With Greece, Ireland and Portugal all under international bailout programs, financial markets are anxious about the risks from a seething Spanish banking crisis and a 17 June Greek election that may lead to Athens leaving the euro zone.
"Markets remain skeptical that the measures taken thus far are sufficient to secure the recovery in Europe and remove the risk that the crisis will deepen. So we obviously believe that more steps need to be taken," White House press secretary Jay Carney told reporters.
Canadian Finance Minister Jim Flaherty said ministers and central bankers of the United States, Canada, Japan, Britain, Germany, France and Italy would hold a special conference call, raising pressure on the Europeans to act.
"The real concern right now is Europe of course - the weakness in some of the banks in Europe, the fact they're undercapitalized, the fact the other European countries in the euro zone have not taken sufficient action yet to address those issues of undercapitalization of banks and building an adequate firewall," Flaherty told reporters.
The disclosure of the normally confidential teleconference came as European Union paymaster Germany said it was up to Spain, the latest euro zone country in the markets' firing line, to decide if it needed financial assistance, after media reports that Berlin was pressing Madrid to request aid.
A G7 source, speaking on condition of anonymity because of the sensitivity of the issue, said there were concerns about the risk of a bank run in Spain, which is struggling to recapitalize nationalized lender Bankia and smaller banks stricken by the collapse of a property bubble.
"There is concern on whether there will be a bank run in Spain that could have repercussions beyond the euro zone," the source told Reuters.
Spanish Prime Minister Mariano Rajoy is pressing for a direct European rescue for his country’s banks with moral support from the European Commission, but Germany appeared to rule out such a "bailout lite" for the euro zone's fourth biggest member.
A source with knowledge of the matter said Madrid is working along with European institutions to find a way to directly refinance banks using rescue funds without the government having to come under a full EU/IMF bailout programme.
"Right now the most urgent issue is the banks, and there are negotiations to refinance the banks directly without it being an intervention. It's a mechanism for all [European] banks, not just for Spanish banks," the source said.
Under current rules Spain can get a loan from the European rescue fund, or EFSF, but it would come with tough conditions and intrusive supervision, with a high political cost for Rajoy. The new permanent European rescue fund, the European Stability Mechanism (ESM), due to enter into force in July, can lend to banks but the request still has to be made by the state.
The source with knowledge of the matter said Spain believed the European Union's executive could take a plan for bank aid to a summit of the bloc's leaders on 28-29 June.
EU Economic and Monetary Affairs Commissioner Olli Rehn said Brussels was considering direct bank recapitalisation by the ESM to break the link between weak sovereigns and ailing banks, but it was not possible under the treaty currently being ratified by member states.
"This is not part of the ESM treaty for the moment, in its present form, but we see that it is important to consider this alternative of direct bank recapitalisation as we are now moving on in the discussion on the possible ways and means to create a banking union," Rehn said.
Germany, the main contributor to the bailout fund, opposes changing the ESM treaty to allow direct bank recapitalisation and has veto power. Berlin contends that only a formal programme approved by national parliaments permits proper international supervision of how aid funds are spent.
Forex: USD/CAD falls after Building Permits - FXStreet.com
Islamic Finance set to mobilize trade and investment flows between Asia and the Middle East - AME Info
The two day WIBC Asia event, held under the official support of the Monetary Authority of Singapore, kicked off today with an inaugural address by H.E. Ravi Menon, Governor of the Monetary Authority of Singapore.
The inaugural address was immediately followed by an opening keynote session which featured H.E. Dr. Ahmad Mohamed Ali Al-Madani, President of the Islamic Development Bank and Edy Setiadi, Executive Director of the Directorate of Islamic Banking, Bank Indonesia. The session addressed the challenges and opportunities inherent in the increasingly global geographic footprint of Islamic finance and also discussed the national and international initiatives that will ensure consistency and foster greater interconnectedness across key jurisdictions for Islamic finance.
A key highlight of WIBC Asia 2012 was the high profile Power Debate session led by internationally respected CEOs and industry leaders. Moderated by Haslinda Amin of Bloomberg Television, the session analyzed the expanding role of Islamic finance as a conduit for trade and capital flows between Asia and the Middle East and also discussed how Islamic financial institutions can better develop the capacity to structure large-scale multi-currency and cross border transactions. The Power Debate session featured Toby O'Connor, Chief Executive Officer, The Islamic Bank of Asia; Hussain AlQemzi; Chief Executive Officer, Noor Islamic Bank and Group Chief Executive Officer, Noor Investment Group; Muzaffar Hisham, Chief Executive Officer, Maybank Islamic Berhad; Dato' Jamelah Jamaluddin, Chief Executive Officer, Kuwait Finance House (Malaysia) Berhad (KFH Malaysia); Syed Abdull Aziz Jailani Bin Syed Kechik, Chief Executive Officer, OCBC Al-Amin Bank Berhad; Shamsun Anwar Hussain, Director - Consumer Banking, CIMB Islamic Bank Berhad; and Wasim Saifi, Global Head, Standard Chartered Saadiq, Consumer Banking.
Speaking to the media present at the event, David McLean, Chief Executive of the World Islamic Banking Conference: Asia Summit noted that "Asia is becoming an increasingly attractive destination for investments that are Shari'ah compliant. To reap the full benefit of the region's rapid expansion and robust development, there is a need to press on towards achieving global connectivity and deepening economic cooperation with various key centres for Islamic finance. In order to better facilitate cross-border relationships, more intensive international co-ordination of regulatory approaches, supervisory oversight and industry practices is needed."
He also said that "as interest in Islamic finance expands across Asia, an increasing number of Middle Eastern investors are looking at opportunities to deploy their capital in the region and Islamic finance is perfectly positioned to act as a catalyst to further bridge capital flows between Asia and the Middle East."
