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Bank of England’s deputy governor says changes will bring stability

Category : Business

Overhaul of the FSA will put Britain’s central bank back in charge of financial stability, according to Paul Tucker

The radical shakeup of Britain’s banking watchdog, which takes effect this weekend, is essential is to avoid another financial crisis, according to a top Bank of England official involved in implementing the new regime.

Four years on from the crisis that threatened to bring down the UK’s financial system, the coalition’s dramatic overhaul of the City regulator will put Britain’s central bank back in charge of financial stability.

Paul Tucker, deputy governor of the Bank, said Threadneedle Street had a “historic mission” to prevent another collapse. Labour’s creation in 1997 of the Financial Services Authority (FSA) stripped it of that responsibility – but its return was a very good thing, he said.

Overlooked for the top job at the Bank last year, Tucker also acknowledged that the new setup, which formally begins on Monday, could itself need reviewing in the future.

Tucker told the Guardian that the institution was “in the business of stability”, but also keen on recovery.

“You lose stability and the costs are enormous. This country learned the hard way about the inflationary boom and bust and now learned the hard way about banking boom and bust. It mustn’t happen again.”

Putting the Bank back at the heart of oversight should help as “separating banking supervision from the lender of last resort is hazardous unless you grow an umbilical cord that connects the two”.

While banking supervision did not always need to be inside the central bank, communication was key, he said.

“I do think it’s essential that the connection is really close, and supervision and central banking grew apart in this country and they’re now being reconnected. Given where this country finds itself, that is a very good thing. It was always the historic mission of the Bank of England to look after stability.”

If the new system had been in place in 2006 – just before complex financial products turned so toxic that they locked up financial markets in a credit crunch – Tucker thinks regulators would have been “worried by the resurgence in credit growth throughout the west from 2004″.

It would also have worried about the ballooning market in credit default swaps and the booming securitisation industry. It would have intervened in wholesale markets and banks would have been required pump up their capital to make them safer in 2005 and 2006 – even then it might not have been enough to stop the crisis.

“I wouldn’t go so far as to say it would have stopped the boom but it would have made the bust a lot less bad,” said Tucker, who acknowledged that he helped to design the new system ripping apart the FSA, which shuts down on Sunday and puts the Bank of England back at the heart of ensuring the financial system is safe from speculative bubbles and spectacular busts.

It means the blame for any future financial implosions can be placed firmly at the doors of the Bank, which during the 2008 crisis argued it had bark without bite, as blame was shuffled around between Threadneedle Street, the FSA and the Treasury – though some would argue that even the Bank’s bark had been rather quiet.

A new financial policy committee (FPC) is being formed inside the Bank – it is the body that this week caused controversy by ordering banks to plug a £25bn capital shortfall. The Bank is also creating a new subsidiary, the Prudential Regulation Authority (PRA), to regulate the big banks. Tucker sits on the FPC and the board of the PRA. Meanwhile, a new Financial Conduct Authority is being spun out of the FSA to regulate the behaviour of the City.

Already though, the FPC, which has met on an interim basis since June 2011, has had a difficult birth. A reshuffle of its external members this week led some to wonder if its most outspoken members were being neutered. The requirement for banks to raise more capital saw the business secretary, Vince Cable, express concern about the impact on lending, while the smaller than expected size of the capital shortfall sparked speculation that the FPC had been leant on. The lack of detail about the requirements for each bank frustrated the City too.

The FPC, borrowing the words of the former Federal Reserve banker William McChesney Martin, will be able to “take the punch bowl away while the party is still going”. But Tucker admits it is hard to gauge whether attempts to impose sobriety on the system will be needed within five years or 20 years.

And then, such a move might be very unpopular. “Eventually there will be a moment when the bankers and the public are on the same side, opposing measures by the Bank of England, its financial policy committee, to slow the party down,” said Tucker.

“The biggest problem with stability is people forgetting and taking stability for granted,” he said. “I think the most important thing about the FPC is an institutional structure that says these 11 men and women will not forget.”

The Bank has published 17 indicators that will be used to look for bubbles. While Tucker notes “there is no indicator that will whisper the answer in our ear”, he cites a rapid growth in credit as one factor to watch closely.

The PRA, led by Andrew Bailey, will be able to use its judgment about each individual bank, which should be “fantastically rewarding” for the regulators. Boards, too, will need to provide leadership in setting a new cultural tone.

