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Markets News Afternoon: Dutch Central Bank seizes struggling DSB bank; US business economists say recession is over
By Finfacts Team
Oct 12, 2009 - 5:35:52 PM
The collapsed DSB bank sponsors a number of sports including Dutch premier football league champions AZ
Dutch central bank takes control of struggling bank
The Dutch Central Bank (DNB) said Monday it has taken control of embattled DSB Bank NV as weekend talks with a group of Dutch banks failed to agree on a support plan after a run on the bank.
The central bank requested court approval take control of DSB Bank after its solvency came "under great pressure" as account holders withdrew cash.
DSB Bank, a nonlisted business with a balance sheet worth about €8 billion, experienced difficulties after the Dutch financial authority, AFM, put it under investigation weeks ago for allegedly trying to sell mortgage customers additional expensive insurance policies. AFM had previously fined DSB Bank €120,000 in August for making it a condition of loans that borrowers took out insurance.
The central bank said today that emergency regulation will facilitate a balanced representation of the interests of all account holders and other creditors. In addition, a procedure has been initiated to appoint receivers for the insurance components of DSB.
Over the past week two Dutch customer associations urged DSB Bank clients to withdraw their savings and deposits.
DNB said it and the Ministry of Finance attempted to arrange a new start for DSB under the custody of a consortium of five banks: Rabobank, ABN Amro, ING, Fortis Nederland and SNS.
DNB expects that the State Deposit Guarantee Scheme may be activated shortly. Under this scheme, which will be administered by DNB, deposits of up to €100,000 (other than subordinated deposits) per account holder at DSB are guaranteed.
US business economists say recession is over; Muted recovery to follow
“The Great Recession is over,” according to the US National Association of Business Economists' (NABE) lattest survey.
“The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines. The NABE panel upgraded the economic outlook for the next several quarters, compared with the previous survey,” said NABE President-elect Lynn Reaser, chief economist at Point Loma Nazarene University.
“Following a sharp 6.4% (annual rate) contraction in the first quarter of this year and another 0.7% drop in the second quarter, NABE forecasters expect real GDP to rise at an above trend 2.9% rate in the second half. The more-than-three-year downturn in the housing market is very close to coming to an end, with substantial growth (from a low base) expected for next year.
According to the survey, the key areas of concern involve the large increases in federal debt and unemployment rates that are expected to remain very high through next year. The unemployment rate is forecast to rise to 10% in the first quarter of next year and edge down to 9.5% by the end of 2010. Inflation is expected to remain contained throughout 2010. The good news is that this deep and long recession appears to be over, and with improving credit markets, the US economy can return to solid growth next year without worry about rising inflation.”
Real GDP is expected to advance at a 2.9% pace over the second half of this year and at a 3% pace next year.
Slow growth of household sector spending is expected to be a drag on the economy, as the lagged effects of past wealth losses and modest employment gains restrain consumer spending growth. Personal consumption
expenditures, which are expected to turn up in the second half of this year, grow a sub par 1.6% next year.
However, in contrast to views of some that the saving rate is set to rise dramatically over the next few years, slightly more than one-half of the panel believes the saving rate will average between 3 and 5% through 2012;
another 40% believe it will average between 5 and 7%; no respondents think it will be above 7.0%.
The saving rate is thus expected to exceed the 2% average of the past four years but be well below the 9% average experienced during the decades of the 1970s and 1980s.
Discussing what shape the economic recovery will be taking, with Brian Bethune, IHS Global Insight; Wayne Angell, Angell Economics; and CNBC's Trish Regan:
Anglo Irish Bank v Hugh O'Regan
State-owned Anglo Irish Bank is seeking judgment of €37.4m against businessman and hotelier Hugh O'Regan.
The application for judgment against the former owner of the Thomas Read pub group will be heard in the Commercial Court on November 4th.
Three months after O'Regan failed in an attempt to have three of his companies put into court operated examinership.
O'Regan owes Irish Nationwide Building Society and Anglo Irish Bank more than €190m.
Discussing whether the rally can continue, with Larry Adam, Deutsche Bank; Doug Roberts, Channel Capital Research; and CNBC's Simon Hobbs.
US markets
On the markets, the Dow rose 42 points, or 0.4%, at 9,907 Monday.
On the New York Mercantile Exchange, oil for November delivery is trading at $73.17 up $1.40 from Friday's close. In London, Brent crude for November delivery is trading at $71.37 a barrel.
Currencies
The euro is trading at $1.4796 and at £0.9375.
For live currency updates, check the right-hand column of the Finfacts home page.The dollar traded at a record low $1.6038 per euro on July 15, 2008.
