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China and Brazil have signed a currency swap deal, designed to safeguard against future global financial crises.

Bank merger

Bank of Cyprus chief executive Yiannis Kypri confirmed he had been removed as head of the bank, which is the country's largest commercial lender.

Reuters reported that Mr Kypri had issued a statement about his removal, which said: "The reason I was given was that, based on the resolution decree recently passed by parliament and upon demands of the troika, an administrator had been appointed at the Bank.

"Until now I have not received a formal letter from the governor of the Central Bank on the matter."

A European Commission spokesman denied that the troika had demanded Mr Kypri's removal.

The BBC's Paul Mason: "Every figure in this document has the word 'euro' and two x's"

"These reports are not correct and decisions like this would any case be the responsibility of the Bank of Cyprus," a Commission spokesman said.

An administrator has been appointed to Bank of Cyprus to restructure the bank. It is being merged with the "good" parts of the failed Laiki Bank, which will be closed down.

Bank of Cyprus chairman Andreas Artemis handed in his resignation on Tuesday, along with four other directors, but the bank's board rejected the resignations.

Now Panicos Demetriades, the central bank governor, has sacked the entire board, according to the Cyprus News Agency.

Demonstrations

Mr Demetriades was widely criticised on Tuesday for suggesting that Bank of Cyprus was going to be wound up in the same way as is planned for Laiki Bank.

His comments led to demonstrations, calls for his resignation from Bank of Cyprus staff, and a hastily-drafted denial from Finance Minister Michalis Sarris.

Mr Demetriades said "superhuman" efforts were being made to get the banks ready for reopening on Thursday.

"Indications are that banks will open tomorrow with some restrictions on capital," said central bank spokeswoman Aliki Sylianou, speaking to the country's state broadcaster on Wednesday.

The banks have been shut since 15 March while the controversial 10bn-euro bailout was being negotiated.

2) Bank of England tells banks to raise £25bn

Major UK banks must raise a total of £25bn in extra capital by the end of 2013 to guard against potential losses, the Bank of England (BoE) has said.

In a statement, the BoE's Financial Policy Committee (FPC) said only some banks need to raise the cash, but did not name them.

It said banks could face losses of about £50bn over the next three years, relating to bad loans and fines.

The order is the first from the FPC, the new financial stability regulator.

It said UK banks and building societies could lose billions of pounds over the next three years relating to "high-risk" loans in the UK commercial property sector and vulnerable eurozone economies.

They may also lose money through fines, and require extra capital to support a "more prudent approach to risk".

Some banks already have enough capital to cover these costs, the FPC said, but others are short.



Yet more money may need to be raised after the end of 2013, the FPC warned, so that banks conform to incoming "Basel III" accords on banking regulation.

Shares mixed

No new government money will be required. Banks are likely to raise the funds by issuing more bonds or selling shares.

But BBC business editor Robert Peston says in the short term the need to raise cash will be bad news for investors, including taxpayers who still own big stakes in two banks - Royal Bank of Scotland and Lloyds.

If these banks are among those that need to raise more capital, it may delay plans to sell the stakes back to private investors.

In a statement RBS insisted it had "a strong capital position".

"We will continue to work with our regulators to ensure RBS remains at the forefront of international capital standards," it said.

However, by midday RBS shares were down 3%.

Other bank shares reflected a mixed response to the FPC's announcement. Shares in Lloyds were up more than 1.6%, while HSBC and Barclays were both down by about 0.5%.

The British Bankers' Association, the banking trade body, described the FPC's report as "the latest step in an ongoing discussion between the UK's banks and their regulators" about the levels of capital they should be holding.

It said raising capital levels needed to be done in such a way as to support growth.

Sustaining lending

The FPC said capital raising measures were also designed to ensure that banks were able to continue lending to businesses and each other, should another banking crisis hit.

The extra capital was needed "to ensure sufficient capacity to absorb losses and sustain lending", the FPC said.

The FPC has overall responsibility for financial regulation in the UK and is part of a new order of regulation designed to keep the banks under closer scrutiny.

It will oversee two new financial watchdogs: the Prudential Regulation Authority (PRA), which will take over responsibility for supervising the safety and soundness of individual financial firms, and the Financial Conduct Authority (FCA), which will be tasked with protecting consumers and making sure that workers in the financial services sector comply with rules.

The new watchdogs will replace the Financial Services Authority (FSA), which is set to close next week.

 

3) China and Brazil sign $30bn currency swap agreement

China and Brazil have signed a currency swap deal, designed to safeguard against future global financial crises.

The pact, first announced last year, will allow their central banks to swap local currencies worth up to 190bn yuan or 60bn reais ($30bn; £20bn).

Officials said this will ensure smooth bilateral trade, regardless of global financial conditions.

Along with being the world's second-largest economy, China is also Brazil's biggest trading partner.

"If there were shocks to the global financial market, with credit running short, we'd have credit from our biggest international partner, so there would be no interruption of trade," said Guido Mantega, Brazil's economy minister.

The agreement was signed on the sidelines of the fifth Brics (Brazil, Russia, India, China and South Africa) summit being held in Durban, South Africa.

'Guarantee normal trade'

Trade between China and Brazil has grown robustly over the past few years, with volumes rising from $6.7bn in 2003 to nearly $75bn in 2012.

A large chunk of this growth has been driven by growing Chinese demand for Brazil's resources, such as iron ore and soy products.

Meanwhile, Brazil has also become a key export market for goods manufactured in China.

Brazil's Central Bank governor Alexandre Tombini said the swap agreement would ensure that trade volumes between the two nations did not suffer if a financial crisis in the future hurt global liquidity.

"The purpose of this swap is that, independent of the conditions prevailing in the international financial market, we will have $30bn available which would represent eight months of exports from Brazil to China and 10 months of imports to Brazil from China," he said.

"This is sufficiently large to guarantee normal trade operations."

Bigger yuan role

China has been pushing for a more international role for its currency, the yuan. It has been trying to promote the yuan as an alternative to the US dollar as a global reserve currency.

As part of that push, it has signed a series of swap deals with some of its key trading partners.

Such agreements not only allow central banks to swap currencies, but can also be used by firms to settle trade in local currencies rather than in US dollars, as happens now, since China's currency is not fully convertible to other currencies.

Earlier this year, the Bank of England said that it was in negotiations with its Chinese counterpart to finalise a three-year swap agreement.

Last year, China signed a swap deal with Australia worth up to A$30bn ($31bn; £20bn) to promote bi-lateral trade and investment.

It is also looking at currency pacts with Hong Kong and Japan.


Date: 2015-12-17; view: 677


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