Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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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

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

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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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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Archive | November, 2016

iPad to be customised for elderly

Posted on 30 April 2015 by

Tim Cook, Taizo Nishimuro, Ginni Rometty...Apple CEO Tim Cook, Japan Post CEO Taizo Nishimuro, and IBM CEO Ginni Rometty, left to right, get together after a news conference at IBM Watson headquarters, in New York, Thursday, April 30, 2015. Apple, IBM and Japanese insurance and bank holding company Japan Post have formed a partnership to improve the lives of elderly people in the country. The program will provide iPads with apps designed to help seniors manage day-to-day lives and keep in touch with family members. (AP Photo/Richard Drew)©AP

Tim Cook, Apple chief, with his counterparts at Japan Post and IBM respectively, Taizo Nishimuro and Ginni Rometty, announcing the tie-up

Apple and IBM are teaming up to develop a modified version of the iPad for millions of elderly people in Japan, in a tie-up aimed at capturing a generation of “silver surfers” and boosting flagging sales of the tablet device.

The iPads will feature preloaded apps designed by IBM with simplified interfaces and larger text. They will include medication management tools, exercise and diet regimes, and a modified version of FaceTime so customers can speak to their families and caregivers.

    The collaboration comes at a time when Apple is seeking new ways to revive iPad sales — its revenue from the device dropped 29 per cent in the most recent quarter — and many technology groups are trying to develop products for a rapidly ageing population.

    Senior citizens make up roughly 25 per cent of Japan’s population, a proportion that is projected to rise to almost 40 per cent over the next 40 years, according to the Japanese ministry of health, and the same trend is occurring in most other developed countries, albeit at a slower place.

    “Sooner or later every country is going to encounter the same issue,” Tim Cook, Apple’s chief executive, said at a press conference. “Japan really respects its elderly and the wisdom of the elderly, so it’s no surprise that this initiative begins in Japan.”

    Mr Cook said the modified iPad was part of Apple’s big push into healthcare and compared the launch to recent initiatives such as HealthKit, a platform for sharing information with medical professionals, and ResearchKit, which allows a person’s data to be used in scientific research.

    Apple and IBM said they would work with Japan Post, which will buy the tablets in bulk and distribute them to its existing customers, either free of charge or for a small fee of about Y1,000 ($8) a month, according to a person briefed on the plans.

    The Japanese postal and financial services group sells banking or life insurance products to almost all of the 33m senior citizens in the country. After launching a pilot scheme in the second half of the year, it said it expected to distribute the iPads to between 4m and 5m customers aged 65 and above by 2020.

    Mr Cook said Apple and IBM would eventually expand the initiative to other countries, such as the US, but added that they would probably have to “cobble together partnerships” with lots of different companies rather than work with a single partner as they have with Japan Post.

    The global population of over-60s is expected to more than double from 841m in 2013 to more than 2bn in 2050, according to the UN.

    Ginni Rometty, IBM chief executive, acknowledged that some customers would be nervous about sharing medical data with their life insurance company, but said they would be able to opt to have their information used anonymously.

    Soft iPad sales were the main weak spot when Apple announced earnings on Monday, although Japan was a rare bright spot. Mr Cook said then that Apple’s tablet, which saw a surge of initial popularity after it launched in 2010, has lately experienced “cannibalisation” by smartphones with larger screens, including its own iPhone 6 Plus, and by growth in its Mac personal computing line.

    “At some point it will stabilise,” he said. “I’m not sure precisely when, but I’m pretty confident that it will . . . l believe the iPad is an extremely good business over the longer term.”

    Alongside Japan, the iPad has also seen growth in China, where demand has been growing strongly across Apple’s product line-up.

    Austria to test rules on broken banks

    Posted on 30 April 2015 by

    ©Bloomberg

    Klagenfurt am Wörthersee, an Alpine lake city almost 350km from Vienna, was once the idyllic backdrop to one of the most calamitous banking collapses in Europe.

