Korean currency slide prompts probe

Korean currency slide prompts probe

By Song Jung-a in Seoul

Published: October 7 2008 15:52 | Last updated: October 7 2008 15:52

South Korea’s finance minister on Tuesday said the government will examine if there is a speculative force behind the won’s recent slide against the dollar, after the local currency plunged to a seven-year low.

The won tumbled as much as seven per cent yesterday, the most since December 1997, when a currency crisis forced the country to seek a $60bn bailout from the International Monetary Fund. It ended down 4.4 per cent at Won1,328.10 per dollar.

“We’re judging if there is a speculative force or something close to that” in the currency market, Kang Man-soo, the finance minister, told lawmakers.

Top economic officials held an emergency meeting with the chief of the central bank to discuss steps to stabilise the financial market.

The government has recently made stabilising the currency market its top priority, as the won has slumped almost 30 per cent so far this year to become the worst performing currency in Asia.

Authorities have intervened frequently to curb the won’s sharp decline. Deputy finance minister, Shin Je-yoon, yesterday said the government will use its currency reserves, the world’s sixth-largest, to provide funds as needed. The reserves fell for a sixth month in September to $239.7bn due to the government’s aggressive intervention.

But investors went panicking this week on fears that the global credit crunch may be spreading to the Korean banking sector, which is increasingly reliant on overseas funding. “It is not just one factor, but a combination of a number of negative factors driving down the won,” said Park Chan-ik, strategist at Morgan Stanley in Seoul. “The Korean economy is heavily dependent on exports, so the global financial crisis is having huge ramifications on it.”

South Korea could be hit hardest among Asian countries by the global financial turmoil because its banks are struggling to raise foreign currency funds and small and mid-sized companies are suffering from liquidity problems.

But Rhee Chang-yong, vice chairman of the Financial Services Commission, said yesterday that investors should not over react because the government is preparing various measures to cope with the impact of the global financial crisis.

Analysts also said the country is not likely to run into another currency crisis, which halved the won’s value over a decade ago, citing the country’s stronger economic fundamentals.

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Darling unveils bank rescue

By FT Reporters

Published: October 7 2008 18:25 | Last updated: October 8 2008 08:39

Britain’s largest banks are to be part-nationalised after the government took the momentous decision to pump tens of billions of pounds of public money into the sector to avert a banking collapse.

The government is to put up to £250bn into the banking system in an effort to keep banks lending. It will also offer a guarantee to banks issuing medium term debt, which could mean backing a further £250bn of bank borrowings. But it is likely to demand dividend cuts and the end of big bonuses at the banks in return.

Under the plan, announced by the Treasury on Wednesday, seven leading banks and the Nationwide Building Society will initially apply for £25bn in permanent capital to raise their Tier One capital ratios, with a further £25bn available as a stand-by and for other eligible institutions. The banks have agreed to conclude their recapitalisation by the end of the year.

The banks involved are Abbey, now part of Santander of Spain, Barclays, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland and Standard Chartered as well as Nationwide. Other UK banks and building societies are invited to apply for the scheme as well.

Referring to “extraordinary market conditions”, the Treasury said it would provide at least £200bn under its £200bn special liquidity scheme “until markets stabilise”.

The government will also, for a fee, guarantee new short and medium term debt issues by the banks to help them refinance wholesale funding obligations as they fall due. It said it expected the take up of this guarantee to be of the order of £250bn.

In return for the new permanent capital the banks will be required to provide “full commitment to support lending to small businesses and home buyers”, the Treasury said.

In talks with the banks, the government insisted that the terms and conditions of the new funding would “appropriately reflect the financial commitment being made by the taxpayer.” The government will also take into account “dividend policies and executive compensation schemes”.

The extra capital will probably come in the form of preference shares or other permanent interest bearing shares. However, the Treasury said it would also assist in the raising of ordinary capital if requested to do so.

The government said the measures were designed to “ensure the stability of the financial system” as well as protecting savers, borrowers and businesses.

The massive public bail-out comes after a day of turmoil on the London stock exchange on Tuesday, where shares in RBS fell 39 per cent to add to a 20 per cent tumble the day before. HBOS fell 41 per cent.

Faced with an intensifying banking crisis, prime minister Gordon Brown sanctioned moves for the taxpayer to recapitalise Britain’s leading banks in an effort to restore confidence in the system and to allow them to start lending again.

The rescue is being presented as part of a wider attempt to reform markets and is expected to include a call to the banks to show responsibility over remuneration for bosses, now that the taxpayer has a direct stake.

Alistair Darling, chancellor of the exchequer, said the rescue package was the start of a solution to the logjam in the bank lending system, and did not rule out further action.

