Morgan Stanley, Citigroup cold feet on business fund |
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| Economy | |
| Written by Paul Williams | |
| Friday, 18 December 2009 | |
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Morning Business News, Friday 18 December: Morgan Stanley, Citigroup, banker bonuses and bank migration.
Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C) are amongst a number of US investment banks operating in London that have been accused of turning their back on a small business investment fund to be set up by the government. The establishment of the National Investment Corporation (NIC) was announced by Gordon Brown in September and is essentially a £1bn fund intended to establish credit lines to stuttering small businesses in the UK. Big US investment banks, such as Morgan Stanley, Citigroup and Goldman Sachs were to join the likes of RBS, Lloyds Banking Group and Barclays in contributing to the fund. However, Ian King write in the Times this morning that the Treasury is now having a hard time convincing the US investment banks to take part in the scheme. King suggests that the recently imposed 50% tax on bankers bonuses over £25 000 could be the source of a reluctance to commit. Morgan Stanley and Citigroup are believed to have been asked to committ £25m each. RBS and Lloyds Banking Group have already confirmed they will commit £100m each while Barclays and HSBC Holdings are still dithering on the matter. Banker bonusesModest restraint by the banks during the boom years over bumper bonuses and dividends would have spared taxpayers the cost of recapitalising them during the financial crisis, the Bank of England says. It also highlights the fact that more than £1trn of funding will have to be found by lenders to finance their activities over the next few years, with no evidence that the Bank is enthusiastic about extending its current unprecedented support, reports the Independent. We could do without some banksMeanwhile, a senior Bank of England official said that if some banks migrated overseas in response to tougher UK regulation “it might be a price worth paying” to protect the reform of the financial system in the wake of last year’s crisis. The comments, made by Andy Haldane, the Bank’s head of financial stability, in a BBC World Service interview to be broadcast on Friday, are certain to exacerbate tensions between the authorities and the financial sector, the Telegraph reports.
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