The Great Debate UK
- Jane Foley is research director at Forex.com. The opinions expressed are her own.-
The pound has started the year on a negative note. Ongoing concerns over the budget deficit, an impending general election, the prospect that the Bank of England (BoE) may yet increase quantitative easing (QE) and a drop in consumer confidence are all clouding the outlook.
That said, sterling has already paid a high price for its weak fundamentals. In 2009 EUR/GBP averaged 0.8909, this is 17 percent higher than its average in the 12 months leading to the Northern Rock crisis and 35 percent above the average rate between 2000-07.
A lot of bad news is in the price but a sustained sterling recovery is unlikely until there are concrete signs of resolution to the UK’s deficit problem.
from UK News:
Government plans to split and sell state-owned Northern Rock have met with mixed reaction.
The plan is to create a new savings and mortgage bank, called Northern Rock Plc, which will take deposits and offer savings and home loans.
That's the provocative question posed by Willem Buiter. His latest, characteristically lengthy, blog post tackles the regulatory vogue for forcing banks to hold much greater reserves of liquid assets - in practice, government bonds.
Buiter's missive follows new rules from Britain's Financial Services Authority, which will force banks to increase their reserves of government bonds by more than a third. The rules have been met with predictable bleating from the industry, which accuses the regulator of undermining Britain's competitiveness and promoting the fragmentation of the global financial system. Another concern is the FSA's handling of the transition.
Shares in Lloyds Banking Group are worth 150 pence apiece, according to the analysts from Royal Bank of Scotland, who think the shares offer "a compelling restructuring opportunity" around today's 95 pence.
Lloyds, say the brokers, is going to recover sufficiently to pay a nominal dividend next year, and something quite substantial in 2011, thanks to margin expansion, cost control and normalising bad debts.
- Bob McDowall is research director, Europe, at TowerGroup, a research and advisory services firm focused exclusively on the global financial services industry. The opinions expressed are his own. -
The banking results being published this week are inseparable from the catastrophic financial events of the last two years. It is time to glance back to where we have been and determine where we are now.
The crisis at Northern Rock marked the beginning of Britain’s slide into large-scale state ownership of the banking system. Returning the mortgage lender to the private sector would be a sign that normal service is being resumed. But rumours that the British government is poised to sell Northern Rock, are premature. Suggestions the government could do so at a profit are even more far-fetched.
Prime Minister Gordon Brown is apparently keen to offload the Rock, ideally “at a substantial profit” before the general election, which must be held before next summer. According to the Times, the prime minister “wants desperately to avoid a Conservative government taking the credit”.
from The Great Debate:
People are up in arms about bankers receiving bonuses when the banks they worked for have gone down the pan. But isn't it just as shocking that so many state-backed financial firms still subsidize the eye-popping wages of sporting superstars through rich sponsorship deals?
It's the same story on both sides of the Atlantic. Citigroup, which received $45 billion from the U.S. government, is sticking with a $400 million marketing deal from 2006 which includes the naming rights for the new home of the New York Mets baseball team, which will be called Citi Field.