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PS: here’s our news story on the Treasury Committee hearing:
Mark Carney: massive shortfall in currency reserves for independent Scotland, writes @jilltreanor http://t.co/qFLJxZ0R7I #indyref
— Guardian Scotland (@GdnScotland) September 10, 2014
Closing post
And that’s all for tonight.
Highlights of the session, and instant reaction, starts here.
My lunchtime summary of the other events is here. That covers the surprise news that the UK’s next EU commissioner, Lord Hill, will cover financial services; France’s warning that it won’t hit its deficit targets until 2017, and the latest business reaction to the Scottish independence battle.
Andy Sparrow continues to liveblog the events in Scotland here:
Scottish independence: Poll gives no camp 6-point lead - Live
Thanks and goodnight. GW
Tyrie issues response to Mark Carney
Andrew Tyrie MP, Chairman of the Treasury Committee, has issued a response to Mark Carney’s comments on Scottish independence (details here).
Tyrie flags up governor Carney’s comments about the need for large currency reserves, which could require spending cuts or tax rises:
“Today the Governor clarified that, whatever currency arrangement is chosen - sterlingisation, a pegged exchange rate or a currency board – Scotland would require much higher reserves than it could inherit as a share of UK assets.
“That would leave a very big shortfall. As the Governor said, meeting this shortfall would mean ‘real fiscal costs’ for Scotland – almost certainly higher taxes or spending cuts.
“He also acknowledged the risk that financial firms domiciled in Scotland might migrate to seek the protection of lender of last resort cover from the Bank of England.”
The pound has jumped in late trading, up 0.7 of a cent to $1.618, after a new opinion poll from Survation showed the No campaign holding a 6-point lead in Scotland.
More in Andy Sparrow’s Scottish liveblog.
Mark Carney: Independent Scotland must build currency reserves
To recap.
Mark Carney, governor of the Bank of England, has indicated that an independent Scotland would need to build up billions of pounds worth of currency reserves if it did not agree a currency union with the UK.
Under tough questioning from the Treasury Committee this afternoon, Carney indicated that an independent country which used another country’s currency in an informal arrangement needs substantial reserves, to ensure that the arrangement is credible.
While trying to avoid saying anything new ahead of next week’s vote, Carney cited the example of the Baltic states who hold reserves worth around 25% of their GDP.
Given the Scottish economy is around £146bn (including the oil industry), this suggests that reserves totalling around £36bn would be needed if Scotland chose ‘sterlingisation’ - ie, using the pound without a currency deal.
The governor indicated that Scotland could start independence with around £15bn of reserves, depending on negotiations ahead of break-up.
The difference would probably have to come from increased taxation and reduced spending, suggested committee chairman Andrew Tyrie.
Jesse Norman tries to nail down the cost of sertlingisation for Scotland at £28bn-£30bn. Point is, most would have to be raised in taxes
— Philip Aldrick (@PhilAldrick) September 10, 2014
Carney to TSC: "countries which run successful currency sharing generally have large reserves" #Scotland
— Jesse Norman (@Jesse_Norman) September 10, 2014
My takeaway from Carney: if Scotland wants to keep its banks it'll have to raise somewhere between £10bn & £100bn in financial reserves
— Ed Conway (@EdConwaySky) September 10, 2014
John Thurso MP cited Hong Kong as an alternative example, arguing that Scotland would need £45bn of reserves.
Carney declined to give a figure. But he did agree to hand over the Bank of England’s work on currency sharing schemes first thing on Thursday morning, to show what level of reserves are needed.
Carney explained to MPs that ‘sterlingisation’ would require three elements to be successful:
- similar economic structures and business cycles
- a credible lender of last resort, and a credible deposit protection scheme
- And credibly banking standards, including capital and liquidity requirements.
And the amount of reserves needed can be larger if a country has a large, or complex, financial system, Carney added.
The governor warned that there could be problems if the two countries in question were diverging, rather than converging.
Carney also told MPs that the Bank of England has drawn up contingency plans to handle a Yes vote next week. He declined to say what they are, but indicated that they would tackle the risks of capital flight.
Scottish banks still have access to Bank of England facilities, and that Scottish deposits are backed by financial services compensation scheme, Carney explained, adding:
“There are reasons why we have contingency plans in place.”...
Updated
#Carney confirms #BankofEngland has contingency plans in place against possible capital flight if #Scotland votes Yes
— Jesse Norman (@Jesse_Norman) September 10, 2014
Mark Carney: Contingency plans to address Scottish capital flight risk
The session ended with another discussion on the Bank’s contingency plans.
Is there a risk of capital flight if Scotland votes for independence?
Mark Carney replies by explaining that Scottish banks still have access to Bank of England facilities, and that Scottish deposits are backed by financial services compensation scheme.
But he acknowledged that there is a risk, adding:
“There are reasons why we have contingency plans in place.”
And with that, chairman Andrew Tyrie brings the session to an end.
MPs are also asking about the eurozone.
Minouche Shafik, deputy governor, says that there is a risk of a prolonged of very low growth, and what’s been coined lowflation, which would make balance sheet adjustment very difficult, especially in the periphery.