    Now, it is closing in on a new claim to fame: as the venue for a trial run for as-yet-untested rules within the EU on who foots the bill when banks go bust.

      Investors, including Pimco, one of the world’s largest bond investors, have more than €11bn at stake in the final act of what was once Hypo Alpe Adria (HAA), the lender nationalised in 2009 amid allegations of mismanagement that saw managers jailed, politicians shamed and Austrian taxpayers faced with €5.5bn in costs.

      On March 1, reeling from news that Heta, the “bad bank” created to dispose of the non-performing portion of HAA, could need another €7.6bn state aid, Austria’s financial regulator put the bank into resolution after the government said it would not provide any more money.

      In response, Heta suspended bond payments, including payments on bonds guaranteed by its home state Carinthia, until at least May 2016 while it decides which creditors get paid first out of its remaining monies.

      “There will be extremely important precedent set,” said Wolfgang Freund, partner at Vienna-based law firm Grama Schwaighofer Vondrak, adding that the case would establish how publicly guaranteed debt should be dealt with when banks are wound down.

      “The issue goes beyond mere banking law,” his colleague Wolfgang Lafite adds, describing it as a constitutional law issue around the right to property — the property in this case being the protection of a guarantee.

      The most complicated case is the €9.85bn of Heta’s debt guaranteed by Carinthia.

      The guarantees were a common structure in Austria which allowed regions to support their local banks, who in turn supported local economies. In HAA’s case it also enabled a massive expansion abroad. With plentiful access to cheap credit the bank invested heavily in eastern Europe and funded pet projects of politicians in the Carinthia region.

      “Heta was a great fraud institution obviously,” says Werner Kogler, finance spokesman for the opposition Green party, adding that there were “many mistakes” in how Austria dealt with the bank‘s slow-motion collapse.

      But now the monies have to be paid back, the sums Carinthia guaranteed dwarf its annual €2.2 bn budget.

      “It is incomprehensible that the land of Carinthia continued to accrue guarantee commissions even though it would not have been able to fulfil its obligations under the public liability,” a report by an Austrian commission of inquiry said in late 2014, referencing the payments Carinthia received from the bank for providing the guarantees.

      Earlier this week, Austria’s finance minister Hans Jörg Schelling said the federal government would “consider providing liquidity” to Carinthia if the province struck a deal with the bonds’ owners. Carinthia would owe the federal government the money, Mr Schelling added.

      Some investors and analysts, including Commerzbank chief executive Martin Blessing, warn that a default on the Carinthia guarantees would have ripple effects not just across other Austrian debt but also to Germany, where regional banks’ debt has also historically enjoyed public guarantees.

      Germany’s Bundesbank has warned German banks and insurers, who own about €7bn of the affected bonds, that they could lose half of what is owed to them by Heta Asset Resolution, HAA’s successor.

      Lawyers point to the differences between both guarantees: the Austrian ones cover the difference between what investors are owed and what they are eventually paid, and pay out only at the very end of a resolution process. The German ones are default guarantees that would pay back the full amount borrowed when a bank fails.

      The state of Carinthia said it could not immediately answer questions on how it would deal with the bonds. Some investors continue to hope they will be fully paid and point to negative consequences — potentially much higher borrowing costs — for other regions if they are not. Risk-hungry hedge funds have piled into some of the instruments in the hope they will be paid out eventually.

      Some investors are mulling attempts to hold the Austrian authorities liable for HAA’s financial implosion on the grounds that it was poorly supervised, a charge Austria’s financial regulator, the FMA, rejects.

      “Of course all those creditors that are affected need to have a close look at any and all remedies,” said Kurt Retter, partner at Vienna law firm Wolf Theiss.

      Under Austrian law, investors have a three-month window to June 1 to file challenges to the FMA’s decision to wind up the bank. A spokesman for the FMA said three law firms had requested access to files related to Heta, and one individual had lodged an objection.

