European Commission plans sanctions for wayward bankers – reports

March 4 2009

By Clive Leviev-Sawyer

The European Commission wants Europe to set up a sanctions regime for banks and bankers that flout industry rules, according to plans to be published on March 4 2009, AFP reported.

The proposal is part of plans for a major shake-up of European supervision of the financial sector based on recent recommendations from an expert panel headed by former IMF director Jacques de Larosiere.

In a media statement on March 4, the EC said that it was calling on EU leaders to further step up co-ordinated European action to fight the economic crisis.

In its communication to the European Council summit on March 19 and 20, the Commission sets out proposals for building on the extensive support already being given to the real economy and to employment.

The Commission’s communication unveils a comprehensive reform of the financial system based on the de Larosiere report.

“It shows how a clear and united commitment to this ambitious programme can pave the way for the EU to give a global lead at the G20 summit in London on April 2,” the EC said.
EC President Jose Manuel Barroso said: “The Spring European Council must send a strong signal to citizens, businesses and the world. Yes, there is a way out of this crisis. Yes, Europe has the unity, the confidence and the determination to win this battle. We must forcefully implement the agreed recovery plan in a coordinated way. We must use the single market to the full.

“Today we are asking EU leaders to agree on a comprehensive action plan. To do everything possible to protect our citizens from unemployment. To clean up financial markets on the basis of the de Larosiere Report. And to pave the way for Europe to lead by example and by persuasion as we approach the G20 summit in London,” Barroso said.

The Commission’s communication begins with an overview of the measures taken since autumn 2008 which have prevented the meltdown of the European banking industry and thus prevented countless bankruptcies and job losses.

It urges member states to act quickly to restore confidence and get bank lending flowing again, in particular by implementing the guidance the Commission issued on February 25 2009 on removing impaired assets from banks’ balance sheets.

“The Commission endorses – and asks EU leaders to endorse – the key principles set out by the de Larosiere Group,” the EC statement said.

The Commission calls for a supervisory system combining much stronger oversight at EU level with maintaining a clear role for national supervisors.

It backs the Group’s proposal to set up an early warning body under ECB auspices to identify and tackle systemic risks.

The Commission supports the Group’s recommendation for a core set of regulatory standards throughout the EU.

In April, the EC will bring forward initiatives already in the pipeline on hedge funds, private equity and remuneration structures.

Following an impact assessment, the Commission will put forward to the June European Council a detailed timetable for further measures based on the de Larosiere report.
It will bring forward proposals in the autumn on the new supervisory framework and on issues including: liquidity risk and excessive leverage; further reinforcing protection for depositors and policy holders; and effective sanctions against wrongdoing.

The communication points to good first results of the European Economic Recovery Plan. The overall fiscal support to the economy from European and national measures and from automatic stabilisers amounts to at least 3.3 per cent of GDP over the 2009-2010 period.

An annexe summarises 500 national measures and concludes that they are broadly in line with the principles that recovery action should be timely, targeted and temporary.

The Commission calls on EU leaders to endorse clear principles for further action, in line with the single market, with open trade worldwide, with building a low carbon economy and with returning to sustainable public finances as soon as possible.

The Commission repeats its call for Member States to agree on the targeted investment of five billion euro in energy interconnections and broadband.

The Commission’s contribution calls for member states to step up efforts to tackle unemployment – which could approach 10 per cent in 2010 for the first time since the 1990s – and social exclusion.

“These efforts will also help maintain demand and prevent further job losses.”  They should be a central plank of national stimulus plans, the EC said.

The Commission invites member states to use measures such as financial support for temporary working-time arrangements, boosting income support for unemployed people, lowering non-wage costs for employers and boosting investment in skills and retraining.

At European level, the EC calls for rapid approval of its proposal to allow an immediate increase of 1.8 billion euro in advance payments under the European Social Fund.

The Commission also sets out a road map towards the European Employment Summit in Prague in May, which should agree on further concrete measures to save jobs and create them in the sectors of the future.

The Commission will organise a series of workshops with all key stakeholders in different member states in the approach to the summit.

The EC asks EU leaders to agree on a number of areas “where Europe can and should give a firm lead” on April 2 at the London G20 summit, building on the success it achieved by speaking with one voice at the Washington Summit in November 2008.

