Monte
Paschi's new capital needs could force nationalization - (www.reuters.com) The
prospect of nationalisation looms large for Italy's Monte dei Paschi di Siena (BMPS.MI)
now that the beleaguered lender needs to raise more than twice as much capital
as originally planned to meet new European Union requirements. Italy's third
largest bank said on Monday it would approve a tougher than initially expected
restructuring plan on September 24 to comply with European Union demands,
confirming investor fears it is struggling to emerge from the euro zone debt crisis. The bank's statement came
after the EU told the bank over the weekend to carry out a 2.5 billion euro
($3.3 billion) capital increase if it wants EU approval of a 4.1 billion euro
state bailout it received earlier this year. The required cash call is more
than twice the 1 billion euros capital increase initially planned by the bank. The
latest financial woes compound ongoing legal troubles the 540-year-old lender
is facing over its expensive acquisition of rival Antonveneta in 2008 and
loss-making derivative trades the Siena-based bank made in the deal's
aftermath.
Russians
elected to board of Cyprus' biggest bank - (www.miamiherald.com) Shareholders
of Cyprus' largest bank on Tuesday elected six Russians to sit on its new,
16-member board of directors, a consequence of the country's bailout agreement
with international creditors. The vote puts more foreign nationals on the board
of the Bank of Cyprus than ever before. The fact that they are all Russians —
one of whom, Vladimir Strzhalkovskiy, was elected by other board members as
vice chairman — reflects the large stake they had in Cyprus' banking system. Russians
kept billions in Cypriot bank accounts because of benefits such as low taxes
and high interest rates, helping to swell the size of the financial sector at
its peak to eight times the country's entire economy. Cyprus turned for help to
its euro area partners and the International Monetary Fund in June, 2012, to
rescue its Greece-exposed banks and to stave off bankruptcy. But Cyprus'
creditors sought a fundamental restructuring of the country's financial system
which they saw as unsustainable. According to the terms of Cyprus' rescue deal
it agreed in March, depositors with over 100,000 euros in the Bank of Cyprus,
and the second-largest lender Laiki, were forced to take huge losses on their
savings in order for the country to qualify for a 10 billion euro ($13.2
billion) loan.
Europe's
carmakers warn of more cuts in weak recovery - (www.reuters.com) European
carmakers need to close more factories and cut more jobs, executives at the
Frankfurt car show said on Tuesday, warning any recovery in demand was likely
to be long and slow as unemployment remained high and bank lending weak. The
bosses of automakers including Volkswagen, PSA Peugeot Citroen, and Ford Europe
said on the opening day of the biennial event that sales in Europe appeared to
be stabilizing after five years of decline. But recovery was not assured and
likely to take years with the industry still needing to cut capacity to staunch
losses at some manufacturers and ease price pressures on all, they added. Peugeot,
which incurred the wrath of French ministers and workers last year by scrapping
a major factory and 8,000 jobs, said it would seek more plant cutbacks from
unions. Volkswagen (VW) chief Martin Winterkorn said the European industry
could do with closing around 10 factories, although he stressed the German
carmaker itself did not need to make cuts thanks to strong growth in the United
States, China and Russia.
Mortgage
Lenders, Home Buyers Feel Rate Squeeze - (online.wsj.com) A
rise in interest rates is slamming homeowners' demand for mortgages, prompting
large and midsize banks to cut jobs and warn investors of declining
profitability in the home-loan business. Wells Fargo
& Co., the nation's largest mortgage company by loan value, on Monday told
investors at a conference that it expects mortgage originations to drop nearly
30% in the third quarter to roughly $80 billion, down from $112 billion in the
second quarter. J.P. Morgan Chase & Co., the largest U.S. bank as
measured by assets, said during the conference sponsored by Barclays PLC
that it expects to lose money on its mortgage-origination business in the
second half of the year. On Aug. 29, Bank of America Corp.,
notified about 2,100 employees that they were being let go largely due to a
decline in refinancing activity, said a bank spokesman. Mortgage originations
include loans for home purchases and refinancings. Rates are rising on investor
worries the Federal Reserve soon will take steps toward reducing an
$85-billion-a-month bond-buying program designed to help stimulate the economy.
Loan
Size to Be Cut for Fannie, Freddie - (online.wsj.com) Federal
officials are preparing to reduce the maximum size of home-mortgage loans
eligible for backing by Fannie Mae and Freddie Mac, a
move that is likely to face resistance from some lawmakers in Congress and the
real estate industry. The proposed move is designed to wean the mortgage market
off government support and allow the market for non-government-guaranteed
mortgages to take a bigger role. But critics argue that any such move will
shrink the pool of eligible home buyers, stunting the nation's housing
recovery. "It would be counterproductive to make changes to the loan
limits before private capital is fully engaged," said Gary Thomas,
president of the National Association of Realtors. Currently, Fannie and
Freddie Mac can back mortgages that have balances as high as $417,000 in most
parts of the country and up to $625,500 in expensive housing markets, including
parts of California and New York, and as much as $721,050 in Hawaii. Mortgages
within the limits are called "conforming" loans; mortgages that
exceed them are called "jumbo" mortgages.
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