EUROPE - Leaders of the Eurozone nations, plus Britain, have agreed on a "concerted action plan" to boost ailing stock markets across the continent.
The deal will guarantee new inter-bank lending and debt issued until the end of 2009 for five years, force national governments to finance institutions with Tier 1 capital, such as preferred shares. The French deal alone would be worth as much as €300bn.
The plan was heavily influenced by the structure of the UK bailout plan unveiled last week (globalpensions.com; 08/10/08) and included the ability for government to impose "additional restrictions" such as capping bonuses, as per the UK scheme.
The Eurozone leaders said they welcomed the decision by the European Central Bank (ECB) and other global financial institutions to cut interest rates.
Major European bourses rose on the news, with early surges of over 5%. By midday, Paris' CAC 40 index was up 5.02%, the Belgian BEL 20 rose 7.17%, while Frankfurt's Dax rose 6.54%.
In the UK, HBOS, Lloyds TBS and RBS confirmed they were demanding £37bn as part of the government's bailout. RBS said it needed £20bn additional funding, while the soon-to-be merged HBOS / Lloyds TSB bank has taken £17bn.
Reacting to the Eurozone and UK banking sector announcements, the FTSE 100, which suffered severe falls last week, was up 3.7% at midday, to 4,082 points.
In a comparison of the UK and US bailout plans, John Greenwood, chief economist with Invesco, said the UK plan was "significantly more expensive" but "more comprehensive", and warned both schemes would take time to implement.
He said the UK plan was "somewhat smarter" in that it targeted bank capital which was the core problem underlying the current money market difficulties and had led to the elevated Libor rates.
Greenwood added: "In reality both plans will take some time to implement, and in the meantime the stress and panic in the financial markets is continuing, and the economic downturn is intensifying daily.
"Both plans should be seen only as the first round in what is likely to be a multi-round effort to stabilise the banking systems and capital markets from the deleveraging that is going on."
Recently, the director-general of the Banca d'Italia, Fabrizio Saccomanni, called for the International Monetary Fund (IMF) to become a global monetary and financial watchdog to prevent such crises from reccurring.
Saccomanni said the IMF "should have the role of monitoring unsustainable trends in the financial sector" (globalpensons.com; 09/10/08).
This week's edition of Professional Pensions is out now
MPs failed to place legislation into the Financial Guidance and Claims bill that would have made pension guidance default, which Just Group director Stephen Lowe said left a "bitter taste".
Aegon has called for the government to double the tax exemption on employer-arranged pension advice, up from £500 to £1,000.
Institutional investor confidence in Europe rose by 8.9 points in April with each region showing growing appetite for risk, according to State Street Global Exchange.