The Government should push through the full separation of investment and retail banking businesses in light of the interest swaps mis-selling scandal, according to one of Britain’s largest investor trade bodies. In evidence to Parliament’s Committee on Banking Standards, the Investment Management Association said the mis-selling of interest-rate swaps meant the Government “should now review its position” on the way banks are able to sell complex derivatives to retail and small-business customers. Last year, the IMA, which represents more than 90 per cent of Britain’s 3.9 trn pound fund management industry, gave its backing to the Government’s proposals on banking industry reform, however, the lobby group said it had changed its view in light of the revelations about the way lenders had mis-sold interest-rate hedging products to some of their customers, according to The Telegraph.
Europe’s political and economic leaders clashed yesterday over debt crisis resolutions, underscoring the sense of chaos and disunity between Brussels and the key Eurozone economies. At a summit in Berlin, Angela Merkel and Mario Monti publicly stated they disagreed over the role of Europe’s new big bazooka bail-out fund. The Italian prime minister said the European Stability Mechanism (ESM) should have a bank license to be able to properly bring down Club Med borrowing costs. The German Chancellor said the plan was “incompatible” with EU treaties – and that she was backed by Mario Draghi, president of the European Central Bank. Meanwhile, Mr Draghi launched an attack on Germany: in an article for Die Welt, he argued that the ECB would need “exceptional measures” to curb the crisis and that Berlin’s interpretation of the bank’s mandate was too narrow, The Telegraph says.
Shares in scandal-hit Barclays face renewed turbulence today after the bank last night confirmed that the Serious Fraud Office (SFO) has started an investigation into payments between it and the sovereign investor Qatar Holdings. Barclays disclosed at its interim results in August that the Financial Services Authority was investigating the matter. FSA sources confirmed yesterday that the financial regulator’s own inquiry is also continuing. The investigations relate to fees paid to the Qatar Investment Authority, the investment arm of Qatar Holdings, as part of the bank’s £11.5bn Middle and Far East capital-raisings in 2008 at the height of the financial crisis. Analysts say it is unusual for big new investors in a bank to receive fees, The Scotsman says.
Russia has been humiliated after it was forced to abandon one of the world’s largest gasfields. Gazprom, the state-controlled gas group, has spent the past 20 years trying to develop the giant Shtokman field. But soaring costs and a glut of cheap shale gas from the United States have scuppered the flagship project in Russia’s sector of the icy Barents Sea, about 300 miles north of Finland. The project was originally slated to cost $15bn when it was announced four years ago but costs are since thought to have doubled. The field, which was first discovered in 1988, is large enough to supply more than a tenth of Europe’s gas and the decision to put it on hold will be seen as a setback for Vladimir Putin. Russia’s President is actively involved in the country’s energy policy and has taken a close interest in Shtokman, The Times explains.
The Office for National Statistics said that the number of households in which no adult has been gainfully employed dropped 22,000 to 340,000 in the second quarter of the year, compared with the same period a year earlier. But, despite the fall, it was nearly twice the 178,000 recorded 16 years ago when the records began. The total number of workless households, which includes members who have worked in the past, fell by 153,000 to 3.7m in three months to June, the ONS said. This brought the total down to 17.9% of all households, but remained above the record lows witnessed in 2006 before the global downturn struck, The Times reports.
Mexico has struck oil for the first time in deep water in its section of the Gulf of Mexico, only a few miles south of the maritime border with the United States, the country’s president, Felipe Calderón, said on Wednesday. The successful well, known as Trion 1, lies in the Perdido Fold Belt, a formation that has been found to hold large oil reserves on the US side of the border. Engineers from Pemex, Mexico’s state oil monopoly, had identified the region as one of the country’s most promising prospects. Trion shows considerable promise, with a flow rate of 10,000 barrels a day, Pemex said in a statement. Mr Calderón said the discovery could point to potential reserves in Mexico’s share of Perdido of between 4bn and 10bn barrels of crude and its equivalent in natural gas, The Financial Times explains.
Plans to launch 4G superfast mobile internet in the UK before Christmas have been thrown into turmoil by a threat of legal action from the O2 network. The Guardian understands that Spanish company Telefónica, which owns O2, has written to telecoms regulator Ofcom threatening to challenge its decision to allow rival brands Orange and T-Mobile to launch 4G services this autumn. Last week, Ofcom gave Everything Everywhere (EE), the company that owns Orange and T-Mobile in the UK, the nod to use some of its existing spectrum to launch 4G from 11 September – a head start of up to a year on its rivals.