      Investors may not get any answers until they find out the amount of their shortfall in May 2016, when Heta knows how much money it can pay bondholders, so lawsuits could be years away.

      “This discussion is not helpful for the market, this is clear,” said Karl Sevelda, chief executive of Austria’s Raiffeisen. “The consequences of uncertainty are never good because investors want certainty.”

      Commerzbank setback in bonus vote

      Posted on 30 April 2015 by

      The logo of the German bank Commerzbank...The logo of the German bank Commerzbank is seen on a branch (R) and the headquarters (L) of the bank in Frankfurt/M., western Germay, on April 7, 2011. Germany's second biggest bank, Commerzbank, unveiled plans on April 6, 2011 to raise billions of euros in equity to pay back most of the state aid it received in 2009 during the global financial crisis. Commerzbank said it would redeem 14.3 billion euros ($20.4 billion) of a total 16.2 billion in silent participations held by the government by June 2011, and pay the rest by 2014 at the latest. AFP PHOTO / DANIEL ROLAND (Photo credit should read DANIEL ROLAND/AFP/Getty Images)©AFP

      Commerzbank has suffered an embarrassing setback after the German government blocked its plan to pay some staff bonuses worth double their base salary.

      At the bank’s annual meeting in Frankfurt, only 64.7 per cent of the share capital represented backed the bank’s request for greater flexibility over bonus payments. The proposal needed 75 per cent approval to be accepted.

        With just 45 per cent of shareholders voting, the 35 per cent no-vote was largely because of the German government, which was able to call on a 17 per cent stake after rescuing Commerzbank during the financial crisis.

        The finance ministry said that it voted against the measure because Commerzbank had not justified why any staff should receive a higher bonus multiple than the 140 per cent of base pay that the bank was proposing for its top management.

        Commerzbank said that it would retain the option of putting the topic before shareholders again.

        Under European rules designed to help make the financial system safer, banks are limited to paying staff bonuses of up to 100 per cent of their base salary unless shareholders give permission for a higher payout.

        Pay has proved a delicate topic at a number of state-owned banks in recent years. Last year, Royal Bank of Scotland was forced to drop its own plan to push bonuses up to double its employees’ salary after the UK chancellor, George Osborne, said his government would use its 80 per cent stake in the bank to vote against the move.

        Meanwhile, in the Netherlands, many of ABN Amro’s top managers last month abandoned a planned pay increase of €100,000 each after a political uproar forced the government to delay a planned initial public offering of the state-owned bank.

        Commerzbank had asked for permission to pay bonuses of up to 200 per cent of base salary, a move that it said would affect about 210 staff, citing the need to remain competitive with its rivals.

        “As well as remaining competitive … a greater flexibility in setting variable compensation serves other important goals,” the bank added.

        “It counteracts an inappropriate increase in base salaries, and makes it possible to maintain an appropriate bonus component which matches the financial position of Commerzbank.”

        Commerzbank’s AGM took place three days after it completed an unexpected €1.3bn capital raising to bolster its financial position, a move that attracted criticism from a number of shareholders.

        Klaus Nieding, from the DSW shareholder association, said that the bank was the “uncrowned king” of shareholder dilution, adding that it was disappointing that the lender was not in a position to boost its capital through retained earnings.

        However, investors received some good news after Martin Blessing, chief executive, said that Commerzbank was planning to pay a dividend this year for the first time since 2007.

        Yelp crushed after missing results estimates

        Posted on 30 April 2015 by

        Investors took a dim view of Yelp’s first-quarter results, which fell short of expectations. The online review company said its loss had narrowed to $1.3m, or 2 cents a share, for the three months ending in March, from $2.6m for the same period a year ago. Analysts had expected a profit of $877,625.

        Although sales climbed 55 per cent to $118.5m, they were below projections for $120m.

