ARAB TIMES, TUESDAY, JULY 19, 2011
STC Q2 net up Egypt cbank ‘Egypt pound still looks vulnerable’
Saudi Telecom Co (STC) reported a 9 percent increase Egypt’s central bank said it will offer 1 billion Egypt’s pound still looks vulnera- government is in place, which quarter. The government has inter-
in second-quarter net profit, beating forecasts, accord- Egyptian pounds ($167.95 million) in seven- ble. Supporting the currency so far should happen later this year. vened in the foreign exchange mar-
ing to a statement issued on Monday. day repurchase agreements in the money has been a costly strategy. Along The pound has fallen just 2.6 per- ket directly, and is widely believed to
STC made a net profit of 2.256 billion Saudi riyals market on Tuesday at a fixed rate of 9.25 per- with a decline in tourism and for- cent against the dollar since the start be doing so indirectly.
($601.6 million) in the three months to end-June, com- cent. eign direct investment, foreign of the year despite a huge slowdown Letting the currency move in a
pared to 2.062 billion riyals in the same period a year ear- The central bank introduced the weekly repo exchange reserves have shrunk in growth expectations. Barclays controlled slide would help boost
lier, said the statement posted on the bourse website. agreements in March to keep short-term inter- around 40 percent or by roughly Capital forecasts that the Egyptian growth and allow interest rates to
Analysts surveyed by Reuters expected on average the est rates under control after a popular uprising $16 billion. But the decision may economy grew 1.4 percent in the fis- decline. But Egypt can’t afford to let
firm to post a net profit of 1.99 billion riyals for the quarter. ousted President Hosni Mubarak. have helped avert a bigger capital cal year that ended in June, down the pound fall too much. It would
The company proposed to pay a dividend of 0.5 riyal Last week it offered repos worth 6 billion flight. Furthermore, it makes sense from 5 percent last year. And Egypt’s make imports more expensive and
per share for the second quarter, it said in another pounds and accepted the same amount it had for the central bank to carry on balance of payments deficit widened increase inflation — the headline
statement. (RTRS) offered. (RTRS) down that path until a new elected to a record $6.1 billion in the last rate is already 11.8 percent. (RTRS)
‘China lacks sufficiently dispersed shareholding structure’
Fitch warns of ‘weaknesses’ in Chinese companies
BEIJING, July 18, (Agencies): Ratings and its closest peers.” currently undertaking the job that China’s “sufficiently dispersed shareholding over how to oversee the auditing of US- report that issued “red flags” to Chinese
agency Fitch warned Monday of “wide- The Fitch report, which screened 35 underdeveloped capital market is not structure” and “quality information for listed Chinese companies. Possible companies based on their governance or
spread weaknesses” in Chinese corporate companies it rates for governance issues, doing: that of challenging Chinese man- shareholders”. accounting problems at such companies accounting risks.
governance and a lack of “quality infor- comes amid growing scrutiny of over- agement to adopt higher standards,” it Hong Kong’s Securities and Futures have overshadowed fundraising efforts “Fitch does not expect the flow of
mation” for shareholders after a spate of seas-listed Chinese firms due to allega- said. Commission said last week it was “look- both in the US and in China. accusation and investigations to slow
accounting scandals overseas. tions of accounting irregularities and Fitch said its ratings for Chinese com- ing into the matter” of the report. Short-sellers have been targeting some down in the near term, particularly if
Chinese companies were at “above other problems. panies were clustered around the “BB Fitch said last week it was reviewing US-traded Chinese companies, driving short-selling is involved,” the report said.
average” risk of being accused of fraud The US Securities and Exchange level and below” — meaning a low cred- the 35 Chinese companies that it assigns their share prices sharply lower amid Short-sellers profit by borrowing stock to
— sometimes wrongly — which could Commission has halted trading of several it quality — and at investment grade and credit ratings to after a spate of allega- doubts about the accuracy of financial sell and then buying it back when the
hamper their attempts to raise money, Chinese firms this year, accusing them of higher for the mainly state-owned com- tions of corporate fraud at other China statements filed with regulators. price drops so they can return it to the
Fitch said in a report on Chinese corpo- violations like keeping two sets of books panies. companies. In some cases, the companies have lender and pocket the difference.
