Date: Tuesday 23 Jun 2015
LONDON (ShareCast) - Banks may not be happy with the new 'ring-fencing' rules, but just a decade on from the financial crisis they need to learn live with them. Legislation passed in 2013 set out the need for lenders to separate their retail and small business operations by 2019. The aim was to avoid banks using retail deposits´ government guarantee as a subsidy for their investment banking arms.
Critics say ringfencing could backfire if it turns out it was the retail divisions which were most dangerous, as occured with Northern Rock, the retail lender. Then there are the governance and other cost burdens associated with complying with the new regulation. So much so that HSBC may be preparing to hive off its retail operations. However, a robust argument can be made for others such as Lloyds and Santander UK to keep their treasury and foreign exchange units inside the fence. Ringfencing is just one more regulatory tool so banks should simply learn to live with it, writes the Financial Times´s Lex column.
With the passing of the uncertainty around the elections and after Ofwat set its prices for water companies for the next five years the M&A-rumour mill has started up again. That is no surprise, the remaining private water companies in the UK offer unparalleled visibility on dividends and earnings. Combined with rock-bottom borrowing costs they are attractive to overseas bidders. A report that Canadian infrastructure investor Borealis might have set its sights on Severn Trent sent the company´s stock duly higher. Indeed, the firm failed in a previous bid two years ago as part of a consortium of buyers. Even so, the most likely scenario is that no takeover offer will be forthcoming and heavy demand from investors has pared the dividend yield on the shares to 3.8%. Take profits, says The Times´s Tempus.
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