“The EU should make a united push to improve the global financial and regulatory system, focusing on: better transparency and accountability; appropriate regulation of all financial actors; tackling difficulties caused by uncooperative jurisdictions; boosting international supervisory cooperation; and reforming the IMF, Financial Stability Forum and World Bank,” the EC statement said.

“Europe should also promote global recovery by calling for a review of the global impact of fiscal measures taken so far, by promoting open trade and by inviting the London Summit to launch a multilateral initiative on trade finance and to reaffirm the Washington commitment to the Millennium Development Goals,” the EC said.

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Workers protest massive wave of job cuts

Holding a banner reading, “Destruction of employment,” Japanese workers shout slogans during a protest rally against job cuts by top Japanese companies in front of the headquarters of Nippon Keidanren, Japan’s largest business federation, in Tokyo Tuesday, Dec . 16, 2008. About 200 protesters accused Japanese corporate leaders of sacrificing their jobs to protect their profits amid the global slowdown. (AP Photo/Itsuo Inouye)

Holding a banner reading, “Destruction of employment,” Japanese workers shout slogans during a protest rally against job cuts by top Japanese companies in front of the headquarters of Nippon Keidanren, Japan’s largest business federation, in Tokyo Tuesday, Dec . 16, 2008. About 200 protesters accused Japanese corporate leaders of sacrificing their jobs to protect their profits amid the global slowdown. (AP Photo/Itsuo Inouye)

A group of Japanese women workers participate in a protest rally against job cuts by top Japanese companies with banners and placards in front of the headquarters of Nippon Keidanren, Japan’s largest business federation, in Tokyo Tuesday, Dec . 16, 2008. About 200 protesters accused Japanese corporate leaders of sacrificing their jobs to protect their profits amid the global slowdown. (AP Photo/Itsuo Inouye)

TOKYO

Hundreds of unionized workers rallied in Tokyo on Tuesday to protest massive job cuts, accusing the country’s biggest companies of sacrificing jobs to protect profits.

The global financial crisis has forced some of Japan’s corporate giants to take drastic measures including job cuts, suspending production, postponing projects and closing factories. Sony Corp., Toyota Motor Corp. and Nissan Motor Co. are among the major employers to trim thousands of workers from their payrolls.

About 200 protesters waved banners and shouted slogans through loudspeakers outside the headquarters of the Nippon Keidanren — Japan’s largest business lobby group — in Tokyo’s main business district.

“Toyota, stop cutting seasonal workers! We workers are not disposable!” they chanted. “Sony, stop massive firing!”

Most of the job cuts have targeted temporary contract workers, but lately they have included full-time salaried workers.

Speakers at the protest said some newly unemployed contract workers also lost their company-owned housing, leaving them jobless and homeless.

“We do not accept job cuts in the name of the economic crisis,” said Kazuko Furuta, a representative of New Japan Women’s Association, a women’s rights group that organized the rally with dozens of labor unions. “Shame on the Japanese companies that dump their workers like objects.”

Economy, Trade and Industry Minister Toshihiro Nikai told reporters Tuesday that the government was doing its “utmost to support small businesses and ensure job security.”

Fujio Mitarai, head of Keidanren and also chairman of Canon Inc., said the influential lobby “will cooperate with the government” to implement job security measures.

Japanese exporters have been hit hard by slowing consumer demand from abroad and the yen’s appreciation, which erodes their overseas earnings.

Sony announced plans to slash 8,000 jobs around the world — about 5 percent of its work force — and lowered its full-year earnings projection 59 percent from the previous year.

Major automakers including Toyota and Nissan have terminated contracts with thousands of seasonal workers at their factories and parts makers.

Citing their own tally, union members say more than 18,800 people, mostly contract workers, have lost their jobs in recent months.

The government last week announced a 23 trillion yen ($256 billion) stimulus package to shore up the economy, including measures to encourage employment.

Source

Renault workers in Spain protest work reduction plan

December 13 2008

MADRID

Thousands of Renault workers braved heavy rain to march through the central Spanish city of Valladolid Saturday to protest a work reduction plan by the French automaker at its four plants in the country.

Renault management in Spain on December 3 proposed the 2009 cuts at its two factories in Valladolid, one in the nearby town of Palencia and another in the southern city of Sevilla.

