Since most European banks have moved long-awaited stress tests, they now face even more serious challenge in the coming months, namely – the collection of long-term resource for billions of dollars with which to finance lending. Card is placed on the fragile economic recovery across Europe. Unlike the U.S. the majority of European companies rely on bank financing. If banks fail to attract investors to the bond markets, they will be able to grant long term loans, which businesses to fund their investments. According to the European Central Bank (ECB) bank loans accounted for 70% of debt financing to companies in the euro area, while 80% of loans to U.S. companies raised through capital markets, reported Wall Street Journal. European governments are hoping stress tests that only 7 of 91 banks failed to pass, to reduce concerns about the health of the banking sector in Europe, encouraging investors to buy bonds of credit institutions. So far, banks face problems raising funds from markets, and instead resorted to mass services of the ECB to fund their daily operations. “The real test is whether banks will be financed at a reasonable price from the capital markets to perform their usual function in the economy,” said Gary Jenkins, head of analysis of fixed income instruments at Evolution Securities.
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Plans by financial regulators around the world to force banks to set aside billions of dollars in additional capital to cope more easily with future crises will be lifted because of intense lobbying against them by the financial sector. Details for Regulatory Reform, which was published six months ago, became the subject of heated disputes between lawmakers and representatives of the banking sector. Now achieved consensus tends to reduce the severity of the proposed changes, writes Financial Times. Preliminary draft of the latest proposals of the Basel Committee, responsible for regulation in the banking sector worldwide, will be presented at the summit of the G-20, which will be held in Toronto this weekend. The most significant change proposed by the committee’s recommendations affect the financial reforms of the amount of liquid funds that banks must hold to protect themselves in financial crisis. Measures to improve the capital base of banks in the short term are retained. Basel Committee, however, may abandon the idea that banks should maintain a stable long-term lending. This means that more stringent rules for consideration of the maturity of their assets and liabilities may be removed. According to representatives of the banking sector made design changes to the financial reform could prevent an excessive increase in funding costs for banks that will affect them and the fees they pay customers. Six months ago they predicted in its initial form measures could bring the industry to 5 billion additional costs.
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The British bank Standard Chartered Bank has gathered 537 million dollars from offering shares in India, announced the Air Force. The issue was oversubscribed more than twice. Standard Chartered has sold Indian shares through depository receipts. This is the first such sale made by a foreign company in the country. The Bank will issue 240 million Indian depository receipts at a price of 104 rupees (2.24 dollars) each. Interest in the issue was both by institutional investors, and the individual. Receipts will be listed two exchanges – Bombay Stock Exchange and National Stock Exchange of India, to 11 June Buyers will receive receipts of bonuses or dividends on them in the same way as if they were direct owners of shares in Standard Chartered. The Bank plans to increase its presence in India, has opened its first branch more than 150 years. Really this revealed in front of many investors the potential of the Asian market and show that the countries like India and China can be the consumer of the financial instruments offered by the European companies and banks.
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The investors in the bond market becoming more distrustful of the reliability of the largest financial companies in the world, although major rating agencies have not moved to decrease their credit rating at this stage. Required by investors in bonds yield banking giants such as France’s BNP Paribas and Goldman Sachs U.S. is 242 basis points higher than that of government securities of the United States. This index shows Global Broad Market Financial to Bank of America Merrill Lynch, which brings together bonds of companies with an average credit rating of A1 on the scale Moody’s. This difference is much higher than presumed credit rating of banks. It is actually much closer to the difference of 259 basis points between the interest on government securities and bonds in this industrial companies that have a credit rating by five steps lower than that of banks. Only three weeks until the difference (spread) between the profitability of banks and government bonds was up 11 basis points. Even in early 2009 spread was less than now amounting to 177 basis points. All this reflects the distrust of investors to the bonds of large banks that are actually most at risk from potential bankruptcy in Greece or another indebted country. Government debt crisis reduced confidence in Europe in the creditworthiness of the banks whose profits may suffer more than planned and additional regulations in the financial sector.
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The Germans are outraged that have to pay the debts of Greece. Politicians exploit these feelings without having to bother to explain to people the whole truth, says the publication of the newspaper Suddeutsche Zeitung, quoted by Radio Deutsche Welle. Reality has little to do with clichés. Worse is that the Germany government totally failed in its mission to inform and calm just Germans the truth about what is highly indebted to Greece for the common currency, responsibility and interests of Germany. Silence continued so long that finally Luxembourg Prime Minister Juncker seemed forced to take over the role of educator.
No money – no jobbery
In an interview on the radio Juncker said what chancellor Merkel suppressed. He explained that no European taxpayer and at least Germany should be afraid for their money. In the event that Athens asked for money, she will get a loan, which will be quite normal to pay interest. Germany Government may even benefit from such a loan, since it would take the money market at much more favorable conditions than those under which they grant to the Greeks. And not only Germans could allocate money to Athens. No, we should help all countries in the euro area, the burden will be distributed in accordance with a special key.