rate governance. or failing to disclose that their auditors The ratings take into account China’s The report highlights recent worries fought back, complaining that the accusa- “Some of the accusations will be legit-
“Some of the accusations will be legit- had quit. “underdeveloped legal system and docu- over accounting irregularities at Chinese tions of accounting fraud or other prob- imate, some will be erroneous; many will
imate; some will be erroneous; many will Fitch said the flow of “accusations and mentation standards, distinct business companies that were sparked by claims of lems were unfounded. But in others, reg- be a mixture. All will have the potential
be a mixture,” Fitch said. investigations” was not expected to slow practices and weak corporate gover- fraud at some that are listed in the US. ulators have suspended or delisted the to present liquidity problems for an indi-
“All have the potential to present liq- down in the near term. nance”, it said. US and Chinese finance officials met companies or started investigations. vidual issuer and its closest peers,” the
uidity problems for an individual issuer “It seems that overseas investors are Fitch also noted that China lacks a last week to try to resolve differences Also, last week, Moody’s released a report said.
Rate on 10-yr Italian bonds spikes
No policy consensus as Europe
European debt fears
hit markets after tests ‘limps’ toward Greece summit
LONDON, July 18, (Agencies): percent, and Germany’s Deutsche
Worries that Europe’s debt crisis will Bank dropped 3.4 percent. The
spread to Italy and Spain spooked retreat wasn’t just isolated to coun- No clarity on bond buy-back and swap
investors Monday after stress tests tries that use the euro - Britain’s
into the continent’s banks failed to Barclays fell 3.6 percent.
ease tensions ahead of an emergency The worry in the markets is that BRUSSELS, July 18, (RTRS): Government officials and com- be reached on a way for private owners of Greek government bonds — banks, insurers
and other investors — to contribute to the bailout by taking cuts in the face value of
meeting of EU leaders. this week’s meeting will fail to come mercial bankers remained divided over competing policy pro- their holdings.
In afternoon trading, most of up with concrete measures to deal posals on Monday as Europe struggled to put together a sec-
Europe’s main stock markets were with Greece amid growing signs of a Fears that the rescue might fail, leading eventually to a disorderly debt default by
sharply lower, with bank shares hit split between the European Central ond bailout for Greece and prevent the region’s debt crisis Greece, pushed the euro down against other currencies while the government bond
particularly hard, while the euro fell Bank and the German government in yields of highly-indebted euro zone states rose. Italy’s 10-year yield climbed 0.2 per-
from spreading. centage point to a euro-era high.
0.6 percent to $1.4041. particular.
In a sign that contagion fears have German Chancellor Angela French government spokeswoman Valerie Pecresse said she believed a sum- Paul de Grauwe, a professor of international economics at Leuven University in
not been allayed by last week’s Merkel, who will be at the summit, mit of the euro zone’s 17 national leaders scheduled for Thursday in Brussels Belgium who has informally advised European Commission President Jose Manuel
European bank stress test results, has been pressing for the involve- would agree on a rescue of Greece, supplementing a 110 billion euro ($154 bil- Barroso, said politicians had delayed taking decisive action on Greece for so long that
yields on Italian and Spanish bonds ment of the banks in the bailout. lion) bailout launched in May last year. their options were narrowing fast.
ratcheted up, in contrast to most other But the ECB’s president, Jean- But after three weeks of preparatory talks, it was unclear whether a consensus could “I’m afraid to hope. I still hope, yes, but I’m not optimistic,” he said.
large economies. Claude Trichet, insists the central “We’ve had solutions in the past, but
The rate on ten-year Italian bonds bank would not accept defaulted we haven’t grasped them. Now it’s too
spiked up 0.25 percentage point to Greek bonds as collateral, potentially late for some of those solutions to work
5.92 percent, having earlier jumped cutting off funding for Greece’s any more; the opportunity has been lost.”
above 6 percent, even though the banks. Officials are wrestling with a range of
Parliament backed an austerity pack- “If a country defaults, we will no proposed schemes for Europe’s bailout
age designed to get the public longer be able to accept its defaulted fund, the European Financial Stability
finances back on an even keel. The government bonds as normal eligible Facility, to finance a voluntary buy-back
Spanish rate rose 0.15 percentage collateral,” he said in an interview or swap of Greek bonds, or possibly both.
point to 6.23 percent. with Financial Times Deutschland. The schemes would be conducted at a
Last Friday’s stress tests have so Trichet added that governments discount to the bonds’ face value, helping
far been met with a degree of skepti- would then be responsible to provide to reduce Greece’s 340 billion euro
cism by investors, partly because their own backstop for the Greek mountain of sovereign debt.