”We will do whatever it takes,” he told Sky television on Wednesday. ”I think it is very important that governments across the world do that. It’s a crucial part of what we need to do here. It’s not the only thing, but it’s a crucial step forward.”

Mr Darling, who will make a Commons statement later on Wednesday, wanted more time to form a full package but was forced to act by the market chaos and by circulated reports that banks wanted an injection of public money.

Officials apparently worked through the night to finalise the scheme so that an announcement could be made before the London stock market opened on Wednesday morning. Even so, many of the details have yet to be thrashed out, and banks will have to engage in negotiations with the government to agree how much capital they require.

At £50bn – roughly equal to £2,000 per taxpayer – the recapitalisation of the banks would more than double Britain’s planned public borrowing this year, pushing public sector net borrowing close to £100bn and more than 6 per cent of national income, worse than any year since 1994-95.

The recapitalisation will deliver a huge boost to the banks’ core Tier One capital – the preferred measure of balance-sheet strength. This is expected to give the market greater confidence about the banks’ ability to absorb future losses.

However, the government’s move has a broader significance because it will also send a strong signal to the banks’ creditors that they are, in effect, protected from future losses.

Concerns about losses among creditors, triggered by the collapse of Lehman Brothers, the Wall Street bank, are the main reason why banks have recently struggled to access the funding markets.

The government said it had informed the European Commission of the plan, and was in talks with the governments of other countries about extending the proposals internationally.

Although HSBC is included in the list of eligible institutions, this refers to its UK subsidiary, not its holding company. HSBC said its UK unit would observe the requirements on Tier 1 capital but would do so from its own resources and had “no current plans” to participate in the scheme.

HBOS, the UK's largest mortgage lender which is currently being taken over by Lloyds, said: “The government’s announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system. HBOS believes that this initiative is very much in the interests of its shareholders and customers.”

Banking stocks were mixed in early London trading. Lloyds TSB rose 4.3 per cent to 234.7p while HBOS rose 6.4 per cent to 103.7p. RBS was 6.3 per cent higher at 95.7p.

But the banks seen as less vulnerable before news of the rescue package was released fell. HSBC fell 3.3 per cent to 870.8p, Barclays was 1.1 per cent lower at 282p and Standard Chartered lost 1.5 per cent to £12.92.

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EU agrees common action on banks crisis

By Tony Barber in Brussels

Published: October 7 2008 09:03 | Last updated: October 8 2008 07:26

European Union governments on Tuesday sought to put aside their differences on how to stop the financial whirlwind sweeping through Europe and announced agreement on a set of principles for rescuing troubled banks.

EU finance ministers said each of the country’s 27 member-states would be free to adopt measures ranging from recapitalisation, the purchase of bank assets and state-backed guarantees of bank liabilities.

But the ministers failed to establish clear guidelines for protecting the bank savings of individual depositors, saying all countries would guarantee savings of €50,000 for one year, but some countries might raise the figure to €100,000.

The ministers met in Luxembourg amid rising anxiety in financial markets about the EU’s inability in recent weeks to forge a coherent response to the havoc threatening the foundations of Europe’s banking system.

With stock markets plunging and emergency nationalisations and bail-outs of banks gathering pace, EU leaders are under intense pressure to present a united front at a summit of the bloc’s heads of state and government in Brussels on October 15-16.

In a statement issued on Tuesday, finance ministers agreed on seven principles of government action in bank rescues:

- any support given should be timely and, in principle, temporary

- taxpayers’ interests must be protected

- existing shareholders should bear the consequences of government intervention

- governments must be free to change bank managements, if necessary

- governments must have the power to change banks’ remuneration policies

- EU state aid rules must be respected to ensure a level playing field for competitors

- there must be no negative spillover effects on other EU countries

Diplomats said Germany and the UK, which are home to the EU’s largest financial markets, had been reluctant to endorse more specific, EU-wide action, arguing that it was better to deal with bank rescues on a case-by-case basis.

Giulio Tremonti, Italy’s finance minister, proposed that each EU state should place a certain percentage of its gross domestic product into a fund for saving its domestic banks.

But few other EU ministers offered support for the Italian proposal, which resembled a short-lived idea floated last week in French and Dutch government circles for a common EU bank bail-out fund.

“There was a lot of discussion about capital injection. Clearly, individual member-states are now considering investing substantial capital, investing their own taxpayers’ money in the banking system,” said Brian Lenihan, Ireland’s finance minister.

Nellie Kroes, the EU competition commissioner, said the European Commission planned to publish new guidelines that would permit it to make rapid assessments of whether recapitalisation or deposit guarantee schemes were compatible with EU state aid rules.

The new guidance, which will be issued later this week or early next week, illustrates how the financial cyclone is forcing Brussels to adapt its rules as fast as possible to circumstances almost inconceivable when the EU launched its single European market project in 1993.

