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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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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Categorized | Banks

Taxpayers face losses of £27bn for bailing out banks


Posted on November 23, 2016

UK taxpayers face £27bn of losses from bailing out some of the largest high street banks during the financial crisis after their share prices dropped following the Brexit vote.

The Office for Budget Responsibility, the fiscal watchdog, has increased its estimates for potential taxpayer losses for propping up the banks eight years ago by more than £9bn.

It comes after the OBR said in March that it expected costs of £17.5bn, and marks the second time in 2016 that the watchdog has revised down the value of taxpayers’ stakes.

The UK government stumped up £137bn to save high street banks — including the Royal Bank of Scotland, Northern Rock and Lloyds Banking Group — that either failed or were on the brink of collapse during the financial crisis.

But shares in UK banks slipped after the Brexit vote amid concerns of exposure to a weakening economy, reducing the value of the government’s holding.

The OBR also warned that falling share prices and further delays to selling off RBS would increase the UK’s debt by £22bn. The value of the government’s stakes in RBS and Lloyds has dropped by £6bn in the past six months. Chancellor Philip Hammond’s announcement that now is not the right time to sell more RBS shares increases the debt forecast by a further £16bn.

Mr Hammond said at a conference last month in Washington that “it is clear that the disposal of the RBS shares at a price that recovers the taxpayers’ investment is not practical at the moment”.

He said that any sale would only come after the bank had resolved a number of its “problems”. These include a likely multibillion-dollar settlement of the US Department of Justice’s probe into mis-selling of mortgage securities and the disposal of Williams & Glyn, a retail bank, as a condition of European state aid rules.

RBS has had eight years of consecutive annual losses, amounting to a total deficit of more than £50bn, weighed down by restructuring charges, bad loans and litigation costs.

The government still owns a 72 per cent stake in RBS. The OBR expects it will not be selling down its holding for at least another five years. RBS shares are down more than 30 per cent year to date, languishing at 202p.

Earlier this week, the government announced it had reduced the taxpayers’ holding in Lloyds to less than 8 per cent.

Mr Hammond said the government aimed to return Lloyds to the private sector fully by April 2018.

• Separately on Wednesday, the government said it would “continue to consider the balance between revenue and competitiveness” with regard to bank taxation, “taking into account the implications of the UK leaving the EU”.