The Bank's Great House-Price Bubble Dilemma

It's rather ironic that the one time there is widespread attention on the Office for National Statistics' (ONS) house price index, amid fears of a housing bubble, the index then goes and falls.

But the drop in annual UK house price inflation from 9.2% to 8% in March does little to diminish concerns that the market might be on the brink of a bubble.

Nor does it change the enormous regional disparities evident across the economy. In London, house prices are rising at an annual rate of 17%.

While this is down a touch from the 17.8% rate recorded the previous month, there is little doubt that there is at the very least a boom and more probably a housing bubble in the capital.

Prices have risen so far in most parts of the city that, when compared to wages, inflation or yields, they are further out of reach for most consumers than ever before.

The only metric upon which house prices look affordable in the capital is when mortgage interest payments are borne in mind – but even with borrowing costs at the lowest level in 320 years, these costs are on the rise.

But saying there is a bubble in London, which is fuelled in part by debt and in part by enormous demand from foreign investors, is quite distinct from claiming there is a bubble nationwide. A glance at today's ONS figures will underline this.

Outside London and the South East, prices are rising at a far less terrifying 4.7%. In some parts (Scotland and Northern Ireland) they are falling in real terms (eg adjusting for inflation).

Moreover, prices outside London fell further and in most regions (aside from the south) have not yet regained their pre-crisis peak.

This underlines Bank of England Governor Mark Carney's dilemma. His job is to set monetary policy for the country as a whole, not just specific regions.

There are some central banks (notably the South Korean one) which do set policy region by region, but don't expect that to happen in the UK anytime soon.

So does he tighten policy in an effort to try to restrain London, and risk damaging a benign recovery elsewhere? Of course, the dilemma dissolves if, as many expect, the bubble spreads out elsewhere. But today's numbers suggest that hasn't happened quite yet.

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Credit Suisse Fined $2.6bn Over Tax Dodgers

Credit Suisse has agreed to pay a $2.6bn (£1.5bn) fine imposed by the US government, after it helped wealthy Americans evade taxes.

The Swiss giant became the largest bank in two decades to plead guilty to a US criminal charge.

Despite paying the massive fine, the bank's management was allowed to stay in place and the New York state regulator said it would not revoke its permit to operate.

Prosecutors said it helped clients allegedly deceive US tax authorities by hiding assets in illegal, undeclared accounts.

Authorities said it was a conspiracy that spanned decades, and in one case began more than a century ago.

US attorney general Eric Holder said: "This case shows that no financial institution, no matter its size or global reach, is above the law."

Assistant attorney general for the tax division Kathryn Keneally added: "We also appreciate that Switzerland has taken important steps to ensure that its banking community will no longer be a haven for US tax evasion."

American officials have pushed for higher penalties in the wake of the global financial crisis, and since January's enactment of the strict Foreign Account Tax Compliance Act.

Credit Suisse, Switzerland's second largest bank, will pay a large financial penalty to the Department of Justice, along with smaller sums to the Internal Revenue Service, the Federal Reserve and New York's banking regulator, the Department of Financial Services.

It had already paid just under $200m (£120m) to the Securities and Exchange Commission.

Credit Suisse Chief Executive Brady Dougan said: "We deeply regret the past misconduct that led to this settlement."

"We have seen no material impact on our business resulting from the heightened public attention on this issue in the past several weeks."

Neither Mr Dougan nor chairman Urs Rohner were found to be personally guilty of misconduct.

The bank's fine is around three times the $780m paid by rival UBS in 2009.

Part of the agreement means that nine staff members can no longer be employed by the bank, including its head of offshore banking for North America.

The penalty has caused a political furore in Switzerland, amid questions about the future of senior management of the bank and bonus clawback possibilities.

The country's finance minister said her government was satisfied with the US deal that allowed to put the criminal investigation behind it - but admitted other banks remain in the American crosshairs.

Eveline Widmer-Schlumpf said banks including regional lenders remain in talks to resolve charges of misconduct, as part of the US crackdown on foreign banks suspected of helping American tax cheats.

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LDC To Beat Miliband Freeze With uSwitch IPO

By Mark Kleinman, City Editor

An investment firm controlled by the taxpayer-backed Lloyds Banking Group is examining a stock market listing of the price comparison website uSwitch just months after acquiring a majority stake.

Sky News understands that LDC has begun tentatively sounding out institutional investors about a flotation of uSwitch that would take place ahead of next May's general election.

Ed Miliband, the Labour leader, has pledged to freeze energy bills for 15 months if he forms the next government, a decision which could curtail the number of households which change providers during that period.

