13 September 2013 - 14:32 pm
Spain is heading for a big debt resaca, or hangover, as its national debt climbed to 92.2 per cent of gross domestic product in the second quarter, data from the country’s central bank show. To put that in context, that is more than double the 40 per cent reading at the end of 2008.
It is also up sharply from a reading of 77.5 per cent a year ago as Madrid still shoulders the burden of sorting out its former regional savings banks, paying for a misguided mid-crisis stimulus programme instigated by the previous government, and sharply reduced tax receipts as a result of its recession.
But there are signs that funding pressures are easing for Spain’s lenders. Total borrowings from the European Central Bank in August fell to €246bn from €248.2bn in July – representing a twelfth consecutive month of reduced borrowing.
Relief comes to those who wait.
09 September 2013 - 15:07 pm
Political uncertainty, a still challenging economic backdrop and a sharp deterioration in bank asset quality? A country in the eurozone? Check. Italy? Check.
The Bank of Italy’s monthly report said banks’ bad loans leapt by 22.3 per cent in the twelve months to end-July, even as domestic lending contracted – a sign that banks are still far from working through the downturn.
The data will lend support to calls for consolidation – especially among Italy’s myriad smaller lenders – as these undercapitalised banks struggle with the toll of bad loans.
Nor is the pressure showing any sign of lifting. Last week’s Italian purchasing managers’ index reading of 48.8 showed the country was lagging its eurozone peers, while the budget deficit for 2013 could again exceed the 3 per cent eurozone target as political risk threatens the country’s economic management.
Worst is yet to come.
Non-performing loans are rising rapidly as India’s battered economy stalls. On the other hand, rising bond yields make it tougher for banks to absorb credit losses from current earnings.
State Bank of India shares fell 3.4% in Mumbai on Aug. 12 after surging bad loans at India’s largest lender caused a 14% fall in its quarterly net income.
Gross NPLs at India’s top 10 government-owned banks doubled over the past two years to US$24 billion. Bad debt provisions among banks will cover about half the NPLs but taking care of the remaining half is expected to wipe out one year of operating income.
The rise in 10-year government bond yields since May will leave lenders that own a big chunk of government debt with huge losses. The Reserve Bank of India’s recent monetary-tightening efforts to halt the 12% slide in the rupee since April sent the yield on three-month treasury bills soaring to 10.9%, compared to 8.3% on 10-year government bonds.
The Bank of Italy is said to be inspecting the finances of some of the country’s top lenders, according to reports from the Wall Street Journal.
According to Linkiesta, non-performing loans could exceed €250bn (£216bn) and have tripled since 2007
Five years has been enough time for Elizabeth Duke at the Federal Reserve.
Ms Duke, a member of the Fed’s board, sent her resignation to President Obama this morning, effective August 31.
In her letter, Ms Duke said she believed the Fed “met every test” before it. She did not disclose her plans after she departs the central bank.
Fed chairman Ben Bernanke said:
She brought fresh ideas grounded in her deep knowledge of the banking industry and the real-world dynamic between borrowers and lenders
President Bush appointed Ms Duke to fill an unexpired term that ended in January of 2012. She served as chairman of both the consumer affairs and small and community bank regulation committees while at the Fed.
Ms Duke was the chief operating officer of TowneBank before joining the Federal Reserve.
The Indian rupee has weakened rapidly in recent months, with the exchange rate against the US dollar dropping by 11%, to around 60 rupees, since early May. As a symbol of India’s economic strength, the rupee’s fall has provoked more than the usual hand-wringing and angst at home and abroad.
here is indeed reason to be worried, but not because the rupee’s value has declined. In fact, the slide has been long in coming, and recent market uncertainty has merely been a wake-up call.
The real reason to worry is that India has lost international competitiveness and has been buying time by borrowing from fickle lenders. Growth momentum has fizzled and, with inflation persistently high, Indian producers are struggling to compete in world markets. The current-account deficit is increasing relentlessly, owing to a widening trade deficit (now at 13% of GDP), raising the balance-of-payments crisis.
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Greece has three days to reassure its lenders it can deliver on conditions attached to its international bailout in order to receive the next tranche of aid, four euro zone officials said today.
Athens and its creditors unlocking 8.1 billion euros ($10.6 billion) of rescue loans resumed talks on Monday on after a two-week break during which the government almost collapsed over redundancies at state broadcaster ERT.
There is a general dissatisfaction with progress in Greece when it comes to reforming its public sector, such as tax and custom collection or health care services, a senior euro zone official involved in negotiations said.
“All agreed that Greece has to deliver before the Eurogroup on Monday. That’s why they must present again on Friday,” a second source told Reuters. >> Read More
Britain’s biggest lenders must plug a £27.1 billion hole in their finances, the City regulator revealed today.
Barclays, Lloyds Banking Group and Royal Bank of Scotland account for more than 90 per cent of the shortfall, the Prudential Regulation Authority (PRA) said.
Barclays needs to boost its balance sheet by £3 billion, while state-backed players RBS and Lloyds must raise £13.6 billion and £8.6 billion respectively.
Nationwide building society is facing a £400 million shortfall, while The Co-operative must stump up £1.5 billion as already announced.
HSBC, Standard Chartered and Santander UK do not need to boost their capital cushions, the PRA said.
Cyprus’ President Nicos Anastasiades has realized (as we warned), too late it seems for the thousands of domestic and foreign depositors who were sacrificed at the alter of monetary union, that the TROIKA’s terms are “too onerous.” Anastasiades has asked EU lenders to unwind the complex restructuring and partial merger of its two largest banks leaving EU officials “puzzled”, according to a letter the FT has uncovered, as “essentially, he is asking for a complete reversal of the program.” The EU officials claim that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government, which voted down a first agreed rescue before succumbing to a similar deal nine days later.
The FT goes on to note that although the letter does not request it explicitly, Mr Anastasiades is in effect asking for further eurozone loans on top of the existing EUR10bn sovereign bailout – something specifically ruled out by a German-led group of countries at the time. The return of beggars-can-be-choosers we presume – or just token gestures to recover some populist support as the enemy of my enemy is my friend. >> Read More
The Reserve Bank of India (RBI) tightened the rules for corporate debt recasts on Thursday, seeking to address the risk of restructured loans turning bad as the economy struggles for recovery from its slowest pace of growth in a decade.
Banks should set aside more money to cover restructured loans and the promoters of companies seeking a debt recast have to be made personally liable for compensation for losses incurred by lenders engaged in such an exercise, RBI said.
The move reflects the concern of the central bank over debt recasts, already at Rs.2.29 trillion in March and likely to surge further in the context of a sluggish economy, putting the earnings of overburdened state-owned lenders even more at risk. It also echoes the concerns expressed by finance minister P. Chidambaram earlier this year. >> Read More