NEW US BANKING RULES SHOULD RESTORE CONFIDENCE - US President Barack Obama has announced some major reforms of banking regulation. Banks' liquidity requirements have been raised, as have reporting standards. More will also be done to protect consumers and investors while regulatory supervision is being changed. Straight after the changes were announced, ratings agency S&P downgraded several US banks, saying the new regulations will make it harder for them to do business and make them less competitive.
Art Hogan, from Jeffries and Co in Boston, says any changes to the regulatory environment in the banking industry will be seen as an impairment to business, whether it is the changing of rules to make things more transparent or to require more disclosure to whether it is just an increase in the required capital levels. S&P took the move as a near-term impairment for banks and insurance companies.
However, Mr Hogan says the US is hoping to lead the way in improving the banking industry regulation around the world. He said the US is admitting that it lead to the world into the current recession, but will not lead it out of the downturn. He says the new rules and regulations should get confidence back in the banking system and he says it should prove an incentive to get banks back into lending.
CALL TO PROJECT CAPITAL SPENDING PROGRAMME - Confidence and lending - these are problems also faced by the Irish building and construction industry. Change is needed here too, says Davis Langdon PKS in its summer review. Davis Langdon PKS says construction prices and tender levels are now at 2001 levels and that the Public Capital Programme needs to be protected to protect jobs and stimulate the economy by building a better infrastructure.
Norman Craig, managing partner at the firm, says a number of bodies, as well as the financial industry, all understand that an initiative like NAMA is required. He says it is needed to bring back confidence and liquidity into both the building industry and the economy as a whole. He says he is urging all parties involved to come up with an early resolution of all the legislation and to get a workable framework in place as soon as possible so that this 'important initiative' is actually effective and implemented.
Mr Craig says there is a major worry in the industry of the knock-on effect on the whole economy if the capital spending programme comes under any more pressure. He says everyone knows that there is very limited funds available, but adds it must be realised that if the current proposals are put in place, the programme over the next three years could decline by up to 40%. He predicts a catastrophic effect on employment if this happens.
MORNING BRIEFS - A report on cross-border trade by retailer Currys reveals that there is a base level of cross border shopping despite what the euro and sterling are doing. But because of sterling's weakness around last Christmas, the purchase in the north of televisions by shoppers from the south increased by 1000% in Currys' Newry store. Currys Managing Director Declan Ronayne has analysed the cross border sale of televisions from 2007 to 2009. He says the effect of the UK and Irish VAT changes late last year are hard to quantify, but that normally the sales of TVs in the North to shoppers from the South works out at about 10% of trade.
*** About 120 economists meet today in Dublin to discuss the implications for the economies North and South of the economic downturn and its end. It is the first North-South Economic Forum, it is hosted by Inter Trade Ireland and its chief executive says that one of the major challenges facing Ireland is the reskilling and creation of job opportunities for the unemployed. The meeting wants to generate ideas on how North-South co-operation can return Ireland to economic growth.
*** Despite news this morning that the World Bank thinks a massive stimulus spending will keep China growing at a respectable rate and a survey showing confidence among Japanese manufacturers improved sharply in June, shares in the Far East are lower. In Hong Kong the Hang Seng is down by 2 per cent, and in Tokyo the Nikkei is 1.7 per cent lower.
*** On the currency markets the euro is trading at $1.3940 and 85.18 pence sterling.