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BUSINESS WITH PERSONALITY www. .com 0203 405 1000 BUSINESS WITH PERSONALITY JOE LEWIS WHAT MBA CLASSES CHASES M&B SUITOR HOPES TO LEARN FROM LADY GAGA IMPRESS TYCOON BUSINESS EDUCATION P26-28 INVESTORS P7 Issue 1,468 Thursday 15 September 2011 www.cityam.com FREE Euro banks THE GLOVES ARE scramble for funding ▲ EUROZONE OFF: UK SUES ECB BY JULIET SAMUEL TWO unnamed banks tapped the ▲ POLITICS ECB’s weekly dollar funding facility for BY DAVID CROW the second time in a month yesterday in a fresh sign that Europe’s interbank BRITAIN will today sue the European markets are freezing up. Central Bank (ECB) over new rules that The escalating crisis has seen bor- will force the City’s biggest clearing rowing costs rise for banks, forcing house, LCH.Clearnet, to relocate to the weaker lenders to tap the emergency Eurozone. cash supply to the tune of $575m The move highlights growing impa- (£364.6m). That follows a one-time use tience among Whitehall officials and of the facility by one bank in August, politicians, who believe Brussels is which borrowed $500m. using new regulation as a smoke- A bank would only draw on ECB screen to undermine London’s pre- funding if it were frozen out of the eminence as a global financial centre. open market, where borrowing costs Under new rules unveiled by the are much lower than the 1.1 per cent ECB in July, clearing houses must be rate the Bank demands. based in the Eurozone if they hold Moody’s yesterday downgraded two more than five per cent of any one French banks, Credit Agricole and euro-denominated market, including Société Générale, but they have denied over-the-counter (OTC) derivatives. any funding problems. London is home to around 40 per cent The average rate banks are charged of OTC derivate trading. for loans in sterling, euro and dollars is Such a rule would force on the rise. The three-month dollar LCH.Clearnet – one of the largest clear- London interbank offered rate (Libor) ing houses in the world – to relocate Chancellor George Osborne is taking the ECB, headed up by Jean Claude-Trichet, to court Picture: REX increased from 0.347 per cent on huge parts of its business to a financial Tuesday to 0.349 per cent yesterday, centre within the Eurozone, such as “This sets a dangerous precedent and single market, the unprecedented and fundamental single market prin- with Credit Suisse and Credit Agricole Paris or Frankfurt, costing hundreds of has serious implications for the City’s move represents part of a wider ciples by preventing the clearing of charged the most at 0.415 per cent. London jobs. competitiveness. The general feeling is assault against the deluge of anti-City some financial products outside the Three-month euro rates also According to the ECB policy paper, that this is our ‘enough’s enough’ regulation that is coming out of Euro area. That is why we have begun increased, from 1.4781 per cent to clearing houses that exceed the five moment.” Brussels. proceedings against the ECB through 1.4787 per cent and the equivalent per cent threshold must be “legally Britain is expected to file the lawsuit Some officials fear that France and the ECJ. sterling rate rose from 0.912 per cent incorporated in the euro area with full today at the European Court of Justice Germany are trying to win business “[We] want to see this resolved swift- to 0.915 per cent. managerial and operational control (ECJ), marking the first time a member for their own financial centres by ly and without involving the courts, And IFR magazine has reported that and responsibility over all core func- state has taken legal proceedings changing the regulatory goal-posts in but if necessary will not shy away from US banks are stepping into the fund- tions exercised from within the euro against the ECB. the name of financial stability. continuing legal action to make sure ing breach, signing deals to lend bil- area”. Although Britain will fight the case A Treasury spokesman said: “This there is a level playing field across the lions to European lenders over the One Whitehall official told City A.M.: on the grounds that it undermines the decision contravenes European law EU for British businesses.” summer. MORE: P3, P24 ▲ ▲ ▲ ▼ ▼ Certified Distribution FTSE 100 5,227.02 +52.77 DOW 11,246.73 +140.88 NASDAQ 2,572.55 +40.40 £/$ 1.57 -0.02 £/¤ 1.15 -0.01 ¤/$ 1.37 unc 01/08/11 till 28/08/11 is 92,745 Isn’t It Time You Learnt To Trade Properly? Attend our FREE Wealth Creation Seminar at our London trading floor. 