          Yelp also forecast that second-quarter sales would lag analyst’ expectations, projecting revenues between $131m and $134m, below Wall Street’s call of $137.4m.

          Shares in Yelp, which have declined 29 per cent in the past year, fell 21 per cent to $40.25.

          RBC Capital downgraded the stock from “outperform” to “sector perform” and lowered the price target from $82 to $50 after the results.

          The number of average monthly users of its mobile products rose 29 per cent from a year earlier to 79m, while a similar metric for desktop unique visitors fell 3 per cent to 80m. Overall, unique visitors climbed 8 per cent to 142m.

          “Younger cohort markets are generating revenue dramatically below the level of Yelp’s older markets, but we’re now seeing substantial deceleration in all cohorts’ revenue growth,” said Mark Mahaney, analyst at RBC Capital Markets.

          “Yelp’s international markets have yet to break out of the 3 per cent contribution range, and now international unique visitor numbers have flatlined.’’

          Harman International was among the worst performers on the S&P 500, after it missed fiscal third-quarter sales expectations.

          The auto electronics and audio equipment maker, which is based in Stamford, Connecticut, reported profits of $70m, or 99 cents a share, compared with $73m, or $1.05 a share, in the period a year ago. Sales rose 4 per cent to $1.46bn.

          Analysts had forecast earnings of $1.25 a share, on sales of $1.48bn.

          Harman also declared a quarterly cash dividend of 33 cents a share. The shares dropped more than 10 per cent to $125.47.

          Avon Products, the door-to-door cosmetics company, reported a first-quarter loss as the strong dollar weighed on its results, sending its shares 7 per cent lower to $8.06.

          The New York-based company reported a loss of $147m, or 33 cents a share, on sales of $1.8bn. Analysts were expecting profits of 7 cents a share, on sales of $1.83bn.

          Avon derived more than 80 per cent of its sales overseas last year and on a constant currency basis, it said, sales had risen 1 per cent in the first quarter, driven by strong growth in Europe, Middle East & Africa.

          Rockwell Automation was the biggest per cent gainer on the US benchmark index after reporting a 14 per cent rise in its fiscal second-quarter profit, which topped analyst expectations. However, the company said the dollar had weighed on revenues, which declined 3 per cent to $1.6bn from the year ago period.

          US stocks declined for a second straight day with the S&P 500 utilities sector leading the decline, but the main benchmarks are higher for the month.

          The S&P 500 declined 0.7 per cent to 17.917.17, the Dow Jones Industrial Average declined 0.7 per cent to 17,911.52, and the Nasdaq Composite fell 1 per cent to 4,972.58.

          mamta.badkar@ft.com

          Twitter: @mamtabadkar

          Short squeeze may be a tailwind for euro

          Posted on 30 April 2015 by

          Trading volumes on Friday will be hit by much of the world shutting for the May Day break (Wall Street will be open, while London takes Monday off instead).

          Given that a feature of recent sessions has been sharp moves in various assets as punters exited supposedly overcrowded strategies, such a thinning of global attendance could further exacerbate volatility.

            For many analysts, currencies have been the main source of these sentiment shifts; particularly the relationship between the euro and the US dollar, where a sudden lurch in favour of the former illustrates changes in attitudes towards the relative performances of the US and eurozone economies.

            European stocks have revelled in the euro’s decline in recent months, so equity bulls shouldn’t moan if the common currency’s surge above $1.12 on Thursday weighed on share prices.

            The euro’s bump up is getting extra lift from a short squeeze.

            Coming into this week, net short euro futures positions on US markets remained near record levels.

            An update from the CFTC Futures should be released late on Friday.

            Unless it shows a significant fall in net shorts, then traders may assume there remains a tailwind behind the euro’s resurgence.

