Entries Tagged 'Money' ↓

On Friday, bank regulators closed Texas Guaranty Bank, the latest in a series of bankruptcies throughout the sector. The closure of Texas Guaranty brings the number of bank bankruptcies this year to 81.

Texas Guaranty Bank had assets of $12 billion and deposits from customers of $11.5 billion. Texas Guaranty’s banking activities will be taken over by the second largest Spanish bank, BBVA, through its American subsidiary BBVA Compass for an unspecified amount.

The Federal Deposit Insurance Corp. (FDIC), which administers the deposit-guarantee plan in the U.S., insures deposits of customers up to $250,000 per account.

Last year, 25 banks were closed by the U.S. government, compared to only three in 2007. The largest U.S. bank failure this year was Colonial Bank which closed on August 14. Colonial had assets of $25 billion.

At the end of last week French President Nicolas Sarkozy issued a warning to French banks about the return of outsized employee bonuses. The warning came after news reports that BNP Paribas – France’s largest bank in terms of market capitalization -has allocated almost one billion euro or 14% of revenue in the first half of this year for bonuses. BNP Paribas had received 5.1 billion euro from the government to get through the credit crisis.

In contrast to Sarkozy’s statement, the chief of France’s central bank, Christian Noyer, said that the package allocated by BNP for bonuses are within the guidelines for banks established by G20 nations in April.

A political conflict was triggered last week after opponents on the left said that the BNP Paribas bonus plan proves that Sarkozy and the govenment have not managed to bring the banking sector under control following the collapse of the credit markets.

G20 Reshaped the Culture of Bonuses

In April, leaders of the largest economies of the world came together to reform the so-called “culture of bonuses” of the banks considered to have generated a wave of risky transactions with derivatives that triggered the crisis on the credit markets worldwide. The G20 agreement states that multi-year guaranteed bonuses should be eliminated that that employee incentives should be closely linked to the overall performance of the bank.

Ukraine has paid the invoice value of $605 million for Russian gas, announced Premier Iulia Timosenko. Ukraine must accumulate gas stocks during the summer, saving it for the winter season. Stocks would allow Russian gas transit intended for the European Union.

“Today, the government paid 605 million dollars for Russian gas” stored in underground tanks, said Timosenko.

Last Friday, international financial institutions and the European Commission reached agreement with Ukraine to help this country to pay bills on Russian gas and to accumulate stocks, allowing avoiding a new gas crisis.

The agreement will allow funding of approximately 800 million dollars (570 million euro) from the World Bank and the European Bank for Reconstruction and Development in October 2009, explained a spokesman of the EC.

In addition, the IMF unblocked 3.3 billion dollars, the third installment of a credit line of 16.4 billion dollars granted to Ukraine for two years. Part of these funds will be used to help Ukraine to buy gas for the accumulation of stocks.

The recession hasn’t been bad to all business. MasterCard, the second largest international network of credit cards, recently reported a profit of $349 million for the second quarter.

Last year, during the same period, the company announced losses of 747 million dollars. MasterCard’s profit was generated by increasing fees on customer accounts and reducing internal costs.

In contrast to this year’s profit, MasterCard reported a loss of $5.7 billion for the first six months of last year.

This year, the company’s American group expenses decreased by 13%, reaching 722 million dollars. The company also reduced funds allocated for advertising and marketing by 36% and trimmed administrative and staff costs.

Higher commissions and increased use of credit cards by customers increased Mastercard’s revenue by 2.7%, reaching up to 1.3 billion dollars. Value of MasterCard transactions processed increased by 7.9% to 5.6 billion dollars.

As a result of the recession, many consumers are turning to prepaid credit cards.

One of seven people in Britain, the most active consumers in Europe, will not benefit anymore from loans by the biggest banks in the country until the end of next year, growing a legion of sub-creditors.

British number that were rejected by traditional lenders will climb to 9 million next year or 15% more than at the end of last year, said Jonathan MacDonald, an analyst in Datamonitor.

Sub-lending market will grow by 11%, to 10.1 billion pounds (16.4 billion dollars), up to the end of this year, he said.

“Sub” Interest of 350% per year

Banks including Lloyds Banking Group and Royal Bank of Scotland owned by the government which deal with losses, decline a growing number of consumers after tightening lending criteria. Instead, sub – customers are accepted by the lenders that charge interest of up to 350% per year.

“We are worried because people are forced to resort to more dangerous types of lending where interest rates are very high,” said Frances Walker, spokesperson of Consumer Credit Counseling Service.

HSBC, the biggest European bank, closed it British Beneficial Finance sub-division and announced its intention to close 100 of the 125 branches. In this way HSBC follows example of Deutsche Bank and Barclays, who have withdrawn from the sub market in 2007 and 2008 in the slowing condition of economic growth and increasing volume of bad loans.

“If we don’t exist, all clients should receive money from somewhere, may be appealing to illegal lenders, “said CEO Provident Peter Crook.