News & Current Affairs

September 26, 2008

Bank giant HSBC axes 1,100 jobs

Bank giant HSBC axes 1,100 jobs

HSBC hopes the cuts will allow it to weather the storm on financial markets

Banking giant HSBC is to axe 1,100 jobs worldwide, blaming the current financial turmoil for the decision.

About half of the cuts, which will affect back room jobs at its global banking and markets operation, will take place in the UK.

HSBC employs about 335,000 people around the world.

Last month, HSBC said half year profits fell 28% to $10.2bn (£5.2bn), as it was forced to write-off $14bn from bad debts in the US and asset write-downs.

Meanwhile, pre-tax profits fell 35% to $2.1bn during the same period.

An HSBC spokesman said the firm had opted to reduce its workforce, “because of market conditions and the economic environment, and our cautious outlook for 2009”.

Many of the job-losses will be at the headquarters of HSBC’s investment banking division, which are in London’s Canary Wharf.

Banks around the world have been coming under increased pressure from the credit crisis currently affecting financial markets.

The problems have forced governments to step in and boost money markets as well as bail out a number of companies.

Earlier this year, the UK government had to buy mortgage lender Northern Rock, while in the US lenders Fannie Mae and Freddie Mac have been rescued as well as insurer AIG and investment bank Lehman Brothers filed for bankruptcy.

Do you work for HSBC? Are you concerned by the proposed job-cuts? Send us your comments

Bush scrambles to save $700B bailout plan

Bush scrambles to save $700B bailout plan

President George W Bush has said that legislators will “rise to the occasion” and pass the Wall Street rescue plan.

In a statement he said that are still disagreements because, “the proposal is big and the reason it’s big is because it’s a big problem”.

President Bush is expected to resume talks with Congressional leaders later on Friday to try to reach an agreement.

He wants to pass a $700bn (£380bn)rescue package to buy mortgage-backed assets from US banks.

‘Shouting match’

He added that, “there is no disagreement that something substantial must be done”.

Talks to agree the huge bail-out of the financial industry ended in a “shouting match” on Thursday.

After several hours of discussions with President Bush, a group of Republican members of Congress blocked the government plan.

The proposal would have seen the government buy bad debts from US banks to prevent more of them collapsing.

The leader of the Democrats in the House of Representatives, Nancy Pelosi, told ABC News that she “hoped” a bailout plan could be agreed within 24 hours, because “it has to happen”.

Financial markets are gummed up because banks do not know exactly how much bad debt they hold and are therefore reluctant to lend to businesses, consumers and each other.

The fall-out of this credit crunch continues to have a huge impact:
The United States suffered its largest bank failure yet, when regulators moved in to close down Washington Mutual and then sold it to US rival JP Morgan Chase for $1.9bn
In a co-ordinated move the European Central Bank, the US Federal Reserve, the Bank of England, Bank of Japan and the Swiss National Bank announced new short-term loans to the banking sector worth tens of billions of dollars
Banks continued to cut costs, with UK banking giant HSBC saying it would axe 1,100 jobs
Shares in UK bank Bradford & Bingley fell another 20% to 17 pence before recovering slightly.

‘Full throated discussion’

On Thursday, Democrat and Republican legislators appeared to have struck a deal.

A group of Democrats and Republicans even made a public statement, with Senator Christopher Dodd, chairman of the Senate Banking Committee, announcing that they had reached “fundamental agreement” on the principles of a bail-out plan.

But after the White House meeting, the top Republican on the committee, Richard Shelby, told reporters: “I don’t believe we have an agreement.”

The intense discussions reportedly saw US Treasury Secretary Henry Paulson literally down on one knee, begging Ms Pelosi to help push through the bail-out package.

September 18, 2008

Have Your Say

Global markets crisis: are you concerned?

Global financial markets have suffered a week of bad news and turbulence. Have you been caught up in the crisis?

European stocks opened higher in cautious trade as Lloyds TSB’s takeover of UK lender HBOS dispelled some of the gloom hanging over financial markets.

Asian shares had earlier fallen sharply on fears that more companies could fall victim to the global financial crisis.

There has also been feverish speculation about the future of two other leading US banks – Morgan Stanley and Washington Mutual.

On Thursday the Bank of Japan injected another 1.5 trillion yen ($14.4bn) into money markets, as Asian shares continued the global trend downwards.

Are you concerned about the wider implications of the crisis? Are you an employee of the companies affected, an investor, or a shareholder? Or are you worried about mortgage lenders like HBOS? How do you think this will affect markets all over the world?

Send us your comments

September 10, 2008

Britain ‘to fall into recession’

Britain ‘to fall into recession’

German car production line

Many exporters have been hit by the stronger euro

The UK, Germany and Spain will fall into recession in 2008, the European Commission has predicted.

Brussels said the three countries would see two negative quarters of economic growth in a row, which is the technical definition of a recession.

In its latest economic forecast, the commission also downgraded its outlook for eurozone growth again.

It said the 15-nation bloc would now grow by 1.3% this year, against previous projections of 1.7%.

Earlier this month, data showed the region’s economy shrank by 0.2% between April and June – the bloc’s first decline since its creation in 1999.

The contraction was driven by a slowdown in exports and consumer spending.

But high inflation in the region led policy makers at the European Central Bank to keep interest rates at 4.25% at its latest meeting, allowing no relief for the eurozone’s slowing economies.

In its latest report, the commission believed that inflation was now likely to creep up to 3.6% in the eurozone – above its previous predictions of 3.2% and way above the government’s target of 2%.

Gloomy outlook

Shaken by a housing slump and volatile financial markets, the Brussels-based organization predicts that the UK economy, which is not a member of the eurozone, will shrink by an annual rate of 0.2% in each of the next two quarters.

The grim outlook echoes forecasts from the Organization for Economic Cooperation and Development (OECD) out earlier this week, which were even worse.

According to the latest official figures, the UK economy did not grow at all in the second quarter of 2008.

The European Commission said the UK economy would grow by 1.1% in 2008 – much less than the 1.7% previously forecast and a sharp reduction from the official Treasury forecast of 2.5%.

A second quarter of negative growth is also expected in the German and Spanish economies, which are expected to contract by 0.2% and 0.1% respectively.

Stubborn inflation

Economic and Monetary Affairs Commissioner Joaquin Almunia blamed ructions in the financial markets, soaring commodity prices and the housing slump for the gloomy outlook.

“In a context of an unusually high degree of uncertainty, the external headwinds not only had a direct adverse impact on inflation and capital costs, but also an indirect one on confidence,” he said.

Stamping out hopes of an interest rate cut in the near term, Mr Almunia said even if economic activity were to slow further, inflation risks were still “tilted to the upside”.

“The risk of second-round effects can not be excluded, although there is no evidence of any widespread such effects so far.”

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