Workers at one of the Valladolid plants are also waiting for Renault to assign it a new vehicle for production that would ensure its survival.

The protesters, who numbered 25,000 according to unions and 16,000 according to police, marched through the city in driving rain before a statement was read out calling on Renault to guarantee staff levels, Spanish media said.

“If this isn’t resolved, war, war and war,” the protesters chanted.

Renault employs around 11,000 people in Spain, Europe’s third-largest automaker, of whom 9,800 work in its four factories.

The company proposed a 60-day work reduction plan at one Valladolid plant and a 30-day cut at the other three factories.

The company blamed “the strong and continued fall in European markets, the main destinations of Renault Spain products” for its decision.

The auto manufacturing sector accounts for just under 10 percent of Spain’s economic output and 15 percent of exports.

Several large automakers in the country have already taken measures to cut their workforce, such as Japan’s Nissan and US group Ford.

Prime Minister Jose Luis Rodriguez Zapatero late last month announced an 800-million-euro cash injection for the country’s auto sector, part of an 11-billion-euro (14.3-billion-dollar) stimulus package to help the country cope with the global financial crisis.

Source

Bank Of America Says It Will Cut 35,000 Jobs

By John H. Smith
December 11 2008

CHARLOTTE

Due to its purchase of Merrill Lynch and worsening economic conditions, Bank of America said it will cut up to 35,000 jobs over the next three years.

Under its leadership, Bank of America previously seemed to have weathered the financial storm compared with some other banks that have engaged in riskier lending activity that plagued other banks such as Wachovia and CitiBank.

However, in its a statement today, the Charlotte bank said it is “working on a plan to eliminate a significant number of positions over the next three years.”

The bank added that the two main factors are its pending merger with Merrill Lynch & Co., Inc. and “the weak economic environment.”

The bank said it would have a final plan released early next year but did say that the total number of job losses would be between 30,000 to 35,000 positions over the next three years.

“A final number will not be determined until early 2009,” said the bank.

The company said that severance packages would be offered to those who were laid off.

Bank of America continues to do business actively with all of its client segments. It continues to benefit from a flight to safety, attracting deposits and new client relationships. In addition, the company continues to actively originate loans through all of its credit product lines.

Shareholders of both companies voted to approve the transaction last week and Bank of America is currently targeting a closing on Jan. 1, 2009.

Bank of America says it serves 59 million consumer and small business customers and now has over 6,100 retail banking offices.

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Did being part of the EU protect them from the Financial Crisis

Turmoil Spurs US Plant Closures, EU Layoffs At ArcelorMittal

December 10th, 2008

By Alex MacDonald

In a sign of the severity of the economic downturn, ArcelorMittal (MT), the world’s largest steelmaker, announced plans to close two U.S. steel processing plants and lay off several hundred workers in the European Union.

ArcelorMittal plans to close its finished steel processing plant in Lackawanna, N.Y., by the end of April and plans to close its finished steel processing plant in Hennepin, Ill., sometime in the future, although no date was disclosed. The two closures will result in 545 job losses, 260 of which are located at the N.Y. plant and 285 of which are located at the Illinois plant.

Meanwhile, ArcelorMittal rolled out voluntary redundancy programs in Europe over the past week or so that would eliminate 3,550 mostly white-collar jobs through voluntary layoffs. The company is eyeing 6,000 job cuts in Europe out of 9,000 job cuts globally.

The closures and layoffs are in line with the company’s plans to cut 35% of its global steel production capacity during the fourth quarter and saving $1 billion annually by cutting 3% of its global workforce.

Both steel plants supply the auto market, where demand has slumped so dramatically that the U.S.’s three largest car manufacturers are now seeking federal government funds to avert bankruptcy.

The closures are part of ArcelorMittal’s global restructuring program to weather the economic downturn.

The decision to close ArcelorMittal Lackawanna was “purely an economic business decision based on the extraordinary economic conditions we face today,” the company said in a statement.

The Lackawanna plant has inherent disadvantages due to its location that lead to higher costs, longer customer lead times, and higher inventory levels than other ArcelorMittal finishing facilities in the US, the company said.

Meanwhile, at Hennepin, “the company had to make the tough decision to close the…facility, consolidate operations and move production to other ArcelorMittal facilities in the U.S.” in order to remain competitive.

