Emergency talks called to calm global markets turmoil

The European Central Bank is due to hold emergency talks on whether to start buying Italian debt to contain spreading turmoil on financial markets.

The BBC’s Business Editor Robert Peston says the ECB is split on the move.

Growing worries over debt in the eurozone and the US caused sharp falls on world stock markets last week.

Finance ministers from the G7 major economic powers are also to hold emergency talks on how to calm the markets before they reopen on Monday.

The main council of the ECB will hold a telephone conference on Sunday afternoon, the BBC has learned.

According to an ECB source cited by Reuters news agency, the bank’s president Jean-Claude Trichet wants a final decision on whether to buy Italian debt to be made at the meeting.
Low growth

Italy is the latest and biggest economy to be hit by the eurozone crisis.

The price Italy pays on its government bonds has shot up amid growing doubts it can keep its debt level so high while economic growth is so slow.

Spain, too, has been caught up in the crisis – hammered by high unemployment, high government debt and anaemic growth.

The high levels of debt coupled with low growth and an uncertain response among eurozone leaders to the crisis has sparked fears that both countries could become engulfed in the same cycle which has led to Greece, the Irish Republic and Portugal already being bailed out.

Last week, European Commission President Jose Manuel Barroso said authorities in the eurozone were failing to prevent the sovereign debt crisis from spreading.

 On Friday, Italian Prime Minister Silvio Berlusconi said he was bringing forward austerity measures and would balance the government budget by 2013, one year ahead of schedule.

Last week, the gap between German bonds – seen as the safest in Europe – and Spanish and Italian debt reached a record high since the euro was introduced in 1999.

There have been rumours that the ECB was preparing to buy Spanish and Italian bonds to try to help those countries. Last week the ECB bought Irish and Portuguese bonds but did not include Spanish and Italian debt in its purchases.

The BBC’s Business Editor Robert Peston says the ECB’s governing council is divided on whether to buy Italian bonds.

A decision not to buy would risk further turmoil in share and bond markets on Monday, he says.

Some analysts argue that investors expected the bank to buy Italian and Spanish debt soon after the eurozone leaders summit on 21 July, and the fact that it has not has undermined confidence in the markets.
Not impressed

Finance ministers and central bankers from the G7 are to hold emergency talks by telephone before markets open in East Asia on Monday morning, aiming to craft a global response on the eurozone debt crisis and ease fears over rating agency Standard & Poor’s downgrading of US credit-worthiness.

The rating agency Standard & Poor’s (S&P) on Friday downgraded America’s top-notch AAA rating to AA+.
Continue reading the main story
S&P ratings (selected)
AAA: UK, France, Germany, Canada, Australia
AA+: USA, Belgium, New Zealand
AA-: Japan, China

Source: S&P

S&P, one of the world’s three major rating agencies, failed to be impressed by a last-minute deal in the US last week to raise the US debt limit by up to $2.4tn (£1.5tn) from $14.3tn.

It staved off a potential US government default on its debt but was only achieved after months of wrangling between Democrats and Republicans in Congress.

The credit rating downgrade is seen as a major embarrassment for President Obama’s administration. It could also raise the cost of US government borrowing.

An economic adviser to the White House condemned the S&P move.

“It smacked of an institution starting with a conclusion and shaping any argument to fit,” said Gene Sperling, the head of President Obama’s National Economic Council.

White House spokesman Jay Carney said on Saturday that last week’s debt deal had been “an important step in the right direction”, but that “the path to getting there took too long and was at times too divisive”.

Elisabeth Murdoch will not join News Corporation board

 The daughter of Rupert Murdoch will not join the board of her father’s News Corporation conglomerate as had been expected, the company has announced.

News Corp said Elisabeth Murdoch, 42, told its directors that it would be “inappropriate” to join the board.

She was expected to join the News Corp board after it bought Shine Group, the UK television production firm she runs.

In February, her father said he expected her to make the move after the £415m deal had been completed.