She says that the eurozone needs closer fiscal co-ordination, supply-side, and demand-sized reforms.
Mark Carney wades in too, saying we must call “a spade a spade”. The reason Europe struggled so much since the financial crisis began is the currency arrangement in the eurozone, which forced wage deflation to create competition again, he says.
MPs on the treasury committee have challenged Mark Carney to give more details of the Bank’s contingency plans for Scottish independence.
He’s explained that the BoE would still be responsible for Scottish banks and financial stability after the referendum, whatever the outcome.
He reiterates that the Bank has contingency arrangements, and significant resources, and it will co-ordinate with its partners.
Updated
Martin Weale, one of the two hawks on the MPC, told MPs he voted to raise rates in August because he thought inflation would be higher than the Bank’s forecasts.
He also believes that wage growth acceleration was close.
But deputy governor Minouche Shafik, who voted to hold rates in August, argues that signs of imminent wage growth have proved misleading in the past.
Committee member Jesse Norman tweets:
Carney to TSC: "countries which run successful currency sharing generally have large reserves" #Scotland
— Jesse Norman (@Jesse_Norman) September 10, 2014
Here’s Phil Aldrick of the Times, summing up Mark Carney’s comments on sterlingisation.
Jesse Norman tries to nail down the cost of sertlingisation for Scotland at £28bn-£30bn. Point is, most would have to be raised in taxes
— Philip Aldrick (@PhilAldrick) September 10, 2014
Carney obfuscating because he doesn't want to be political - but he's clearly trying to agree. His behaviour is a bit of a nonsense really
— Philip Aldrick (@PhilAldrick) September 10, 2014
My takeaway from Carney: if Scotland wants to keep its banks it'll have to raise somewhere between £10bn & £100bn in financial reserves
— Ed Conway (@EdConwaySky) September 10, 2014
The Treasury committee has moved onto other issues, but I think it might be helpful to summarise Mark Carney’s comments on Scotland, so I’ll do that now....
John Thurso MP: Independent Scotland would need £45bn of reserves
Ah, we’re back on Scotland again.
John Thurso MP, Liberal Democrat MP for Caithness, Sutherland and Easter Ross, suggests to Mark Carney that an independent Scotland would need to accumulate £45bn of foreign reserves to underpin a credible lender of last resort (if it didn’t have a currency union).
Thurso points out that Hong Kong, which is dollarised (with a currency board) holds 30% of its GDP in reserves.
Based on Scotland’s GDP of £145bn (including oil), that means around £45bn, Thurso says.
And as Scotland would start independent life with around £15bn of reserves (see earlier in the blog), this means a significant shortfall that would need to be raised from somewhere.
Carney doesn’t dispute the maths, but is not willing to put a figure on Scotland’s needs. He’s still promising to provide the Bank’s views, based on historical evidence, tomorrow morning.
And he then gives this explanation:
The scale of reserves that a country that adopts another country’s currency increases with the size of the country’s financial system, the complexity of its financial system, the extent of [cross-border banking].
But it is also a function of the fiscal position of the country, the fiscal strength, as that provides more credibility.
And it is also a function of the credibility of the arrangement -- is it seen as a permanent relationship, or is there the possibility that is is a temporary arrangement.
Even that’s not enough for Andrew Tyrie -- is it not a fact that the size of the reserves is one of the most important factor that determines the credibility of the Lender of Last Resort?
Carney acknowledges that this is true, but he is not prepared to judge what reserves Scotland might leave with. That’s a matter for negotiation, he replies.
Onto other issues, and David Miles (giving Mark Carney’s throat a rest) says that the financial crisis has caused some permanent loss of GDP, but he hopes that productivity will recovery.
BoE to produce figures on Lenders of Last Resort
Mark Carney agrees that that the Bank of England will produce figures on its position regarding the reserves needed for a credible lender of last resort.
Those estimates will be based on GDP, bank reserves, and broad money (ie, how much money circulates through an economy).
Those estimates will be in the hands of Andrew Tyrie, chairman of the Treasury committee, “first thing tomorrow morning”.
Even if the BoE doesn’t apply those figures to an independent Scotland directly, I imagine it will be easy for us to make calculations....
Mark Carney insists that everything he has said today is consistent with his previous testimony.
Ditto his TUC speech yesterday (when he said a currency union was incompatible with sovereignty). There’s no change in position since my original speech in January, he tells the committee.
Carney explains to MPs that under European law, a Lender of Last Resort must stand behind the banks who are based in its jurisdiction.
It’s not an issue of where the assets are based -- it’s where the bank is headquartered.
There’s some dispute about how large Scotland’s GDP. Carney says £106bn, but Stewart Hosie MP insists it’s more like £145bn once oil is included....
We don’t know, of course, how those resources will be split up.
Bank of England will implement contingency plans if Scotland votes for independence
Governor Mark Carney says the Bank of England will implement contingency plans if needed, to support UK financial stability, if Scotland votes for independence.