they did not take into account any financial system if the country is con-
sovereign default. sidered to be in default on its debts. Schemes
The banks were required to reveal The ECB said Monday that it had But all of the schemes could face tech-
their exposure to shaky government made no effort last week to prop up nical and legal obstacles, in some cases
debt but analysts said it would have bond markets through its securities requiring the approval of national parlia-
been better if the European Banking purchase program, the 16th straight ments in the euro zone. Other proposals
Authority had simulated the impact week it has left the measure idle. still appear to be on the table; Germany’s
of a default in its test scenarios to bet- The euro and global stock markets Die Welt newspaper reported that govern-
ter judge the system’s strength. fell while the borrowing costs of Italy ments were considering a levy on banks
“On the face of it, the tests high- and Spain, two eurozone nations in as a way to involve private creditors in
light that the European banking sec- the line of fire, soared to euro-era rescuing Greece.
tor is in better health than expected, record levels amid debt contagion An official of a major euro zone gov-
although crucially investor concern fears. ernment who is familiar with the talks
will remain over the credibility of the With fears growing that the crisis said he had not heard of a proposal for a
tests given that the tests did not could reverberate across the world, bank levy, but added: “There are at the
include an assessment of the impact US Treasury Secretary Timothy moment so many proposals that you can-
of sovereign defaults,” said Lee Geithner urged European leaders to not rule out anything.”
Hardman, an analyst at the Bank of “work more forcefully to contain the An official European Union source
Tokyo-Mitsubishi UFJ. risk of an escalating crisis in Europe. told Reuters that it was likely the EFSF
Only eight of the 90 banks tested “They have the capacity to manage would be used to lend money to Greece
failed and were pushed to raise 2.5 this in a way that doesn’t add to the to buy back its own bonds. But this by
billion euros ($3.5 billion); five were broader burdens in the global econo- itself would not nearly be enough to solve
from Spain, two were Greek and one my and of course we want them to do the problem.
was Austrian. Sixteen barely passed, that,” he told the US financial net- Guntram Wolff, deputy director of the
however, and may face pressure to work CNBC. Bruegel think tank and until earlier this
strengthen their finances by raising Merkel has made clear she wants a Striking taxi drivers block central streets in Athens, during a protest on July 18. Taxi drivers are angry at plans to liberal- year a senior economist at DG Ecfin, the
new capital - the idea behind the deal on the table by Thursday after ize their tightly-regulated profession, as part of the country’s fiscal recovery program that has already spurred months of European Commission unit handling the
exercise. she forced EU president Herman Van protests from other affected professional groups. (AP) crisis, said a buy-back might cut Greece’s
Battle Rompuy to cancel plans for a meet- debt by as little as 20-30 billion euros.
ing last Friday following a turbulent Analysts have estimated the debt
Shoring up the banks is a key part
of Europe’s battle against its govern-
week in the markets. Sept 15 deadline set for EU bank fee transparency would have to be roughly halved, to 80
She stressed on Sunday that the percent of gross domestic product, to
ment debt crisis, since a default by summit was “urgently necessary” but make it manageable in the long run.
Come clean on fees: Barnier
Greece or another ailing country added: “I am only going if there’s an A bond swap might have more impact
could inflict losses on banks, requir- outcome.” but Wolff said he did not think Europe
ing government bailouts and choking was close to agreeing on a large-scale
off credit to the economy. Optimistic
swap. German insurance giant Allianz,
Greece is expected to be deemed in Her spokesman took a more opti- for example, has suggested that private
default by credit rating agencies if mistic tone on Monday. BRUSSELS, July 18, (RTRS): Banks ed a recommendation, a non-binding the customer to deposit and withdraw
in the European Union have until mid- request for member states to crack down cash, receive payments such as investors write off 25-30 percent of their
banks take losses in a second bailout “The government is working on all Greek debt via a swap, German media
for the country. On Thursday, EU levels with all its strength on prepar- September to come clean on fees they on restrictions used by banks as an salaries, issue payment orders, make reported; the market prices of many
leaders will hold an emergency meet- ing for Thursday a good result, a charge customers or face mandatory excuse to reject account applications. payments through direct debits and buy Greek bonds are now near half of face
ing to discuss the terms of such a deal. decent result, a result that sends out a transparency rules. About 30 million people over 18 goods and services online. value.
