Each week QFINANCE will endeavor to bring you some of the biggest news stories from the past five days in finance and business, as well as some of the most fascinating websites and links that have crossed our path. We hope you'll enjoy reading, we hope you'll have a great weekend and we hope that you'll come back each Friday to brush up on your finance and business knowledge.
Monday October 3
This week has seen the annual conference for the Conservative party, the party with the majority of seats in the UK’s coalition government. The opening day of the conference saw the country’s chancellor, George Osborne, reveal plans to unleash tens of billions of pounds from the governmental pot to promote economic growth. The chancellor’s termed “credit easing” plan will see government finance companies buying their debt in the secondary bond markets, thus assisting small- to medium-sized forms looking to raise cash without relying on bank loans. Sources close to the chancellor hinted that this scheme could be extended to larger firms and corporations were financial crisis in Europe to worsen. Whilst those supporting the idea have claimed that it will not affect the deficit, as the government is buying assets rather than cutting taxes or increasing spending, critics of the scheme have pointed out that, were a large number of companies to default on the bonds (apparently a common occurrence with small- and medium-sized firms), the Treasury could be left with a rather large bill.
Read about Osborne's plans to boost economic growth in more depth here.
Tuesday October 4
After France and Belgium announced that it would take “all necessary measures” to save Dexia, the failing Belgian lender lost a fifth of its market capital. Investors, uncertain as to what that could mean, began discussing the possibility that the joint governmental effort could split the lender in a “good” and “bad” bank, slowly winding down the latter over time. Whilst this is a common plan in the cases of failing banks, the markets now expect Dexia to be saved, which would make it the first eurozone bank to be bailed out because of its exposure to sovereign debt. On the same day Dexia was called to write down their holdings of Greek debt beyond the 21 per cent that they have already accepted. The same was asked of BNP Paribas and Société Générale. Bloomberg has done some calculations and worked out that a write-down on all three banks could generate a loss of €3bn between them.
Read about the efforts to save Dexia and the wider repercussions of this action in more depth here.
Wednesday October 5
On Wednesday, Steve Jobs, Apple’s celebrated founder, died at the age of 56. He passed away late in the day, only six weeks after stepping down as the firm’s chief executive. Our thoughts go out to his family and friends.
Read our blog on the legacy of Steve Jobs here.
Thursday October 6
Markets were stunned yesterday when Sir Mervyn King announced a second round of quantitative easing (QE) worth £75bn. Sir Mervyn was quoted as saying: “This is the most serious financial crisis at least since the 1930s, if not ever… the world has changed”. This additional £75bn of assets will be purchased with newly-printed money over the next four months, supposedly beginning with £1.7bn on Monday. Sir Mervyn claimed that this was pre-emptive action “to try to prevent the slowdown from becoming too serious”, remarking that he believed the weak Eurozone economy was dragging down UK growth.
Read our blog on Sir Mervyn King's ideas for a dramatically-altered global financial system here.
Friday October 7
We at QFINANCE don’t think we have to wait out the rest of the day to find out what the biggest news will be. Credit ratings agency Moody’s has downgraded twelve UK financial firms. This includes such big names as Lloyds, TSB, RBS, Nationwide and Santander UK. Moody’s justification for this move was that it now believed the country’s government was less likely to support some firms that could get into trouble. Moody’s did point out that this in no way reflected “a deterioration in the financial strength of the banking system”. At the same time Moody’s also downgraded nine Portuguese banks, citing financial weakness.
Read about Moody's bold day in more depth here.
Come back next Friday for another report on the world of business and finance.
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This conference will bring together the leading energy supplies and producers as well as banks, hedge fund and asset management companies to clarify unclear rules stemming from the impending Dodd-Frank regulations and to determine best practices for an integrated risk management system. Attendees will discuss how to implement an integrated risk management system, market risk and finding best practices for evaluating the independent risks.
Financial Forecasting and Planning Summit, Amsterdam, 22nd & 23rd November
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