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90 seconds at 9 am: Dutch bank nationalised; sharp US and UK bank crackdowns; Visa sued in Australia over fx conversion; Dow down, gold up; NZ$1 = US$0.846 TWI - 76.3
Here's my summary of the key news overnight in 90 seconds at 9 am, including news that banking regulators are making the headlines today.
Firstly, Dutch bank SNS was nationalised after being classified as 'systemically important' by the national government on Friday. The bank’s large exposure to real estate had damaged its capital position and shut it out of the wholesale funding market. Private sources of capital couldn’t be found, leaving the bank in a precarious position.
The government clearly felt that a bankruptcy would be disastrous to the Dutch banking system, so nationalisation was the next step. SNS had acute problems that were specific and not necessarily shared by other banks. However, the announcement by the Dutch Ministry of Finance could have implications for banks across the whole of Europe.
In Britain, the government there has announced that UK banks - including Barclays, HSBC and RBS - will be broken up if they do not follow new rules to ring-fence risky investment operations from retail banking.
And Spanish and Italian bond and stock markets tumbled overnight, bringing a months-long rally to an abrupt halt as investors pulled back amid a political storm in Madrid and as Silvio Berlusconi staged an electoral fightback in Italy. Yields on Spanish sovereign debt suffered their biggest one-day percentage jump since September as the row over slush fund allegations engulfed prime minister Rajoy and his party.
In the US, bank regulators and lawmakers are also pushing to limit the risk that the government again winds up financing the rescue of one or more of the nation’s biggest financial institutions.
Strategies being considered range from laws that would cap the size of big banks, make them raise more capital, regulate them to discourage mergers, and require them hold specified levels of long-term debt to convert into equity in a failure.
Closer to home, Australia's competition watchdog has sued credit card company Visa for alleged "misuse of market power". The regulator alleged that Visa "engaged in exclusive dealing" and barred retailers from using rival currency conversion services. The outcome of this case could have implications for retailers here and give a significant opportunity to non-bank fx dealers.
Late today the RBA will review its official rates. No change is expected from that review.
The Dow is down 0.8% in mid-day trade. Oil is down, but gold is up.
The New Zealand dollar starts today retaining its recent gains at 84.6 USc, 81.2 AUc, and the TWI starts at 76.3, edging closer to the all-time high of 76.9.