Carney says that the eurozone has taught us the need for fiscal arrangements within currency unions.
Mark Carney concludes this series of tricky questions on Scotland by offering this explanation of how sterlingisation could operate:
Any currency arrangement has to be credible, he says. It is a judgement for the relevant authorities what best suits their economy and their broader circumstances
And regarding fiscal matters, it is a judgement about the priorities of those authorities, he adds.
Mark Carney appears to be suggesting that Scotland would start its independent life with around £15bn of reserves (including the assets which currently underpin the £5bn of notes in circulation).
So if the 25% of GDP is the minimum needed for credibility, as indicated at 3.07pm, it would need to raise another £20bn or so.
So sounds like Carney is saying Scotland will get £10bn-£15bn of reserves and would need to raise more
— Philip Aldrick (@PhilAldrick) September 10, 2014
A quarter of GDP would be required he reckons, at least. Scottish GDP with oil is £145bn - so the extra would be £20bn at least
— Philip Aldrick (@PhilAldrick) September 10, 2014
The crucial unknown factor in deciding what reserves an independent Scotland would need is how its financial sector would respond to the break-up.
The Scottish banking sector currently holds £1 trillion of assets, and has around £800bn of deposits.
Mark Carney on Scots bank sector to TSC: £1tr total assets; £800bn deposits. Seems to be saying needs £106bn of reserves. Actual = £10bn!
— George Hay (@gfhay) September 10, 2014
Could an independent Scotland borrow from the IMF to build up its reserve requirements, Tyrie asks?
After a brief pause, Carney declines to offer hypothetical advice to a future Scottish government. There are various ways of obtaining funding, he points out.
But borrowing would be a “transitional mechanism”. Ultimately, it’s about the “underlying resources” that underpin an economy.
OK, Mark Carney is going to submit some firm numbers on the issue of the reserve requirements for Scotland, if it chooses to use the pound without a currency union.
He still appears reluctant to commit too fully though.
Andrew Tyrie has been totalling up the maths, and suggests that Scotland may have £15bn of reserves.
Carney doesn’t deny it, but he’s trying to stick to historical examples rather than give a guesstimate for Scotland.
(updated)
Updated
The governor is ducking and weaving where he can....
Mark Carney is currently doing all he can to avoid saying anything new about Scotland at the Treasury Select Committee. Doing well so far...
— Ed Conway (@EdConwaySky) September 10, 2014
Important point. Mark Carney explains that the reserves needed to fund a credible lender of last resort must be raised over time. By borrowing in the markets, and by running current account and budget surpluses.
So we’re talking higher taxes or lower spending, Andrew Tyrie MP homes in?
Carney is not prepared to get into discussions about fiscal policy. It’s all an issue of budget decisions, consistent with the currency arrangement which a government decides on.
Updated
Carney does not appear comfortable discussing this issue.
Carney suggests that a Scottish central bank might require sterling reserves worth around 25% of its GDP to fund a credible lender of last resort. That’s based on Baltic States.
Hong Kong, though, has reserves totalling 120% of its GDP.
Carney says that the banknotes currently circulating in Scotland are currently backed 1 to 1 with assets by the Bank of England. That will continue, he says.
Updated
#carney Lender of last resort has to be backed up by FX reserves
— BlondeMoney (@MarketBlondes) September 10, 2014
Andrew Tyrie seeks some details: What sort of reserves to deposits, reserves to GDP, and broad money measures would be needed?
Carney offers to come back with ‘robust’ numbers in the coming days.
Tyrie wants some ballpark figures now....
10-Sep-2014 14:58 - BANK OF ENGLAND’S CARNEY - CENTRAL BANK NOT NECESSARILY A CREDIBLE LENDER OF LAST RESORT IF DOES NOT ISSUE CURRENCY
10-Sep-2014 14:58 - BANK OF ENGLAND’S CARNEY - INDEPENDENT SCOTLAND WOULD NEED ACCESS TO STERLING RESERVES TO BE CREDIBLE LENDER OF LAST RESORT
Carney on Lenders of Last Resort
And how would a lender of last resort work under sterlingisation?
Carney says that simply having a central bank isn’t enough, if it isn’t the issuer of the currency. And you also need to be backed up by a government.
And if you are using a foreign currency, you would need reserves in that foreign currency, Carney explains.
In other words, without those reserves, a country using another country’s currency would not be able to underwrite bank deposits.
Mark Carney on sterlingisation
What are the major issues involved in sterlingisation, Tyrie asks Mark Carney?
Carney says it is a “particularly sensitive time” to be discussing this issue (ie, using the pound without a currency union).
I am quite intent to restricting my testimony to points that are consistent with previous testimony, the governor insists.
And then he explains what it would take to work:
1) You would need similar economic structures and business cycles. As with a currency union.
So monetary policy would be consistent across both countries.
And it would be in the country using sterlingisation to ensure the flow of labour and capital across both countries.
2) But in addition.... the country choosing to use another one’s currency would need certain ‘buttressing’
You would want a credible lender of last resort....a credible deposit protection scheme.
