Word: banking
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...Markets may feel better about a joint European commitment announced Sunday to guarantee certain bank loans and recapitalize banks. Unfortunately, disappointment in the markets, the failure of another major bank or other dramatic events may yet produce another early-morning FDIC board determination that the American financial system as a whole is at risk...
...gains are tentative. Light trading volume in Hong Kong suggests that investors are holding back ahead of Wall Street's reaction to bailout plans. During an Oct. 10 meeting of G-7 finance ministers, European central bankers suggested they would follow Britain's lead by buying stakes in struggling banks and underwriting interbank loans. The U.S. Federal Reserve is also finalizing a plan to recapitalize the nation's bank in order to loosen frozen credit markets...
...Despite interest-rate cuts last week in the U.S., Europe and Asia, businesses throughout the world are finding it nearly impossible to borrow and money-market rates remain abnormally high. In Hong Kong, for example, the one-month interbank offered rate, the benchmark for short-term bank lending, rose to 5% last week even as the city cut its policy rate from 3.5% to 2.5%. Banks remain leery of lending in the face of further financial-industry failures...
...credit crisis is hurting even small Hong Kong businesses, according to Danny Lau, chairman of the Hong Kong Small and Medium Enterprise Association. "Bankers are tightening loans," Lau says. "That will affect most small businesses. Some of them have loans from banks in order to run their operations. Now they will have to tighten up, or they will have to contract in the future." Last week, U-Right, a clothing retailer with about 100 outlets in Hong Kong and another 500 in China, was forced to liquidate after it could not meet bank demands to repay its debts. By Sunday...
...fruits of tense negotiations between the government and British lenders - talks given added urgency by the meltdown in global markets at the end of last week - the bailout is breathtaking for its scale. British taxpayers are on the hook for a $34 billion investment in the Royal Bank of Scotland (RBS), Britain's second-largest lender, a cash injection amounting to almost double the bank's current market capitalization. Most of the investment will take the form of ordinary shares, which private investors are invited to purchase along with the government. But under the deal, those shares yield no dividends...