Word: bankes
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Dates: during 2000-2009
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...financial crisis exploded. Most economic statistics in the U.K. and around the Continent already look awful, but the turmoil of the last few weeks will likely make the downturn longer and more painful. "You name it, it's falling," says George Buckley, a London-based economist for Deutsche Bank...
This grim outlook presents some particularly tricky challenges to those in charge. In previous downturns, such as the early 1990s slump, governments typically ramped up state spending in order to offset the drop in business activity. But this time, the gigantic cost of bank bailouts will leave national treasuries with little room for maneuver. Indeed, the bailout plans - under which stricken banks will receive direct injections of taxpayer money to strengthen their capital base, while governments provide guarantees aimed at getting banks to lend to one another again - may well throw government finances seriously out of kilter...
...will be a lot harder to obtain. That's already happening in the U.K., for example, where the volume of home mortgages approved by lenders fell dramatically in August. Including other forms of consumer credit, total net lending plunged by 86% from its level a year ago, according to Bank of England statistics. Just as Europe's banks were overextended, so consumers in many countries ramped up their household borrowing in the past few years - usually because rising house prices made them feel richer. For policymakers, the critical issue is the speed with which the inevitable weaning off of credit...
Figuring out exactly what's happening and then reacting accordingly falls to the European Central Bank and its president, Jean-Claude Trichet. The bank has been nervous about inflation all year, but earlier this month it slashed its lending rates by 0.5% to 3.75% as part of a coordinated rate cut by the world's biggest central banks. Riches-Flores expects the bank to cut rates further in the near future as the economy slows. At the weekend, the E.U.'s Commissioner for Economic and Monetary Affairs, Joaquín Almunia, even called for monetary easing "in the near term...
Fiscal Creep Around Europe, that ripping noise you hear is the sound made by Treasury officials tearing up their 2009 budgets. With the economy slowing, tax receipts are lower than expected, and in Britain, France and elsewhere government spending is higher than forecast. Now comes the bank bailout, and with it, a huge increase in government borrowing. British Prime Minister Gordon Brown has been the first to detail his national package, and it's making fiscal hawks shudder. It involves injecting up to $65 billion into three British banks - Royal Bank of Scotland, HBOS and Lloyds TSB - in exchange...