Monthly Archives: November 2009

All eyes on Abu Dhabi: the focus has shifted from the health of companies to the relationships between emirates. On this, the consensus is that Dubai’s oil-rich, older, wiser brother may “ride, but not race” to the rescue. The UAE central bank has offered to make funds available, improving liquidity. But investors want more, ideally a debt guarantee: “This isn’t just a liquidity crisis, it’s a solvency crisis.”

It’s also a confidence crisis. Read more

Reuters has just announced that the FT’s Maverecon blogger, Willem Buiter, is to become Chief Economist at Citigroup from January 2010. Details:

NEW YORK, Nov 30 (Reuters) -Citigroup Inc <C.N> on Monday named Willem Buiter as the bank’s new chief economist replacing Lewis Alexander, the bank said. Read more

Today, Bank of England figures show that, by its own yardstick, quantitative easing is falling short. In the Bank’s bluffers’ guide to QE, the goal of the policy, which creates money to buy assets, was described as “the degree to which the cash injection boosts the growth of money and spending by households and businesses.”

But the measure of the money supply that the MPC has pointed to in the past fell at 5.3 per cent annualised in the three months to October. Read more

On Dubai:

Other news:

“Investors view this as shockingly bad news”: one assessment of Dubai’s request for a freeze on all financing to Dubai World, the government’s heavily indebted flagship holding company. The requested freeze would last till May 30, and would cover DW’s troubled property unit Nakheel, which is due to pay back $4bn on an Islamic bond on December 14. Dubai sovereign CDS spreads rose 130bps from an overnight level of 318 and LSE shares fell – the exchange has a 20 per cent stake in Borse Dubai.

Meanwhile the “gold up, dollar down” trends continue. Sri Lanka has bought 10 tonnes of gold from the IMF Read more

Ralph Atkins

The headline news from today’s Bundesbank financial stability review is about the €90bn in further write-downs it expects from German banks. But there are some insights on Bundesbank thinking on monetary policy as well – although Axel Weber, Bundesbank president, was not at the press conference to elaborate.

In particular, the Bundesbank favours an eventual return to “variable rate tenders” in liquidity-providing operations, in which the European Central Bank determines the amount of liquidity injected into the bank system. Since the collapse of Lehman Brothers it has, instead, been matching banks’ bids in full at a fixed interest rate. Read more

Russia has lowered rates and Vietnam has raised them. This is the ninth cut since April for Moscow – they are trying to slow the appreciation of the rouble and revive lending. Hanoi has devalued the dong by more than five per cent and raised rates by a full percentage point in an effort to curb inflation. The Vietnamese move is not the start of the mooted currency war.

Rising bank failures pushed the FDIC rescue fund into debt as of September 30, 2009. Read more

The Office for National Statistics has today published a paper defending its early estimates of Gross Domestic Product against criticisms that the figures are not worth the paper they are written on. But its case rests entirely on trust, writes Chris Giles of the Financial Times, and does not address the external concerns about its data.  Read more

One global fear is that if China continues to peg the renminbi to the sliding US dollar, other Asian economies will retaliate by devaluing their currencies against both. With this in mind, today’s 5 per cent devaluation of Vietnam’s dong appears an ominous sign, but Vietnam is a special case writes Chris Giles of the Financial Times. Read more

Vietnam announced on Wednesday that it will devalue the dong by over 5 per cent, raise interest rates and request big exporters to sell foreign exchange to the central bank in a dramatic attempt to underpin the beleaguered currency. The central bank also said it would reduce the trading band of the dong against the dollar to 3 per cent above and below a daily mid-point set by the central bank from 5 per cent (Reuters, more here).

Ralph Atkins

The German government’s bailout of WestLB, one of the country’s largest regional Landesbanken, will, I am sure, be greeted with a cheer at the European Central Bank. Jean-Claude Trichet, ECB president, has been calling repeatedly for greater efforts to reinforce the eurozone’s banking system. Now it seems Wolfgang Schäuble, the new finance minister, has heeded his call and stopped all the political dithering over one of Germany’s worst performing banks. Berlin will provide up to €4bn to WestLB.

Berlin’s move is important to the ECB because the central bank is impatient to start implementing its “exit strategy” Read more

The Treasury Select Committee was on particularly supine form when half of the Monetary Policy Committee came to give evidence this morning, writes Chris Giles of the Financial Times, allowing Mervyn King and Pauol Tucker to paper over their differences on banking regulation. Read more

The ratings agencies have been busy: we are awash with downgrades and warnings. First up, S&P. They have ranked banks’ health using a new methodology, and it makes for grim reading. Just nine of 45 banks exceeded the minimum “risk-adjusted capital” ratio (for example, HSBC did well; UBS and Citigroup less so). The results are important because the new methodology foreshadows the new capital regime ratio likely to be adopted by Basel next year. S&P conclusion: “Capital for the majority of banks remains a relative weakness.”

Next, Fitch has downgraded Mexico to BBB, just two notches above junk status. Read more