            That said, such is the velocity of the euro’s rally that the EURUSD’s 14-day relative strength index, a closely watched momentum gauge, by mid-session on Thursday was up to 67, nearing the supposedly “overbought” threshold of 70.

            jamie.chisholm@ft.com

            RBS: McEwan goes Forth

            Posted on 30 April 2015 by

            Ross McEwan, CEO of the Royal Bank of Scotland Group©Bloomberg

            Ross McEwan

            The Forth Rail Bridge lost its status as a symbol of Sisyphean tasks a few years ago. A tough new brand of paint made constant repainting unnecessary. But patching up Royal Bank of Scotland, whose Edinburgh headquarters lies a few miles to the east, still feels like a perpetual rather than attenuating process.

            Seven years after a bailout by the state, RBS goes on writing off billions. The total on Thursday was £1.75bn. And this was just for the first quarter. The attributable loss was £446m, a £1.6bn year-on-year decline, compared with a £1.6bn operating profit before nasties higher up the P&L. The bank is heading for a £2.8bn loss in 2015.

              Analysts hope RBS will reverse out to a pre-tax profit of around £4bn in 2016. That year will be “Phase Three” in the timeline of chief executive Ross McEwan, when he believes RBS will return to something approaching financial health. This year he is on course to free RBS of its “bad bank” and two-thirds of its stake in Citizens of the US, while still cutting costs by £800m despite a higher bank levy.

              The tricky bit will be ensuring big writedowns and provisions cease to the same deadline. This would make it easier for the government to start selling its 81 per cent stake. The fact that the shares trade 11 per cent below tangible net assets indicates scepticism among investors that the bonfire of value is burning out. Mr McEwan sounded a little weary on an early morning results call. He’s not the only one.

              jonathan.guthrie@ft.com

              Russia cuts rates as rouble rallies

              Posted on 30 April 2015 by

              Russia’s central bank on Thursday cut its key interest rate by 150 basis points to 12.5 per cent in response to the rally in the rouble and a contracting economy.

              The rouble has been one of the world’s best performing currencies this year after falling oil prices and sanctions pushed it to record lows against the dollar last year. In an attempt to shore up the currency, the central bank raised rates from 10.5 per cent to 17 per cent in an emergency meeting in the middle of the night in December.

                Thursday’s rate cut was largely in line with market expectations, although larger than the 100 basis points forecast by a group of economists surveyed by Bloomberg.

                “The bigger-than-expected cut in Russian interest rates today suggests that policy makers will take advantage of the rouble’s recent strength to unwind the policy tightening that was put in place in the heat of the currency crisis towards the end of last year,” said Neil Shearing, chief emerging markets economist for Capital Economics.

                The rouble initially fell against the US dollar on Thursday’s news but later recovered to trade up by as much as 1.4 per cent on the day. Russia’s Micex stock index added 0.5 per cent.

                In its statement, the central bank said it expected inflation, which as of this week was estimated at 16.5 per cent, would moderate more quickly than previously anticipated, on the back of the rouble strength, tighter lending conditions and a contraction in the economy.

                The central bank predicted that consumer price inflation would slow to below 8 per cent in the next year and hits its target of 4 per cent in 2017.

                “Lower consumer demand amid contracting real income and rouble appreciation in the recent months curbed prices. Inflation expectations of the population decreased against this backdrop,” the central bank said.

                The bank said macroeconomic economic indicators pointed to a “considerable” contraction in the country’s first-quarter gross domestic product. Earlier this month, Prime Minister Dmitry Medvedev announced that Russian GDP had fallen 2 per cent in the first three months of the year, while the economy ministry has estimated the fall at 2.2 per cent.

                The World Bank has forecast that the Russian economy will contract by 3.8 per cent this year and 0.3 per cent in 2016.

                While the rouble has been one of the world’s best performing currencies over the past few months – gaining 36 per cent against the US dollar since the start of February – Russian policy makers have said that the currency has already reached its fair value and should stop strengthening.

                Anton Siluanov, finance minister, last week said the rouble had already “climbed more than is needed”, echoing earlier comments by Ksenia Yudaeva, first deputy governor of the central bank.