Nine months ago, when he was the frontrunner to replace Sir Mervyn King as governor, Tucker got caught up in the Libor-rigging scandal when exchanges between him and Barclays’ then boss, Bob Diamond (who was forced to quit), became the subject of scrutiny.

The appointment of the Bank of Canada chief Mark Carney as the next governor has led to speculation about the future of Tucker – whose five-year term as deputy governor for financial stability ends a year from now.

Speaking in his parlour-like office at the Bank of England, he is keener to focus on regulation regime changes rather than discuss his past or future. Asked if he intended to stay on, Tucker replied: “I am the deputy governor for financial stability. It’s been the most extraordinary privilege being in this room while the system has been completely redesigned.

“Whether I like it or not, I’ve been one of the architects of the new system. I think it can serve this country well.

“No system is perfect and it will eventually be found wanting and we will need to keep it under review and improve it from time to time. But I think it’s fit for purpose for now.”

Kipper Williams on the financial policy committee

Category : Business

Financial policy committee: ‘Now all we need is some financial stability to take control of’

Read more here: Kipper Williams on the financial policy committee

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Greek reforms hit new setback as privatisation chief resigns

Category : Business

Takis Athanasopoulos quits after being charged with dereliction of duty in former role as chief exectutive of public utility PPC

In another setback for Greece’s reforms, the country’s privatisation chief Takis Athanasopoulos has resigned after only a few months in the job, after being charged with dereliction of duty in his former role as chief executive of the public utility PPC.

An official at the Greek finance ministry, Giorgos Mergos, also stepped down after being charged. Both men denied knowingly commissioning a loss-making plant when on the board of PPC, which led to losses of more than €100m for the state-owned power company.

Athanasopoulos said he welcomed the charges. “It gives me the opportunity to prove that the interest of the PPC and the state were fully served,” he wrote in a resignation letter, insisting his decision to step down had been motivated by the desire not to further impede Greece’s problem-plagued privatisation process.

The Greek finance minister, Yannis Stournaras, is under pressure to clean up corruption from international creditors keeping Greece’s debt-stricken economy afloat.

The departures are a fresh blow for the privatisation agency following successive changes of administration since its creation two years ago.

The sale of state assets is among the issues being discussed between Stournaras and visiting inspectors from the country’s “troika” of lenders at the EU, ECB and IMF.

The talks will determine whether Greece receives €2.8bn aid at the end of March. The country’s debt load is expected to rise to a staggering 185% of GDP this year.

Greece’s privatisation programme aimed to raise €50bn by 2015 through the sale of publicly owned properties ranging from islands to former royal palaces and hotels. But foot-dragging, red tape and at times outright resistance have repeatedly obstructed progress, with Athens reducing the target to €19bn by 2015. A mere €1.6bn has been raised since the debt crisis began three years ago.

The resignations come just as headway was beginning to be made with the entity recently completing its first international deal in almost 15 years, leasing a prime plot on the popular island of Corfu.

Last month, the Fund succeeded in luring back Qatar to the table with Doha announcing that it would participate in an international tender for the development of Athens’ former airport at Hellenikon, the country’s biggest privatisation project.

Athanasopoulos, who faces a maximum sentence of life in prison, is expected to be replaced on Monday.

Amid popular anger at an elite perceived to have brought Greece to the brink of bankruptcy, prosecutions of politicians and businessmen have accelerated in recent months. Public figures, including the former mayor of Thessaloniki and former defence minister, have received long prison sentences after being found guilty of fraud and corruption.

Prime Minister Antonis Samaras said at the weekend that while Greece’s predicament has improved dramatically since the summer “it is out of intensive care but it is not out of the hospital yet.”

Highlighting the country’s fragile state, one of German Chancellor Angela Merkel’s senior allies insisted at the weekend that Athens remained the biggest risk for the euro zone despite the stabilization of its economic and political scene.

“The greatest risk for the euro is still Greece … I still believe that Greece’s exit would be a possible long-term alternative for Europe and for Greece itself,” Alexander Dobrindt, a leading conservative told Die Welt am Sonnrag newspaper.

“We have created a situation that gives Greece a chance to return to stability and restore competitiveness. But I still hold that, if Greece is not able or willing to restore stability, then there must be a way outside the euro zone.”

Council Vote to Keep Windsor Aquatic Centre Public "a Win for Windsorites"

Category : Stocks, World News

Agreement approved by City Council ensures stability and superior service for state-of-the-art aquatics centre, says CUPE 543 President Mark Vander Voort

Go here to read the rest: Council Vote to Keep Windsor Aquatic Centre Public "a Win for Windsorites"

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Moody’s cuts rating of ESM fund

Category : World News

Moody’s cuts the triple-A rating of the European Stability Mechanism (ESM) euro rescue fund on Friday by one notch.

