Banks would do rather too well out of a proposed rollover

IMMEDIATE worries about a Greek debt default were allayed on June 29th, with the passage of a first vote in the Greek parliament on an austerity plan. Not before fear had spread well beyond the Aegean. The interest rates demanded by investors to hold Spanish and Italian government debt rose to their highest levels in seven months on June 27th, before slipping back. On June 29th America’s Federal Reserve extended a promise to provide dollars to other major central banks.

The pressure to put together a second bail-out package for Greece remains intense. A proposal from the French banking sector this week on rolling over privately held Greek debt is supposed to clear the way. Not all the details are clear but the plan seems to do too little to help Greece, and too much to help the banks. ...

Which emerging economies are at greatest risk of overheating?

WHEN the term “emerging markets” was coined 30 years ago by Antoine van Agtmael, then at the World Bank, these economies accounted for one-third of global GDP (measured at purchasing-power parity). Now they make up more than half. More dramatic still, emerging markets produced more than four-fifths of global real GDP growth over the past five years.

Important though these countries are, many commentators still tend to lump them together in a way they never would with developed economies. Headlines about rising inflation, rampant bank lending and a flood of capital inflows might appear to suggest that virtually all emerging economies are overheating. In reality, some are red-hot and others are only lukewarm. An analysis by The Economist tries to identify the hottest spots. ...

Bank of America’s settlement will worry other lenders

NOT for the first time, the tough talk was merely a prelude to a hefty settlement. Brian Moynihan, Bank of America’s boss, had vowed to engage in “hand to hand combat” with investors suing to recover losses on mortgage-backed securities (MBSs) peddled before the housing market collapsed. He had even likened them, none too diplomatically, to buyers of a Chevy who wanted it to be a Mercedes. In the end, though, BofA rolled over surprisingly quickly in order to relieve the worst of its housing-related headaches, a product of its ill-advised purchase of Countrywide, a gung-ho mortgage lender.

The bank will pay $8.5 billion to investors in more than 500 Countrywide-linked securitisations who had claimed the loans breached basic underwriting standards. The deal is backed by the loans’ trustee, Bank of New York Mellon, and 22 of the biggest out-of-pocket money managers, including BlackRock and PIMCO. ...

Dipping into oil stocks is not a wise idea

PUTTING something aside for a rainy day is rarely a bad idea. Raiding the piggy bank often is, as the International Energy Agency (IEA) may yet discover. On June 23rd the rich-world energy consumers’ club surprised markets by announcing that its 28 members would release 60m barrels of oil over 30 days from their reserves—with the United States providing half the total. The IEA cited the disruption to oil supplies resulting from the uprising in Libya and the need to provide a “soft landing” for the global economy.

The decision to dip into reserves was unexpected, although it did not come entirely without warning. Both the IEA and Barack Obama had hinted in recent weeks that action to tackle high oil prices was on the cards. Yet the only two previous withdrawals from the oil-savings bank, set up in the wake of the oil crises of the 1970s, had come at times of more obvious emergencies—in the aftermath of Iraq’s invasion of Kuwait in 1990 and of Hurricane Katrina in 2005. ...

The rule-book governing international finance is slowly taking shape

WATCHING the world’s regulators rewrite the rules of finance is a bit like supporting toddlers in an egg-and-spoon race. You want them to get to the finishing line but for every step forward there is a fumble, a squabble and lots of milling about. Yet bit by bit the main chapters of the financial rule-book are being written.

The most recent bit of progress was an agreement in Basel on June 25th to make the most important global banks hold an extra 1-2.5% of equity, the gold standard of capital. Some details of these rules still have to be thrashed out, including which banks will be named as systemically important financial institutions (SIFIs) on a global scale. Yet on capital, at least, the end of the race is now in sight. The agreement on a surcharge for the SIFIs comes on top of already-agreed “Basel 3” rules requiring all banks to raise their core-capital buffers to at least 7% of their risk-weighted assets. ...