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This is London – It also led many in the City to believe the Bank favours a weak currency, prompting a series of downbeat forecasts today. “I’m super bearish on the pound,” said Hans-Guenter Redeker, the London-based head of foreign exchange at BNP Paribas.
“The Bank of England has made it clear it can’t afford a stronger currency.” He forecast the pound would fall to $1.50 in 12 months.
John Taylor, chief executive of New York hedge fund FX Concepts, said sterling will “get crushed” and sink as low as $1.45 in the coming months.
“The fundamentals in the UK are certainly not pretty,” he said. “It’s a race for the least ugly of the candidates, and I would argue that the US is going to be the least ugly for a while.” Others were more upbeat and said the measures taken by the Bank and the Government to ease the slowdown will boost sterling. HSBC predicted the pound would rise to $1.75 by the end of next year — midway between the high of $2.12 in November 2007 and the low of $1.38 in March this year.
Times Online – Alistair Darling has warned that he will impose tougher regulation to avoid a repeat of the banking crisis amid fears of a return of the bonus-driven, risk-taking culture in the City.
The Chancellor told The Independent newspaper that bankers who are too complacent will be “brought back to earth” by new legislation.
An important White Paper on the banking sector, due next week, will grant new powers to the Bank of England and the Financial Services Authority (FSA), Mr Darling said.
He promised “new tools” for the regulatory bodies to strengthen their powers, which could mean that the FSA will be able to extend its reach to hedge funds, some of the riskiest investment funds.
Caymen Net News – Hedge funds and financial institutions based in the Cayman Islands have been pulling their money out of Britain as they are hit by the credit crunch, according to figures from the Bank of England. The low-tax regime and limited regulation of the Cayman Islands – with a population of 52,000 – has attracted 80% of the world’s $1.3tn (£790bn) hedge fund industry.
The drop in Cayman Islands’ deposits comes as hedge funds are being forced to return money to investors who have made big losses from the financial crisis. Loans from UK banks to Cayman institutions also fell, but at a lower pace. Outstanding loans from UK banks to Cayman institutions outweighed Cayman deposits in UK banks by $124bn in the first quarter, a sharp increase from $12bn in the last quarter of last year, the data shows.
Hedge funds and financial institutions based in the Cayman Islands have been pulling their money out of Britain as they are hit by the credit crunch, according to figures from the Bank of England.
The low-tax regime and limited regulation of the Cayman Islands – with a population of 52,000 – has attracted 80% of the world’s $1.3tn (£790bn) hedge fund industry.
Those institutions have almost halved their deposits in UK banks over the past 12 months, from $356bn at the end of the first quarter in 2008, to $173bn at the end of March, Bank of England data shows. The drop in Cayman Islands’ deposits comes as hedge funds are being forced to return money to investors who have made big losses from the financial crisis. It also reflects fund losses from falling markets.
The outflow of funds from Britain puts the spotlight on hedge fund threats to abandon the UK because of higher taxes, tighter regulation and potential caps on executive pay and bonuses.
Times Online – Secretive hedge funds will eventually be subject to the same supervisory rules as banks, under a tightening of Britain’s system of regulation.
The changes, which will require banks and other lenders to build up their reserves in healthy economic times, could become the basis for international efforts to overhaul regulation at the G20 summit in London on April 2. The moves will be proposed on Wednesday in a report by Lord Turner of Ecchinswell, chairman of the Financial Services Authority, who will call for an overhaul of the tripartite links between the FSA, the Bank of England and the Treasury.
They follow repeated pledges from Gordon Brown for a crackdown on the “shadow banking system”.
MSN Money UK – Northern Rock was the darling of the UK mortgage sector, but fuelled its rapid growth by borrowing in money markets and selling on its mortgage debts rather than customer deposits.
The eruption of the credit crunch in August 2007 as banks clamped down on risks shattered its business model and forced it to seek emergency aid from the Bank of England.
Reuters – The government is considering injecting as much as 10 billion pounds into Northern Rock to use the nationalised bank to ramp up mortgage lending, the Daily Telegraph reported.
The Treasury has yet to make a final decision on the plan, which may also see the bank hiring new staff, the newspaper reported in its Friday edition.
Spokesmen for the Treasury and Northern Rock, which is due to unveil a new business plan in the next few weeks, could not immediately be reached for comment.
Northern Rock became the first British casualty of the credit crunch in September 2007 when the bank, heavily dependent on wholesale markets for its funding, revealed that it had been forced to seek emergency support from the Bank of England.
The bank was nationalised in early 2008 after attempts to find a private sector buyer fell through.
Ananova - Royal Bank of Scotland says it is facing a potential loss of £400m after a Wall Street banker was charged with a massive alleged fraud.
US prosecutors say Bernard Madoff has confessed to defrauding investors of $50bn (£33bn) in a giant pyramid scheme that collapsed in the global financial crisis.
RBS, in which the British government now has a majority stake, says it has exposure through investments in hedge funds that invested with Mr Madoff.
It is one of a number of banks that face big losses in the suspected fraud.
Santander, the Spanish bank that owns Abbey and Alliance and Leicester, said it had more than 2.3bn euros (£2.08bn) worth of exposure.