And the credibility of those institutions is partly a product of the fiscal credibility of the country involved, Carney adds.
3) And the third broad element is that the prudential standards of the banks in the country, such as capital and liquidity requirements.
In reality, capital requirements are usually higher in a country that has chosen to use another one’s currency.
And finally, the extent to which this system works is partly a function of the similarity of the economies.
But also to what extent the adoption of another currency is part of convergence or divergence. That effects the overall credibility of the system.
Tyrie responds: IN scotland’s case, we are looking at divergence, governor?
To an extent yes, we are looking at divergence, Carney replies.
Andrew Tyrie starts with the Scotland question to Bank of England governor Mark Carney "bad luck we are going to persist with qs on this"
— Jill Treanor (@jilltreanor) September 10, 2014
And we’re off... and Andrew Tyrie has started the hearing by asking about Scotland....
Preamble...Bank of England at the Treasury Committee
Time for the main event of the day.... Parliament’s Treasury committee are about to hold a session with senior policymakers at the Bank of England.
Governor Mark Carney, deputy governor Nemat Shafik, and MPC members Martin Weale and David Miles will all take questions from MPs.
Officially, it’s to discuss last month’s quarterly inflation report, during which the BoE denied being clueless about the labour market.
But we’re also expecting (hoping?) for some questions on Scottish independence.
It is being streamed live here.
JPMorgan: Scottish Yes vote would hit UK growth
JPMorgan analysts are predicting that Scotland will reject the chance of independence, citing the example of the Quebec referendum in 1995.
They are speaking on a conference call now, and warned that the UK economy would suffer from a yes vote :
Economists at JP Morgan still expect a no vote in Scottish referendum but the outcome is looking "a lot closer".
— Angela Monaghan (@angelamonaghan) September 10, 2014
JP Morgan: The past tells us that voters tend to back the status quo, irrespective of polls. Cites Quebec vote in 1995.
— Angela Monaghan (@angelamonaghan) September 10, 2014
JP Morgan: A yes vote would lower UK growth over next six months and would push back first interest rate rise to Q2 2015 from Q1 #Scotland
— Angela Monaghan (@angelamonaghan) September 10, 2014
I may have been wrong to suggest that the European Parliament couldn’t block Lord Hill....
The Telegraph’s Bruno Waterfield reports that socialist MEPs have warned they will veto him unless he enforces an EU cap on banker bonuses:
“We will not accept any backsliding on curbing bonuses. Major banks using allowances to side-step the cap is a provocation,” said Gianni Pittella, the Italian leader of Socialist MEPs.
“If you are part of the EU you must apply the same rules as any other member state. The next commissioner for financial services must be crystal clear on this, otherwise we will reject their candidacy.”
Lunchtime (ish) summary
Time for a recap, before the Treasury committee begin hearing from the Bank of England at 2.45pm BST.
Britain is celebrating a rare success in Brussels after Lord Hill, the UK’s next European Commissioner, was surprisingly handed responsibility for financial services and supervision.
Jean-Claude Juncker says the move shows there are no hard feelings over Britain’s opposition to him. George Osborne called it “great news”, and Liberal Democrat MEP Catherine Bearder says:
Despite the bumpy start to our relationship, President Juncker has shown he is prepared to work closely with the UK and take on board British concerns.
“The UK is the world’s biggest exporter of financial services, much of which go to the EU, and so this is clearly an area that is central to our national interest.... (more here)
UK business groups have welcomed the appointment, which may indicate a thawing of relations between London and Brussels.
Lord Hill has already been swamped with advice. The Institute of Directors wants more liberalisation and less EU red tape, while the CBI hopes Lord Hill can free up the financial services industry and encourage growth and jobs.
But German politician Sven Giegold says the nomination of the “right-conservative” Brit is an “unacceptable provocation”.
Elsewhere....
The Scottish independence referendum continues to loom over the City.
The pound hit a new 10-month low against the US dollar, and a three-month low against the euro, on speculation that an opinion poll tonight will contain dramatic news.
Kingfisher CEO Sir Ian Cheshire, and BP boss Bob Dudley, have both come out in favour of a No vote today.
Two foreign exchange brokers have reported a surge in demand to trade sterling since last weekend.
France has confirmed that it will miss its deficit targets, and not cut borrowing to 3% of GDP until 2017.
The FTSE 100 will soon have five female CEOs. Véronique Laury, the head of Kingfisher’s French DIY business, is replacing Sir Ian Cheshire.
And Santander chairman Emilio Botin has died, aged 79, after a glittering career creating one of Europe’s most powerful banks. His daughter Ana is expected to take over.
One caveat; Lord Hill still needs to be approved by the European Parliament.
He could get a hostile reception, but I believe they can’t block his appointment; MEPs either approve or reject the Commission en masse.
Open Europe, the think tank, explains what Lord Hill’s job will be:
- Overseeing the creation of the banking union – a crucial policy for the Eurozone but also one which threatens to split the EU into euro-ins and outs. In his new role, Lord Hill can ensure this does not happen.
- Power to review the role of the European supervisory authorities, institutions which have been controversial in the UK since their creation.
