Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Banks

Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

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Categorized | Banks

Osborne warns BoE against curbing growth


Posted on April 30, 2013

George Osborne urged the Bank of England not to undermine recovery through an overzealous focus on banking stability, in an attempt to put growth at the heart of the new governor’s mandate.

The chancellor told the bank’s Financial Policy Committee to give “due weight to the impact of its actions on the near-term economic recovery” when carrying out its primary job of maintaining financial stability.

    Mr Osborne noted the “short-term trade-offs” that the FPC faces: between strengthening the banking system and making sure that banks are able to increase lending into the economy.

    His letter to Sir Mervyn King, departing bank governor, said the committee should be particularly attentive to its secondary objective of sustaining economic growth “at this stage in the cycle”.

    The chancellor set out the remit for the FPC, which formally took on its new powers in April, in a five-page memorandum. The committee will guide the work of Mark Carney, who will chair the committee when he takes up his post as governor in July.

    The remit reflects Mr Osborne’s concern that an excessive focus on making the banking system shockproof could create “the financial stability of a graveyard”.

    The emphasis on growth echoes Mr Osborne’s earlier guidance to the bank’s Monetary Policy Committee, which clarified that policy makers could prioritise growth when setting interest rates, provided that inflation remained under control.

    Mr Osborne’s focus on growth was reflected in his decision in March not to appoint two outspoken advocates of tough bank regulation, Michael Cohrs and Robert Jenkins, to the permanent FPC.

    Mr Osborne’s comments in the remit may be part of his long running battle over efforts by some regulators and MPs to force banks to conform to tougher leverage requirements, which the chancellor fears could constrain lending.

    The FPC suggested last year that banks could use liquidity buffers, held in excess of regulatory guidance, to support extra lending.

    Mr Osborne’s letter to Sir Mervyn also urged FPC members to co-ordinate their speeches and opinions. He said confidence in financial markets would be boosted by “consistent messages about the planned regulatory response to financial stability risks”.

    The move to assert discipline concerned Andrew Tyrie, Commons Treasury committee chairman, who said the FPC’s accountability to parliament and the public would be “enhanced, where possible by open debate, not by concealment”.