ArcelorMittal now has announced plans to lay off 19% of its U.S. salaried workforce of 15,543 people and has announced more than half of its planned job cuts in Europe.

The United Steelworkers union and other relevant stakeholders were notified about the plant closures and job layoffs. They are now negotiating with the Luxembourg-based company to arrive at a compromise.

Jim Robinson, the director of USW’s District 7 said the union was aware that ArcelorMittal faced operational issues at the two plants but was surprised by the company’s decision to close the plants.

“They called us before they announced but we did not know this specifically” beforehand, he said.

Robinson dismissed views that ArcelorMittal has underinvested in the plants. “I don’t think the issue is lack of investment over time, I think it’s an issue of the company’s overall strategy.” He declined to elaborate further.

ArcelorMittal is one of many steelmakers globally that have announced production cuts and layoffs. U.S. Steel Corporation (X), the world’s tenth-largest steelmaker by volume, announced last week it would temporarily idle an iron ore mining facility and two steel works. The move will affect 3,500 employees.

Corus, Europe’s second largest steelmaker by volume and the European arm of India-based Tata Steel Ltd (500470.BY) has cut production by 30% and has shed about 500 jobs from the U.K.

In Europe, ArcelorMittal is seeking voluntary redundancies equal to 1,400 jobs in France, 800 in Belgium, 750 in Germany, and 600 in Spain. Most of them are white collar jobs. ArcelorMittal’s American depositary shares recently traded up 8.9% to $25.99 on the New York Stock Exchange.

Company Web site: http://www.arcelormittal.com

Source

EU businesses expect 1 million job losses in 2009

Brussels – European Union businesses called Monday for a cut in interest rates amid predictions that the bloc’s economic slowdown could lead to more than 1 million jobs being lost in 2009.

BusinessEurope, which groups national business federations from 34 European countries, also called on governments to ensure a continued flow of credit and to approve structural reforms aimed at improving the continent’s competitiveness.

According to its latest Economic Outlook, EU gross domestic product (GDP) is predicted to grow by just 0.4 per cent in 2009, compared to 1.4 per cent this year, with exports, imports and private consumption levels all slowing.

Unemployment is predicted to increase from 7 per cent to 7.8 per cent, with the loss of 1.1 million jobs, compared to a net job creation of more than 2 million in 2008.

“The most fundamental preoccupation of the business community is obviously the way in which the impact of the financial market turmoil will play out,” the paper said.

“Even though a fully-fledged credit crunch has not yet appeared in Europe, uncertainty about the impact for companies and consumer markets has increased tremendously.”

Source

SEMI Europe calls for investment to avoid mass job losses in semiconductor industry

December 10 2008

During the third SEMI Brussels forum, SEMI Europe declared that the decline in the European semiconductor industry could potentially put half a million European jobs at risk. SEMI Europe presented its White Paper to EU officials and urgently appealed for the EU and national policymakers to invest to support the European semiconductor industry citing the industries importance to the health and global competitiveness of the EU economy.

The equipment/materials producers and the semiconductor device manufacturers contribute around €29 billion to the EU economy and provide around 215,000 jobs. The European semiconductor industry is also a significant contributor to the GDP in EU countries such as France, Germany, Ireland, the Netherlands and the UK.

“If semiconductor manufacturers leave Europe, indigenous equipment & materials producers will face an uncertain future”, said Franz Richter, Chairman of the SEMI European Advisory Board. “The current economic crisis and rising unemployment underscore the urgent need to safeguard jobs in the European semiconductor industry. Supporting a robust and competitive semiconductor industry in Europe is critical to keeping jobs in Europe across all industries and supporting key European economies.”

The decline of the market share even during the increase in total volumes sold reflects that manufacturing is changing and moving away from Europe because of the unfavourable global level playing field conditions. The European equipment and materials manufacturers that supply the semiconductor industry with machinery and parts are for the most part small or medium-sized European businesses that heavily rely on the future European semiconductor industry to guarantee their own future and the 105,000 jobs they embody.

Further information on the Brussels forum is available here.