- Responsibility for a Capital Markets Union. While this remains vague it could be a good initiative for the UK since London is already the centre of European capital markets. Lord Hill can base the union around the single market rather than the eurozone.
This letter from Jean-Claude Juncker to Lord Hill has more details.
Open Europe also reckons that the overall commission is “positive” for the UK. More details here.
Catherine Bearder, Liberal Democrat MEP for the South East, reckons Lord Hill’s appointment shows Britain still wields influence in Brussels.
“Despite the bumpy start to our relationship, President Juncker has shown he is prepared to work closely with the UK and take on board British concerns.
“The UK is the world’s biggest exporter of financial services, much of which go to the EU, and so this is clearly an area that is central to our national interest.
“I now look forward to working with Lord Hill to lead reform of the EU in services and to give a huge boost to jobs and growth in Britain and across Europe.”
Lord Hill's appointment as EU Financial Services Commissioner is a victory for British influence in Europe http://t.co/GjWxQVBbKu #EUtopjobs
— Catherine Bearder (@catherinemep) September 10, 2014
Jean-Claude Juncker has told the BBC’s Gavin Hewitt that Lord Hill’s appointment shows there are no hard feelings against David Cameron (who tried to block Juncker from becoming EU president).
Juncker tells me re Lord Hill 'I always intended to give a major portfolio to the British Commissioner.'
— Gavin Hewitt (@BBCGavinHewitt) September 10, 2014
More from Juncker re Lord Hill. Says wanted 'to avoid the impression that I could or would be angry' - a reference to Cameron's opposition
— Gavin Hewitt (@BBCGavinHewitt) September 10, 2014
Back to Lord Hill’s appointment, and the CBI wants the Conservative peer to push growth and job-friendly reforms.
Katja Hall, CBI deputy director-general, says:
“Business is looking for Lord Hill to use his key role at Europe’s top table to push for reforms that will create jobs and growth across the continent. This major appointment along with the make-up of the full Commission has laid strong foundations for ambitious reform in Europe.
“At the top of the new Commission’s in-tray should be completing the Single Market, getting an EU-US trade deal over the line and pulling back where the EU does not add value.
“Lord Hill must see through the important steps already taken to secure Europe’s financial stability and seize the opportunity to keep Europe’s financial markets open, competitive and able to deliver the finance businesses need to grow. This will allow the UK financial services industry, so central to our economic success, to deliver for the whole of Europe.
And if that wasn’t enough of a challenge, the CBI would be grateful if he’d do his bit to avoid Brexit:
“Now Lord Hill must work hard to cement alliances in Europe, making the UK’s case in Brussels while also selling the benefits of the EU in the UK.”
Jumping back to Scotland briefly, BP’s chief executive Bob Dudley has issued a statement in favour of the No campaign.
Dudley says:
As a major investor in Scotland – now and into the future – BP believes that the future prospects for the North Sea are best served by maintaining the existing capacity and integrity of the United Kingdom.
Not the first time Dudley has warned about independence, as Andy Sparrow flags up in the Scotland Live Blog.
BP’s statement came shortly after Standard Life warned that it could pull pensions and investments from Scotland if it chooses independence.
We’re collecting a list of businesses who have come out for or against independence here:
Scottish independence: which firms are in the yes or no camp?
Who is Lord Hill anyway? As the two profiles below explain, the former PR man has risen through the ranks to become an important voice within the Conservative Party without ever really capturing the public’s attention.
As John Major’s former political secretary, Jonathan Hill played a role during the Maastricht Treaty negotiations. His appointment as Leader of the House of Lords was meant to bring more brainpower to the cabinet.
And there was a fantastic story (later denied) that he tried to resign in 2012, but David Cameron wasn’t paying attention.
Updated
Hugo Brady of the London School of Economics reckons Jean-Claude Juncker has played his cards adroitly, by giving Lord Hill the revamped “Financial Stability, Financial Services and Capital Markets Union” portfolio.
Brady says:
“Juncker has done a very good job of marshalling quite an array of big beasts. A lot of decisions are quite courageous.
“Hill for financial affairs is a major peace offering to Cameron. It is clever, it is political and it is generous.”
And French get econ portfolio, in proof of what we all knew deep inside: JJ Juncker is a master dealmaker who will leave no one unhappy
— Matina Stevis (@MatinaStevis) September 10, 2014
Updated
While Lord Hill gets financial services, former French finance minister Pierre Moscovici has been given the economic and monetary policy portfolio.
But both men will be ‘supervised’ by former Finnish prime minister Jyrki Katainen and former Latvian prime minister Valdis Dombrovskis.
Associated Press explains:
Like Moscovici, Hill’s brief will be overseen by Katainen and Dombrovskis, part of a structure in which [EU president Jean-Claude] Juncker said seven vice-presidents would help coordinate the work of the Commission, on which each of the 28 member states has one seat.
“I have decided to make some changes and to shake some things up a bit,” Juncker told a news conference. His new structure will have more vice-presidents than before and they no longer have their own portfolios but oversee broader themes.
