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90 seconds at 9am: BP cancels dividend; UK abolishes FSA; Dow flat on mixed FEDex result

90 seconds at 9am: BP cancels dividend; UK abolishes FSA; Dow flat on mixed FEDex result

 Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with BNZ, including news BP has cancelled its dividend for at least the next 3 quarters and will set aside US$20 billion for a compensation fund for those affected by the massive Gulf of Mexico oil spill.

This is big news for UK pension funds in particular as the BP dividend of around US$10 billion annually made up a full 14% of all the dividends paid by FTSE 100 companies last year.

Meanwhile, the new British government has announced plans to abolish the Financial Services Authority set up a decade ago as a 'mega' regulator. Its banking regulatory powers will be shifted to the Bank of England, where they once resided. The FSA was blamed for failing for recognise the disastrous build up of leverage on British bank balance sheets that eventually brought the British banking system to its knees.

This brings the UK into line with New Zealand's regulatory system, where banking regulation has stayed with the Reserve Bank, but is different from the Australian system where banking regulation is handled by APRA (Australian Prudential Regulation Authority), rather than the Reserve Bank of Australia.

Meanwhile, the Dow gave up its early gains in late trade after a mixed result from FEDex, which is the world's biggest air cargo firm. FEDex is watched closely because air cargo is seen as an early barometer of global trade. FEDex's profit was below expectations because of increased healthcare and pension costs, but it sees moderate growth globally with some strength in Asia, which is good news for New Zealand and Australia, which is now so closely linked to intra-regional trade in the Asia Pacific.

The New Zealand dollar was buoyant up near 70 USc in early trade.

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1 Comments

Wally

It's a pretty good regulatory system here for our banks. The one for Finance companies is another story entirely.

I'm not thrilled with the current plan for the RBNZ to regulate the finance companies at arms length using Trustees and ratings agencies as their agents. It's better than the nothing there was before.

It sort of won't matter much anyway. I'd be very surprised to see any finance companies of any size survive past the end of 2011 when the extended guarantee scheme expires.

cheers
Bernard

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