USwitch is understood to derive a significant proportion of its revenue from gas and electricity switching, with profits last year understood to have hit £19m, well ahead of management expectations.

A new framework for energy switching has been introduced in recent months with the result that more than 250,000 customers move to another provider every month, according to the industry lobbying group Energy UK.

A uSwitch spokesman said last week in the wake of a record fine handed out by Ofgem, the regulator, to E.On, that trust in the industry was at an all-time low.

"This fine will only serve to further increase consumers' cynicism towards energy suppliers," he said.

"Our research shows that almost three quarters of consumers would now switch to a small supplier - up from 56% last year - which is clear evidence of the dwindling loyalty amongst 'big six' customers."

Mr Miliband's pledge to freeze prices could also spur an acceleration in switching ahead of next year's election as the major utilities compete to win customers.

Last year's takeover of uSwitch valued the business at a fraction of the £210m for which it was sold by its founder, Lord Milford Haven, in 2006.

Under the deal, Forward Internet Group, which took control of the site in 2009, retained a minority stake.

USwitch operates in a fiercely competitive market, and in recent years has seen itself out-muscled in terms of its advertising spending by larger rivals such as Comparethemarket, Go Compare and Moneysupermarket.com.

Lord Milford Haven's windfall from the sale of the site in 2006 resulted in a substantial loss for the buyer, the US media group EW Scripps.

It sold the business to Forward for less than £10m and took a big writedown on the value of uSwitch because of slower-than-expected consumer switching trends.

USwitch works with thousands of direct and affiliate partners, providing their websites with branded comparison tools for a range of home services. Its calculators also appear on many other websites.

A source close to LDC said no decision had been taken about whether to pursue a flotation, but if it does choose to press ahead, it would represent one of the fastest exits from a UK company by a private equity firm.

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Consumer Inflation Rises In April To 1.8%

The consumer prices index (CPI) for April hit 1.8%, according to officially released figures.

The Office for National Statistics (ONS) said it was a rise of 0.2% on the March figure.

The rise was more than expected, up from its lowest level in more than four years.

Chancellor George Osborne called March's figure of 1.6% "welcome news for families" and will now be under pressure to address the rise.

The ONS said the late Easter break helped push up the cost of travelling.

Fuel prices were flat in April, compared to a 2.1p per litre month-on-month fall recorded in 2013.

Food prices, especially for vegetables, helped cap the rise. Vegetables dropped 2.3% between March and April and fish prices dropped 3.4%.

Non-alcoholic drinks and food inflation fell 0.5% in the month, but it is unclear if this was due to increased competition in the supermarket sector.

Core CPI, which excludes food and other household components, rose 2% - the strongest rate since September.

The Chancellor is under pressure to explain the inflation-wage disparity

The Bank of England (BoE) target for inflation is 2% and the CPI has now been below that figure for five months.

The CPI's six-month period of falls has now come to an end.

Weaker price growth has helped salaries and wages recoup lost ground since the 2008 financial crisis.

However the latest figure show wage increases in April of 1.7% have now lost out to inflation again.

The separate measure of inflation known as the retail prices index (RPI) remained static at 2.5%, according to the ONS.

The RPI includes housing costs in the calculation.

Meanwhile, the ONS said house prices were up 8% in March, year-on-year, slowing from a 9.2% figure in February.

The low level of inflation is helping the BoE to keep the base rate at its historic low of 0.5%, which have a direct impact on mortgage rates offered by lenders.

Responding to the unplanned CPI rise, Trades Union Congress general secretary Frances O'Grady said: "Last month we were told the living standards crisis was over, yet one month later real wages are falling again.

"Even on a measure that excludes the cost of housing, prices are rising faster than wage packets.

"It will be years before workers even recover the earnings they have lost since 2008, let alone start to feel any better off."

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Cyber Fusillades Pushed US To Name And Shame

US And China Spy Row: Diplomatic Fallout 'Huge'

Updated: 7:32pm UK, Monday 19 May 2014

By Mark Stone, China Correspondent

America's decision to file charges against five Chinese individuals and to publish 'wanted' posters for them is as serious as it is unprecedented.

These are allegations levelled not just against China but against the Chinese State.

The United States government is, for the first time ever, accusing another nation of state-sponsored economic espionage or as they called it "21st century burglary".

The diplomatic fallout will be huge.

The officials from the Department of Justice not only singled out individuals from Chinese People's Liberation Army (PLA), but they named the unit within the PLA which they say has been doing the hacking: Unit 61398.