20th, 22nd, & 28th of September 1PM - 3PM 0203 405 1000 Saturday 24th September 11AM - 1PM .com Call to reserve your seat now on: 0203 405 1000 Home of the New Turtle Traders 2 News CITYA.M. 15 SEPTEMBER 2011 Economy not rebalancing fast enough NEWS | IN BRIEF Lehman Bros bonus case fails A bankruptcy judge has denied Lehman Brothers Holdings’ attempt to recover boom-time peak, a devastating blow in late 2009, hitting 21.9 per cent on banks, total pay in the public sector $500m (£317m) it alleges was supposed but still less than expected after a the official measure; payrolls reached rose by 1.6 per cent on a year earlier to go toward employee bonuses from recession of such severity. One reason 6.327m at the end of 2009. They then (against 3.1 per cent in the private sec- Barclays. Lehman had said Barclays was that public spending, including in started to fall when Labour was still in tor). Because the public sector is failing never gave the money to the employees construction, propped up technically power – a decline that has since accel- to keep wage costs down, far more peo- and should send it back to Lehman for “private” but in fact state-funded jobs erated – and dropped to 6.037m in the ple will have to lose their jobs. the benefit of Lehman's creditors. (a major trend during the Labour second quarter, 20.7 per cent of the All of which put the onus back on Wednesday's ruling is the latest instance years, when hundreds of thousands of total. So far, therefore, total state sector the private sector. It is a miracle, given of validation for Barclays, which bought EDITOR’S LETTER “private” jobs dependent on govern- jobs are down by 290,000, through a that national insurance (aka the jobs Lehman’s North American business in ment contracts were created). combination of non-replacement and tax) has been hiked, that the coalition 2008 following the collapse of the firm. ALLISTER HEATH Firms started to add to their staffing redundancies – but even then we are has utterly failed to deregulate the levels at the start of 2010. Private sector still only just back to levels last seen in economy in any meaningful way, the HSBC dropped from silver probe IT is not good news on the jobs front. employment has grown during each of 2008. The most recent three months job cuts in the City, and that vast num- HSBC has for now been dropped from Unemployment jumped by 80,000 over the past six quarters, with a net were unusual in that total public sec- bers more rules have actually hit an investor lawsuit accusing it of con- the past three months; employment is 617,000 jobs added, taking the total tor job losses (111,000) swamped pri- employers in recent months, that the spiring to drive down silver prices, leav- up by just 24,000 over the past year. back to 23.132m. But the strong vate sector growth (41,000). situation isn’t worse. ing JP Morgan Chase as the only bank The post-recession jobs rebound has growth of previous quarters is now The rate of job losses in the public With the Eurozone in crisis and UK defendant in the case. Investors had in a ground to a halt. The economy is rebal- running out of steam. One reason for sector appears to be running 3-4 times inflation hitting real incomes, growth raft of complaints filed in 2010 and ancing towards the private sector but this is the loss of state-supported jobs; faster than predicted by the Office for will remain depressed. The only way 2011 accused banks of amassing hun- no longer quickly enough. but the main factor is that the econo- Budget Responsibility. Either George the coalition can possibly incentivise dreds of millions of dollars in illegal prof- Private sector employment peaked my grew by just 0.2 per cent in the sec- Osborne is getting the painful news UK Plc to create more jobs under such it by manipulating prices of COMEX at 23.542m during the first quarter of ond quarter, which is just too weak to out of the way – or the overall reduc- conditions is to transform the business silver futures and options contracts. But 2008. Interestingly, private jobs started create enough jobs. tions will end up being higher than climate by introducing radical deregu- an amended complaint in the US courts to fall long before Northern Rock. The What was more surprising was the planned. One reason to suspect the lat- latory measures. It is the only hope; yesterday said HSBC had entered into a trough came in the final quarter of acceleration in the rate of public sector ter is that the supposed pay freeze in Osborne must act urgently.