Allied Irish Banks to give $50 million bonuses amid government bailout
Dublin, Ireland, United Kingdom (AHN) – Financially challenged Allied Irish Banks is scheduled to give $50 million (EUR 40 million) bonuses to bank officers despite the company being a possible recipient of another bailout from the Irish government.
The bonuses, amounting to $214,328 (EUR 161,000) for each of 2,400 bankers in the Dublin capital markets division, are part of a court award in 2008. The bonuses are scheduled to be given Dec. 17.
Because of the AIB situation, European banking regulators were scheduled to meet in London Thursday to come up with new rules applicable within the regional bloc on payment of bonuses amid financial crises. The rules propose to defer paying the bonuses over three years and forfeiting the payments if the banks suffer more losses.
AIB is 19 percent owned by taxpayers, but the government share is expected to go up to 95 percent after the Irish central bank required AIB to raise another $6.9 billion (EUR 5.2 billion) by the end of February. The amount will likely come not from the private sector, but from the $113 billion (EUR 85 billion) bailout from the International Monetary Fund and the European Union.
AIB investors, including some of the world’s largest fixed-income pension and insurance funds, are scheduled to meet Friday to discuss a possible lawsuit against the Irish government if the bank will be required to reduce again the value of subordinated debts issued by AIB.
Investors who held Tier 1 and Tier 2 bonds in AIB agreed in June 2009 to trade in these bonds for a new issue of lower Tier 2 debt. The move caused investors to lose 33 to 50 percent of their investments’ face value.
The investors warned that if they were forced to another round of swap, many pension funds, insurers and main fixed-income funds would shirk from Irish paper in the future for a long time.
Subordinated debt investors have filed similar legal cases against the Anglo Irish Bank and Irish Nationwide, but with little success.
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British Families’ Euro Bailout Share Is $1,050
London, England, United Kingdom (AHN) – Because of Britain’s commitment to help bail out European Union countries facing financial difficulties, British families could have to shell out $1,050 (GBP 700) as their share despite already having to tighten their own belts.
The $1,050 is on top of yearly contributions of Britain to the EU and a potential UK liability of $60 billion (GBP 40 billion) for the eurozone bailout.
However, assurance of an international bailout to Ireland and Greece has not placated the markets, as the contagion has started to spread to Portugal, Spain and Italy. On Wednesday, borrowing costs for Portugal went up to 5.3 percent from 4.8 percent two weeks ago for buyers of the $627 million (GBP 418 million) 12-month Portuguese bonds on the table.
After the auction, ratings agency Standard & Poor’s warned Lisbon it may cut Portugal’s credit rating. By evening, S&P placed Portugal’s debt on negative credit watch and said it may further downgrade Lisbon’s A-minus rating in three months.
The worsening currency crisis has prompted the U.S. Treasury to send a representative to Europe this week to sit down with the governments of German, Spain and France.
The nervousness of the markets over the situation in the eurozone has fueled speculation that the European Central Bank could increase the bailout funds, which would translate into higher costs and liabilities for EU residents.
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Costco November same-store sales up 9%
LONDON (MarketWatch) — Costco Wholesale Corp. said Thursday that comparable sales for the four-week period ending Nov. 28 rose 9%. Excluding the impact of inflation in gasoline prices and strengthening foreign currencies, same-store sales for November were up 6%. The company said net sales for the period rose 12% to $6.78 billion. Excluding sales from its Mexico joint venture, net sales were up 9%.
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Euro-zone third-quarter GDP unrevised at +0.4%
LONDON (MarketWatch) — Gross domestic product in the 16-nation euro zone expanded 0.4% in the third quarter and grew 1.9% compared to same period last year, the European Union statistics agency Eurostat said Thursday. The figures were unchanged from an earlier Eurostat estimate. GDP grew at 1% quarterly pace in the second quarter.
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Ireland to get €85bn banking loan
Potential bailout followed comments by the world’s biggest bond investor virtually inviting depositors to withdraw their money
Ireland is to be offered an €85bn (£72bn) loan from the IMF and the EU to bail out its banks and fund its public finances.
