October 2008 Archives

The International Monetary Fund yesterday approved a new financing facility for emerging market economies.

The IMF said it will create a new short-term lending facility to channel funds quickly to emerging markets that have a strong track record, but that need rapid help during the current financial crisis to get them through temporary liquidity problems.

It also stated that "until recently, emerging markets were one of the few bright spots left in a world economy hit by massive deleveraging, failing banks, and corporate profit warnings. But now, the crisis is spreading beyond the advanced economies where it originated, with emerging markets all over the world suffering from the squeeze in global financial markets". The IMF has already reached outline financing agreements with several countries including Iceland, and the Ukraine, and is reportedly in advanced talks with several other countries.

Deatails of the policy are listed below:

• Purpose. Provide large, upfront, quick-disbursing, short-term financing to help countries with strong policies and a good track record address temporary liquidity problems in capital markets.

• Eligibility. Countries with a good track record of sound policies, access to capital markets and sustainable debt burdens may qualify (the IMF's standard debt sustainability analysis should indicate a high probability that both public and private debt will remain sustainable). Policies should have been assessed very positively by the IMF's most recent country assessment.

• Conditions. Financing is made available without the standard phasing and loan conditions of more traditional IMF arrangements. However, borrowers are expected to certify that they are committed to maintaining strong macroeconomic policies.

• Size of loan. Disbursement of IMF resources can be up to 500 percent of quota, with a three month maturity. Eligible countries are allowed to draw up to three times during a 12-month period.

The Mirror recently commented on the downturn being experienced following the credit crunch, which has slashed the fortunes of the UK's richest property tycoons by almost £15billion.

The 500 wealthiest property owners were worth £117billion before the turmoil started just over a year ago.

That has fallen to £102.5 billion, according to the Estates Gazette rich list - with the 10 biggest casualties alone losing more than £5.5 billion.

Deputy editor Julia Cahill said: "The rich get richer, so they say. But the crisis has wiped more than 12 per cent off the value of the 500 biggest property empires. With property falling and banks circling there is every sign that the pain is only just beginning."

Among the biggest fallers is Vincent Tchenguiz, listed last year with brother Robert with £1billion. This time he is listed alone with an estimated wealth of £200million.

House builders David Wilson and Keith Miller lost £484 million, or 66 per cent, and £530million, or 65 per cent respectively.

The Duke of Westminster remains the richest property owner with £7billion.

India Rose James, 16, granddaughter of porn king Paul Raymond is the youngest listed with a £150million empire.

The Daily Telegraph's City Diary column spotted Chris Eubank at Monday's Jones Lang LaSalle commercial property auction.

But the boxer-turned-entrepreneur did not make any bids and was just said to be there to take "a look".

The newspaper notes that Eubank is back on the up after he was declared bankrupt in 2005.

It hopes his presence at the auction signals the same for the commercial property market.

Bank of America, which occupy ten floors at 5 Canada Square, is reportedly considering a move to Merrill Lynch's City based office at 102-105 Newgate Street, EC1, which features two of the largest trading floors in Europe, following a $50 billion merger. Bank of America houses 1,700 employees but not all of them would expect to be kept on after the merger, which is set to finalised in December.

If the Bank does decide to vacate Canary Wharf it would be a substantial blow for the location, following on from the redundancies at Lehman Brothers which led to employees filing out of its 25 Bank Street building.

Following the fall of several large investment firms, and cut backs being made across the capital, are we likely to see further consolidation as companies continue to downsize and if so which areas are likely to suffer the most?

Throughout the recent credit market turmoil recruitment agents have had to begin to focus on what lies ahead and where those made redundant are likely to be placed.

Following the collapse of Bear Stearns and Lehman Brothers job losses have followed at Goldman Sachs, Citi, UBS and HSBC. Many recruiters have now started to look to more distant horizons in order to place candidates, and this focus has largely been on the Middle East and the likes of Bahrain, Dubai, Qatar and Abu Dhabi. Recruiters have been networking in these regions since the beginning of the year to ensure that any opportunities which do arise are not missed out on.

However, the Middle East is experiencing dramatic market change, and many opportunities of longer term employment are beginning to surface which require commitment, as opposed to a short term stay of a year or two to line pockets and take advantage of the tax situation.

Whilst the desert region isn't renowned for its banking prowess, the area does benefit from being cash-rich, and there is competitive edge to the sector as several cities are looking to claim the title as the financial centre of the Middle East.

