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Going all the way with Gordon

Gordon Brown and his bully boys are about to have another go at banker bashing – theyve summoned the big names in the industry to 11 Downing Street for an earful about not following base rate all the way down.

And given the way that both Nationwide and Halifax retreated under political pressure over their right to impose a 3% collar on tracker mortgages theres cause for alarm.

That concession by Halifax will according to analysis by cost around 500m and will be probably be passed on to new borrowers, so wheres the sense in that?

But to return to the Downing Street meeting, one wonders if Brown and Darling will try the good cop, bad cop ruse. Its not hard to imagine the PM playing the bruiser role.

Brown would say: Look here you bankers, dont give me that crap about pensioners needing their building society savings to supplement their pathetic state pensions. If they got savings they cant be that badly off. Its the people in debt that weve got to look after.”

And he wouldnt have much patience if the banks and building societies bleated on about deposit based Child Trust Fund savers losing out too.

Theyre doing better than anybody whos gone the equities route, hed rant.

Theres curious ambiguity in all this. Gordon and his bother boys know perfectly well that the mortgage lenders position is far more complicated than they maintain.

Base rate may be the lowest since the 1950s (ominously the age of rationing) but LIBOR has only fallen by something like a third of 1% since the Monetary Policy Committee dropped a full 1% and the banks which are being recapitalised by the state are paying 12% for the privilege.

And amazingly the Financial Services Authority is proposing to make it even more difficult for mortgage lenders to lend with proposals to harden their already over the top liquidity regime with proposals to hold between 6% and 10% of their liabilities in government gilts – that is a massive step change from the average of 4.6% that they currently hold and will amount to billions of pounds.

True, such a move will help the massive public sector borrowing requirement but it wont help the financial services industry and it certainly wont help aspiring homeowners and it will do nothing to unlock the credit crisis.

And in that context the bank base rate is not the main issue. As Geoffrey Wood, professor of economics and Cass Business Schools, observed in the Sunday Times: In terms of interest rates I think the government is using the wrong policy. The problem is the banks still need more capital.

“How much more? Unfortunately I dont know and I dont think anybody does.

But if he is right, then why is the governments recapitalisation programme costing RBS, HBOS and Lloyds TSB a punitive 12% while the US Treasurys scheme is costing participating financial institutions 5% and the German package is priced between 5% and 8.5%?

Going all the way with Gordon may not be the right option, especially if hes heading in the wrong direction.


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In Focus — May 2015: private medical insurance market in Germany

Welcome to the latest edition of In Focus. In this issue, Jelf examines the private medical insurance market for employers with expatriate workforces in Germany. This includes the common challenges faced in sourcing appropriate coverage, along with a selection of available solutions. This will be of particular interest to HR/reward decision makers with employees based in Germany. It will assess the cultural norms, risks and backdrop that are relevant to organisations with expatriate staff in this location.


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