Source

Spanish auto sector highly exposed to global crisis

December 11 2008

By Robert Hetz

MADRID,

Spain’s car industry, which became Europe’s third largest, thanks to a cheap workforce, has lost cost advantage and could shrink as companies slash costs at foreign plants and save politically-sensitive jobs at home.

As executives at multinational manufacturers weigh up Spain’s ageing factories, relatively high wage costs and weak competitiveness against their own domestic markets and cheaper alternatives, the country’s plants are clear targets as the credit crunch saps demand all over the world.

“The big decisions are being taken abroad, not here, and managers in London, Paris and Detroit prefer to close a plant here and not in their home market,” said the director of one Spanish parts plant, who asked not to be named.

Unlike Germany, France or Italy, Spain’s auto industry has no nationally-owned car maker and little control over decisions on the future of its 18 foreign-owned plants, which employ around 70,000 people.

And unlike the case of Britain, Spain’s plants are older and less productive, and the country lacks a more skilled workforce or much tradition of home-grown research and development.

Global car makers, also including Peugeot, Opel and Volkswagen, built most of their Spanish plants in the 1970s when Spain was a low-cost backwater, well placed to serve Northern European markets.

Since the 70s, Spain has lost its price advantage as living standards have caught up with the European average. In 2007, per capita income overtook that of Italy. At the same time, new competitors have emerged as low-cost manufacturing centres.

Spain’s auto-sector salaries averaged 22.83 euros ($29.64) an hour last year, above the European average and around three times the 6.93 euros in Poland and 8.83 euros in the Czech Republic, Europe’s new manufacturing hubs, alongside North Africa.

NORTH AFRICA PASSES SPAIN FOR RENAULT

Renault plans to make 200,000 cars at its plants in North Africa in 2010 and double that within a couple of years, overtaking production from its Spanish operations.

The global credit crunch has hurt demand for new cars across Europe, with new car registrations in November falling 36.8 percent in the UK, 18 percent in Germany, 30 percent in Italy and 50 percent in Spain.

With some 84 percent of cars built in Spanish plants for export, manufacturers are finding fewer financial or political reasons for remaining in the country as international competition rises.

Spanish plants are ideal candidates for the inevitable cuts across Europe, head of Ford Espana Jose Manuel Machado said, as salaries rise and productivity fails to rise at a similar rate.

Machado’s comments came before the U.S. company announced production cuts of 120,000 units at its Almussafes plant in Valencia, and the temporary layoff of 5,200 workers.

Job cuts are expected from most of the major manufacturers, with more than 60 filings listing potential layoffs by private companies made to the government, which may affect up to 40,000 workers, Spain’s main union UGT said.

As Spain’s unemployment rate soars to the highest in the European Union and the economy nears recession, the government is keen to keep the industry, which accounts for around 5 percent of gross domestic product, in the country.

Spain has earmarked 800 million euros for the sector as part of measures worth a total of around 50 billion euros to stimulate the economy.

But this aid may not be enough.

“It’s a good gesture from the government, but obviously the amount of money is insufficient. It would be less than 80 million euros per manufacturer,” said Jose Antonio Bueno of consultancy Europraxis.

The sharp fall in new car sales in Spain has also affected the manufacturers’ showrooms and spare parts centres throughout the country.

Concessions for new and second-hand cars and garages employ around 278,000 people in Spain, and 16,000 of those jobs are at risk, the association for the sector, Ganvam, estimates.

“Four years ago we sold two or three cars a day, but now its not even two a week,” said Adela Benito, who has worked in a Madrid-based Renault showroom for 20 years. (Reporting by Robert Hetz; Additional reporting by Tomas Gonzalez; Writing by Paul Day; Editing by Rupert Winchester)

Source

Swedes want government bailout for Volvo

In a new survey just released, 68 percent of Swedes want to see the Swedish government bail out its beleaguered carmaker Volvo. Although Volvo is owned by US carmaker Ford, Swedes would like its government to temporarily take control of the nation’s iconic firm, as many residents fear Volvo may disappear entirely from Sweden in the near future.

The Local newspaper reports that support for government intervention is piling in from all sides of the political arena. Some 65 percent of those polled who support the bailout side with one of the governing Alliance parties, and 73 percent of all left bloc voters approve of a government bailout.