Finance ministers devoted a large part of Tuesday’s discussions to bank deposit guarantees, a hot topic after first the Irish Republic and then Germany took their EU partners by surprise last week and announced blanket guarantees for savers.

In their statement, the ministers said: “We agreed that all member-states would, for an initial period of at least one year, provide deposit guarantee protection for individuals for an amount of at least €50,000, acknowledging that many member-states [are determined] to raise their minimum to €100,000.”

The statement fell substantially short of the EU’s aim of setting common standards for deposit protection schemes.

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Fed to start buying commercial paper

By Chris Giles in London,Tony Barber in Brussels, Michael Mackenzie in New York and James Politi in Washington

Published: October 7 2008 14:33 | Last updated: October 8 2008 00:36

Ben Bernanke, Federal Reserve chairman, on Tuesday opened the door to possible interest rate cuts after the central bank announced it would buy short-term debt from banks and corporations in an unprecedented attempt to unfreeze money markets.

Mr Bernanke indicated that lower interest rates could be necessary, saying the Fed would “need to consider whether the current stance of policy remains appropriate”. He stopped short of explicitly signalling that rates would be cut below the present level of 2 per cent.

His remarks came shortly after the Fed unveiled an aggressive move to bolster the market for commercial paper, which is issued by companies and others to fund day-to-day operations and has been shrinking rapidly in recent weeks.

The Fed’s plan, which involves setting up a special purpose vehicle to buy potentially unlimited amounts of three-month debt from banks and non-financial companies, would expand its role as lender of last resort. Senior Fed staff said the extraordinary action was needed because companies were struggling to issue commercial paper for any period longer than overnight.

Policymakers have been scrambling to shore up the financial system amid a growing recognition that the Bush administration’s $700bn bail-out plan, enacted last week, would not be sufficient, given the size and breadth of the crisis.

The supervisory board for the $700bn plan, which includes Mr Bernanke, met for the first time on Tuesday. Although the core of the plan, which is to buy troubled assets from banks through a reverse-auction mechanism, is not expected to be in place until next month, there is speculation that the US government may soon have to make use of the broader powers it was given to aid individual institutions.

The depth of the US banking crisis was highlighted on Tuesday when the Federal Deposit Insurance Corporation announced it would have to double the fees it charged banks as it faced more than $40bn in losses on the fund it used to guarantee Americans’ bank deposits.

Mr Bernanke said economic activity had showed signs of slowing down even before the recent unrest and was “likely to remain subdued” into 2009.

“The heightened financial turmoil we have experienced of late may well lengthen the period of weak economic performance and further increase the risks to growth,” Mr Bernanke said.

Fresh data on Tuesday showed that consumer credit dipped by 3.7 per cent in August, the first drop in a decade.

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Crisis takes toll on China’s rich

By Patti Waldmeir in Shanghai

Published: October 7 2008 17:08 | Last updated: October 7 2008 17:08

China’s top 50 richest people lost almost a third of their wealth in the past year, the first decline since 2002, according to Hurun’s 2008 China Rich List, published on Tuesday.

Steep declines in China’s stock and property markets took their toll on the richest 50, but the average wealth of the country’s 800 richest people fell by only 8 per cent, according to Rupert Hooge­werf, compiler of the list.

He says China’s rich are surviving the credit crunch in better shape than expected: China still has 101 US dollar billionaires, “only five fewer than last year”, and the Hurun list has been expanded from 800 to 1,000 people, all of whom must have $100m (€73m, £57m) to qualify. The first Hurun Rich List, in 1999, included only 50 people, with a cut-off of $6m.

Although the average personal wealth of the richest 50 Chinese fell to $2.4bn in 2008, down from $3.6bn the previous year, it remained more than 10 times the 2000 figure of just over $200m.

China’s richest man this year was Huang Guangyu, chairman of Gome, the electrical appliance retailer, with a personal fortune of $6.3bn. He is used to the top spot, having been placed first three times in five years. Mr Huang dropped out of school at 16.

China’s second richest man is a steel magnate, Du Shuanghua of Rizhao Steel.

Last year’s richest person, Yang Huiyan, a real estate heiress, saw her wealth decline precipitately from $17.5bn last year to $4.9bn, largely because of the credit crunch, which has hit property developers. She remains China’s third richest person.

The list highlights the intersection of politics and wealth in China: “2008 has been the year of China’s entrepreneurs coming of age in terms of political status”, says Mr Hoogewerf.

Some 15 per cent of the list are delegates to the National People’s Congress or the China People’s Political Consultative Congress.

Yao Ming, the NBA basketball player, 28, made the rich list for the first time this year, ranked 987, and was its youngest self-made millionaire. The Hurun report notes that healthcare fortunes are on the rise, “primarily due to increased market share in traditional Chinese medicine”.