Many do believe that the influx of Western trained talent could have a big effect on regions such as Dubai's status as a financial hub, and for those with sufficient international exposure in the finance sector this could be an opportunity to good to be missed.

This Mornings City A.M commented on trade union Unite's launch of a social contract for financial services to protect finance workers jobs, which is set to be launched today. The principles, which set out the union's ideas for how the finance sector should safeguard workers, follow the government's decision to inject capital into the market to support the financial services industry. The union, which represents thousands of employees in the financial services industry, said it welcomed the government's decision, but wanted to ensure this money was used to bring security to staff, rather than encourage the continuation of large wages for those keen on the short term rewards of highly irresponsible risk taking. This will largely come from protecting employee pension schemes.

This will obviously mean a restructuring of the regulatory system, currently employed in the financial sector, will have to take place. There is also emphasis placed on the recognition that this sector is of great importance to the capital following the collapse of the manufacturing industry.

Following a bailout, Insurance firm AIG were able to take a step back and examine how its recent demise occured.

One of the items discussed was its expenditure of $440,000 for a corporate retreat. These funds were spent on Sept. 22nd, a week after the Federal Reserve extended an $85 billion emergency loan to AIG to keep it from going bankrupt due to insurance liabilities.

An article by the Financial Post has reported that according to the receipt from the hotel, the eight-day company retreat was a lavish one -- $139,000 was spent on hotel rooms, while even more money -- $147,301 -- was spent on banquets. Another $23,380 was spent on undisclosed spa treatments and another $6,939 was spent on golf. A full $9,980 was spent on room service and food and cocktails at the hotel lounge.

AIG have since issued a statement saying that "This type of gathering is standard practice in the industry and was planned a year advance of the Federal Reserve's loan to AIG. We recognize, however, that even activities that have long been considered standard practice may be perceived negatively. As a result, we are reevaluating various aspects of our operations in light of the new times in which we operate."

According to the statement, the event was held by one of AIG's insurance subsidiaries, not AIG employees. The attendees were independent life insurance agents who were "top business producers" for AIG. Only about 10% of the attendees were AIG American General employees, and no corporate executives from AIG headquarters attended the meeting, according to the statement.

The question still remains, couldn't these "independent" insurance agents have scaled their activities back in light of the company's bailout?

Following developments over the past few weeks, the £500 billion bailout was announced and there has been a large amount of coverage of both positive and negative views on how successful the plan will be.

We would like your views on the bailout, and whether you think it was the best, and maybe only option left, for a market full of uncertainty??

Following the recent market turmoil, bonus payouts in the financial industry have started to be questioned and this has led to large banks forecasting a 70% fall in bonuses.

City bonuses are expected to be cut from £8.5 billion last year to just £3.6 billion this year, and are expected to fall to £2.8 billion next year.

The findings from the economics consultancy, the Centre for Economics and Business Research (CEBR), suggest that a new bonus culture, based on longer term results, will begin to emerge.

Following the past weeks of unrest, and disruption in the financial markets, many have lost confidence in the British banking system and started to question the positioning of their savings.

How has the financial crisis affected you, and have you opted to withdraw your savings and sleep on them untill the market recovers?

It has been reported in CIty AM that confidence in the British banking system has reached such a low level that it now ranks below Botswana in a league table compiled by the World Economic Forum.

RANKINGS

1. Canada
2. Sweden
3. Luxembourg
4. Australia
5. Denmark
6. Netherlands
7. Belgium
8. New Zealand
9. Ireland
10. Malta 11. Hong Kong
12. Finland
13. Singapore
14. Norway
15. South Africa
16. Switzerland
17. Namibia
18. Chile
19. France
20. Spain
--------------------------------------------
124. Kazakhstan
125. Cambodia
126. Burundi
127. Chad
128. Ethiopia
129. Argentina
130. East Timor
131. Kyrgyz Republic
132. Lesotho
133. Libya
134. Algeria

SOURCE: World Economic Forum Global Competitiveness Report 2008-2009.

Britain, which once ranked in the top five, has slipped to 44th place behind El Salvador and Peru, after a £50 billion pledge this week by the government to bolster bank balance sheets.

Botswana has now climbed to 38th position.

Across the pond in the United States, where some of Wall Street's biggest financial names have collapsed in recent weeks, rated only 40th, just behind Germany in 39th place, and smaller states such as Barbados, Estonia and even Namibia, in southern Africa.