Updated
UKIP leader Nigel Farage claims Lord Hill won’t fight Britain’s corner in Brussels.
Lord Hill will not work for the UK's interest, he has to swear an oath to work for the EU's interest
— Nigel Farage (@Nigel_Farage) September 10, 2014
IoD "greatly welcomes" Lord Hill's appointment
The Institute of Directors has also hailed the decision to hand Lord Hill the EU Financial Services commissionership.
Director general Simon Walker reckons Hill is getting “a significant economic portfolio”:
Entrusting this commitment along with financial services to a UK Commissioner is a clear demonstration that British influence in Brussels is far from waning.
The IoD hopes that Lord Hill can help stimulate the ailing European economy by helping to create a new ‘capital market’ across the region, to stimulate bank lending.
Walker says:
“The torrent of financial sector regulation that has come from Brussels over the past 5 years has often been counterproductive. Further liberalisation as a means of boosting business and economic growth is vitally important for both the UK and the EU as a whole.
The best solution to the vicious downward spiral of deflation and low growth must be capital markets which allow new firms to find financing and help savers invest in their pensions. The City of London and the financial industry as a whole are key drivers of growth and represent a real asset for the European Union as a whole.
Challenge for Lord Hill to show he's serious abuot boosting access to high-quality financial services across EU, not just boosting City.
— Simon Nixon (@Simon_Nixon) September 10, 2014
EEF, which represents Britain’s manufacturers, has welcomed Lord Hill’s appointment.
Terry Scuoler, EEF chief executive, says:
Britain must punch above its weight in Brussels and our commissioner has to play a key role in the reform, growth and competitiveness agenda for the EU. This portfolio gives Lord Hill a chance to do that in an area of policy which is of critical importance for the UK economy.”
Updated
German politician Sven Giegold has slammed the choice of Lord Hill to the financial services brief.
Giegold says the nomination of the “right-conservative” Brit is an “unacceptable provocation”.
Die Nominierung des rechtskonservativen Briten Jonathan Hill als Finanzmarktkommissar ist eine unakzeptable Provokation. #JunckerTeamEU
— sven_giegold (@sven_giegold) September 10, 2014
Giegold is the speaker of the Green Party group in the European Parliament.
Updated
Remarkable gesture by Juncker to hand financial services to UK so soon after collapse of UK bank sector and string of scandals.
— Simon Nixon (@Simon_Nixon) September 10, 2014
George Osborne has welcomed the news that Lord Hill, Britain’s man in Brussels, will be overseeing financial services.
It’s “great news” for the UK, the chancellor tweets.
Look forward to working with Lord Hill, EU financial services Commissioner, to build safer & more competitive sector. Great news for UK
— George Osborne (@George_Osborne) September 10, 2014
Lord Hill’s appointment as EU financial services commissioner is a win for Britain, the Financial Times reckons
The FT’s Alex Barker says:
Financial services regulation has been the apple of discord between London and Brussels in recent years, as the EU has expanded its authority and pushed through contentious measures such as the banker bonus cap.
Mr Juncker’s willingness to offer this plum portfolio to Mr Cameron is an indication of how seriously his Commission will take the need to solve “the British question” ahead of a possible in-out referendum.
The nomination will be seen as a victory for Mr Cameron given the rock-bottom expectations in Westminster. At the height of tensions with London, some aides to Mr Juncker signalled that Britain would pay a heavy price for its failed campaign to stop him becoming president.
Lord Hill appointed EU financial services commissioner
Lord Hill, Britain’s EU commissioner, has just been handed the prized role of commissioner for financial stability, financial services and capital markets union”
That’s a surprise, frankly, and a rare bit of good news for David Cameron.
Might it mean a thawing in relations between Brussels and the City, following recent clampdowns on City bonuses and such like?
Full details of Jean-Claude Juncker’s team are online here.
Stunner: UK's Hill gets financial services in new @JunckerEU team.
— Peter Spiegel (@SpiegelPeter) September 10, 2014
European Commission 2014-2019 #Juncker: UK's Hill with financial services, 3 female VPs, new portfolios. pic.twitter.com/ya4dpWcsAd
— Jakub Krupa (@JakubKrupaFE) September 10, 2014
World First: Opinion polls will keep hitting sterling
Currency exchange company World First reports that it has seen a 30% increase in trading volumes since YouGov put the Scottish Yes camp in the lead last Sunday.
It says clients are rushing to protect themselves against the falling pound, and believes this volatility will continue.
Chief economist Jeremy Cook explains:
“Until we receive a clear Yes or No vote, sterling will pitch and yaw with the results of each opinion poll. Global investors are uncertain as to the longer-term economic prospects of an independent Scotland and a broken union, and will continue to pressurise UK assets as long as this fear remains.
“If Scotland votes Yes next week, then the sterling implications could be horrific.”
That Scottish poll speculation also sent the pound down to a three-month low against the euro.
It dropped another 0.13% to €1.243, the lowest since mid-June.
Updated
Pound hits new 10-month low against the dollar
Sterling has hit a new 10-month low against the US dollar as jitters over Scottish independence continue to reverberate through the financial markets.
