Wednesday newspaper round up.

Germany’s central bank has shot down EU proposals for a European banking union, warning categorically that eurozone liabilities cannot be shared without a fundamental shift towards fiscal and political union. Andreas Dombret, a key board member of the Bundesbank, said the grand plan by Brussels is premature and unworkable as constructed. “A banking union is a sensible way forward as long as liability and control are aligned. What I mean is you don’t give somebody your credit card if you don’t know what he or she is going to do with it.” Mr Dombret said a pan-EMU deposit-guarantee scheme and a debt resolution fund would require “a genuine, democratically legitimated fiscal union” and a new treaty, The Telegraph says.

Banks must strengthen their capital positions now in order to protect the UK against a potential economic collapse in the future, a leading policy maker has warned. Paul Tucker, deputy governor of the Bank of England, said weak growth in bank lending remained a “serious” concern because households and small and medium-sized businesses relied on bank loans. With the “worst still possibly ahead of us”, banks should take what opportunities they can to build their resources now, he added in a speech last night, The Telegraph writes.

The Financial Reporting Council has warned that a price war between accounting firms is exposing shareholders to slapdash audits. The audit watchdog said firms were cutting corners to compensate for lower fees, which was putting audit quality in severe jeopardy. “We are not happy with some of the things audit firms are doing to cut their expenses as it has resulted in businesses being given less attention and a reduction in the quality of audits,” said Paul George, head of auditing at the FRC. “We are putting a warning shot out there so firms don’t lose sight of the minimum work that is needed,” The Telegraph says.

Business must shout louder for the merits of lower taxes or the Government will be unable to cut the top rate of income tax to 40p, George Osborne warned yesterday. The Chancellor said that Britain was vulnerable to a return to the “politics of envy” and that anti-business sentiment was on the rise. Mr Osborne accepted that the Budget had caused “lots of bad headlines”, but he chastised bosses for the “near silence” with which they had greeted his politically tough decision to lower the top rate of tax from 50p to 45p. And he urged business leaders to be much more vocal in helping the Conservatives to make the case for a low tax economy and a smaller State. Without such support Chancellors would find it hard to “put their necks on the line” for cuts in the top rate of tax. Mr Osborne told The Times CEO Summit: “If your voice is not heard then elected politicians are going to find it very difficult to put together pro-business packages because you leave the space open to everyone else,” The Times reports.

The retirement crisis was thrown into sharp relief yesterday as official figures showed that the collective shortfall in company pension schemes had ballooned to a record £312.1bn last month. It marked the highest deficit in final-salary pension schemes since records began in May 2003, according to the Pension Protection Fund, the lifeboat for stricken schemes. In its latest monthly update, the PPF said that only 929 of the 6,432 schemes that it monitors had more than enough funds to meet their long-term obligations. At the same time last year, more than 2,260 schemes were in surplus and the collective deficit in company schemes was only £24.5bn. The PPF blamed the problem on tumbling gilt yields, which are used to calculate pension liabilities. Drops in yields of as much as 0.55% last month had more than offset gains in equity markets, it said, according to The Times.

Engines for an all-new, part-electric BMW supercar are to be built at a factory in the West Midlands. The latest investment in the automotive market comes amid forecasts that British car plants will be producing record numbers of vehicles within three years. The German carmaker said at the annual summit of the Society of Motor Manufacturers and Traders that the high-performance engine for its i8 plug-in hybrid sportscar — which will be launched next year — would be assembled at Hams Hall. At present the plant near Birmingham, which was BMW’s first engine-making factory outside Germany or Austria, builds engines for BMW’s Mini assembly line in Oxford, says The Times.

Lloyds Banking Group may claw back some of the £375m in bonuses paid out to top bosses last year after it was forced to set aside £3.57bn over mis-sold payment protection insurance. Anthony Watson, the bank’s senior independent director and chairman of the remuneration committee, told the Treasury select committee that no decision had been taken, “but of course we have to consider it” as the provision had triggered a £3bn-plus loss for the year. “I can assure you it will be part of our deliberations,” Watson said. In February the bank announced it was clawing back nearly £1.5m in bonuses from top executives, including former chief executive Eric Daniels, for “accountability” for the PPI mis-selling. The bank stressed there was no wrongdoing involved. A Lloyds spokesman said after yesterday’s hearing that any further bonus clawback related to the issue remained “hypothetical,” The Scotsman reports.

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