News from Europe

Deutsche Bank boss opposes IMF bailout

Head of Germany's biggest bank says €200bn capital injection will not solve eurozone crisis

the Guardian,

Thursday 13 October 2011 20.12 BST

The head of Germany's biggest bank opposed a Europe-wide capital injection into the financial sector on Thursday as analysts tried to work out which institutions might need to share in the €200bn (£174bn) boost.

While Britain's banks are expected to escape major cash calls, their shares were among the biggest fallers in the FTSE 100 after ratings agency Fitch downgraded Barclays and bailed-out Royal Bank of Scotland and Lloyds Banking Group. Like Moody's, which downgraded a number of banks last week, Fitch blamed the move on the government's efforts to try to wean the sector off taxpayer support.

On the third anniversary of the bailout of RBS and Lloyds, taxpayers' loss on their £65bn stake stood at £32bn.

Evidence of the slowdown in the banking business was underlined when JP Morgan Chase became the first Wall Street bank to report for the third quarter. Group profits were down 4%.

The investment banking division would have made a loss without a $1.9bn accounting adjustment caused by the falling value of the bank's debt. Jamie Dimon, the chief executive, warned that 1,000 jobs would be lost in the next 12 to 18 months.

Even so, the investment bank cut employee compensation by just 2% in the first nine months of the year to $7.71bn, averaging $289,611 in salaries, bonuses and benefits for each of the division's 26,615 employees.

While the markets have been buoyed by hopes that a plan to bolster the financial health of Europe's bank will be announced on 23 October, Josef Ackermann, head of Deutsche Bank, reckoned that it would not solve the crisis and claimed that holding on to Greek bonds had cost the bank €400m this year.

"It is not the capital position which is the problem, but the fact that sovereign debt as an asset class has lost its risk-free status," Ackermann said. A number of German banking associations also urged Germany's finance minister, Wolfgang Schäuble, to put pressure on the European Banking Authority to stop it imposing strict capital rules on banks.

The EBA, the new European regulator based in London, has refused to indicate the size of the buffers it wants banks to hold in the face of the eurozone crisis. But it is thought that it will ask banks to hold up to 10% in so-called core tier one capital. In Brussels, EU officials made it plain that the higher capital buffers would be temporary but would need to be implemented by affected banks within three to six months.

Barclays Capital asked whether fresh capital injections would be a recapitalisation or a "pre" capitalisation in the event of a "calamity" such as an Italian default. "This isn't 2008. Back then the sector needed a massive recap because capital ratios were too low. Today, the circumstances are entirely different. The sector has a core equity tier one ratio of over 9% (in 2007 it was 6%), rising to 10% by 2012 on our forecasts," BarCap said.

Analysts at Credit Suisse suggested that RBS might need €19bn more capital – the highest of any European banks – but other experts, such as those at HSBC, said it would not need any.

It is thought that 60 or so banks being assessed by the EBA may require less in fresh capital than the €200bn put forward by the Christine Lagarde, head of the International Monetary Fund. "We would expect that the numbers will not be that large, the numbers will be manageable, and we will see if banks can raise that capital," a senior EU official said, suggesting that most of this could be done from internal resources.

The EBA exercise is expected to be complete "within the coming days" and, after talks with the European commission and ECB, a full-scale bank recapitalisation plan, identifying individual banks and their requirements, should be approved by the EU/eurozone summits on 23 October.

After Thursday's (thu)ratification by the Slovak parliament of enhanced powers for the European Financial Stability Fund, Klaus Regling, the bailiout fund's chief executive, said the new instruments would be available "in the near future".

BP to expand North Sea oilfields

• Cameron backs £4bn plan for 'new Atlantic frontier' 

• Greenpeace warns of oil spills and rising emissions

the Guardian,

Thursday 13 October 2011 

BP faced fresh condemnation from environmentalists on Thursday after it got the go-ahead to invest £4bn to develop one of the North Sea's largest oilfields off Shetland.

The company has been criticised by green campaigners for trying to open up "a new Atlantic frontier" west of Shetland, to replace dwindling reserves in other parts of the North Sea.

BP's latest move to extract oil from the Clair Ridge field was immediately criticised by Greenpeace, which claimed it was now "frankly risible for David Cameron to claim that this government will be the 'greenest ever'."

Greenpeace said: "While [energy secretary] Chris Huhne likes to portray himself as the good green guy of the cabinet, all those around him are pledging the UK to a dirty fuel future that will do only one thing: increase CO2 emissions and cause irreparable damage to the environment."

Green groups have already criticised BP for seeking permits to drill a potentially hazardous deep-water well 1,300 metres below the surface in the North Uist field – a seabed block named after the Hebridean island but located 80 miles north-west of Shetland.

However, the prime minister threw his weight behind BP, declaring: "We should be looking to try and make these things happen rather than ruling them out."

For article GO HERE

Carrefour, Europe's biggest retailer, sounds the alarm over the economy

• French store chain issues its fifth profit warning of the year

• Analysts slash forecasts for growth in Germany

The Guardian,, Thursday 13 October 2011 19.38 BST

Deepening economic gloom has forced Europe's biggest retailer, Carrefour, to issue its fifth profit warning this year and Germany's leading independent forecasters to highlight the risk of a recession in 2012.

For article GO HERE