The wobble comes ahead of an eagerly-awaited new Scottish opinion poll, due tonight.
That poll, by Survation, is scheduled for 10.30pm BST, and the company itself says that the results are “VERY interesting”.
After a solid start, the pound slid almost a cent to $1.6053, the lowest since November 2013. It then bounced back a little, but remains below $1.61.
Our #indyref figs for @daily_record are VERY interesting @davieclegg will tweet headline numbers first - follow @survation for full info
— Survation (@Survation) September 10, 2014
Patrick Graham of Reuters says that opinion poll rumours are hitting the pound.
Sterling getting another hammering the last half an hour following the rumours of the Survation poll #indyref
— Patrick Graham (@reutersPatrickG) September 10, 2014
For full coverage of events in Scotland, do track out Scottish Independence Liveblog:
Scottish independence referendum: Cameron, Miliband and Clegg visit Scotland to campaign for no - Live
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Lloyds CEO Antonio Horta-Osorio says Emilio Botin was a "great mentor to me"
— Richard Partington (@RJPartington) September 10, 2014
Greek deflation rate eases
Greece remains in deflation, although the pace of decline eased last month, according to the latest consumer prices figures.
Prices fell by 0.3% in August, compared to a year earlier, following a 0.7% drop in July. That’s a smaller fall than expected, but means prices have shrunk for the last 18 months running as the country’s austerity programmes hit demand and push down wages.
Disdeflation.. RT @TradeDesk_Steve: Greek h CPi was much less negative than expected at -0.2% v -0.5% expected
— Lorcan Roche Kelly (@LorcanRK) September 10, 2014
If Ana Botin does leave @santanderuk for Madrid, it will be a huge loss for UK business. She has been terrific - a breath of fresh air.
— Ian King (@IanKingSky) September 10, 2014
More reaction to the death of Santander chairman Emilio Botin (see 8.38am), which may mean daughter Ana will take over.
One of the titans of European banking, Emilio Botin, dies. Built up Santander into behemoth status. Successor presumably his daughter Ana?
— George Hay (@gfhay) September 10, 2014
Assumption was Emilio Botin wd retire at 83 like his father; Ana would take over after listing Santander UK. His death at 79 changes things.
— George Hay (@gfhay) September 10, 2014
*ANA BOTIN SAID TO SUCCEED EMILIO BOTIN AS SANTANDER CHAIR: SKY
— Carlos Babiano (@_CarlosBabiano_) September 10, 2014
Bank of England witnesses could show rate dissent
The main event of the day will be Mark Carney’s appearance, with senior colleagues, at the Treasury committee at 2.45pm, says Ilya Spivak, currency strategist at DailyFX.
Carney is testifying on last month’s inflation report, alongside deputy governor Nemat Shafik and MPC committee members Martin Weale and David Miles.
Weale is one of the two hawks who voted for a rate rise in August (and quite possibly in September too, although we don’t find out until the minutes are released next week).
So there could be dissent today, Spivak reckons, and that could possibly push the pound up:
“Mr. Carney argued in favor of an initial rate hike by spring of 2015 with gradual tightening thereafter in a speech in Liverpool yesterday. At least one of his colleagues also due to testify sees that as too dovish considering Mr. Weale was one of the two dissenting votes in favor of an August rate increase.
“The British Pound paused to digest losses yesterday, ending a 5-day losing streak, as feverish fears of the looming Scottish Independence referendum cooled absent novel news-flow (as expected). If the cumulative tone of BOE officials’ rhetoric betrays a growing hawkish consensus, the UK unit may at last find fuel for a meaningful recovery.”
France to miss deficit targets
Quelle surprise. France has announced that it won’t hit its deficit targets.
Finance Minister Michel Sapin told a press conference that the French deficit won’t fall to 3% of national output until 2017, two years later than the previous extension agreed with EU partners.
Sapin told a news conference that the deficit will probably rise this year, to 4.4%, before only dipping slightly to 4.3% in 2015.
He also slashed France’s growth figures yet again, to just 0.4% this year and 1% in 2015.
Sapin argued that France’s economic troubles mirror a broader lack of growth in Europe. He isn’t seeking a change to the deficit rules, but wants Brussels to take into account the continuing weakness of the euro zone’s second largest economy.
France will push on with its plan to cut €21bn from public spending next year, without raising taxes, Sapin added.
Some detail on the new boss of Kingfisher:
New Kingfisher CEO Veronique Laury is a competitive showjumper. She has completely renovated three homes. And, yes, she's a mother of 3.
— Andrew Clark (@clarkaw) September 10, 2014
Housebuilder Barratt Development has doubled its profits, thanks to the recovery in the UK property market.
But the party may be over. Barratt says “things are settling down to a more sustainable pattern”, after the government’s Help to Buy scheme sparked demand last year.
More here: Barratt doubles annual profits on back of Help to Buy scheme
Back on the pound.... Societe Generale’s currency expert Kit Juckes has predicted that sterling could call further, after stabilising this morning.