Go here to see the original: Moody’s cuts rating of ESM fund

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Financial risks ‘have increased’

Category : World News

Risks to global financial stability have increased in the past six months despite efforts by policymakers to make the financial system safer, says the International Monetary Fund.

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Spanish hopes threatened by ‘shocking’ statement

Category : Business

The European Stability Mechanism row damages the notion that the eurozone countries are capable of acting quickly

The plan to recapitalise banks was meant to be the easy part of the latest scheme to save the euro. Didn’t everybody agree that breaking the link between weak sovereigns and weak banks was a vital and urgent step? Wasn’t the central European Stability Mechanism (ESM) deemed the perfect vehicle to strengthen the balance sheets of teetering banks and thus offer a helping hand to the governments of the likes of Spain and Ireland?

Yes and yes. But now comes a powerful “no” in the form of a joint statement from the German, Dutch and Finnish finance ministries. The critical paragraph began with the words “regarding longer-term issues”, a giveaway that a classic piece of foot-dragging was on the way.

The ESM, declared the trio, can only go to work on bank recapitalisations “once the single [bank] supervisory mechanism is established and its effectiveness has been determined”. That latter could take years. Further, “legacy assets” should remain the responsibility of national governments. So are saying there should be no central hand-outs to cover past government-funded bailouts of banks.

The statement is a shocker. Even if there had not been riots in euroland yesterday, stock markets would have slumped on the news and bond yields in the periphery would have soared. If the will of the trio of northern objectors prevails, the €60bn (£47.8bn) needed to save the Spanish banking system will go directly on the Spanish government’s books, thereby making the arithmetic of the inevitable bailout of Madrid bigger and uglier. And poor old Ireland – the one country that the austerity disciplinarians could promote as a story of recovery – would get a slap in the face.

More fundamentally, the row over the role of the ESM damages the already-fragile notion that the eurozone countries are capable of acting quickly. Germany and the others seem guilty of sharp practice here – they are attempting to re-write an agreement whose general meaning had seemed clear. The time to argue these points was when use of the ESM was being debated by all.

But, if that’s the true picture of the state of eurozone relations, you can’t blame investors for wondering what other agreements could be challenged in future. It is a terrible climate in which to negotiate the conditions of the Spanish bailout. The backdrop to those delicate talks will now be poisonous.

Quantitative easing isn’t magic | James K Galbraith

Category : Business

It is unrealistic to expect central banks like the Fed and the ECB to solve our deep economic problems

What should we make of the latest moves to kickstart the US economy, and to save the euro? As the late, great Harvard chaplain Peter Gomes said to my graduating class many years ago, about our degrees: “There is less there

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Viscount Rothermere | MediaGuardian 100 2012

Category : Business

With profits from Mail Online offsetting declines at print titles, the Daily Mail & General Trust chair looks to be in a solid position

Job: chairman, Daily Mail & General Trust
Age: 44
Industry: publishing, digital media
2011 ranking: 42

His empire includes the Daily Mail, the Mail on Sunday and the morning free paper Metro. And of course the world’s biggest newspaper website, Mail Online.

The site is read by an estimated 6.5 million unique visitors daily, and last year generated £16m. It may seem modest but year-on-year growth was 69% in the second quarter and Mail Online is on course to hit revenues of £45m in the year to September 2013, offsetting declines at the print titles.

It’s all looking good for Rothermere – Jonathan Harmsworth – who chairs DMGT and controls the majority of its voting stock; his wealth was estimated at £760m in the Sunday Times Rich List.

Despite making what our panel said was “his first genuine editorial appointment” in Mail on Sunday editor Geordie Greig, his relatively low placing reflects his hands-off approach to his titles; the Mail’s main influence is of course Paul Dacre. Rothermere also made an assured appearance at the Leveson inquiry on the same day as Andy Coulson.

“Still in 40s, he’s really smart,” said one of our experts. And given the Mail’s strength and the company’s stability he is likely to creep up the list.

Euro rescue fund clears major hurdle

Category : Business, Stocks

The German Constitutional Court ruled against a group of conservative politicians who requested an injunction that would bar Germany from ratifying the treaty governing the European Stability Mechanism.

Originally posted here: Euro rescue fund clears major hurdle

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