                “The fast appreciation of the rouble that we saw, linked to the sharp upswing in the price of oil by 30 per cent – that’s over,” Ms Yudaeva said.

                Businesses in Scotland braced for shift

                Posted on 30 April 2015 by

                Nicola Sturgeon, the leader of the Scottish National Party, launches her party's final poster at a campaign event in Leith Walk Edinburgh, Scotland, April 30, 2015. REUTERS/Russell Cheyne©Reuters

                With the Scottish National party poised to sweep the board in Scotland on May 7, businesses and financial groups are braced for higher taxes, a tougher business environment and a renewed push for independence.

                Although Scots voted to stay in the union in last year’s referendum, the SNP and its supporters came out of the campaign reinvigorated. Polls suggest that after taking only six of Scotland’s 59 constituencies in 2010, the nationalists are poised to win more than 40 and the party has the potential to be the deciding factor in who governs the UK.

                  Although Nicola Sturgeon, SNP leader, has said an SNP rout of Labour in the general election would not mean another referendum on independence, businesses fear one will not be far behind — or, perhaps worse, a state of “neverendum” where the SNP pushes for repeated votes until it gets the answer it wants.

                  “The confusion and frustration for people who voted to stay [in the union] is the feeling that not far down the line we won’t be in the UK,” said Ray Entwistle, chairman of new Edinburgh-based private bank Hampden & Co. “We are confused as to why that apparent change has happened in the last few months.”

                  The likelihood of higher taxes and land reform and the uncertainty over Scotland’s future could discourage investment and even force businesses and financial organisations to enact contingency plans drawn up before the referendum to relocate south of the border, some fear.

                  The parallel they draw is to “the Montreal effect”, a reference to Quebec’s independence referendums in 1980 and 1995. Despite wins for the No campaign in both, the uncertainty around its “neverendum” hurt Montreal’s status as a corporate hub and caused some big companies to gradually move their headquarters.

                  Brad MacKay, a professor at the University of Edinburgh Business School, said: “Are we in a situation of neverendum? The evidence of Quebec suggests that over time it can have a dampening effect on an economy as people invest elsewhere.”

                  Insurer Standard Life — one of Scotland’s biggest employers — warned in the run-up to the referendum that a Yes vote could prompt it to shift large parts of its operations away from Scotland. Royal Bank of Scotland also confirmed contingency plans that it would redomicile its holding company and primary-rated operating entity to England.

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                  Sir Angus Grossart, founder of Scottish merchant bank Noble Grossart, said: “There will always be risks for business out of uncertainty. It could take decades to progress to some semi federal or quasi-independence form.”

                  Scottish financiers are particularly concerned about any potential alliance between the SNP and Ed Miliband’s Labour party, which they perceive could mean higher taxes and a less supportive environment for business.

                  Mr MacKay said: “Business leaders are concerned that Scotland might be shifting to the left. There are lots of discussions about expenditure but not much about wealth creation.”

                  The SNP has made full fiscal autonomy — this month renamed full fiscal responsibility — a medium-term goal. This could have big practical implications for Scotland’s financial services industry.

                  Owen Kelly, chief executive of Scottish Financial Enterprise, which represents the financial services industry, said: “There could be a different taxation approach [in Scotland] to pensions, savings and investments altogether. This would mean that different financial services products would be needed in each jurisdiction and the existing single market for such products would, presumably, come to an end.”

                  If there is a fear in the No camp it is that Nicola Sturgeon is more personable than Alex Salmond. He is clever and makes sure you know it. She is considered and thoughtful.

                  – Neil Woodcock, a former PwC partner

                  On top of this, full fiscal autonomy could lead to a shortfall of up to £10bn in Scotland’s finances by 2020, according to the latest projections from the Institute of Fiscal Studies, which is likely to necessitate spending cuts or tax rises. This shortfall is exacerbated by a slump in the oil price since the referendum, which makes the SNP’s previous fiscal predictions look overly optimistic.

