Iceland stock market to stay shut

The Icelandic stock exchange has said that share trading will remain suspended until Tuesday because of continuing "unusual market conditions".

Trading was suspended last Thursday after days of market turmoil and the government's decision to nationalise Iceland's three major banks.

UK councils and other public bodies have about £1bn invested and it is not known if their deposits are safe.

Icelandic and UK authorities are trying to establish a single claims procedure.

Government talks

A Treasury delegation spent the weekend in talks with their Icelandic counterparts.

Private customers with Landsbanki's closed internet bank Icesave are protected by the UK's Financial Services Compensation Scheme.

And arrangements have been agreed "in principle" for a quick payout to retail depositors in Icesave.

But the Icelandic government has not extended protection to the £1bn of taxpayers' money invested by councils, police forces, fire services and charities.

Insolvency fears

So far, more than 100 local authorities in England, Wales and Scotland have revealed they have deposits worth £842.5m in total.

Fears are growing that some local government workers may not be paid this month because councils have payroll tied up in the banks.

And at least 60 UK charities fear they may have lost up to £120m of funds invested in failed Icelandic banks.

The Christie NHS Foundation Trust, based in Withington, Manchester, has revealed it could lose £7.5m.

Representatives from the board of the cancer hospital met with the Financial Services Authority and its lawyers over the weekend.

Iceland is crippled with debt and giving UK depositors their funds may depend on the country securing emergency loans from other countries or the International Monetary Fund (IMF).

Its debt is an estimated about £50bn, which is five times the total annual income of the country.

Oil higher after world leaders pledge to tackle global crisis

Oil prices are higher in Asia on Monday after world leaders united to tackle a global financial crisis engulfing Europe and the US, analysts said.


New York's main contract, light sweet crude for delivery in November was USD 2.45 higher at USD 80.15 a barrel, recovering from one-year lows reached on Friday.



The contract had plunged USD 8.89 to USD 77.70 at the end of last week, in tandem with a global equities meltdown on fears of recession that would crimp demand for energy.



Brent North Sea crude for November delivery traded USD 2.18 higher at USD 76.27.



On Friday in London, Brent fell by USD 8.57 to settle at USD 74.09.



Oil prices have already plunged from record highs above USD 147, reached in July, because of demand worries, dealers said.



But today's recovery followed weekend signals by US and European leaders that they have a growing commitment to take joint action to end the turmoil after the Wall Street collapse of investment bank Lehman Brothers unleashed a worldwide crash on stock markets.

UK banks receive £37bn bail-out

The government is to pump billions of pounds of taxpayers money into three UK banks in one of the UK's biggest nationalisations.

Royal Bank of Scotland (RBS), Lloyds TSB and HBOS will have a total of £37bn injected into them.

In return for the investment, the government will get a say in how the banks are run, including controls over the bonuses paid to management.

BBC business editor Robert Peston said the banks faced "absolute humiliation".

It would "count as perhaps the most extraordinary day in British banking history", he added.

'Extraordinary times'

RBS is to raise £20bn with a further £17bn to be put into HBOS and Lloyds TSB. Barclays intends to raise £6.5bn without government help.

Taxpayers will own about 60% of RBS and 40% of the merged Lloyds TSB and HBOS.

Prime Minister Gordon Brown said the bail-out was: "unprecedented but essential for all of us", and would thaw frozen money markets.

"In extraordinary times, with financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about," he added.

Mr Brown insisted the investments were assets and, "not just money being pumped in", adding the government was "not a permanent investor in UK banks".

"Its intention, over time, is to dispose of all the investments it is making as part of this scheme in an orderly way," he said.

The Treasury cash forms part of the government rescue plan announced last week.

Management shake-up

As part of the banks' announcements:

Lloyds and HBOS said they had renegotiated their merger, reducing the number of Lloyds TSB shares that HBOS shareholders will receive.
RBS said chief executive Fred Goodwin was quitting with immediate effect - without a severance pay-off. He will be replaced by British Land boss Stephen Hester. RBS chairman Tom McKillop is to retire.
HBOS chief executive Andy Hornby and chairman Lord Dennis Stevenson said they would stand down from their posts.
RBS and Lloyds TSB/HBOS will return mortgage and small-business lending to 2007 levels, which is much more than they are currently lending.

Other developments included:

Major central banks saying they would offer financial institutions an unlimited amount of short-term dollar loans to help stem the crisis.
London's FTSE 100 index rising by about 5% as investors reacted to the news, though banking shares were mixed.

Europe acts to strengthen banks

Germany, France and Spain have announced multi-billion euro rescue schemes to shore up their banks.

Germany has approved a package worth up to 500bn euros (£393bn; $683bn), France will spend about 350bn euros and Spain has set aside 100bn euros.

The bulk of this money will be used to guarantee lending between banks - part of a plan agreed to this weekend by the 15 nations that use the euro.

France and Germany will also use the cash to take stakes in ailing banks.

The moves helped to lift investor confidence, with stock markets rising worldwide.

Two-fold plan

The two-fold plan involves guaranteeing lending between banks and taking stakes in financial institutions - similar to the bank rescue in the UK announced last week.

The US is also getting ready follow in Europe's footsteps and purchase stakes in financial institutions.

"We are designing a standardised programme to purchase equity in a broad array of financial institutions," said Neel Kashkari, the treasury official in charge of the US government's $700bn bail-out package.

French President Nicolas Sarkozy said France would offer up to 40bn euros to provide banks with the financing they needed via a public company in which the state would the only shareholder.

"This is a massive engagement," he said.

He added that no financial institution would be allowed to collapse.

German Chancellor Angela Merkel said that the measures being taken would only work if they were accompanied by more robust regulation that will curb "market excesses."

"The package passed by the German government will serve the financial system and ought to serve to protect the citizens and not just serve to protect the banking system," she said.

Fund

Unlike France, Germany and Britain, Spain's Prime Minister Jose Luis Rodriguez Zapatero said that Spain did not need to take stakes in any banks because its banks were solvent.

However, last week the Spanish government announced the creation of a 30bn euro fund to buy assets from Spanish banks to help stabilise the lending industry and unfreeze credit.

At present banks are reluctant or unable to loan cash to fellow financial institutions due to fears about whether the money will be paid back.

It is this lending between banks that traditionally lubricates the banking system, freeing up cash for lending to private individuals and other firms.

Italy is also working on its own bank rescue plan.

Markets surge, Sensex regains 11K level

Stock markets on Monday opened on a strong note, never looked back in the day and at close the benchmark Sensex was up by an impressive over 800 points and had regained the 11,000 level, leaving behind losses suffered last week, the toughest ever for the bourses.


Asian and European markets also snapped their losing spree with key indices in the regions gaining nearly in the range of 5-10 per cent.


The Bombay Stock Exchange 30-share Sensex settled the day higher by 804.38 points, or 7.76 per cent, at 11,332.20.


Similarly, National Stock Exchange's index also gained 210.75 points, or 6.43 per cent, at 3,490.70 and most of the index participants traded higher.



Marketmen credited the surge to Finance Minister P Chidambaram's statement that more measures are expected to be announced to improve liquidity in the system.



They said announcements by G-20 nations of plans to tide over the crisis also helped boost investor sentiment.


With governments worldwide assuring of steps to address the liquidity concerns, banking index surged the most at 12.51 per cent at 5985.16 points.


ICICI Bank spurted 25 per cent at Rs 453.05 during intra-day before ending the day little lower at Rs 424.95.



Its shares were battered in the recent past on rumours that cast doubts over its financial strengths.