Babajide Komolafe and Peter Egwuatu
13 October 2008
European leaders, yesterday, agreed to guaranty interbank loans across the euro zone countries.
French President and current President of the European Union, Mr Nicholas Sarkozy, annouced this at a press conference at the end of an emergency meeting of the EU leaders.
He said 15 European countries would guarantee interbank loans, while France, Germany, Italy and "other countries" will unveil their national bank plans today, the French president added.
A draft declaration from the 15 Eurozone countries last night outlined their intention to guarantee "for an interim period and on appropriate commercial terms" new debts caused by bank lending.
The Eurozone countries have been unveiling moves to safeguard their citizens from the worst of the global financial crisis. Portugal has said it will offer a £20bn state guarantee for banks endangered by the crisis.
France has said it will make an announcement today on a proposed law to guarantee money in the country's banks.
And now Norway has promised £40bn of government bonds to encourage movement in the markets.
Its government also announced that the Norwegian branch of ailing Icelandic bank Kaupthing would be placed under public administration.
Germany has said it will not give any details of a rescue package for the country's banks before Monday.
But German Chancellor Angela Merkel, has been quoted by the newspaper Bild am Sonntag as saying, "Only action by the state is capable of restoring the necessary trust.
"In this it is important that countries do not act unilaterally but that we co-ordinate at European and international level and then implement the measures within our national responsibilities.
"We are not doing it in the interest of the banks but in the interests of people."
The British government is set to acquire £35 billion majority stake in four of the UK biggest banks, in one of the latest moves by the government to confront the global financial meltdown.
European Union leaders also met yesterday to agree on a coordinated action plan to arrest the on-going crisis, while the World Federation of Exchanges (WFE) has invited the Chief Executive Officers of member exchanges worldwide to a meeting in Milan, Italy, to discuss developments in the global securities market.
Also, there are strong indications that trading in banking shares may be suspended across the seven most industrialised nations (G-7) today.
British Treasury sources confirmed that government had drawn up plans to take on a majority stake in Royal Bank of Scotland and big holdings in Lloyds TSB, HBOS and Barclays under its £500 billion plan to bail out the banking industry. Talks were continuing this weekend, added the source, warning that it was a fast-moving environment.
The government is expected to invest £12 billion in RBS, £10 billion in HBOS, £7 billion in Lloyds TSB and £3 billion in Barclays, following request for the emergency funding from the banks.
G7 countries may suspend trading in banks' shares
With markets in the US and Japan closed on Monday, Britain and the other G7 nations are determined to avoid further slumps in banking stocks that could compound the global contagion.
The developments emerged as the International Monetary Fund warned global equities could plunge by a further 20 per cent in the coming days unless governments deliver concrete action to address the crisis.
The world financial system was standing on the "brink of systemic meltdown," Dominique Strauss-Kahn, the IMF managing director, said. "Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown."
The warning came as Chancellor Alistair Darling told his fellow finance ministers that they "must get on with" dramatic plans to recapitalise their banking systems.
The German government is today expected to unveil plans to pump billions of euros into banking shares. The country is likely to announce a plan to spend around £50 billion to £100 billion on bank equity.
World Federation of Exchanges convene emergency meeting.
The World Federation of Exchanges (WFE) has invited all the Chief Executive Officers of member exchanges worldwide to a meeting in Milan, Italy, to discuss developments in the global securities market.
Vanguard, yesterday, reliably gathered that the President and Chairman of Council of The Nigerian Stock Exchange, Dr. Oba Otudeko, who was attending the World Bank Annual General Meeting in the United States has joined the Director-General/Chief Executive Officer of The Nigerian Stock Exchange, Professor Ndi Okereke-Onyiuke, in Milan for the crucial meeting.
The WFE is an umbrella organisation of the global securities exchanges. Members account for nearly all of world stock market capitalisation, and most of its exchange-traded futures, options, listed investment funds, and bonds. The combined market capitalisation of the markets these exchanges operate is around $61 trillion at the end 2007 and the trading of those securities last year broke $100 trillion.
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