In a deal expected to include a contribution from the UK taxpayer of up to £10bn, the crippled banking sector is to be recapitalised, effectively taking Allied Irish Banks into state control and giving the government a majority stake in Bank of Ireland.
According to Irish broadcaster RTÉ, the banks will be forced to push up their capital cushions from 8% to 12% in a move that should boost confidence in the banking sector that has been suffering big deposit outflows.
RTÉ said €48bn would be used to fund the government deficit over the next three years, with €15bn-20bn to recapitalise the banks, and an extra contingency fund of €20bn.
The potential bailout of the banking system followed comments by the world’s biggest bond investor, virtually inviting depositors to take their money out of Ireland’s stricken banks.
EU authorities will be hoping the speed with which the deal appears to have been agreed will calm the markets, where there have been fears that Portugal could also need a bailout, and even Spain.
Markets were febrile yesterday, with the euro plunging more than two cents against the dollar and share prices falling heavily in Europe and North America.
Tensions between North and South Korea further strained nerves, while Germany admitted that the future of the euro was at stake through the Irish bailout.
Mohamed El-Erian, chief investment officer of the powerful bond manager Pimco, fuelled anxiety about the health of the banks yesterday by describing Ireland’s banks as “bleeding deposits”.
He said: “What you advise your sister in Ireland now is that you’d say take your money out of an Irish bank and put it in another bank headquartered elsewhere.
“That’s what happened in Argentina and in emerging economies. People worry about their savings.”
Ireland’s central bank had immediately denounced Erian’s remarks by saying there was “no basis for concern” and all deposits were guaranteed by the government. But the central bank’s admission that major international firms had been withdrawing their funds from Ireland highlighted the anxious mood of the markets on the eve of the government’s four-year fiscal plan, which is a crucial component on the deal with the IMF and EU.
Erian, who was interviewed by the Bloomberg news agency, said Ireland needed to conclude those negotiations to restore confidence in the banking system.
“It will seriously undermine the prosperity of this country for a generation. The first thing they must do is execute on what they announced this weekend, which is a big external aid package and steps by the Irish government,” he said.
According to RTÉ, Ireland’s banks will be made considerably smaller and the bad loans will be taken out of the troubled UK arm of AIB in an attempt to allow the operation to be sold off.
Irish bank shares had been hit hard before details of the package leaked and central bank boss Patrick Honohan had invited bidders. “They [the banks] are for sale as far as I am concerned. I have been an advocate for a number of years for small countries to have foreign owners for their banks,” he said. US billionaire Wilbur Ross said he was “very far along” in the process of buying a bank.
Ireland’s woes prompted concerns that the authorities had failed to use the Republic as a firebreak for the crisis which now risks enveloping Portugal and even Spain. The cost of borrowing for both countries rose yesterday. Spain did not manage to raise as much money as it had hoped in its regular bond auction and was forced to pay more to raise the funds.
Jim O’Neill, chairman of Goldman Sachs Asset Management, warned that the Irish rescue package did not solve the problems at the heart of the single currency.
Other market experts were also concerned about the eurozone. Graham Turner of GFC Economics said the solution for weak members might be for Germany to walk away from the single currency.
He suggested that Austria, Finland, the Netherlands and Germany could form a new deutschemark bloc which would allow the other 12 members of the eurozone to devalue and reflate their way out of the crisis. “It has to be a better option than the present straitjacket of a single currency,” said Turner.
In Europe, London’s FTSE 100 index closed 95 points (1.8%) lower at 5581.28 while Germany’s DAX tumbled 1.7% and the CAC-40 in France ended 2.5% lower. Spain’s Ibex closed down 2.8% and Portugal’s PSI 2.1%.
The euro fell to its lowest level in two months of 1.3377 against the dollar.
