Crisis brings Banks, Bankers to their knees

Switzerland's largest bank, UBS announced losses of $16.8 billion, — thanks to to losses at its investment banking unit — and another 2,000 job cuts, higher than market expectations. UBS had earlier received a six billion Swiss franc bailout from the government, and now plans to focus on its core domestic business.

In London’s Whitehall, four top British bankers, Sir Fred Goodwin and Sir Tom McKillop, former chief executive and chairman respectively of RBS, and Andy Hornby and Lord Stevenson, former chief executive and chairman respectively of HBOS, started by apologising profusely to the grilling from MPs on a Treasury committee. While the enquiry is intended to probe the financial crisis, expectations are that bankers’ bonuses and pay will top the agenda.

UK banks Lloyds, RBS, HBOS and Barclay's are due to announce bonuses soon, and the British government, which now owns 70% of RBS and 43% of Lloyds Banking Group — the enlarged bank that took over HBOS last autumn — is under tremendous pressure to do an Obama on bank bonuses, though it has not yet resorted to any direct compensation caps.

Turmoil continued in Russia, hitting the euro, where early reports that major Russian banks have asked the Kremlin for a $40 billion lifeline to help restructure external debt was later denied by the Russian government.

Cracks in Eurozone

Domestic taxpayer versus single market stresses in the EU surfaced again, when France announced an $8.5-billion loan bailout for Peugeot-Citroen, Renault, and Renault Trucks, owned by Sweden’s Volvo. In return, the automakers promised not to close down French plants and avoid sacking French workers. This, in turn, triggered outrage from the Czechs, where these carmakers have large operations and factories. The Czechs have accused Paris of economic protectionism at the cost of Czech w o r k e r s , and intend to take the issue to the World Trade Organization in Brussels. Nissan, which is 44% owned by a troubled Renault, just announced 20,000 job cuts globally. The European Commission said it would have to look very carefully at the package.

Similarly, Italian industry associations have publicly lashed out at British Prime Minister Gordon Brown for bowing to pressure from wildcat strikers at Total last week. British workers at Total struck work to protest against a contract given to an Italian company to employ Italian workers, and a compromise deal was worked out, earmarking some portion of jobs for Britons. Eurozone bosses are yet to find a unified approach to tackling the financial crisis for the G20 meeting in April.

Source: The Economic Times, Mumbai