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Friday, 28 November 2014

BREAKINGVIEWS

A bank clerk counts Chinese yuan banknotes at a branch of Industrial and Commercial Bank of China in Huaibei, Anhui province June 8, 2012. REUTERS/Stringer

China's deposit guarantee is really the opposite

28 November 2014

A long-awaited plan to protect bank savings could have strange effects in a system where citizens believe the state stands behind almost everything. Those with wealth above the guaranteed limit may abandon small banks. The benefits will only kick when assurances are tested.

Lowflation in Asia

Cheap oil worsens Asian debtors' lowflation woes

28 November 2014

Sliding energy prices could make already-low Asian inflation vanish. That’s bad news for heavily indebted economies like China, South Korea, Thailand, Malaysia and Singapore. If prices and wages don’t rise, borrowers will curb spending. Slowing GDP growth could stumble.

Wads of Swiss franc banknotes are stacked in piles at the GSA Austria (Money Service Austria) company's headquarters in Vienna July 22, 2013.

Betting against Swiss currency cap is high stakes

27 November 2014

Traders are testing the central bank’s franc ceiling and using options to bet the currency will break through. The wager is inspired by euro weakness and a looming referendum on whether the SNB should buy more gold. This is one monetary authority the market is unwise to take on.

A Scottish Saltire flag and British Union flag fly together with the London Eye behind in London September 19, 2014.

UK has to decide if Scotland is too big to fail

27 November 2014

A state-appointed British commission says income tax-raising should be devolved to Edinburgh, along with some powers to borrow. That raises the tricky question of whether London will underwrite Scottish debt. If so, there’s moral hazard; if not, it pushes Scots towards secession.   

A billboard advertisement of Takata Corp is pictured in Tokyo September 17, 2014.

Faulty air bags puncture Takata financial cushion

27 November 2014

The Japanese group has set aside $660 mln to replace car parts linked to at least five deaths. Regulatory demands for a US-wide recall could double the bill. Lawsuits and fines will mean more pain. Takata’s survival may depend on the support of its customers – or the government.

Wells Fargo: first big bank simple enough to fail

26 November 2014

The $1.6 trln lender secured a provisional stamp of approval from regulators for its living will. Less credible plans from 11 other titans suggest size isn’t the issue. Wells ranks fourth in assets and first in market cap. The real problems are complexity and interconnectedness.

A BT phonebox is seen in front of the British Telecom tower in central London.

Investors can forgive BT going back to the future

26 November 2014

If the former British Telecom buys Telefonica’s UK mobile business, it will regain a unit demerged in 2001. The round-trip is unusual but forgivable. 02’s demerger delivered good returns for BT investors who kept their stock. BT refocused, and its re-entry to UK mobile is timely.

Saudi Arabia's Oil Minister Ali al-Naimi talks to journalists before a meeting of OPEC oil ministers at OPEC's headquarters in Vienna November 27, 2014.

OPEC inaction confirms new order for oil

27 November 2014

The oil cartel, led by Saudi Arabia, is either willing to sacrifice profit or unable to agree on production cuts. Either way, lower prices challenge U.S. shale oil producers, but that industry may still thrive. In the OPEC fog, one thing is clear: weaker members will suffer. 

A part of the EU flag is pictured through a magnifying glass on a special edition of postage stamps, January 21, 2014.

EU bank ring-fencing plans need a reboot

27 November 2014

Splitting European lenders’ market-making from their other activities could cost 21 bln euros, research suggests. Yet global resolution reforms are reducing the need for structural separation. And the proposals, as drafted, could hinder the nascent capital markets union.

A bartender pours Haywards 5000 strong beer, a product of SABMiller, into a glass at a restaurant in Mumbai August 28, 2013.

SABMiller’s Coca-Cola push is Africa buy signal

27 November 2014

The UK brewer and the U.S. drinks giant are merging assets in southern and eastern Africa to create a soft-drinks bottler with $3 bln of sales. SAB gets control and gains market access. The move points to the continent’s strategic potential, and similar consolidation could follow.

A city worker passes a street sign in the Canary Wharf financial district in east London

Bank misdeeds show lack of "should we"

26 November 2014

A Citi analyst settlement and a probe into an HSBC hedge fund leak aren’t about grey areas. The alleged transgressions break clear rules. As in a recent experiment reported by Nature, they betray bankers’ tendency to eschew what they should do for what they can get away with.

The European Commission's new President Jean-Claude Juncker rings the bell as he chairs the first official meeting of the EU's executive body at the EU Commission headquarters in Brussels November 5, 2014.

Juncker’s stimulus ambition far exceeds capability

26 November 2014

The EC president is pushing a 315 bln euro infrastructure project, using a sliver of taxpayer-funded equity. Europe’s economy needs the stimulus, but this one relies on old money and financial engineering. Investing the funds as quickly as the region needs will prove a challenge.

Houses are seen behind a residential street sign in London.

Remember the UK housing bubble?

26 November 2014

Not long ago an overheating housing market was seen by many as the big UK danger. Now mortgage approvals are dropping and house inflation is easing – even though mortgages are getting cheaper. Tighter home-loan regulation is a factor. Workers’ low earnings are the main restraint. 

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Columns

Edward Hadas

Edward Hadas: A healthy attitude to deflation

27 November 2014

The strength of downward price momentum has surprised most experts. Central bankers keep trying to fight the tide, as if in denial. It would be better to accept that the demographic forces which create disinflation are too strong to turn. Mild deflation isn’t so bad anyway. 

Andy Mukherjee

India in depth: Time to follow China on rates

26 November 2014

Global disinflation is creating room for the Reserve Bank to follow its counterpart in Beijing and cut borrowing costs. Unlike the People’s Republic, India doesn’t need to worry about triggering overinvestment. Monetary easing now would have few risks, and several benefits.

Rob Cox

Rob Cox: American banking has its own Tea Party

25 November 2014

Like the anti-establishment wing of the GOP, the Independent Community Bankers of America has emerged as a highly vocal opponent of all things Wall Street, including a Lazard banker’s nomination for a Treasury role. These are the plaintive cries of a dying breed of banker.

Features

Kate Duguid

Review: Congo's problems run deeper than oil

21 November 2014

Virunga Park sits on top of reserves and between hostile states inhabited by warring militias. A new documentary casts UK oil firm Soco as the park’s top threat. Unethical exploiters are just one symptom of a nation whose institutions are too weak to assure economic stability.