H.M. Treasury I can confirm that the Government will abolish the tripartite regime, and the Financial Services Authority will cease to exist in its current form. With that statement George Osborne and the new UK government move rapidly to refocus the responsibilities for regulation of financial services, as promised.  This will not be welcome news the British bankers but it is a good thing for banks because it places the risk assessment banks with bankers (at the Bank of England). Technorati Tags: OBR,Bank of England,banks Continue reading Conservatives confirm the abolishment of the FSA and transfer of banking regulation to Bank of England

Spanish banks break ECB loan record | ft.com Spanish banks are borrowing record amounts from the European Central Bank as the country’s financial institutions struggle to gain funding from the international capital markets. …. “If the suspicion that funding markets are being closed down to Spanish banks and corporations is correct, then you can reasonably expect the share of ECB liquidity accounted for by the country to have risen further this month,” said Nick Matthews, European economist at RBS. Technorati Tags: Spain,economy,Spanish Banks Continue reading Early warning signs of Spanish banks in trouble

The Walmart plans that caused all the stir 4 years ago is resurfacing in a different form as they increase their ownership in a small bank. Walmart extends its banking interests | ft.com Green Dot, which provides support for Walmart’s pre-paid cards, said this month that it had issued more than 2m shares to Walmart, following an agreement in May that extended the existing alliance between the companies until 2015. Technorati Tags: Walmart Continue reading The Walmart as a bank story returns

How We’re Doing as Debt Fears Rise | Brookings The policy response to the Great Recession — while reducing some risks to credit markets — has created new problems. The loss of household wealth, income and credit was partially replaced with a substantial increase in government borrowing to mitigate the drop in demand for goods and services. The U.S. debt held by the public has risen to 53 percent of gross domestic product and is projected to reach 67 percent by 2020. Further, the increase in the Federal Reserve’s balance sheet from $0.9 trillion at the end of 2007 to … Continue reading Nice summary of the US dilemma from Brookings but no answers

When I read this from May 7th and this today it is clear that the fears outlined by Niall Ferguson are valid. He points out that one of the classic methods of eliminating debt problems is producing an inflationary environment, and make the debt worth less through relative increases in asset valuations and incomes. He goes on to note that the markets are smarter now, and run by professionals who know this.  The Greek yields on bonds were forced dramatically higher before any central bank action to print money occurred and the result was that the interest costs to Greece … Continue reading The worlds economies are in a precarious position right now

Fascinating Peterson Institute lecture by Niall Ferguson on the implications of government debt and on what he believes will occur after Greece which he predicts will default. http://www.piie.com/events/event_detail.cfm?EventID=152&Media And here is the slide show that accompanies the lecture.  The video is about an hour.  You can skip the first 13 minutes which are introductions. fiscal crises and imperial collapses Technorati Tags: niall ferguson,GDP,economics Continue reading Niall Ferguson | The metrics of doom

I believe George Osborne has got it right with a refusal to accept the Euro bank fund levy (tax).  If we consider the notion of a ‘failing bank fund’ the idea arose because of the 2007 banking crisis.  One result of that crisis was that bank liquidity dried up following banks’ refusal to lend to each other.  The only solution adopted by all the western nations was to provide the necessary liquidity by purchase of bank assets for cash.  The cash was ‘printed money’ created by the central banks’. Osborne rules out fund for failing banks | ft.com The chancellor … Continue reading Euro proposal to create a ‘failed bank’ fund is a bad idea

A new paper from Deloitte explores the potential of banks shifting pricing methodology to bundled pricing using relationship pricing models.  It recognises the distinctions between telco’s who have long used this model and banks but feels its worth exploring.  The next revolution in retail financial services marketing? | Deloitte Relationship-based pricing is a system of pricing whereby the prices or products and services depend on an individual or household’s overall product and service purchases rather than being determined on a product-by-product basis (i.e., overall purchase levels do not impact individual product level pricing). The goals of relationship pricing include: Attracting … Continue reading Considering bundled pricing for bank services | Deloitte

An interesting two pager from the Bank of England in response to a freedom of information enquiry.  It includes this succinct explanation of Quantitative Easing (QE). Where Does Money come from | BofE | FT Alphaville Nowadays, it is central banks that have the ultimate role in creating money. They generally do so in response to the demand for money – through both the issue of banknotes and the creation of so-called ‘central bank reserves’ on the accounts of commercial banks (which use this money to make payments to one another). The demand for money is usually affected by the … Continue reading Where does money come from | BofE