It is not the first time the unit 61398 has been in the frame.

Last February, an American internet security firm called Mandiant published the results of several years research and intelligence analysis.

Working on behalf of their clients - multinational companies in both the US and in the UK - they analysed instances of hacking and commercial espionage.

Using sophisticated technology and cyber forensics, Mandiant collated evidence and 'digital crumbs' from hundreds of investigations.

They mapped the IP addresses from many different cyber attacks. Remarkably, they all popped up in one small neighbourhood in the Chinese city of Shanghai, and the location of the headquarters of Unit 61398.

Mandiant was not able physically to prove that the hackers were inside the building but analysts were convinced that they could not be anywhere else.

"Either they are coming from inside Unit 61398 or the people who run the most-controlled, most-monitored internet networks in the world are clueless about thousands of people generating attacks from this one neighbourhood," the Mandiant's founder Kevin Mandia said at the time the report was released.

At the time, the US government said that it was aware of Mandiant's report.

They said they were talking to the Chinese at the highest level about their concerns over cyber espionage of intellectual property. But it was also made clear that the diplomatic sensitivities were huge.

The Chinese have been unusually swift with their angry response to the American move.

A Foreign Ministry statement, published at nearly midnight in Beijing, said the allegations were "made up".

The Chinese cries of 'hypocrisy' will be deafening. After all, as Edward Snowden revealed, America has hacked China - the NSA allegedly hacked into the HQ of Huawei, the Chinese tech giant.

But the US says its agencies only 'cyber spy' when it concerns national security - and they say Huawei is a national security concern.

America insists it doesn't steal intellectual property for commercial gain. In China, the distinction is a little more blurred.  

America's allegations are bound to be of concern to companies, big and small, who do business in China and those wanting to break into China.

It's the world's second largest economy and a market to win. But it's hard to trust who you're working with in China.

Hugo Swire, a British Foreign Office minister, is on a trade trip to China this week trying to help UK companies break into the country.

But he and his staff leave their smartphones at home - UK government advice states that the chances they may get hacked into are too high to risk taking them.

Some of the companies who the Americans say had intellectual property stolen are in the business of nuclear power and solar panels.

It just happens that China's nuclear power and solar panel industries are becoming increasingly successful. Is that through their own innovation or is it "21st century burglary"?

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China Angry Over US Spy Charges 'Hypocrisy'

US And China Spy Row: Diplomatic Fallout 'Huge'

Updated: 7:32pm UK, Monday 19 May 2014

By Mark Stone, China Correspondent

America's decision to file charges against five Chinese individuals and to publish 'wanted' posters for them is as serious as it is unprecedented.

These are allegations levelled not just against China but against the Chinese State.

The United States government is, for the first time ever, accusing another nation of state-sponsored economic espionage or as they called it "21st century burglary".

The diplomatic fallout will be huge.

The officials from the Department of Justice not only singled out individuals from Chinese People's Liberation Army (PLA), but they named the unit within the PLA which they say has been doing the hacking: Unit 61398.

It is not the first time the unit 61398 has been in the frame.

Last February, an American internet security firm called Mandiant published the results of several years research and intelligence analysis.

Working on behalf of their clients - multinational companies in both the US and in the UK - they analysed instances of hacking and commercial espionage.

Using sophisticated technology and cyber forensics, Mandiant collated evidence and 'digital crumbs' from hundreds of investigations.

They mapped the IP addresses from many different cyber attacks. Remarkably, they all popped up in one small neighbourhood in the Chinese city of Shanghai, and the location of the headquarters of Unit 61398.

Mandiant was not able physically to prove that the hackers were inside the building but analysts were convinced that they could not be anywhere else.

"Either they are coming from inside Unit 61398 or the people who run the most-controlled, most-monitored internet networks in the world are clueless about thousands of people generating attacks from this one neighbourhood," the Mandiant's founder Kevin Mandia said at the time the report was released.

At the time, the US government said that it was aware of Mandiant's report.

They said they were talking to the Chinese at the highest level about their concerns over cyber espionage of intellectual property. But it was also made clear that the diplomatic sensitivities were huge.

The Chinese have been unusually swift with their angry response to the American move.

A Foreign Ministry statement, published at nearly midnight in Beijing, said the allegations were "made up".

The Chinese cries of 'hypocrisy' will be deafening. After all, as Edward Snowden revealed, America has hacked China - the NSA allegedly hacked into the HQ of Huawei, the Chinese tech giant.

But the US says its agencies only 'cyber spy' when it concerns national security - and they say Huawei is a national security concern.