"An ongoing dialogue between key regulators, industry practitioners and market participants representing the two key centres for Islamic finance, i.e the Middle East and Asia, is vital to achieve greater international harmonization in the architecture for Islamic finance", he added.
A similar view was expressed by Hussain AlQemzi, Chief Executive Officer, Noor Islamic Bank and Group Chief Executive Officer, Noor Investment Group, who said that "in order to ensure an orderly evolution of Islamic finance from a niche segment into the mainstream international financial markets, it is vital to further enhance the industry's capabilities for cross-border activities, which in turn will encourage innovative product development, robust and standardised regulatory frameworks and the long term stability of the industry. What the industry lacks at the moment is the breadth and depth that investors enjoy in the conventional market. An inter-linkage between the key Islamic financial centres will facilitate investor access to a wider range of Shari'a-compliant products beyond those available in their domestic market."
He also said that "the annual World Islamic Banking Conference: Asia Summit is becoming an increasingly important platform that facilitates dialogues between the two key centres for Islamic finance - Asia and the Middle East. The theme for this year, "Islamic Finance in Asia: Strengthening International Connectivity and Capturing Cross-Border Opportunities", highlights the tremendous potential for significant cross-border transactions which the Islamic finance industry must tap into. As a key industry player we are keen on exploring these unique opportunities."
Commenting on their participation at the event, Toby O'Connor, Chief Executive Officer of the Islamic Bank of Asia said that "the theme for the 3rd Annual World Islamic Banking Conference: Asia Summit (WIBC Asia 2012), "Islamic Finance in Asia: Strengthening International Connectivity and Capturing Cross-Border Opportunities", highlights a significant opportunity that IB Asia is focused on. We hope that the high-level discussions at this important forum in Singapore will foster new business relationships between key growth markets for Islamic finance. We are once again delighted to renew our partnership as a Platinum Strategic Partner of WIBC Asia."
WIBC Asia 2012 continues on the 6th of June and will features an exclusive keynote address by Jaseem Ahmed, Secretary-General of the Islamic Financial Services Board (IFSB), and a special address by Daud Vicary Abdullah, President and Chief Executive Officer of INCEIF- The Global University of Islamic Finance.
FOREX-Euro falls as minister spotlights Spain funding worry - Reuters UK
* Euro falls, erasing earlier gains as Spain worries grow
* Spain's Montoro says financial markets shut to Spain
* Market awaits G7 conference call on euro zone crisis
LONDON, June 5 (Reuters) - The euro fell on Tuesday, erasing earlier gains, on growing concerns about whether Spain can restore health to its banks as a minister said high borrowing costs meant Spain was effectively shut out of the bond market.
The comments by Treasury minister Cristobal Montoro highlighted the funding problems facing Spain as investors fretted the country may have to seek external aid.
Analysts said the euro's losses may be limited before an emergency conference call of Group of Seven financial policymakers on the euro zone debt crisis, although the chances of a significant breakthrough looked slim.
The euro fell 0.6 percent on the day against the dollar to hit a session low of $1.2415. It traded more than a cent below an earlier one-week high as investors cut back hefty bets against the currency.
"People will be happy to sell into moves above $1.25," said Anders Soderberg, currency strategist at SEB in Stockholm.
The euro has rebounded from a two-year low of $1.2288 hit on Friday, but Soderberg said its recovery was only "a short-term break in what now seems to be a well-established downtrend".
In addition to the concerns about Spain, investors are worried about the risk that a Greek election in two weeks could push Athens out of the euro.
The depths of the problems facing the euro zone were highlighted by a purchasing managers' survey showing the euro zone's private sector economy shrank in May at the fastest pace in nearly three years.
The common currency faced chart resistance at $1.2545, the 76.4 percent Fibonacci retracement of its decline last week, and at $1.2570, the 23.6 percent retracement of its longer-term decline from a February high near $1.35.
"I don't expect European policymakers to come to an agreement soon. I am ready to sell the euro around $1.2550," said a trader at a Japanese bank in Tokyo.
It also erased earlier gains against the yen and was last down 0.8 percent on the day at 97.08 yen, although this still left it above Friday's 11-year low of 95.59 yen.
Against sterling, the euro was down 0.25 percent at 81.02 pence, off an earlier one-month high of 81.405 pence.
CENTRAL BANK ACTION
The G7 talks prompted some market players to speculate that the European Central Bank could opt for some form of further monetary stimulus when it meets on Wednesday.
International Monetary Fund Managing Director Christine Lagarde said in an interview with a Swedish newspaper that the ECB had room for another interest rate cut.
There has been some talk of a rate cut, although a recent Reuters poll showed only 11 out of 73 analysts polled expected a move this month.
In a sign of increasing concern about the impact of the euro zone debt crisis, the Reserve Bank of Australia cut interest rates by 25 basis points on Tuesday.
The cut was less than some had expected, however, sending the Australian dollar higher. It was last up 0.1 percent against the U.S. dollar at $0.9733, extending its recovery from an eight-month trough of $0.9581 hit on Friday.
However, some see the Aussie trapped in a downtrend as they expect the RBA to cut rates further in coming months.
Traders will also be looking ahead to testimony by U.S. Federal Reserve Chairman Ben Bernanke on Thursday for any hints that Friday's weak U.S. jobs data could prompt a further bout of quantitative easing.
The dollar was down 0.15 percent against the yen at 78.20 yen, taking it closer to Friday's 3 1/2-month low of 77.652 yen though market players were wary about the possibility of Japanese authorities stepping in to stem the yen's rise. (Additional reporting by Hideyuki Sano in Tokyo, editing by Nigel Stephenson)
UAE finance minister lowers 2012 GDP forecast - AME Info
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