Peter Larsson of the Swedish Association of Graduate Engineers points out that Volvo’s current crisis is not minor. “One thing is certain, there are no dollars on their way over the Atlantic,” Larsson said, referring to the massive problems currently faced by the “Big Three” US carmakers – Ford, Chrysler, and (Saab-owner) General Motors.

Rolf Wolff, dean of the school of business at Gothenburg University, told The Local: “If Volvo Cars disappears as a base for industrial knowledge and skills, then Sweden will never again be a part of the auto industry. All the knowledge and skills would be lost, and with it all future associated development potential would be gone.”

Maud Olofsson, Sweden’s minister of trade and industry, has expressed doubts whether the government would be able to better manage Volvo than the car firm itself. For now, the issue has been placed on the political back burner, but the crisis at Volvo and Ford goes on.

Source

This is just the tip of the iceburg.  Seems no one is safe from the Financial Crisis. Not even EU members.

There are 27 member of the European Union.

austria 1. Austria
belgium 2. Belgium
UK 3. UK
denmark 4. Denmark
germany 5. Germany
greece 6. Greece
ireland 7. Ireland
spain 8. Spain
italy 9. Italy
luxembourg 10. Luxembourg
netherlands 11. Netherlands
portugal 12. Portugal
finland 13. Finland
france 14. France
sweden 15. Sweden
cyprus 16. Cyprus
czech 17. Czech Republic
estonia 18. Estonia
hungary 19. Hungary
latvia 20. Latvia
lithuania 21. Lithuania
malta 22. Malta
poland 23. Poland
slovakia 24. Slovakia
slovenia 25. Slovenia
bulgaria 26. Bulgaria
romania 27. Romania

EU members and when they joined.

1952 Belgium, France, Germany, Italy, Luxembourg, Netherlands

1973 Denmark, Ireland, United Kingdom

1981 Greece

1986 Portugal, Spain

1995 Austria, Finland, Sweden

2004 Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia

2007 Bulgaria, Romania

Source

Hungary’s Letter of Intent to the IMF

World Bank lends to Bulgaria to tackle poverty, jobless

Latvia mulling IMF loan as crisis sweeps Nordic region

EU, Iceland, Canada Suffering Fall Out, Caused By US Crisis

Europeans Angry at their Money being Used for Bailouts

The £2trillion question for British economy

Europe catches America’s financial disease

How Britain’s banks will never be the same again

Economist, deregulation and loose fiscal policies lead to Meltdown

World Leaders Must Roll Back Radical WTO Financial Service Deregulation

Ryanair to appeal EU’s ‘corrupt’ support of Alitalia takeover

Ashley Mote Revealing European Union Corruption

The EU budget is necessarily corrupt

EU leaders tear up rules of Eurozone

Starting to remind me of the Corruption in the US where the Crisis started.

Goldman begins to cut 10% of staff

AP

November 06, 2008

Goldman Sachs Group Inc has begun notifying about 3,200 employees globally that they have lost their jobs, as the world’s biggest investment bank slashes expenses to ride out the financial crisis, a person familiar with the situation said.

The job cuts, which were first reported last month, are a reflection of the ongoing downturn in the credit and lending markets that triggered massive losses for banks around the world. Goldman Sachs had been considered the strongest investment bank on Wall Street, and earlier this year had expected its payrolls to expand.

Positions will be cut across Goldman’s offices globally and among various business lines, and will bring the company’s staffing to 2006 and 2007 levels, the person said yesterday. He spoke on condition of anonymity because the company hasn’t publicly disclosed details of the plan.

According to CapitalIQ, Goldman has more than 37,000 employees across its operations.

There also have been reports that Goldman’s army of bankers might see their bonuses cut in half this year.

Difficulties at the firm demonstrate that even the industry’s most powerful player is not immune to fallout from the unprecedented financial turmoil.

On Monday, Merrill Lynch analyst Guy Moszkowski predicted that Goldman would report a loss for the fourth quarter, its first since going public in 1999. The stock market’s

plunge has created a brutal atmosphere for some of Goldman’s once high-flying businesses, such as private equity and proprietary trading.


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Jobs in peril as the relationship between banks and companies worsens, says CBI

November 5 2008

The CBI yesterday gave warning that the relationship between businesses and their lenders has deteriorated sharply and that job losses will be acute this winter if the banks fail to lend (see Commentary, facing page).