America insists it doesn't steal intellectual property for commercial gain. In China, the distinction is a little more blurred.  

America's allegations are bound to be of concern to companies, big and small, who do business in China and those wanting to break into China.

It's the world's second largest economy and a market to win. But it's hard to trust who you're working with in China.

Hugo Swire, a British Foreign Office minister, is on a trade trip to China this week trying to help UK companies break into the country.

But he and his staff leave their smartphones at home - UK government advice states that the chances they may get hacked into are too high to risk taking them.

Some of the companies who the Americans say had intellectual property stolen are in the business of nuclear power and solar panels.

It just happens that China's nuclear power and solar panel industries are becoming increasingly successful. Is that through their own innovation or is it "21st century burglary"?

00.25 | 0 komentar | Read More

M&S Annual Profits Drop For Third Year In A Row

Marks and Spencer has announced that staff and management will be denied bonuses this year, after recording its third straight year of declining profit.

The decision comes as the high street icon revealed a 3.9% drop in full-year underlying pre-tax profit to £623m.

The company said its like-for-like UK sales for general merchandise, which includes clothes and furnishings, were down 1.4% in the year until March 29.

In the same period its like-for-like food sales outperformed the wider market and were up 1.7%.

Mr Bolland has been in the top job at M&S since 2010

M&S has invested heavily during the last three years to try and revive its general merchandise business.

For the first time the profit outcome is below the annual profit made by faster growing fashion rival Next.

Total UK sales were up 2.3% in the year but general merchandise remained at 0%.

Multi-channel sales, including online and mobile, were up 22.8%.

It said the company's newly launched website would take up to six months "to settle in" and therefore revenue for the current quarter is expected to be adversely affected.

Chief executive Marc Bolland said: "We are focused on improving our performance in general merchandise and were pleased to see early signs of improvement.

"Our food business had a very strong year, consistently outperforming the market."

Last week Mr Bolland, who has now been in the job four years, announced a new campaign to push 19 million customers online.

He added: "Three years ago, we recognised the scale of investment required to transform our business, investing to strengthen our foundations and improve our customer offer.

"We are making solid progress on this journey and are now focused on delivery."

Sales at M&S were down for the eleventh quarter in a row last quarter, although clothing purchases did rise slightly.

The company was able to reduce its net debut by 6% in the year, to £2.46bn.

It said 2013/14 was a "significant year on our journey" as it seeks to transform itself from a traditional UK chain to "an international, multi-channel retailer".

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Search Ruling 'Could Let People Sanitise Past'

"Serious questions" must be asked about a European Union ruling that search engines should remove links to information about individuals, the Justice Secretary said.

Last week's judgement means details that are irrelevant or incorrect - and prejudicial to a person - should be withdrawn, prompting more than 1,000 requests to Google.

But Chris Grayling, Secretary of State for Justice, said he was concerned about the consequences of the European Court ruling.

"I have real reservations about the decision made by the European Court," he told Sky News.

"This is an area that's now subject to negotiation within the EU.

"I have a real reservation about the idea you can somehow eradicate your past, that news organisations are forced to sanitise their archives, that search engines are forced to direct away from difficult stories for people.

"We live in a world of press freedom. We live in a world where people should be accountable for the mistakes we make.

"I think the European Union as a whole needs to ask some serious questions about whether this is really the right way forward."

Sky News understands that half of the takedown requests submitted to Google from the UK are from people with criminal convictions.

Among those who have asked for information to be removed were a man convicted of possessing child pornography, a university lecturer who was suspended, someone who tried to kill his family, and a convicted cyberstalker.

A former politician has also contacted Google to ask that links to an article about his time in office be removed, because he wants to stand again.

However, Mr Grayling conceded there were some instances where people should be entitled to have details about them withdrawn from the public domain.

"There are individual circumstances (where it is reasonable for individuals to ask for records to be removed). For example, it's not fair for somebody who does flamboyant things at a teenage party and puts a photograph on Facebook, to have that in wide circulation 20 or 30 years later.

"But when it comes to people who have had difficult circumstances in their professional lives trying to sanitise those, so they don't show up when people search for their names on a search engine, I have serious reservations about whether that is desirable, right or proper in a free society.

"I think we need to have some serious discussions about this court judgement, about the nature of European law and whether it needs to be modified in the wake of this judgement."

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Overseas Banks Sceptical About Standards Body

By Mark Kleinman, City Editor

Some of the biggest foreign banks operating in the UK have signalled that they are unlikely to join a new body being set up to rehabilitate the embattled industry's reputation.

