FRANKFURT, July 10 |
FRANKFURT, July 10 (Reuters) - Banks mobbed the ECB on Tuesday in a bid to take advantage of its one remaining interest-paying facility after it slashed its mainstream deposit rate to zero last week.
From Wednesday, banks will no longer get anything if they park spare cash overnight at the ECB, something they have been doing in increasing numbers as the euro zone debt crisis has worsened and frozen bank-to-bank lending markets.
The ECB, however, still offers interest on money banks are willing to park with it for a week in order to counterbalance the purchases of government bonds it has made over the last two years.
Knowing it will be the only chance of getting a return on their money from the ECB this week, 95 banks beat a path to the central bank offering up 425 billion euros, over double the 211.5 billion the ECB was able to accept.
The ECB operates the offer as a reverse auction and the intense demand to park money from banks saw the average interest rate paid by the ECB plunge to a near-zero 0.02 percent.
If extrapolated over a year it would mean the ECB would only have to pay around 800,000 euros a week, or 42 million euros a year to offset its stock of government bond purchases. (for full details of operation click )
In contrast, the central bank's new record low 0.75 percent interest rate had little impact on banks' weekly take-up of ECB funding.
Demand was little changed on last week at 163.7 billion euros although there was a small jump in the one-month operation, with bank taking 24.3 billion versus 18.9 billion a month ago.
Banks are already sodden with funding after two monster injections of three-year ECB loans in December and February.
Minutes of the latest meeting of the ECB's money market contact group - a mix of top money market traders and a handful of the ECB's top experts - showed none of the traders thought the ECB's rate cut last week would help repair the battered money market.
A poll run by the group also revealed that 75 percent of respondents thought that cutting the bank's deposit rate to zero or even into negative territory would not prevent banks parking huge sums of cash at the ECB each night.
The survey also showed most favoured proposals to combat the crisis that are most controversial among policymakers.
"The introduction of Eurobonds was mentioned most often as an effective measure to address the current tensions in the markets," minutes of the meeting showed.
"As the second best solution, large SMP (ECB bond purchases) purchases by the Eurosystem as well as a guarantee of public debt of euro area countries by the EFSF were mentioned."
Some MMCG members were of a view that EFSF/ESM facilities should be used more pro-actively and an option of granting a banking licence to the EFSF/ESM should be considered," the summary added.
(for summary of money market contact group meeting click here)
RECORD LOW RATES
The ECB's rate cuts continued to push market rates to fresh all-time lows on Tuesday.
The ECB's overnight deposit rate acts as a floor for money market rates as banks only lend to rival banks if they are able to earn a better rate of interest than at the ECB.
Three-month Euribor rates, traditionally the main gauge of bank-to-bank lending, on Tuesday hit a new all time low of 0.521 percent, down from 0.531 percent, while overnight rates which do not yet factor in the cut - it comes into force on Wednesday - inched down to 0.325 percent from 0.329 percent.
Three month dollar Libor rates were unchanged at 0.45760 percent on Tuesday, while three-month sterling rates fixed at 0.85963 percent versus 0.86463 percent on Monday.
Both Libor and Euribor rates are currently at the centre of a manipulation scandal after it emerged a number of banks were falsely submitting the rates they pay to the committee that aggregates the data. (Reporting by Marc Jones. Editing by Jeremy Gaunt, Ron Askew.)
Forex Flash: EUR at 2 Yr Lows; Possibility of a small bounce, perhaps to 1.24 - Laidi - FXStreet.com
"EUR/USD touched a two-year low but closed marginally above the June 1 low of 1.2088," comments Ashraf Laidi, global market analyst. "Pointing to the possibility of a small bounce, perhaps to 1.24, before the next leg down to 1.20."
Farepak customers to receive half of money owed - BBC News
Customers and agents of Farepak, the Christmas savings firm, will ultimately receive half of the money they lost when the company collapsed.
Swindon-based Farepak collapsed in 2006, leaving 114,000 people with total losses of £37m.
Now liquidators BDO have confirmed that final payments will be made to those who lost out at the end of August.
Customers have waited for the end of court cases to see a final settlement reached.
'Hardball' attitudeThe government's Insolvency Service had argued that the high-profile collapse of Farepak had been the fault of nine former directors of the company.
At a recent High Court hearing, the service had to admit that its case did not stand up, and the action was dropped.
However, the judge argued that HBOS bank had taken a "hardball" attitude in dealing with the company and was partially to blame for the collapse.
