ECB Lends Record $622 Billion in Bid to Ease Crisis

ECB Lends Record $622 Billion in Bid to Ease Crisis

(Source WallStreet Journal) FRANKFURT -- The European Central Bank pumped a record €442 billion ($622 billion) into euro-zone money markets Wednesday in its first-ever offer of one-year funds as it battles the Continent's recession.
Euro-zone banks borrowed the one-year funds, the largest amount the central bank has ever dispersed in a single shot, at the ECB's current key rate of 1%. Much of the total likely substituted for amounts banks had been borrowing from the ECB for shorter periods, so the net stimulus to the economy is less than it appears at first sight.
The novelty lies more in the length of time over which the ECB is prepared to offer unlimited funding, reflecting a desire to bring longer-term money-market interest rates down. Although the risk premium that banks charge each other for funds has fallen since the dramatic days of September, it still appears big enough to strain the economy.

The ECB's move signals the central bank remains committed to bolstering the euro-zone economy even as policy makers world-wide discuss how best to unwind the welter of monetary and fiscal stimulus pumped into the global economy over the course of the crisis. The ECB believes the 16-nation euro-zone economy will start growing again by the middle of 2010.

The ECB said in May that it would begin offering banks funds for one year. Before Wednesday, the longest period banks could borrow from the central bank was six months.

Standard & Poor's cuts ratings on 22 banks S&P cuts ratings on 22 banks amid concern over further weakening in financial sector

Standard & Poor's cuts ratings on 22 banks
S&P cuts ratings on 22 banks amid concern over further weakening in financial sector

NEW YORK (AP) -- Credit ratings agency Standard & Poor's on Wednesday cut ratings and revised outlooks on 22 banks amid concern about further weakening in the financial sector.
S&P said the changes reflected its assessment that volatility will remain in the financial sector and the industry is expected to face tighter regulatory oversight. S&P also said loan losses, which have plagued the industry for more than a year, are likely to continue to increase and could grow beyond expectations.

BB&T Corp., Capital One Financial Corp., PNC Financial Services Group Inc., Regions Financial Corp. and Wells Fargo & Co. were among the largest banks that saw their ratings cut by S&P.

Widescale changes to the industry because of the credit crisis and ongoing recession will dramatically alter the banking landscape, S&P credit analyst Rodrigo Quintanilla said in a release.

"We believe the banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions," Quintanilla said. "Financial institutions are now shedding balance-sheet risk and altering funding profiles and strategies for the marketplace's new reality. Such a transition period justifies lower ratings as industry players implement changes."

S&P did note that recent capital raising efforts in the sector will help defray some of the losses banks are facing.

Lower credit ratings make it more expensive for companies to borrow money and can sometimes lead to difficulty accessing credit. Low ratings can also affect investments in a company's debt as some institutional investors are required to only hold debt rated at a certain level.

Ratings were also cut on Associated Banc Corp., Astoria Financial Corp., Carolina First Bank, Citizens Republic Bancorp Inc., Comerica Inc., Fifth Third Bancorp, First National Bank of Omaha, Huntington Bancshares Inc., KeyCorp, M&T Bank Corp., Susquehanna Bancshares Inc., Synovus Financial Corp., U.S. Bancorp, Valley National Bancorp, Webster Financial Corp., Whitney Holding Corp., and Wilmington Trust Corp.

The ratings of Carolina First Bank, Citizens Republic Bancorp, Huntington Bancshares, Synovus Financial and Whitney Holding were cut to junk status from investment-grade levels. The other banks all saw their ratings remain at investment-grade levels.

Saudi Billionaire With HSBC Stake Has Accounts Frozen

Saudi Billionaire With HSBC Stake Has Accounts Frozen

May 31 (Bloomberg) -- Saudi Arabia’s central bank ordered the country’s banks to freeze the accounts of Maan al-Sanea, the Saudi billionaire who owns a stake in HSBC Holdings Plc, people familiar with the instructions said.

The Saudi Arabian Monetary Agency sent circulars to the legal departments of Saudi-based banks on May 28 and May 30 telling the lenders to freeze the accounts, including credit cards, of al-Sanea, his wife and four family members, according to one person who read the documents. SAMA didn’t say why it took the action, according to the person, who declined to be identified because the information is confidential.

Al-Sanea, who is chairman of the Khobar-based Saad Group, also manages The International Banking Corp. B.S.C., a unit of Ahmad Hamad Algosaibi & Brothers Co., according to an Algosaibi official who spoke on condition of anonymity. Algosaibi said last week that TIBC’s creditors weren’t paid “pending a debt restructuring exercise.” The bank has $2.2 billion of short-and medium-term debt, according to a May 16 report by Capital Intelligence, a credit analysis and ratings company.

“Although Mr. al-Sanea was at one time named as a managing director of Ahmad Hamad Algosaibi & Brothers Co., he has not acted in such capacity for many years and is not involved in the operations of Ahmad Hamad Algosaibi & Brothers Co. in any way,” a London-based spokesman said on behalf of Saad Group in response to questions from Bloomberg News. The spokesman said al-Sanea doesn’t manage TIBC.

$7 Billion Fortune

People in the Saudi banking industry said their employers had received instructions to freeze al-Sanea’s credit lines, though they hadn’t seen the documents. They spoke on condition that they not be identified because the information is confidential and they’re not authorized to speak to the press.

The central bank didn’t respond to two e-mails seeking comment on al-Sanea after the governor’s office asked for questions to be submitted electronically.

Al-Sanea’s net worth is $7 billion, ranking him as the world’s 62nd richest person, Forbes magazine reported March 11.

As of Dec. 30, al-Sanea indirectly held 359.1 million shares, or 2.97 percent, of London-based HSBC, Europe’s biggest bank, according to an HSBC filing. The stake is worth about 2 billion pounds ($3.28 billion).

Al-Sanea’s Saad Investment Co. received a $2.82 billion loan from a group of 26 European, U.S., Asian and Arab banks in September 2007 as the global credit crisis damped demand for debt. Earlier that year, Saad Trading Contracting & Financial Services Co., part of al-Sanea’s Saad Group of companies, said it would borrow $5 billion as part of a 20-year plan to diversify investments inside and outside the kingdom.

MEED Report

The Middle East Economic Digest reported on May 23 that Algosaibi had defaulted on $1 billion of foreign exchange transactions, trade finance loans and swap agreements. The magazine cited unidentified bankers.

The default by TIBC, Algosaibi’s Bahrain-based unit, was a “conscious decision not to honor debt payments,” even though the bank’s $400 million equity portfolio means it had enough money to do so, Standard & Poor’s Ratings Services said May 12.
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