Royal Bank of Scotland’s shares took a hammering on Monday – they closed down 15 per cent at 174.3p on Monday, having hit their lowest point since the depths of the financial crisis earlier in the day. Now for some soothing words for staff of the state-backed bank from chief executive Ross McEwan.
He sent this memo round to staff on Tuesday morning:
As you know, last week the UK voted to leave the European Union. Whilst this result was a surprise for many, we had planned extensively for both possible outcomes to ensure we were well placed to support our customers and colleagues.
Our day 1 plan worked, but of course the result of the vote carries with it a range of unknowns about the short, medium and long-term prospects for the UK and its economy. Added to this we now have a period of political uncertainty.
Both of these factors combined have led to significant falls in the value of the pound, the value of many British companies and of course, the value of UK and European banking stocks – ours included.
The reason for these falls and wider volatility is essentially the inability of the market to find certainty in what shape and state the UK economy and its companies will be in leading up to and when eventually leaving the EU.
Britain, I believe, had the best of all possible deals with the European Union, being a member of the common market without belonging to the euro and having secured a number of other opt-outs from EU rules. And yet that was not enough to stop the United Kingdom’s electorate from voting to leave. Why?
The answer could be seen in opinion polls in the months leading up to the “Brexit” referendum. The European migration crisis and the Brexit debate fed on each other. The “Leave” campaign exploited the deteriorating refugee situation – symbolized by frightening images of thousands of asylum-seekers concentrating in Calais, desperate to enter Britain by any means necessary – to stoke fear of “uncontrolled” immigration from other EU member states. And the European authorities delayed important decisions on refugee policy in order to avoid a negative effect on the British referendum vote, thereby perpetuating scenes of chaos like the one in Calais.
German Chancellor Angela Merkel’s decision to open her country’s doors wide to refugees was an inspiring gesture, but it was not properly thought out, because it ignored the pull factor. A sudden influx of asylum-seekers disrupted people in their everyday lives across the EU.
The Bank of Japan on Tuesday conducted its first auction for dollar-supplying operations since the U.K. voted to leave the European Union in last Thursday’s referendum, attracting bids for the total $1.47 billion offered — the largest amount since December 24, 2014, when there were $1.52 billion in bids.
The operation period covers from Thursday, June 30 to Friday, July 8 in U.S. Eastern Standard Time.
Financial institutions have growing demand for dollars in the wake of the turmoil in the financial markets.
The BOJ conducts auctions for dollar-supplying operations on an almost weekly basis. The bank provides dollars at slightly higher interest rates than in the markets at the request of financial institutions. The institutions essentially use the operations when they are unable to raise sufficient dollars in the market.
There have been no bids for half of the recent auctions for the bank’s 10 dollar-supplying operations. The few bids that were made were for amounts limited to $1 million to $2 million.
It appears The Brits may have dodged more than a bullet in their decision to leave The EU. The foreign ministers of France and Germany are reportedly due to reveal a blueprint to effectively do away with individual member states in what is being described as an “ultimatum.” As The Express reports, the shockingly predictable final solution to Europe’s Brexit-driven existential crisis is an apparently long-held plan to morph the continent’s countries into one giant superstate. The radical proposals mean EU countries will lose the right to have their own army, criminal law, taxation system or central bank, with all those powers being transferred to Brussels. According to the Daily Express, the nine-page report has “outraged” some EU leaders.
The plans for ‘a closer European Union’ have been branded an attempt to create a ‘European superstate’, as The Daily Mail reports,
Germany’s foreign minister Frank-Walter Steinmeier and his French counterpart Jean-Marc Ayrault today presented a proposal for closer EU integration based on three key areas – internal and external security, the migrant crisis, and economic cooperation.
But the plans have been described as an ‘ultimatum’ in Poland, with claims it would mean countries transfer their armies, economic systems and border controls to the EU.
Controversially member states would also lose what few controls they have left over their own borders, including the procedure for admitting and relocating refugees.
The Express reports that the plot has sparked fury and panic in Poland – a traditional ally of Britain in the fight against federalism – after being leaked to Polish news channel TVP Info.
Considering Goldman’s abysmal forecasting track record continues to plumb new lows (just today it predicted a Spain victory of Italy, and an England victory over Iceland, both tragically wrong), the following should perhaps be best used as an indicator of what will not happen. Still, since there are a lot of remaining Brexit question, we hope that the following at least provides a useful framework for how to approach the :”known unknowns”, if not so much the unknown unknown ones.
First, here is Goldman’s answer on what happens next, in terms of timeline of key events, as well as bookmaker odds for the next conservative party leader.