English 'encouraged', European stress tests, Lehman coughs up US$873.1 mln

English 'encouraged', European stress tests, Lehman coughs up US$873.1 mln

Gareth Vaughan, sitting in for Bernard Hickey, details the key news overnight in 90 seconds at 9 am in association with BNZ.

Finance Minister Bill English says he’s encouraged to see early signs the imbalances handicapping the New Zealand economy over the past five or six years are easing.

These signs include that growth in the tradeables sector - exporting and import-competing industries – has outstripped growth in the non-tradeables sector - government and domestic industries – by the most over a nine-month period since 2002.

English also suggests we New Zealanders are being more careful with our spending, saying per capita private sector consumption increased by only 1% in the past year, compared to more than 4%, annually, between 2002 and 2007.

Furthermore, he points to Reserve Bank figures showing household debt is also easing for the first time in over a decade.

The results of stress tests by European regulators on 91 of the region's banks are due out tonight New Zealand time. The tests are designed to determine whether the banks can survive potential losses from both a recession and a decline in the value of their government bond holdings.

According to Bloomberg these will include three scenarios – -estimated Tier 1 capital ratios under a benchmark for 2011, what’s described as an adverse scenario, and a third test that covers sovereign shock.

European bank shares were up overnight ahead of the release of the results. However, skepticism emerged about the methodology and whether healthier banks might inadvertently be penalised through comparison with weaker lenders.

Allied Irish, which is among the banks facing a collective loss of about NZ$900 million from their expsoure to New Zealand's Yellow Pages Group, has apparently passed because regulators included 7.4 billion euros the bank plans to raise by the end of the year in their calculations.

Meanwhile, a fascinating story from Bloomberg says Lehman Brothers, which collapsed into bankruptcy in September 2008, paid its lawyers and managers US$873.1 million for 21 1/2 months of work. That’s equivalent to US$1.4 million a day.

The figures cover the period up to June and come from a US Securities and Exchange Commission filing. Leading the way was restructuring firm Alvarez & Marsal which received US$311.6 million in fees for interim management.

In what’s touted as the most expensive chapter 11 case ever, Lehman could take another five years to sell assets before paying unsecured creditors just 14.7 cents in the dollar.

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