:
Europe's long summer holiday still has a week to run but this year's reentry will bring with it evidence that very little progress has been made on the issues that threaten to rend the currency union and upend the global economy.
Despite waving the stress-test magic wand over its banks in late July the same problems continue to grow unchecked: a euro zone periphery that can't compete, may not be able to pay its debts and so may bring down with them the very banks that have been pronounced healthy.
from UK News:
We're wondering who is.
We see bailed-out banks returning to profit at the same time as headlines about others still refusing to lend. The personal finance pages are bristling with stories about mortgage famine . Big businesses may have been overcharged for banks' services in raising new equity capital; lending to smaller businesses is down, and the interest offered on savings is so derisory, would-be savers are being pushed into taking more risk to try to preserve their capital.
What are we missing? What is the magic ingredient that makes you as a customer happy with your bank? Or are we right in thinking "customer satisfaction" is a figment of executive imagination? Tell us your stories.