However, in a statement, Viet Dinh, chairman of the nominating and corporate governance committee of the News Corporation board of directors, said Ms Murdoch had “suggested to the independent directors some weeks ago that she felt it would be inappropriate to include her nomination to the board of News Corp”.

The statement went on: “The independent directors agreed that the previously planned nomination should be delayed.

“Both Elisabeth and the board hope this decision reaffirms that News Corp aspires to the highest standards of corporate governance and will continue to act in the best interests of all stakeholders, be they shareholders, employees or the billions of consumers who News Corp content informs, entertains and sometimes provokes every year.”

Last month News Corp dropped its takeover bid for BSkyB amid revelations reporters working for its now-defunct News of the World title hacked into the mobile phones of celebrities and others, including murdered schoolgirl Milly Dowler.

Before the scandal broke, US investors had questioned News Corp’s purchase of Ms Murdoch’s Shine Group.

In March, US pension funds sued News Corp for buying his daughter’s business, alleging in a writ the company was “paying for nepotism”.

Ms Murdoch is a former BSkyB managing director, responsible for all of the network’s non-sport output and its consumer marketing division.

She joined the company in 1996, oversaw record viewing figures for Sky One, and launched the UK’s first pay-per-view service.

Nick Leeson apologises to Barings’ boss for bank crash

The “rogue trader” Nick Leeson who brought down Barings Bank has for the first time made a heartfelt apology to his former boss.

He told Peter Norris, now Chairman of Virgin Group Holdings, of his remorse after the two were brought together for a BBC radio programme.

Mr Leeson brought down Barings Bank with losses of £827 million in 1995.

He served more than three years in a Singapore prison for forging documents and deceiving the bank’s auditors.

After hearing his apology, Mr Norris told him: “I think I wanted to punch your lights out.”

Mr Leeson replied: “I wouldn’t have blamed you if you had.”
Substantial losses

The former trader was reunited with his boss and former colleagues at Barings for Radio 4’s The Reunion which looks back at the bank’s collapse.
Continue reading the main story

Mr Leeson was Barings’ star derivatives trader on the Singapore International Monetary Exchange and regularly reported huge profits. But he was losing Barings and their customers hundreds of millions of pounds.

He was able to disguise the losses by keeping control over his own “back office” where trading accounts were reconciled.

He set up a secret account with the number 88888, the so-called “five-eights” account, to hide the extent of his losses from his employers.

Barings was Britain’s oldest merchant bank founded in 1762. It was famed for its “word is my bond” approach to banking. Its crash was a massive shock to the financial establishment.

Mr Norris recalled the moment of realisation that things had gone badly wrong in Singapore: “There was a discrepancy of $140 million (£85 million) on the accounts. No-one could find Nick, so I hit the panic button and said ‘crack the desk open’.

“Five or six hours later, we discovered the secret account details and I found out what had been happening.”
Greed and fear

Another former colleague Nicholas Edwards, then an investment banker with Barings, described Mr Leeson as “struck by a mixture of greed and fear over a number of years”.

Responding to the apology, Mr Edwards said: “I’m sure he’s full of remorse, but am I sympathetic? No I’m not. He’s lost a lot of people their livelihoods, their pensions and their family fortunes.”

Having been extradited from Germany, Leeson was convicted by a Singapore court in 1996, pleading guilty to two counts of deceiving the bank’s auditors and of cheating the Singapore exchange by forging documents.

He served three years and seven months of a six-and-a-half-year sentence in Singapore’s Tanah Merah Prison.

“I was 25 years old. I should have turned round and asked for advice, but I didn’t,” he said. “It was the most embarrassing period of my life and the only person who did anything criminal was me.”

Reiterating his apology to his former boss he said: “I offer an apology to Peter – but whether it will make any difference to him I don’t know”.

Since his release from prison, Mr Leeson has written a couple of books and gained a psychology degree.

Most recently, he resigned from Galway United FC in February 2011, having risen to chief executive officer since joining the company in 2005. He is an after-dinner speaker and attends conferences.