Last year’s Hurun list was compiled when the Shanghai stock market was near its peak. The benchmark Shanghai composite index has since lost about two-thirds of its value and property prices have fallen.

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The Short View: Federal Reserve

By John Authers, Investment Editor

Published: October 7 2008 20:15 | Last updated: October 7 2008 20:15

At least one bank in the US is growing, and it is by leaps and bounds. It has added lots of clients in the last year, it has started offering interest on deposits, and on Tuesday, in a radical departure, it started offering short-term finance to companies other than banks.

The bank in question is the Federal Reserve. News that it will now launch its own special vehicle to buy commercial paper (very short-term bonds) directly from issuers means that it has in effect entered the business of lending to companies.

It had already taken over the provision of short-term finance to banks; banks are no longer willing to lend to each other but are still prepared to lend and borrow through the Fed.

The commercial paper move was necessary, as many large companies rely on it to fund day-to-day needs, like payroll. A failure in this area was unconscionable. And the constriction in commercial paper had become severe: the total volume on issue had fallen by 12 per cent, or about $200bn, in the past three weeks alone.

But the Fed’s move merely underlined that vastly greater government involvement in the world’s banking systems was in many ways already a fact.

The only question – a critical one for investors in the institutions under pressure –
is in the detail of how governments intervene.

Markets on Tuesday suggested they felt the sharp falls in materials and emerging market stocks over the past week had adequately discounted a global recession, at least for now.

But even if tension reduced, there was no joyous rebound. The drama in the stocks of banks at the centre of the rumours, with Royal Bank of Scotland the latest hapless victim, did not permit that. Stocks will find it hard to mark a definitive bottom and start to rise until they know many more details of how governments will insert themselves into the banking system.

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The Short View: Debt-holders

By John Authers, Investment Editor

Published: October 8 2008 06:26 | Last updated: October 8 2008 06:26

Bears are on top over bulls in the stock market. And the reason is that debt-holders seem to be in the ascendancy over shareholders.

Each hour on Tuesday brought a new attempt to avert disaster somewhere in the banking world: a state loan to Russia’s banks, a Spanish scheme to buy distressed securities, the US Federal Reserve’s move to buy commercial paper from issuers (or lend directly to non-financial companies) and the UK decision to inject capital into banks.

The effects on credit and stock markets were divergent. For stock markets, it became ever more apparent that the ultimate resolution for the crisis would be the nationalisation of banks in some form.

Injections of capital into banks will horribly dilute the existing shareholders’ holdings. This was reason to sell financials. Until Tuesday, both European and US banking indices had stayed above their lows from July. That remained true in Europe – albeit narrowly – but the S&P financials index plummeted to end 6.5 per cent below its previous low for the crisis, at levels last plumbed in 1997. It did so even as the ban on short selling stayed in force.

It was also enough to throttle any rally by cyclical stocks exposed to global growth. The huge extra burden that governments are now assuming will mean higher taxes, higher interest rates, spending cuts or most likely a combination of all three. This is bad for growth.

However, governments’ scramble to act did have an effect where it was most needed. Credit markets suggest that the risk of default by financials remains far below its highs for the crisis. The cost of insuring against that risk barely rose. Money markets calmed slightly.

So Tuesday’s sell-off is a bet that creditors (and depositors) will be spared, and that taxpayers and shareholders will share the cost of saving them from a banking collapse.

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アフガン巨額支援は非戦闘国に要求　米政府 2008.10.7 21:44

　【ワシントン＝有元隆志】米政府がアフガニスタンの国軍育成のための費用として、少なくと約１７０億ドル（約１兆７０００億円）の負担をアフガンに戦闘部隊を派遣していない日本や北大西洋条約機構（ＮＡＴＯ）加盟の同盟国に求めていることが６日、明らかになった。ロイター通信が伝えた。

　モレル国防総省報道官は１７０億ドルもの費用について、「誰かが費用を払わなければならない。アフガンに軍隊、特に戦闘部隊を派遣することに消極的な国は、財政的な貢献をすべきだ」と語った。

　同報道官によると、日本にはすでに費用分担を要請しているが、福田前政権の時に行われたため、麻生政権に対しても改めて要請する方針という。

　　　　　
◇

　河村建夫官房長官は７日午後の記者会見で、米側の要請に関し「政府として確認していない。正式に要請があれば検討するが、今の時点ではコメントできる段階ではない」と述べた。

　ただ、米政府はこれまで戦況が安定しないアフガン陸上への支援を日本などに再三要請してきた。国防総省は強硬で、７月上旬にＰ３Ｃ哨戒機の追加派遣を打診した防衛省に対し、逆にヘリか陸上部隊の本土派遣を要求したほどだ。

　７月後半には、中央アジア担当の国防副次官補が来日し、外務、防衛両省幹部らに対し、公明党の反対で政府が見送った本土への部隊派遣を再検討するよう求めていた。

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Medvedev turns on charm in video podcast

By Charles Clover in Moscow and Rob Minto in London

Published: October 8 2008 03:00 | Last updated: October 8 2008 03:00

Barely a month has passed since Dmitry Medvedev, Russia's president, steely eyed and jaw set, announced that he was not afraid of a new cold war with the west, and prime minister Vladimir Putin, teeth gritted and neck veins bulging, told a television interviewer that the United States had orchestrated Russia's recent war with Georgia.

