As the financial markets get ready for the European Union to issue a raft of banking stress tests later this month there is speculation as to whether the UK government could be a little more transparent in this particular area in the future. However, there are certainly pros and cons towards publishing banking stress tests and there are many arguments on going within the marketplace.
As the UK economy continues to struggle there are growing fears with regards to the UK small business arena where finance has dried up and the UK government appears to have cut the sector adrift. Historically there has always been a very strong small-business sector in the UK with many of these operations moving on to the medium-size sector and some to a full-blown stock market quotation. So why is the environment so different today?
Stockbroker Jonathan Bunn, who worked for Lewis Charles Securities, has been jailed for 2 1/2 years after admitting unauthorised trading on the company's book. He was hired by the company to match buyers against sellers but it would appear that over the course of a relatively short space of time he took out "a short position" in HSBC which the firm was finally forced to buy back at a loss of just under £3 million.
The Financial Reporting Council (FRC) has today issued a seven point plan which it hopes will increase shareholder responsibility and make investors more aware of their rights and their obligations in relation to their investments. Historically many shareholders have refused to challenge boardroom decisions and boardroom remuneration packages although over the last few months we have seen a significant rise in the number of challenges.
The UK stock market tumbled again today as UK investors moved to the sidelines with the perceived risk to the UK economy and the UK stock market increasing. This comes at a time when investors appear to have lost their appetite for risk hence the significant shift downwards in the UK stock market over the last few days. So what is behind this renewed fear for the future?
There is much talk today of further problems in the European debt markets with liquidity in the money markets and interbank lending arena still very low. Slowly but surely we have seen a gradual increase in the cost of finance for governments around Europe which has also impacted on the cost of finance for businesses. So will we see the cost of finance in the UK rise in the latter part of 2010?
The UK stock market today fell to its lowest level since September 2009 amid concerns that Spanish sovereign debt might be about to be downgraded by ratings agency Moody. The agency has given notice that Spain's AAA sovereign debt rating is on "possible downgrade" watch, something which has obviously unnerved markets in Europe and beyond.
Barclays Bank has today warned that the last two months have been the most difficult since the financial crisis of 2008 with its investment banking division experiencing volatile markets and a significant reduction in the number of corporate finance deals on offer. While this will obviously be a concern to investment banks operating in the UK and in Europe many people will feel it is payback time for the banking sector which had appeared to be benefiting from a UK taxpayer-funded bailout while UK taxpayers and businesses continue to suffer.
You would be mistaken for believing that the banking liquidity crisis has come to an end in Europe judging by the bounce in banking share prices yesterday. However, despite the fact that immediate ECB loans were significantly lower than had been feared there is still relatively low liquidity in the traditional money markets and interbank lending is nowhere near as fluid as it should be. So what can we expect in the future?
Yesterday saw a significant fall in European stock markets as concern about maturing ECB loans to EU banks began to grow. There were concerns that European banks would look to borrow in the region of EUR200 billion this morning after the closure of the ECB emergency liquidity program but in reality the figure was just over EUR130 billion. Many in the market have breathed a sigh of relief although there are still concerns about the state of European money markets and interbank lending.