The German parliament was told of the gravity of the situation by finance minister Wolfgang Schäuble. “Our common currency is at risk,” he said, if Germany did not play its part in bailing out Ireland. Without participation, the “economic and social consequences for our country will be incalculable”. Chancellor Angela Merkel echoed his remarks, saying: “We’re in an extraordinarily serious situation.” Ireland bailout European debt crisis Ireland Euro Currencies Banking European banks Euro European Union Economics Banks and building societies Jill Treanor Larry Elliott guardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds
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GAIN Capital Ranked Among Fastest Growing Companies in North America on Deloitte’s 2010 Technology Fast 500
NEW YORK and LONDON, Oct. 20 /PRNewswire/ — GAIN Capital Holdings, Inc., a global provider of online trading services specializing in foreign exchange (forex or FX) and contracts for difference (CFDs), today announced that it ranked number 305 on the Technology Fast 500™, Deloitte’s ranking o
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GAIN Capital to Acquire the Retail Forex Business of Capital Market Services, LLC
NEW YORK and LONDON, Oct. 19 /PRNewswire/ — GAIN Capital Holdings, Inc., a global provider of online trading services specializing in foreign exchange (forex or FX) and contracts for difference (CFDs), has reached an agreement to acquire the retail forex business of Capital Market Services LLC (“CM
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U.K. Registers 3.1 Percent Inflation Rate In September
London, England, United Kingdom (AHN) – The United Kingdom registered an inflation rate of 3.1 percent for September, according to the Office for National Statistics. The rate has been unchanged since July.
Decreases in air fares and gas prices were offset by a major rise in clothing and food prices, leading to the static Consumer Price Index, the ONS said. Prices of airfares dipped by 27.8 percent in September, but clothing and footwear prices logged a 6.4 percent increase and furniture and furnishings prices surged 4 percent.
It is the first time since 1992 that clothing and footwear prices went up. Economists theorized the jump in prices is because of retailers raising their prices ahead of the forthcoming increase in the value added tax.
The 3.1 percent inflation rate, however, is way off the Bank of England’s 2 percent target. Experts said the static CPI would add pressure on the British central bank’s Monetary Policy Committee, which decides if they will retain the record-low 0.5 percent key lending rate.
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Bank Of England Urges Retirees To Spend
London, England, United Kingdom (AHN) – To boost the sagging British economy, Bank of England Deputy Governor Charles Bean urged on Monday retirees to spend, not save. Bean estimated that five million elderly Britons live off interest from their pension funds have been complaining that their savings accounts pay less than inflation.
Bean explained the low interest rates were part of a strategy of the British central bank because the retirees have benefited in the past from capital gains on their houses. Data said borrowers gained $39 billion (26 billion pounds), while savers lost $27 billion (18 billion pounds) because of interest rates that were deliberately reduced by the Bank of England.
He urged the senior Britons to touch some of their capital even if the average savings interest rate had dipped from 2.8 percent before the financial crisis to 0.23 percent in August.
The Bank of England has held benchmark lending rates at 0.5 percent for 18 months. Bean said the low interest rates could still stay for several rates.
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Bank Of England Mulls Another Round Of Fiscal Stimulus Action
London, England, United Kingdom (AHN) – The Bank of England is considering another round of fiscal stimulus after the pound dipped and interest rates suffered its largest drop in over 18 months on Wednesday.
Reports said the British central bank may order another round of quantitative easing – or the printing of electronic money. The move would boost money supply and improve the pound’s standing against other currencies.
Some of the nine-members of the Monetary Policy Committee of the Bank of England pushed for more stimulus action because of threats to the recovery of the British economy. The committee, in a 8-1 vote, opted to keep key lending rate at the record-low level of 0.5 percent and not to increase the bank’s $300 billion (200 billion pounds) quantitative easing program for the meantime.
On Wednesday, the business group CBI forecast that the Bank of England would hike benchmark interest rates later than previously anticipated. CBI foresaw key lending rates going up to 1.25 percent by the end of 2011.
CBI said Britain’s tentative recovery will be sustained, but with weaker levels of growth because of massive spending cuts by the coalition government.
Among CBI’s other major predictions are that inflation would remain above the Bank of England’s 2 percent target until 2011, exports would rise by 3.5 percent in 2010 and 6.4 percent in 2011 and unemployment would even grow to 2.62 million jobless Britons by end of next year.
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