.@kitjuckes: "sterling has fallen a bit too fast in the near term and is due a bounce, but there is more downside to come" #indyref
— Katie Martin (@katie_martin_FX) September 10, 2014
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Sir Ian Cheshire reiterates warning over Scottish Yes vote
Sir Ian Cheshire, Kingfisher’s outgoing CEO, has repeated his concerns about Scottish independence.
Speaking to reporters this morning, Cheshire warned that consumers could face higher prices, and argued that there’s no chance of a currency union being hammered out.
He also suggested that other business leaders could go public with their concerns soon:
Kingfisher CEO says Scottish yes vote = price rises and less investment. Keeping £ and staying in EU no matter what "is not going to happen"
— Sean Farrell (@farrell_s) September 10, 2014
Kingfisher CEO says Scots must "take this extremely seriously". "There is no way that currency union will be permitted."
— Sean Farrell (@farrell_s) September 10, 2014
Kingfisher CEO Cheshire expects other business leaders to come out against independence in the next few days. Nothing coordinated though.
— Sean Farrell (@farrell_s) September 10, 2014
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All change at British DIY chain Kingfisher, with CEO Sir Ian Cheshire announcing his departure this morning.
He’ll be replaced by Véronique Laury, the head of Kingfisher’s French DIY business, taking the number of female FTSE 100 bosses up to five.
Here’s our story: Kingfisher names French DIY boss Véronique Laury as new chief executive
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A slightly stronger start today for the UK Pound £ as it pushes above US $1.61 and nears 172 Yen #GBP
— Shaun Richards (@notayesmansecon) September 10, 2014
Santander chairman Emilio Botin dies, aged 79
One of Europe’s most venerable bankers has died.
Emilio Botin, chairman of Spanish banking giant Santander, passed away last night after a heart attack, the company announced.
Shares in Santander have dropped 1.7% in early trading.
BREAKING: Santander says Chairman Emilio Botin has died http://t.co/mBHCbLdvbv pic.twitter.com/BQx14Nu9zI
— Bloomberg TV (@BloombergTV) September 10, 2014
During a glittering career, Botin turned Santander into one of the world’s major banks.
He bought Britain’s Abbey National building society in 2004, followed by Alliance & Leicester and Bradford & Bingley during the financial crisis. They now make up Santander UK, run by Botin’s eldest daughter, Ana.
Could she now take over the whole company?
Death of Emilio Botin is momentous: the last of Europe's owner/manager bankers. Will have repercussions for Santander in UK
— Robert Peston (@Peston) September 10, 2014
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FX broker reports surge in demand after sterling's slide
Foreign exchange broker HiFX had reported a jump in business since opinion polls began to show the Yes campaign gaining momentum in Scotland.
It says inquiries are up 67%, and currency transfers up 35%, since Sunday’s YouGov poll showed a majority of Scots would vote for independence.
Mark Bodega, director at HiFX, explains:
“Having held off making transfers as they watched the pound steadily rise against many of the world’s currencies, it seems as if the recent polls have focused clients’ minds.
In the last two days, enquires from both private individuals and businesses have shot up 67% as Brits around the world look to protect themselves or take advantage of the sterling’s sudden dip”.
Bodega reckons the pound could fall by another 3% if the Yes campaign win on the 18th, while a No victory could spark a rally, depending on the majority.
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The pound has inched back from its 10-month lows in early trading, as foreign exchange traders take a rest from pummelling sterling.
One pound is trading at $1.613 this morning, up 0.16% - small relief given its 6.5% slide since mid-July.
Sterling has lost almost five cents against the dollar this month, partly driven by the growing prospect of the Yes campaign winning next week’s referendum.
Marc Ostwald of ADM Investor Services reckons the pound may face further falls, as:
Referendum poll event risk is now writ large, and respite is unlikely to be on the agenda, even if the pound does look very oversold short-term.
Opening post: Mark Carney appearing before MPs this afternoon
Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and the eurozone.
The Scottish referendum continues to loom over the financial markets today.
Bank of England governor Mark Carney, who yesterday declared that “a currency union was incompatible with sovereignty”, is due before the Treasury Committee at 2.45pm BST today to discuss the latest Inflation Report.
MPs are certain to grill Carney about Scotland, amid concerns of capital flight as the 18 September vote approaches.
The uncertainty over the United Kingdom’s future is weighing on shares too; European stock markets are expected to fall at the open, having dropped for three days running.
Stam Shamu of IG says Scotland is just one of several worries:
Global equities have retreated with the wall of worry across major economies sending investors into a cautious mode.
There are a number of key issues plaguing sentiment at the moment, including a more hawkish Federal Reserve, a struggling China economy, the Scottish referendum and potential hiccups for the ECB’s stimulus plans.
Here’s IG’s opening calls:
- FTSE 6817 -12 points
- DAX 9685 -26
- CAC 4440 -8
- IBEX 10927 -25
- MIB 21090 -60
And in the corporate world, there are results from Kingfisher, housebuilder Barratt and retailer Sports Direct to chew through.
I’ll be tracking all the key developments through the day....
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