The stress tests required banks to strong and clear signal to the mar- “We think the fees should be easy to years old in the EU do not have a bank Overdrafts would not be allowed “What we’re talking about down the
show they could maintain a financial kets,” spokesman Steffen Seibert understand across the board, with com- account, with up to 7 million turned because this would mean credit was road is the need for a massive reduction
buffer in a downturn: at least 5 per- said. parable fees charged for comparable down because of poor credit history, no being given, which requires credit his- in the debt burden and they are just not
cent of loans, bonds and other invest- “Confident that this will be possi- services. That is not the case today,” proof of income or failing to meet resi- tory checks. ready to do that yet,” Wolff said.
ments. Regulators required disclo- ble, the chancellor is planning her dency requirements, the Commission “It will require some form of substan-
sure of a large amount of data on trip to Brussels,” he said. Michel Barnier, the bloc’s financial The EU executive had said it would
services commissioner, told a news said in a statement. propose a draft law to make it manda- tial debt restructuring and you have to see
banks’ finances to allow analysts to Germany’s insistence on making who is going to take the hit, will it be the
make their own conclusions on the the private sector share the pain in a conference. Accept tory for banks to offer basic accounts,
Full transparency on fees would but opted for a non-binding recommen- taxpayers or will it be the banks? To carry
sector’s health - since the EU could- new bailout, even if its means caus- “This recommendation does not state out such a move you need to prepare, and
n’t bring itself to consider the possi- ing a Greek debt default, has put make it easier for customers to com- that payment service providers will dation because it gives member states
pare charges and switch to a cheaper more flexibility to tackle the hurdles to they don’t have the time to prepare before
bility of default. Berlin in deep disagreement with the have to accept any application from an Thursday.”
Royal Bank of Scotland analysts, European Central Bank and other account, helping drive down the high individual in any case — it focuses on opening an account. German Chancellor Angela Merkel said
for instance, said that if all the banks eurozone nations. charges seen in some EU states. what is strictly necessary to enable European consumers’ organisation on Sunday that while this week’s summit
had to account for the fallen value of An EU official said that Germany “I am disappointed with the response consumers to use payment services,” BEUC said Barnier has missed a gold- was “urgently necessary”, she would only
distressed bonds now on their books, had yet to hammer out differences from European banks with the request I en opportunity to help citizens by back- attend if lower-ranking officials had
57 of the 90 tested would have to with the ECB and other eurozone the Commission said.
put to them a year ago asking for more “It will assess the situation in one tracking on his promise of legislation already prepared a clear rescue plan. “I
raise Ä91 billion ($130 billion) in states but that Van Rompuy would transparency,” Barnier added. on bank accounts. will only go there if there is a result.”
capital to meet a tougher 7 percent never have called a summit of the 17 year and propose any further measures
If banks don’t take his request seri- as necessary, including legislative “Too often we have seen that self- As part of the second bailout, officials
capital buffer. eurozone leaders if a deal were have also been looking at other measures
Still, German and Spanish officials impossible. ously by Sept. 15, Barnier will take measures,” the Commission added. regulation and voluntary measures in
“legislative action with a view to intro- The Commission said consumers the financial sector do not work. Going to help Greece including up to 60 billion
said they did not see the need for “Van Rompuy would not have euros of additional emergency loans from
their banks to raise more capital and called a summit if he had not ducing more standardisation across should be able to open a basic bank down this route again is a waste of
European markets”. time,” BEUC Director General European governments and the
questioned the assumptions of the received enough signals from the big account at an unspecified reasonable International Monetary Fund; steps to
tests. Germany had two banks that countries, and Germany in particular, Banks must give clear terminology charge irrespective of where they live Monique Goyens said in a statement.
recapitalise Greek and European banks;
barely passed and Spain had seven. that there was enough on the table to on what customers are charged for and or their financial circumstances. Kay Blair, vice-chair of Britain’s and ways to stimulate Greek economic
Amid the uncertainty, bank shares negotiate” an agreement, the official how much, Barnier said, as he gave It only covers people who are legally Consumer Panel, was also not opti- growth.
across Europe took a hammering. said. lenders a year to make it easier for resident in the EU and need an account mistic, saying: “In the UK there is a The EU source said there was a basic
Italy’s Banco Popolare, which barely French Budget Minister Valerie everyone to open a cheap basic account for personal, not business or profes- long track record of voluntary agree- agreement on extending the maturities
passed the test, was down 6.7 per- Pecresse voiced cautious optimism anywhere in the 27-nation bloc or face sional, use. ments in the financial services sector and lowering the interest rates for bailout
cent; France’s Credit Agricole fell 3.6 that a deal will come through. legislation in this area too. A basic payment account is defined failing to deliver good consumer out- loans extended to Greece, Ireland and
The EU executive on Monday adopt- by the Commission as one that allows comes.” Portugal.