This week, however, a kinder, softer image of both men will be on display as Mr Medvedev yesterday unveiled his first podcast and Mr Putin's handlers are putting the finishing touches on his new website.

"My dear friends, hello," says a beaming Mr Medvedev, spinning around in his office chair to face the viewer.

"This is the first time I have used this method of addressing you through my site, and I want to talk about some of the urgent issues facing the world today."

The effort is part of a charm offensive aimed at improving Russia's image in the wake of the August war in the Caucasus. Kremlin aides say the idea of the podcast was Mr Medevdev's own suggestion, aimed at the 17m Russians who use the internet regularly.

But he has clearly had some input from a Brussels-based image consultancy, G Plus Europe, which has been hired to help Russia's leaders improve their image abroad.

The podcast coincides with a speech he will deliver today at the World Policy Conference in Evian, France, in which aides say he will unveil suggestions for a new European security treaty.

Russia's leaders have been famously resistant to departing from the standard script of dour speeches and dark suits, although Mr Putin has recently been photographed tiger hunting and fishing with his shirt off.

The design of Mr Putin's new website (www.premier.gov.ru ) is a secret, but will be unveiled later this week.

Of course, using the media of the age to deliver a message is hardly new.

Franklin Roosevelt, the US president, is perhaps the most famous political radio broadcaster with his "fireside chats", which started in 1933. Broadcasting direct to the nation on television has been a feature of political life since 1947 when President Harry Truman made the first TV address from the White House.

From the 1950s onwards, use of television turned from informing the nation to convincing it, as political advertising and debates became an essential part of the campaign trail.

In the mid-1990s, the internet opened up a new range of possibilities for politicians to communicate with their electorate directly, although the use of video has become popular only recently.

Angela Merkel, Germany's chancellor, began delivering a weekly video podcast in 2006 - the same year that the UK's leader of the opposition Conservatives, David Cameron began "webcameron", a video diary that has seen him in a range of activities including doing the washing up, feeding pigs on a farm, and chatting to the Dalai Lama.

There is an official 10 Downing Street channel on YouTube for Gordon Brown, Britain's prime minister, to answer questions put by the public in a video format.

Blogging is also popular, and not just in the western countries: Mahmoud Ahmadi-Nejad, Iran's president, has committed to writing his blog for 15 minutes a week.

Barack Obama is regarded as the best political exponent of the internet. As well as viral e-mail marketing, the Obama campaign has released an application for the iPhone, allowing users to get news as well as volunteer to make campaign calls.

Not all political websites and videos are popular, and Medvedev may find an audience hard to come by. Unlike old broadcast media, people have to seek out politicians' online missives among countless other websites and podcasts available.

President Medvedev may find a large audience from the novelty value in his first few videos, but he may quickly discover that without anything new to say, he will be simply preaching to the converted.

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In setback for Bush, judge orders release of Guantánamo detainees

* Reuters in Washington
* The Guardian,
* Wednesday October 8 2008

A US federal judge yesterday ordered the release into the United States of 17 Chinese Muslims who have been held at the US military prison at Guantánamo Bay, a ruling that dealt a setback to the Bush administration.

District Judge Ricardo Urbina gave his ruling at a hearing to consider the appeals by members of the Uighur ethnic group, who are seeking their release from the military prison and asking to go to the US.

He said there was no evidence that the detainees, who have been held at Guantánamo for nearly seven years, were enemy combatants or a security risk, and said that the US constitution prohibited indefinite detention without cause. He ordered them to be brought to the court for a hearing on Friday.

The Bush administration had argued that federal judges do not have the authority to order the release of the detainees into the US.

Lawyers for the prisoners said the ruling marked the first time that a federal court had ordered the release into the US of prisoners held at Guantánamo Bay.

The Uighurs remain at the prison even though the US military no longer considers them enemy combatants. The US has been unable to find a country willing to accept them. It has said they would face persecution if they were returned to China.

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Defined benefit pension closures expected

By Nicholas Timmins, Public Policy Editor

Published: October 7 2008 22:19 | Last updated: October 7 2008 22:19

A further wave of closures of defined benefit pension schemes looks in the offing just as employees are regaining faith in pensions as a way of saving, according to the latest survey from the National Association of Pension Funds.

