Daily Archives: June 24, 2010

Ralph Atkins

Ever wondered what exactly Luxembourg did? The tiny Grand Duchy (population: about half a million), squeezed between Germany, Belgium and France is the largest source of foreign direct investment leaving the European Union, according to figures from Eurostat, the EU’s statistical service. With investment outflows of €112bn last year, it accounted for 42 per cent of the EU total. The UK, at €31bn, was the second biggest source. Luxembourg was also the largest recepient of foreign direct investment inflows.  Overall, EU investments in the rest of the world fell by a quarter in 2009 compared with the previous year, reflecting the collapse in economic acvitity.

The data highlight Luxembourg’s role as a financial intermediary, with special purpose entities accounting for much of its foreign direct investment – no doubt attracted by the country’s reputation as a tax haven.

France is aiming for a bank levy of €300m but ” would really like” €1bn, French finance minister Christine Lagarde has announced. Yikes. George Osborne’s feat — taxing the banks £2bn while reassuring them of a level playing field — seems a little less impressive. Might this put Mr Osborne off considering further bank levies?

Lucky for UK banks, then, that the UK levy is so small. And largely offset by corporation tax gains.

Name a small country exposed to a large banking sector. No, not Iceland. Belgium, courtesy of Fortis and Dexia.

So is Belgium most at risk from the EU’s new commitment to stress test transparency? Possibly, says Jacob Funk Kirkegaard in an article for the Peterson Institute. But that would be a small price to pay: Read more

For the first time since June 2008, the central bank of Taiwan has raised rates – by 12.5bp. Central bank information shows the discount rate now standing at 1.3275 per cent, and collateral and non-collateral rates at 1.75 and 3.625 per cent, respectively. Rates had been static since the last cut, of 25bp, in February 2009.

Ralph Atkins

Banks in Greece, Portugal, Ireland and Spain account for more than two-thirds of the increase in lending to eurozone financial institutions by the European Central Bank since the summer of 2008 as many struggle to access financial markets.

Banks in the four countries have borrowed €225bn (£185bn) of the €332bn increase in lending since June 2008, according to the Royal Bank of Scotland, which compiled the information from eurozone central banks (see table). This is 68 per cent of the rise in lending, yet these countries represent only 18 per cent of the eurozone’s gross domestic product. Read more

Ireland’s done it. The UK’s about to do it. Now Denmark’s quite keen too.

Central bank director Nils Bernstein has said he’d like to see much closer co-operation with the Danish regulator, the FSA. ‘We can see a trend in Europe and internationally which involves some kind of fusion between central banks and financial regulatory authorities,’ he told financial daily Børsen (Danish, translation). ‘This could be advantageous for Denmark too.’ Read more