The Great Debate UK

Bonds steal thunder from loans in Europe

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alex-smith- Alexander Smith is a Reuters columnist. The opinions expressed are his own. -

When the going got tough, banks were quick to bring down the shutters and cut off loans to European companies, forcing them to seek other sources of funding. The result — a dramatic shift to the bond markets, where corporates borrow directly from investors.

This failure of the banks to be there when borrowers needed them most could spell the end of the European syndicated loan market as the powerhouse of corporate finance activity in the region, marking a longer-term shift in the funding mix for European companies from loans to bonds.

The European loan market had already fallen to $867 billion in 2008 — from a record high of $1.7 trillion during the leveraged loan frenzy of 2007. Nevertheless, it remained a mainstay of the relationship banking model. This year the decline has continued, as European loan volumes have fallen by 35 percent year-on-year to $225 billion, with leveraged loans down by some 62 percent, according to Thomson Reuters data.

Meanwhile, Eurobond issuance is up 38 percent year-on-year, reaching $1.4 trillion of new bonds so far in 2009. 2008 was itself a near record year for new issues in the Eurobond market, just below the $3 trillion issued during the whole of 2007.

The quantitative easing conundrum

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adriankidd2- Adrian Kidd is financial planner at Unleash Advice. He was voted 50th Most Influential IFA in the UK by Professional Adviser magazine 2008. The opinions expressed are his own.-

The Bank of England tells us that their 75 billion pound quantitative easing programme will start the banks lending again (despite the banks saying that they are already lending, this is not strictly true). The programme works by the Bank buying securities from the banks and then this money can be loaned to consumers. The question is, does and will this work? Is 75 billion pounds enough?

Fortis shareholders retreat with honour

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REUTERS– Margaret Doyle is a Reuters columnist. The opinions expressed are her own –

Revolting shareholders were reduced to throwing shoes and coins at the chairman at Tuesday’s meeting to approve the carve-up of the failed Benelux bancassurer, but to no avail.

Germany’s bad bank fudge

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REUTERSpaul-taylor– Margaret Doyle and Paul Taylor are Reuters columnists. The opinions expressed are their own –

LONDON/PARIS, April 23 (Reuters) – Germany is to set up a system of bad banks before the summer recess to hold some 250 billion euros of toxic assets. Finance Minister Peer Steinbruek has assured taxpayers that his solution — called “eine Bad Bank” (there is no German word for the concept) — will not weigh on the budget.

from The Great Debate:

Goldman’s TARP out: give up ALL state aid

goldman-crop -- Jonathan Ford is a Reuters columnist. The views expressed are his own --

Goldman Sachs wants to do its duty by the American people and give them their TARP money back. Some spoilsports have urged the government simply to say no because allowing the investment bank to repay the cash would make other banks look bad.

But this seems rather un-American. Why shouldn't taxpayers get their money back if Goldman really doesn't need it? The point to insist upon is that they get all of it back -- and on commercial terms.

from The Great Debate:

Geithner’s naked subsidy redefines toxic

jimsaftcolumn31-- James Saft is a Reuters columnist. The opinions expressed are his own

Treasury Secretary Geithner is all but admitting that U.S. banks are suffering not from market failure but self-inflicted collateral damage.

The U.S. Treasury on Monday detailed an up to $1 trillion plan to buy up assets from banks in partnership with private investors, using financing bankrolled by the government, financing that is only secured by the value of the doubtful assets the fund buys.

from UK News:

Late payments send small businesses to the wall

By clamping down on credit, Britain's newly cautious banks are making collapse almost inevitable for many small to medium enterprise (SMEs) who need a financial cushion now, more than ever, as suppliers and customers struggle to pay bills as the economic downturn bites.

Small businesses in Britain, which employ over half of the private sector workforce and annually generate some 3 trillion pounds, typically depend on loans for working capital to tide them over during lean spells.

from The Great Debate:

Let sleeping shadow banking systems lie

James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

Rather than vainly trying to refloat the shadow banking system, the U.S. would be better off grappling with the inevitable ultimate solution -- debt destruction and inflation.

The common denominator of policies like the Term Asset-Backed Loan Facility (TALF) that was detailed on Tuesday, is that they try to solve fundamental problems with indebtedness by attempting to float asset prices high enough that they are back in proportion with the debt.

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