The warning came amid heightened tensions over banks’ lending and their apparent failure to supply enough credit to small businesses and to pass rate cuts on to mortgage borrowers.

John Cridland, Deputy Director-General of the CBI, told MPs that if businesses were denied adequate credit this winter, employers would be forced into sharp cuts in jobs and investment. Relations between banks and business had suffered badly because of the financial crisis, he told the Commons Business and Enterprise Select Committee.

MPs were told that the crisis had caused banks to be less willing to make lending decisions based on specific companies’ circumstances.

The Federation of Small Businesses said yesterday that there had been no improvement whatsover in bank lending since political pressure on the banks to maintain lending, led by the Prime Minister and the Chancellor, began to build last month.

Alistair Darling has insisted that those banks being recapitalised by the Government should maintain the availability of lending at 2007 levels. However, bankers privately say that his assurance is virtually meaningless.

Mr Cridland said: “Over the winter, there will be significant refinancing by a high number of businesses and we really need to see banks become more open to business.”

He added: “One of the worst consequences [of the credit squeeze] is the relationship between businesses and their banks.”

Mr Cridland said: “Firms are unable to borrow their way through the downturn as in other slowdowns over the last decade.” The CBI is calling for a one-point rate cut by the Bank of England’s Monetary Policy Committee tomorrow, but Mr Cridland said that CBI members were not expecting to see the benefits of cheaper rates immediately because interbank lending rates needed to fall further first.

Evidence of strains from the credit crunch emerged in Bank data revealing that businesses are drawing on deposits held with banks as they tap into reserves amid the loan drought. The Bank’s adjusted figures showed that funds on deposit from nonfinancial businesses fell by £7.5 billion in the third quarter, the third successive quarterly fall. The fall in companies’ cash on hand in bank deposits afflicted all the main sectors of the economy, with a record year-on-year fall of 5 per cent for services firms and a record 3.8 per cent drop for property companies.

Lord Mandelson, the Business Secretary, suggested UK banks were embarrassing Gordon Brown on the world stage by failing to pass on rate cuts. On a business delegation in Dubai with the Prime Minister, he said: “One of the things that has struck me going round the Gulf is the extent to which our own British PM is now being looked to as someone who will lead the rest of the world out of this mess. If we can’t even have a response in our own country to his moves, to his decisiveness, that will come as a surprise to many.”

The British Bankers’ Association said: “High street lending rates have to reflect what it costs banks to fund loans, whether from customers’ deposits or from interbank borrowing.”

Source

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£1.5bn bank cuts – but where will axe fall?

November 4 2008

LLOYDS TSB has been warned not to disregard the “human consequences” of the planned HBOS takeover, after revealing the deal will bring an extra £500 million of cuts – but refusing to give details of job losses.
Branches, call centres and entire subsidiaries are likely to disappear, increasing synergy savings to 50 per cent more than the expected £1 billion but provoking the wrath of the unions.

Lloyds issued a document to shareholders yesterday, revealing the name of the superbank to be Lloyds Banking Group.

The circular also proposes raising directors’ pay by £1 million – although this is to cover an expanded board. And it states that, although the bank will take government financing to boost its capital, it plans to be free of this by next year, allowing it to pay dividends to shareholders.

In a separate trading statement, the bank warned of a sharp fall in profits and said it expected to write off a further £300 million, while HBOS reported total write-downs of more than £5 billion from its risky assets in its statement.

Sir Victor Blank, the chairman of Lloyds and the new entity, says in the circular: “Whilst Lloyds TSB believes that the combination with HBOS will generally provide enhanced opportunities for employees, there will inevitably be some rationalisation of the combined workforce as a result of these initiatives, and consultation will take place with, among others, the recognised trade unions in respect of how this can be best achieved.”

There will be £790 million of cost cutting in UK retail banking, £235 million in insurance and investments, £430 million in wholesale and international banking, and £45 million in other areas, including central and support functions.

However, Eric Daniels, Lloyds TSB’s chief executive, refused to be drawn on job losses – which analysts have predicted could number up to 40,000. HBOS employs about 17,000 in Scotland, and Lloyds about 7,200.

