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The Immeasurable Risk European Banks May Be Hiding - (www.cnbc.com) There is growing concern among policymakers and
analysts that the true extent of European banks’ debt problems is being masked.
Sir Mervyn King, Governor of the Bank of
England, became the most high-profile policymaker to date to warn of the
dangers of banks putting off foreclosures in a speech Tuesday night. His stern
warning to U.K. banks that they need to drop the “pretense” that some of their
bad debts will be repaid was coupled with the statement that they have
“insufficient capital” to deal with losses which have remained undeclared. Essentially,
what seems to have happened is that banks across the euro zone have put off
foreclosures on weak businesses – a process known as forbearance. This has been
enabled by low interest rates across the region and rescue packages which have
injected unprecedented amounts of liquidity into the banking system and helped
keep struggling economies afloat.
Spain’s Bad Bank Seen as Too Big to Work: Mortgages - (www.bloomberg.com) Spain’s bad bank will struggle to sell the
90 billion euros ($117 billion) of toxic property assets it takes from other lenders
because of its size and inability to help buyers finance purchases. “When
managing tens of thousands of assets scattered across the whole of Spain, big
is not beautiful, it’s sheer chaos,” said Mikel Echavarren, chairman of Irea, a
Madrid-based financial adviser. A large, “clumsy” bad bank will be at a
“tremendous” disadvantage and will generate losses that Spaniards will have to
pay for. The country has until the end of next month to establish the
institution, a condition for receiving 100 billion euros of external aid for
the financial system it requested in June. Premier Mariano
Rajoy’s government seeks to purge about 180 billion euros of bad
assets that the Bank of Spain says are on the balance sheets of lenders. The government has said the bank
will be profitable and won’t cost taxpayers.
Ford Shuts Three Plants as Europe Loss to Top $3 Billion -
(www.bloomberg.com) Ford Motor Co. (F) will shut three
European plants, its first factory closings in the region in a decade, and cut
5,700 jobs to stem losses that the carmaker predicts will total more than $3
billion over two years. The shutdown of two U.K. factories and a plant in
Belgium will remove production capacity for 355,000 vehicles, or 18 percent of
the carmaker’s total in the region, Dearborn, Michigan-based Ford said in a
statement today. The moves will yield gross annual savings of $450 million to
$500 million annually, it said. Ford rose after saying its third-quarter
earnings will be better than the second. The carmaker is forecasting losses
wider than $1.5 billion each this year and next in Europe, Chief Financial
Officer Bob Shanks said on a conference call. Ford had estimated the loss this
year would total more than $1 billion. The closings, more extensive than those
planned or carried out by PSA Peugeot Citroen (UG), General Motors Co. (GM)’s Opel unit and Fiat SpA (F), are in response to a
car-market drop that may be the worst in 19 years.
ADP changes the way it estimates new jobs - (www.cnbc.com) ADP is altering the formula used for counting
how many U.S. jobs are created each month in order to better align with
government data, after repeated instances in which the two reports sharply
diverged. The first ADP release to include the new formula will be the October
jobs report to be issued Nov. 1. The government’s official report will come out
one day later. Economists and investors look at the monthly data compiled by
Automatic Data Processing Inc. ADP +0.47% , the nation’s largest
processor of company payrolls and the distribution of checks to employees, to
glean clues on how many new jobs the government is likely to report. Yet the
ADP report has often overshot the mark or undercounted the number of new jobs
created when compared to the official U.S. report issued by the Bureau of Labor
Statistics.
France’s Quiet Bank Rescues Top $78 Billion With Peugeot -
(www.bloomberg.com) France’s
aid to PSA Peugeot Citroen SA (UG)’s troubled
finance arm brings the state’s backing for the nation’s banks to more than 60
billion euros ($78 billion). The government yesterday said it will guarantee 7
billion euros in new bonds by Banque PSA Finance, the consumer-finance unit of Europe’s
second-largest carmaker. The aid comes on top of support for Dexia SA (DEXB), the French-Belgian
municipal lender, and for home-loans company Credit Immobilier de France. “These bank rescues on the quiet should be
getting more critical market attention,” said Bill Blain, a
strategist at Mint Partners Ltd. in London.
“We don’t know what’s next, but it certainly demonstrates that some of the
specialized financial institutions remain very, very weak.”
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