                  Douglas Connell, senior partner at Turcan Connell, one of Edinburgh’s best-known legal firms and adviser to wealthy individuals, is advising clients to prepare for the SNP to increase the marginal rates of taxation for those with higher levels of income and capital, which he expects to come in the shape of a review of council tax, a mooted mansion tax and a potential wealth tax.

                  “Taking a 10-year view, I think it inevitable that there will be an increasing divergence between the rates and principles of personal taxation between Scotland and the rest of the UK, irrespective of whether there is another independence referendum,” said Mr Connell.

                  Janan Ganesh

                  England spells more trouble for union than Scotland

                  A man holds a Union flag umbrella

                  If the UK’s largest nation becomes exasperated with Scotland, then the game is up

                  Continue reading

                  “In the case of Scotland, a tax haven may be a train ride away.”

                  Mr Entwistle added: “I think a lot of people would be prepared to pay a little extra in tax provided it kept us in the UK.”

                  The business community’s preference for Conservative economic policies has been damped by David Cameron’s pledge to hold a referendum on Britain’s membership of the EU, raising fears of a potential British exit, to which big business and banks are largely opposed. The SNP has put staying in the EU at the heart of its campaign, but a UK vote to leave could be another catalyst for a move towards independence.

                  Long-time Scottish Tory stalwarts are even considering voting tactically for Labour to try and stop the SNP juggernaut, despite repeated warnings from Scottish Conservative leader Ruth Davidson to her party’s supporters to stick with them. One in seven Scots will vote tactically in the general election, according to a report out this week based on a recent YouGov poll for Scotland in Union, the unionist campaign group.

                  Even so, an SNP rout on May 7 seems inevitable and Neil Woodcock, an Edinburgh-based former PwC partner, said he was worried about where the nationalist tide might take Scotland.

                  “If there is a fear in the No camp it is that Nicola Sturgeon is more personable than Alex Salmond. He is clever and makes sure you know it. She is considered and thoughtful. Our biggest fear of the SNP is that it lacks effective opposition.”

                  Spare small banks from Basel, says Fed

                  Posted on 30 April 2015 by

                  Daniel Tarullo, governor of the U.S. Federal Reserve, speaks during a Senate Banking Committee hearing in Washington, D.C., U.S., on Thursday, July 11, 2013. Dodd-Frank Act measures designed to prevent a repeat of the global credit crisis will be largely complete by the end of this year, financial regulators told lawmakers at a hearing today on the 2010 law. Photographer: Andrew Harrer/Bloomberg *** Local Caption *** Daniel Tarullo©Bloomberg

                  Daniel Tarullo, Federal Reserve governor

                  A top American bank regulator has said the US should explore ways to exempt its smallest lenders from the most complicated demands of international capital rules adopted after the financial crisis.

                  Daniel Tarullo, the Federal Reserve governor in charge of regulation, issued the call on the Basel rules as the rush of post-crisis rulemaking ends and several countries weigh up the effects of tighter regulation on economic growth.

                    Mr Tarullo steered clear of the big Wall Street banks in a speech on Thursday, but said the US should look to help community banks — defined as those with assets of $10bn or less — by exploring ways to “simplify” capital requirements stemming from the Basel committee of regulators.

                    “[We] should explore whether we can achieve the safety and soundness purposes of capital regulation in a simplified way,” he told a conference of community bankers in Washington.

                    The acknowledgment of the rules’ burdens is notable coming from one of Washington’s leading regulatory hawks. It coincides with work by Republicans in Congress to prepare a bill that would modify parts of the US’s own Dodd-Frank post-crisis reforms.

                    His call will be cheered by community banks, a powerful lobby in Washington, which have long complained that they should not be subject to global capital rules designed to prevent another crisis because they played no role in the 2007-09 meltdown.