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The largest commercial bank in the U.S. – Bank of America returned to profit after three consecutive quarters of red territory since it acquired investment bank Merrill Lynch has realized good results and allocation provisions for bad loans fell. The positive financial result for the first quarter amounted to 3.18 billion dollars or 28 cents a share before distribution of dividends. A year ago when it was last quarter in which Bank of America reports profits she had amounted to 4.25 billion dollars. The results were better than analysts’ expectations, notes Bloomberg. Yesterday, shares of the bank closed at a level of 19.48 dollars or more than 6 times the level in March 2009 when it was imminent danger of nationalization of the financial institution. Several days ago the biggest competitor of the U.S. bank JP Morgan Chase announced yet another quarter, which ends with profit.
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Raiffeisen International Bank Holding AG may sell units in Russia and Ukraine in the event that the financial company had to strengthen its capital base and reserves with which to cover possible losses from bad loans to its subsidiaries. This forward Moskow News, quoted the Chairman of Raiffeisen International Christian Conrad, the Austrian group that is ready to give up control over their Russian and Ukrainian banks. Raiffeisen International is one of the largest foreign banks in Russia and owner of Raiffeisen Russia in Russia and Raiffeisen Bank Aval in Ukraine. According to Christian Conrad final decision will depend on whether and how much will have to increase the reserves of the subsidiaries of the Bank’s bad loans. By Raiffeisen International also stated that there are several possible scenarios for the development of the group in the future, one provides its teams in Russia and Ukraine to be sold through initial public offering (IPO). In February, Raiffeisen Zentralbank Osterreich, which is one of the largest cooperative banks in Austria and Raiffeisen International announced plans for a possible merger. Raiffeisen International is a public company in which 70% of capital held by Raiffeisen Zentralbank, the rest are traded freely within the Austrian Stock Exchange. The main market is Raiffeisen International Central and Eastern Europe, the bank is represented in 17 countries in the region.
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The German banks make money at the expense of Greece, gave Prime Minister Theodoros Pangalos accused. He explained that this occurs when his country is waiting from Berlin and the EU assistance to remedy its financial system. “What can be seen from the German position is that banks in Germany have speculated with the bonds to its counterparts in the euro area, as allowed to play with the fate of unhappy people in my country, while on their back in Germany, make money,” said Pangalos. With almost 43 billion euro loan banks are Germany’s biggest creditor of Greece. Berlin last week to oppose the idea of providing new financial assistance to Athens and said that the Greek government only has to cope with the crisis. Greek deputy is one of the most fierce opponents of Germany. His name was implicated in a month ago, the media war between the German magazine Focus, and two Greek newspapers. Pangalos then Germany criticized the attitude of the Greek financial crisis, stressing that Athens never received adequate reparations for World War II. And came to an official note from the the German Foreign Ministry, which said that discussions about the past do not help to solve today’s problems. Now Pangalos prosecution argued with Germany’s export expansion. “Although the countries of Southern Europe suffer from the fall of the euro, German exports because of rising profits, which made massive Germany”, said Deputy Prime Minister of our southern neighbor.
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The Central Bank of China has ordered banks in the country to raise the level of reserves as new rules come into force from today forward CNBC, citing unnamed sources. Thus in practice has entered into force the decision to increased requirements to the level of reserves for which the information leaked last week. The new provision requires that the level of reserves to increase by 0,5 percentage points. Information that currently is not official, says that the requirements imposed on certain financial institutions, which officials say have a risky behavior. Last week Reuters reported that similar requirements are imposed on CITIC Bank, which is the seventh largest bank in the country and the largest lender Industrial and Commercial Bank of China.
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The U.S. president Barack Obama plans to impose a special tax 50 of the largest banks and financial companies in the country over the next decade, cited by New York Times. Thus the administration of President hopes to attract 90 billion dollars, which could offset any losses to taxpayers from the rescue of the financial sector. This tax will be charged for all banks, insurance companies and brokerage houses with assets exceeding $ 50 billion. He is expected to come into force after 30 June this year and bring at least 90 billion dollars of tax revenue for the next ten years. It said a senior official in the administration of Barack Obama, which does not wish to remain anonymous. He stated further that the tax may remain in force for a longer period in the event that any losses from the program for relief from the problem of financial assets not covered in the meantime. According to government estimates the program worth $ 700 billion will likely bring a loss of 117 billion dollars, this is much better than previous estimates. According to State Administration introducing such a tax would ensure that large financial institutions that are the biggest culprits for the financial crisis and the biggest beneficiaries of the measures the government will take responsibility to ensure that all costs incurred by the funds taxpayers will recover completely.
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