Pension funds are being battered by the financial turmoil that will see their value fall sharply on current stock market and bond performance. But even before the financial crisis reached its current peak, a further one in five of the remaining defined benefit – chiefly final salary – schemes were considering switching their employees to money purchase pensions, the NAPF’s annual survey shows. A further 10 per cent were seeking to reduce costs or risks.

A significant minority of all employers – one in five – said they intended to “level down” their pension provision in 2012 when the new system of personal accounts arrives, according to the survey. “There is still much outside pressure on pension schemes, [with] further change on the horizon,” said Joanne Segars, NAPF chief executive, said ahead of the association’s annual conference in Glasgow this week.

The annual survey, published on Tuesday, covers almost 350 schemes with 4.5m employees. It was conducted in July, before the worst effects of the credit crunch. It shows 28 per cent of defined benefit schemes were still open to new members – down 5 percentage points on 2006. This represents a far slower rate of closure than in preceding years.

However, only 37 per cent of schemes expected to make no change for new members, and only just over a half – 53 per cent – expected no change for existing ­members.

Only a small minority of schemes have so far got pension liabilities off their company’s books through a full or partial sale of the liability to an insurer or pension provision specialist. Fifteen per cent had obtained a full or partial buy-out quote, while another 35 had considered doing so – although the recent market turmoil will have reduced the ability of schemes to fund such deals.

Two-thirds said they would continue their current schemes at current contribution rates – which are typically appreciably higher than the minimum 3 per cent of pay employers will have to contribute to personal accounts. But 16 per cent said they would switch new employees into personal accounts, while 4 per cent and 3 per cent respectively said they would reduce their contribution rate for new members, or for both new and existing members.

Meanwhile, the pensions world has reacted with some dismay at the disappearance of two key figures in the development of personal accounts. Mike O’Brien, the pensions minister who won plaudits for his grasp of detail and willingness to consult, has been moved to the new energy and climate department in the reshuffle, while Paul Myners, chairman of the authority charged with developing the personal accounts scheme, has joined the government as minister for the City.

Mr O’Brien’s replacement is Rose Winterton, who moves from being minister of state at transport. With limited experience of pensions, she faces an immediate heavy workload, with the pensions bill completing its final parliamentary stages and with a host of detailed but key decisions to be taken on precisely how personal accounts will function.

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イスラエルでも汚染牛乳販売、企業に１７億円賠償判決

　【エルサレム＝三井美奈】イスラエルのテルアビブ地裁は７日、１９９４年から約１年半、牛乳に許容量の約１０倍のシリコーン樹脂を添加、販売していた同国の乳産業最大手ツヌバ社に、消費者への損害賠償として５５００万シェケル（約１７億円）の支払いを命じた。ハアレツ紙（電子版）などが報じた。

　判決は、同社が「違法行為と知りながら、事実隠匿を図った。消費者の信用に背いた」として、消費者約２２万人に１人当たり２５０シェケル（約７６００円）の賠償が相当と認定。直接払いの代わりに、製品値下げや慈善事業への牛乳の寄付などで対応するよう求めた。

　シリコーン樹脂は、豆腐などの製造過程で消泡剤として使われる食品添加物。ツヌバ社は当初、添加の慣行を認めなかったため、消費者が集団提訴していた。同社は裁判で「原告に実害が出ていない」と主張し、争っていた。

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UK to sue Iceland over bank deposits

By Alex Barker in London

Published: October 8 2008 11:57 | Last updated: October 8 2008 11:57

Britain added to the woes facing Iceland on Wednesday by declaring it would sue to recover all UK customer deposits in Icesave, the failed internet bank seized by Iceland.

After promising UK savers in the bank that they would be fully reimbursed by Britain, Gordon Brown, prime minister, said he would chase Reykjavik through the courts after it reneged on its duty to compensate.

”We are taking legal action against the Icelandic authorities to recover the money lost to people who deposited in UK branches of its banks,” Mr Brown said at a press conference at Downing Street. ”We are showing by our actions that we stand by people who save in Britain.”

Icesave’s parent bank, Landsbanki was seized by Iceland on Tuesday and declared insolvent. Icesave has about 300,000 UK customers, a number approaching the entire population of Iceland.

Alistair Darling, UK chancellor, has pledged to guarantee all deposits made by British savers in Icesave – including those exceeding £50,000, the legal ceiling to compensation claims.

Britain has frozen all Landsbanki assets in Britain while it awaits a response from Reykjavik over the position of UK savers.

”The Icelandic government, believe it or not, told me yesterday they have no intention of honouring their obligations here,” Mr Darling told the BBC.