A number of European and Wall Street investment banks have privately expressed scepticism about this week's launch of the Banking Standards Review Council (BSRC).

Several have told Sky News that they are undecided about whether to sign up to the voluntary body, the remit of which will include monitoring the extent of employees' professional qualifications and their understanding of internal codes of conduct.

Sir Richard Lambert, the former CBI boss, has urged the organisation to encompass "the full range of banking activities" if it was to be "both relevant and credible", with the UK's seven biggest high street lenders already on board.

He now wants the likes of Credit Suisse, Goldman Sachs and JP Morgan to become involved.

In his final report, he wrote:

"Some foreign banks suggested that in the mind of the public failings were largely attributable to those banks which had mis-sold retail products: by implication, the new body was not relevant to them."

One of the largest overseas investment banks, which employs thousands of people in Britain, said it would pay attention to whether its rivals signed up.

"We don't want to be the only foreign bank that doesn't sign up, but we are sceptical about the need to be involved," a source at the institution said.

The publication of Sir Richard's report follows a string of mis-selling and market-rigging scandals which have tarnished the reputation of the banking industry.

The near-collapse of the Co-operative Bank and the opening of an industry-wide inquiry into the possible manipulation of foreign exchange markets have accentuated the reputational crisis confronting major lenders.

As Sky News revealed on Sunday, Mark Carney, the Governor of the Bank of England, has agreed to play a leading role in selecting the inaugural chair of the BSRC.

Monday's announcement about the launch included a statement by the seven biggest high street lenders:

"The chairmen of Barclays, HSBC, Lloyds Banking Group, Nationwide, Royal Bank of Scotland, Santander and Standard Chartered welcome the publication of Sir Richard's final report.

"It confirms that there is a role for a new Banking Standards Review Council in restoring trust amongst customers and clients.

"They accept his recommendations and undertake to implement them expeditiously."

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House Prices Up As PM Mulls Help To Buy Future

House prices have risen 8% in the year to March, figures have shown, as David Cameron said he would "consider" changes to the Help To Buy scheme if advised to do so by the Bank of England.

While the increase is down on the 9.2% rise announced in February, according to the Office for National Statistics, the continued strong price growth, particularly in London and the South East, is set to fuel criticism of the Government scheme which underwrites home loans for people without large deposits.

Bank of England governor Mark Carney told Sky News at the weekend that the housing market had "deep, deep" problems.

In an interview with Sky's Murnaghan show, Mr Carney warned rising house prices represented the biggest current risk to the economy.

Mr Cameron says Help To Buy has helped tens of thousands of people

In response, the Prime Minister indicated he was open to rethinking Help To Buy, which critics argue contributes to forcing up house prices by fuelling demand, which far outstrips the supply of available homes.

Asked if he would look at reducing the programme's £600,000 threshold, Mr Cameron said: "Of course, we will consider any changes that are proposed by Mark Carney.

"But, as he said, this is a well-targeted scheme and it's helped tens of thousands of people get on the housing ladder and to have mortgages."

The PM was speaking ahead of the release of the ONS report which said property values continued to increase "strongly across most parts of the UK".

The ONS said annual house price rises in England were being driven by a 17% year-on-year increase in London, a 6.6% hike in the East and a 6.1% rise in the South East.

It has been warned the housing market has reached "boiling point"

The average house price in London has reached £459,000, while the average price in the UK as a whole now stands at £252,000, slightly down on the £253,000 peak in February.

The 0.5% drop marks the first time property values have fallen month-on-month in just over a year.

However, first-time buyers now face having to pay 10% more than they did a year ago, with the average price of a starter home standing at £193,000 in March, according to ONS figures.

Campbell Robb, chief executive of housing charity Shelter, said: "These figures are yet more proof that our housing market is reaching boiling point.

"With every rise in house prices leaving more people priced out or stuck in cramped homes, rollercoaster house prices are rapidly losing their feel-good factor."

Speaking to Sky News, Mr Carney signalled he is ready to take action to cool the housing market.

He said the Bank could adopt a range of measures, including imposing a new "affordability test" for borrowers and advising the Government to curb the Help to Buy scheme.

Lib Dem Chief Secretary to the Treasury Danny Alexander said: "Help to Buy doesn't change any of those, the qualifying criteria that people need to follow in order to get a mortgage, but what it does do is help to open up the housing market to people who otherwise would be excluded from it.

"I think that's a good policy objective but, of course, if the Bank of England suggest reforms to that we will certainly listen to that in the weeks and months to come."

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