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Darling ready to pump more capital into banks

The Government is expected to announce a huge package of support for the banking industry following pressure to inject additional capital into banks in exchange for equity stakesChancellor Alistair Darling met the chief executives of Royal Bank of Scotland, Barclays and Lloyds TSB earlier this week to discuss fund-raising measures after industry concern that Government support was not going far enough.

The Chancellor was expec-ted to outline additional measures to support the banking system on Monday afternoon but while not ruling out any options, he did not reveal any specific plans apart from an injection of £40bn of liquidity into the markets by the Bank of England which was announced last week.

The high-street banks were reported to be furious that details of a possible recapitalisation plan had leaked to the BBC on Tuesday.

Pressure has been mounting on the Government to offer banks additional capital in a way that protects value for shareholders. Liberal Democrat Shadow Chancellor Vince Cable and former FSA chairman Howard Davies have called for the Government to do this by acquiring equity stakes in banks.

Conservative leader David Cameron has stated that Government injections of capital with proper safeguards for taxpayers may be necessary to help banks rebuild balance sheets.

Speaking in Parliament on Tuesday, Darling said the Government would be looking at liquidity, capital and regulation and that all “practical options must remain open”.

He said it would be irresponsible to provide a running commentary on the Government’s response in these febrile market conditions.

Stroud & Swindon sales and marketing director Linda Will says the Bank of England’s injections of liquidity have not helped to get the markets moving.

She says: “Until we stabilise what is happening in terms of share prices, we are working with shifting sands.”

Checkmate Mortgages executive chairman Stephen Knight says: “The Treasury does not need to pump money into the market. It needs to pump confidence. The Irish had the right idea in guaranteeing depositors and debtors of the named major banks. This has not cost them a penny because they injected confidence and front-footedness.”

Hamptons Mortgages managing director Jonathan Cornell says: “If he does buy fairly big stakes in the banks, then he is seen to be bailing out fat cat bankers who have made stupid business decisions and if he does not, it just puts stress on banks and they are more likely to fail.

“But it is better for him to be criticised for taking decisive action rather than sitting and waiting. The only wrong decision is not to make one.”

The markets reacted badly on Tuesday to further uncertainty about the value of bank shares without any definite Government plans to take stakes being announced.


Made in China

Global equity markets have endured painful and dramatic gyrations in recent weeks. At Barings, we had been expecting further failures in the US financial sector for some time and have long been cautious from a top-down perspective on Western financials.

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Auto-enrolment — don’t leave it too late…

With auto-enrolment (AE) well under way for the UK’s largest businesses, over the next three years an additional 800,000 smaller employers (with less than 60 employees) will start their journey to comply with the legislation. AE mandates all eligible employees and their respective employers to make regular pension contributions into a qualifying pension scheme. To learn more about the legislation read our brief Jelf AEase — simple steps to AE compliance guide.


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