”Because this is a branch of a foreign bank the first call would be on the Icelandic compensation scheme which, as far as I can see, hasn’t got any money in it.

“The British scheme would top that up to £50,000, but people over and above that would lose out,” he added.” But I have decided in these exceptional circumstances that we will stand behind those depositors so they get their money back.”

Reykjavik has so far made no comment on the UK annoucement but the Icelandic government is due to respond later on Wednesday afternoon.

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Why frozen Icesavers deserve sympathy not support

By Andrew Hill

Published: October 7 2008 22:14 | Last updated: October 7 2008 22:14

The Fjármálaeftirlitio will provide. The prospect of British savers queuing round the block in Reykjavik to reclaim the first €20,887 of their sterling deposits in Icelandic krona from the indebted nation’s financial regulator looks like a nightmare devised specially to torment Alistair Darling, the chancellor, and Lord Turner, chairman of the Financial Services Authority.

But at a time when they are considering radical recapitalisation of the British banking system, neither should lose sleep over the Icesave affair, in spite of natural sympathy for savers who may lose out.

There is a reason retail banks top league tables for savings rates. It is a marketing tool. No more, no less. For customers, the simple equation is: the higher the return, the greater the risk. Sometimes that involves giving the bank use of your money for a year before you can withdraw it; sometimes it involves handing over your savings to a bank based in a far-off country you don’t know much about and will never visit. To amend the old saw: you get what you’re paid for.

It was also rash for Icesavers to assume the British government would guarantee deposits above the declared ceiling. The terms of the dual-passport guarantee and the FSA’s scrutiny were laid out on the Icesave website. But in any case, haven’t big savers learnt over the past year to distribute their funds among various accounts? As it happens, some 95 per cent of Icesave’s 300,000 depositors fall under the new £50,000 limit. Those with savings between £35,000 and £50,000 should thank Iceland for waiting until Tuesday, when the new ceiling came into effect, to pull the plug on Landsbanki, Icesave’s parent.

The UK government offered to stand behind all depositors at Northern Rock and Bradford & Bingley following nationalisation. That amounts to an implicit guarantee for depositors in other British banks, but it has not been made explicit for good reason. The fierce debate triggered by Ireland’s unilateral action last week – which excluded British-owned Irish banks – shows how hard it is to define banks by nationality. In any case, as Lombard has repeatedly argued, unless implemented as part of a temporary Europe-wide firebreak in the financial crisis, a 100 per cent retail deposit guarantee would be counter-productive. The Landsbanki experience helps show why. To put in place free, state-backed retail deposit insurance, unlimited in scope and duration, would encourage banks to offer ever higher rates, and lend imprudently with the incoming savings, just as surely as free car insurance would encourage reckless driving.

Tomorrow’s challenges

At a time when many companies’ very survival is at stake, and governments are violently bashing the financial landscape into a new shape, a slim report about the relationship between companies and their owners could simply sink without trace.

Yet the authors and backers of Tomorrow’s Owners, published on Wednesday, say this is precisely the moment to start working out where investors went wrong. The crisis was in part down to a lack of “stewardship” – interested, active ownership of public and private companies. New principles, even rules, are needed to govern that relationship in the interest of all.

We’ve been here before, unfortunately. The last crisis of stewardship – or lack of it – led to the collapse of Enron and WorldCom and spawned Sarbanes-Oxley. It also triggered an upsurge in well-meaning governance models and corporate promises that next time it would be different. But still we got Northern Rock, Fannie, Freddie, Lehman Brothers, AIG and the rest.

The latest failures remain one of the best arguments for reform that the think-tank Tomorrow’s Company (which prepared the report) and the governance arm of Hermes (which backed it) can deploy. While the storm is raging, managers need to concentrate on saving their drowning companies. But bosses of the surviving companies cannot then argue – as they always do when the sun is out – that active investors should just leave them alone to make money.

Two snags. A small one is that long-only fund managers may be reluctant to give up the income from potentially counter-productive practices, such as lending stock to short sellers, when they are rebuilding their funds and reputations. A larger threat – in spite of the report’s attempts at even-handedness – is that populists will adopt it as another weapon with which to attack what the report refers to as the “casino economy” of speculators.

The point the report is trying to make is subtler. It is worth debating properly. The challenge for its authors is to avoid being drowned out by the sound of a fast-moving bandwagon for heavier regulation, now rolling towards a future where tomorrow’s owners are dominated by governments and their stooges.

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Iceland’s biggest bank gets Swedish loan

By Tom Braithwaite in Reykjavik

Published: October 8 2008 09:45 | Last updated: October 8 2008 09:58

Kaupthing, Iceland’s biggest bank, received funding from Sweden on Wednesday as a smaller competitor was swallowed by emergency legislation, and the government pursued negotiations on a €4bn loan from Moscow.