                    Mr Tarullo was referring to Basel III rules on risk-based capital requirements finalised in 2013. They require banks to hold a capital buffer calibrated to the risks taken by their businesses, which tends to involve a laborious set of calculations and record-keeping.

                    The European Union chose to apply the Basel rules uniformly to all its lenders. But a senior Basel official said it would not be a problem if a country did not apply them to its smallest lenders, because the rules were designed for internationally active banks that could jeopardise global financial stability.

                    Mr Tarullo noted that one idea was to let small banks opt into a simpler set of risk-weighted capital requirements in exchange for holding higher minimum levels of capital. That would be tantamount to returning to the original Basel I regime. Many community banks, Mr Tarullo said, already had capital well above minimum regulatory levels.

                    [We] should explore whether we can achieve the safety and soundness purposes of capital regulation in a simplified way

                    – Daniel Tarullo

                    “I look forward to discussions within the banking agencies, with the industry, and with other interested parties on possibilities for developing a sensible and feasible approach,” he said.

                    The Basel committee’s rules are recommendations and it does not have the power to enforce them. Instead it relies on the soft diplomacy of member countries to ensure that its proposals are implemented by their peers.

                    The US has had a bumpy relationship with the committee, having not fully implemented Basel II rules before the crisis.

                    A financial reform bill being prepared by the Senate banking committee, chaired by the Republican Richard Shelby, is likely to include provisions to improve the transparency of the Federal Reserve, as well as more regulatory relief for community banks.

                    London luxury housing market slows down

                    Posted on 30 April 2015 by

                    The number of houses sold for more than £1m has fallen, according to official figures, suggesting the luxury London market has been hit by tax changes and pre-election jitters.

                    Sales of properties worth over £1m were down 19 per cent in January, compared with the previous year, the Land Registry reported on Thursday.

                      The drop at the upper end of the market is attributed by estate agents to tax changes by the current Conservative-led government and to fear of more changes if Labour wins the general election.

                      Over his term as chancellor, George Osborne has introduced capital gains tax for overseas property owners when they sell their UK homes and raised the amount of tax on purchases through a shake-up of stamp duty.

                      Estate agents have also reported pre-election jitters among the wealthy over the possible introduction of Labour’s “mansion tax” on properties valued at over £2m.

                      Matthew Pointon, property economist at consultancy Capital Economics, said it was clear “uncertainty regarding the mansion tax has taken its toll on prices in prime central London.”

                      He pointed out that the two boroughs with the slowest annual growth were the rich areas of Westminster and Kensington and Chelsea. The latter recorded its lowest annual growth in four years.

                      By contrast, poorer London areas such as Newham are still recording growth of nearly 20 per cent.

                      Foxtons, the London estate agents, also reported on Thursday that its sales commissions dropped 12 per cent year on year to £15.5m in the first quarter.

                      Nic Budden, chief executive, blamed politicians for the slowdown. “Many potential buyers and sellers [are] apparently delaying their decisions until the outcome of the general election is known,” he said.

                      Overall, the Land Registry reported that the annual rate of house price increases moderated slightly to 5.3 per cent year on year in March, with a 0.8 per cent drop month on month.

                      The volume of transactions fell in all price brackets, and Howard Archer, UK economist at IHS Global Insight, said the limited supply would mean prices continued to rise, adding “there are signs that housing market activity is now slowly turning around after weakening during much of 2014 and we suspect it will gradually improve over the coming months.”

                      Campbell Robb, chief executive of Shelter, the housing charity that released research this week that found more than 80 per cent of homes on the market were unaffordable for a typical family, said “there might be talk of a cooling market, but the millions of people saving hard for a stable future will know a very different reality: their dream of a home has jumped another £9,000 out of reach”.

                      All sales and the price paid must be recorded by law with the Land Registry, so while its figures lag behind other indicators and do not include new-build sales, it is considered to be one of the best sources of data for the housing market.