London: Bank of England deputy governor Andrew Bailey said the increasingly large fines banks face for poor conduct threaten to undermine efforts to recapitalise the industry.
“This is a considerable dent to rebuilding capital in the banking system,” said Bailey in an interview. “It’s also quite hard as a prudential regulator — and we have to think about this in the context of stress tests — how do you go about predicting and putting in sensible assumptions for future conduct costs.” BNP Paribas SA was fined a record $8.97bn (€6.6bn) last month by US regulators for processing billions of dollars in banned transactions from 2004 to 2012 involving Sudan, Iran and Cuba. At least nine firms have been fined more than $6bn for manipulating benchmark interest rates. Bailey, who is also chief executive officer of the BOE’s Prudential Regulation Authority supervising banks, said it’s important that regulatory actions don’t undermine the stability of the financial system.
Retail sales gains helped US rebound
Washington: Retail sales showed a broad-based gain in June, pointing to a gain in consumer spending that probably helped the US economy rebound in the second quarter. Purchases increased 0.2% after a 0.5% advance in May that was larger than previously reported, Commerce Department figures showed yesterday in Washington.
The reading fell short of the 0.6% increase projected by the median estimate of 83 economists surveyed by Bloomberg, restrained by a drop among auto dealers. Demand climbed in nine of 13 major categories last month.
Consumers are more comfortable opening their wallets as a strengthening labour market lifts earnings. Higher wages give American households the wherewithal to withstand recent increases in food and oil costs.
VW slashes costs to lift profitability
Frankfurt: Volkswagen, Europe’s largest carmaker, plans to cut costs and boost productivity at its namesake brand by €5bn by 2017 to lift sagging profitability. Efficiency gains have failed to keep pace with rising labour costs, Chief Executive Officer Martin Winterkorn said in an internal presentation to company managers obtained by Bloomberg News.
The company is seeking the savings by lowering purchasing expenses, reducing complexity and cutting factory expenses. “We must now take action that is clear, effective and sometimes painful,” Winterkorn said in the briefing. “Let’s be honest: we have a lot of catching up to do with our core competitors in terms of productivity.” VW employs nearly 575,000 people, more than any other carmaker.
Bank to sell shares in funding bid
Beijing: Ping An Bank Co, a unit of China’s second-largest insurer, plans to tackle capital constraints by raising as much as 30 billion yuan (€3.53bn) in a sale of preferred shares and common equity.
The bank will sell as much as 10bn yuan of yuan- denominated shares to no more than 10 institutional investors, including parent Ping An Insurance (Group) Co, the Shenzhen- based company said in an exchange filing yesterday.
It may raise another 20bn yuan selling preferred shares to no more than 200 investors, according to a separate statement.
Ping An Bank is grappling with capital constraints after China introduced stricter requirements in January 2013, posing another challenge for a banking industry that’s facing slower profit growth and rising bad debts.
© Irish Examiner Ltd. All rights reserved