Sweden’s central bank said it was providing up to SK5bn to Kaupthing’s Swedish division to avert “an imminent risk that the bank may suffer liquidity problems”. The decision protects Swedish depositors in Kaupthing’s accounts.

In Iceland, Glitnir, the third biggest bank, was transferred to the control of the financial regulator, using emergency nationalisation powers that on Tuesday saw the nationalisation of Landsbanki. Of the three big banks that powered Iceland’s financial services boom, only Kaupthing remains independent.

The government last week announced it would take a 75 per cent stake in Glitnir in a decision criticised as “bank robbery” by Jon Asgeir Johannesson, the entrepreneur who controlled the biggest stake in the bank and is also chairman of Baugur, the retail company that owns several UK high street chains.

Wednesday’s move by the financial regulator is even worse news for Mr Johannesson and other shareholders in Glitnir who will now be wiped out rather than just massively diluted. Kaupthing, which has received €500m in funding from Iceland’s central bank, said it was helping the government with the restructuring of Glitnir.

Iceland has been struggling with a plunging currency and a financial services sector stricken with short-term liquidity problems. The government, which is negotiating a €4bn loan to its central bank from Russia, has said that money and any further loans would be used to support the currency and would not be extended to individual banks.

The Russian deal has raised tensions between Iceland and its traditional western allies, with the North Atlantic country accusing the latter of neglect. “We have not received the kind of support that we were requesting from our friends,” said Geir Haarde, prime minister on Tuesday. “So in a situation like that one has to look for new friends.”

● ING the Dutch banking and insurance group, said its UK online and phone banking subsidiary had agreed to buy £3bn in UK deposits at two Icelandic banks for an undisclosed sum, writes Michael Steen in Amsterdam

The Dutch group said its ING Direct unit was taking on £2.5bn in deposits from customers at Kaupthing Edge, the UK online arm of Kaupthing, the Icelandic lender, and £538m in savings deposits at Heritable Bank, which is owned by Landsbanki, the Icelandic lender that went into receivership on Tuesday.

ING said it had been approached by the Financial Services Authority and UK Treasury about the deal, which would not have any material impact on the group’s capital position.

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We were forced to ask Russia for help, says Iceland PM

By Tom Braithwaite in Reykjavik and Catherine Belton in,Moscow

Published: October 8 2008 03:00 | Last updated: October 8 2008 03:00

Iceland expressed disappointment yesterday that western allies had failed to provide support to help ease the country's financial crisis, forcing it to turn to Russia for a €4bn loan.

"We have not received the kind of support that we were requesting from our friends," said Geir Haarde, prime minister. "So in a situation like that one has to look for new friends."

In spite of the new friendship, Mr Haarde said it did not extend to military cooperation, refuting the suggestion that Russia might be given access to an airbase vacated by the US air force in 2006. "We are a founder member of Nato," noted an official, "categorically denying" any such deal.

There was confusion over the status of the Russian loan, with the central bank first saying it had secured €4bn ($5.4bn, £3bn) on a four-year deal, at between 30 and 50 basis points above the London interbank offered rate, before acknowledging that the pact had yet to be finalised.

Alexei Kudrin, Russia's finance minister, confirmed Russia had received a request from the Icelandic government for credit. "We will examine it," he said. "Iceland is well known as a country with tough budgetary discipline and a high rating of reliability. We see such an application -positively."

Iceland needs to bolster its foreign exchange reserves in an attempt to shore up the krona, whose depreciation has caused sharp price rises in imported goods such as fuel. The central bank said yesterday that it had begun intervening in currency markets to try to strengthen the krona, helping it to rise 13 per cent against the euro at IKr150.

Mr Haarde refused to say which countries had refused to offer help. He said the Nordic central banks were the only ones to come forward before Russia; they agreed a €1.5bn facility in the spring but the Icelandic government decided it needed more funds to shore up the currency. "In a situation like this it's turning out that it's every man for himself, every country for itself, everybody's taking care of their best interest and that's what we are doing," the prime minister added.

Chris Weafer, chief strategist at Uralsib investment bank, said, "Lending money to Iceland is a very strong and clear statement from Russia that it is solvent and it has spare cash."

"This is going to make a big difference to the Icelandic economy and it's a very clear statement. It builds up political goodwill which could be helpful when it gets into difficult negotiations over territorial rights in the Arctic," said Mr Weafer.

Iceland is continuing to look abroad for other funds but, if finalised, the Russian package will almost double its foreign currency reserves. Mr Haarde said the funding would be used to support the krona but would not be extended to commercial banks. He said despite ratings downgrades and a near-record price to ensure government debt from default, there would be no such move from the country. "Iceland has never defaulted on its sovereign debt and will not," said Mr Haarde.