The trade union Unite reacted angrily to the failure to “give any clarity on job security for staff”. Derek Simpson, its joint general secretary, said: “It is now time to start thinking about the human consequences of this takeover. None of the staff at these two banks should be forced out.”

Tavish Scott, the Scottish Liberal Democrats leader, said: “The UK government must ask why losing 20,000 jobs is compatible with billions of pounds of taxpayers’ money being put in Lloyds TSB’s piggy bank.”

He also claimed a rival offer for HBOS was being dealt with in a “ramshackle and chaotic way” by ministers.

Alex Neil, the SNP MSP who has campaigned against the takeover since it was proposed, described the prospectus as “dishonest”.

He said: “I only hope shareholders will not be hoodwinked into voting for this takeover, which will be bad for Scotland, bad for shareholders, bad for customers and which will jack up unemployment by up to 40,000 people across Britain.”

Investment bank advisers close to the Scottish Government are exploring ways in which a legal challenge could be mounted against the decision by Business Minister Lord Mandelson to waive aside Office of Fair Trading concerns about the effects of the takeover in reducing competition. A key reason for a legal challenge would be to allow time for other possible contenders to work on bids.

The Scotsman told yesterday how Mr Neil was involved in an alternative bid for HBOS, after the newspaper reported on Saturday that a foreign bank was also interested in the group.

Alistair Darling, the Chancellor, said: “Legally, there is nothing to stop any third party coming through and putting in a bid. If they want to talk to the government about it, they can do that.”

Both Lloyds and HBOS remained insistent the deal would go ahead, with Mr Daniels denying knowledge of any other bids, beyond what he had “read in the newspapers”.

The circular says the Treasury and the Lloyds board will work together to appoint two new independent directors. The Treasury says “it currently has no intentions or strategic plans concerning the enlarged group or its business or employees”.

Brown calls for strong leadership from the US

THE incoming US president must offer more leadership if the world is to bounce back from financial turmoil, Gordon Brown said yesterday.

The Prime Minister insisted that retreating to isolation and protectionism could wreck chances for a quick and sustainable recovery. Delivering a keynote speech in Abu Dhabi on the eve of the vote, he also highlighted the importance of the Middle East peace process to achieving co-operation.

Mr Brown said American influence had been “vital” for moves such as co-ordinating an international 0.5 per cent interest rate cut last month.

“I know that leadership will and must continue,” he said. “The next stage of globalisation will require even more international co-operation, with American leadership crucial to its success.

“In the coming weeks and months, the whole world will want to work closely with America on a shared common agenda to bring growth and jobs back to our economies; to give greater stability to our financial system; to defeat protectionism in favour of free trade; and of course to work for a more secure world – and in the Middle East, peace.”

Mr Brown stressed that all governments had a duty to work together to tackle the fallout from the credit crunch. “Because no country, no matter how big, can solve these challenges alone,” he said. “And people in every country want to know that every possible course of action is being pursued.”

New State-Run Glitnir Bank Established


A new Glitnir, Nýr Glitnir banki hf., has been formally established as announced by the Financial Supervisory Authority (FME) yesterday. The new bank will take over Glitnir’s domestic assets to secure regular banking operations and the safety of deposits in Iceland.

The new bank will not be involved in Glitnir Bank’s international operations, ruv.is reports, but all branches in Iceland, service centers and online banks are open.

The new Glitnir has ISK 110 billion (USD 1.0 billion, EUR 0.7 billion) in equity as submitted by the state. The size of the balance sheet is ISK 1,200 billion (USD 10.9 billion, EUR 8.0 billion).

Birna Einarsdóttir is the new director of the bank. A woman has also been hired as the new director of Landsbanki and the Financial Times commented that women were now responsible for tidying up the mess created by their male colleagues.

Ninety-seven employees of Glitnir Bank were given notice yesterday. Around 500 people have lost their jobs in total at Glitnir and Landsbanki, which were nationalized last week. Earlier reports stated that 500 people at Landsbanki alone would lose their jobs.

Einarsdóttir told RÚV that the salaries of many of Glitnir’s remaining employees, including herself, will be reduced.

It is still unclear how many employees of Kaupthing Bank, which was also taken over by the state last week, will be left unemployed.

Source

Published in: on October 16, 2008 at 7:48 pm  Comments Off on New State-Run Glitnir Bank Established  
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