“Start Quote
End Quote Suzy Hall Unfairpak campaign groupNever in my wildest imagination did I think we would get back 50p in the pound”
This led to Lloyds Banking Group, which now owns HBOS, to make an £8m payment to the Farepak compensation fund.
Total paymentThis has allowed the joint liquidators to bring their investigations to an end, and finalise payment levels.
Farepak collapsed leaving no money available to creditors. However, BDO has confirmed that a payment of about 32p in the pound will be made, which includes a share of the £8m from Lloyds Banking Group.
When added to the 17.5p in the pound given by the Farepak Response Fund charity, set up by the government in 2006, customers will have received a total of approximately 50p in the pound, BDO said.
Former customers and agents who have changed their address since they made their original claim should inform the Farepak claims management team of the alteration.
Suzy Hall, who co-ordinated the Unfairpak campaign, a group set up to support victims in the wake of the crisis, said she was delighted with the final figure, describing it as a "fantastic result".
"Never in my wildest imagination did I think we would get back 50p in the pound. Unfairpak believe we have won."
She also praised the liquidators, who have waived some of their fees and been "very mindful" of costs.
"The demographic of Farepak savers is low-income women so this is absolutely wonderful," she said.
Your Money - Spa parties and money-smart daughters - Reuters
NEW YORK, July 11 Reuters) - My seven-year-old daughter, Annabelle, recently attended her third spa party in the last 18 months. She put cucumbers on her eyes, wore a chocolate mask on her face and got her toenails polished by adult attendants.
In contrast, her 8-year-old friend Aleksandar had a birthday party in which he asked for donations for a $400 Lego "Death Star" puzzle, rather than individual gifts.
Is it any wonder that Annabelle and her girlfriends want to spend their allowance on nail polish, while Aleksandar, having raised the money to buy his Lego set, has begun saving for a sports car?
Perhaps pressured by subtle social cues to value appearance over saving, many girls still grow up without adequate money and investing skills despite their success in the classroom and a proliferation of programs designed to teach kids about money.
Young women are "substantially" less financially literate than their male counterparts and less likely to correctly answer questions about interest rates, inflation and risk diversification, according to a 2010 study of more than 7,400 young adults by researchers at Harvard, Dartmouth and the University of Pennsylvania.
Make no mistake: all parents need to teach their children - boys and girls - about money. But girls encounter different social and environmental messages, and those messages can be financially crippling. It's now common to find girls' clothing with slogans like "I (heart) shopping," something that never appears in the boys' department.
"(My boys) don't get invited to spa parties," says Mary Blanusa, a vice president at the Council for Economic Education in New York and Aleksandar's mother. "If I had girls, I'm sure it would be different. There's a lot of pressure on girls to have certain things and look a certain way."
But there are some ways parents can subvert subtle spa-party messages to raise money-smart women. And it's never too early to start.
EMBRACE THE LEMONADE STAND
Annabelle has been begging for a lemonade stand for three years. I wasn't initially thrilled with the idea but now plan to help her budget, price, produce and sell homemade lemonade to nurture her entrepreneurial and financial skills.
How valuable is this lesson? Some 61 percent of 301 people responsible for hiring at their companies said it is important for an employee to be "entrepreneurial," according to a 2008 Junior Achievement survey, conducted by Gallup. A lemonade stand is one way to teach math skills and encourage entrepreneurship.
JOIN THE GIRL SCOUTS
The Girl Scouts have come a long way from cookie sales. The organization, known for community service projects, field trips and those cookies, now awards badges for "money manager," "financing my future" and "budgeting."
That's intentional. "We are trying to teach girls how to have courage, confidence and character, and that includes entrepreneurship, good saving and spending habits," says Davia Temin, vice chair of the Girl Scouts of the USA and chief executive of crisis management firm Temin and Co.
"If women see money as only to be used to acquire stuff, they're missing out on the power that money brings you, which is safety, security, power and influence," says Temin.
MODEL APPROPRIATE SPENDING
Some 86 percent of teens learn about money management from their parents, rather than school, online or friends, according to the 2012 Junior Achievement USA/Allstate Foundation "Teens and Personal Finance" survey.
Create a budget before you go to the mall or the grocery, and tell your girls how much you have to spend. They'll soon see how quickly it disappears. Encourage them to write their own budget and let them suffer the consequences of not having money for a favorite toy after blowing it on a impulse purchase.
NEEDS VS. WANTS
Parents say their girls feel more pressure than boys to use their money on the latest trendy clothing. That means girls need extra guidance in making appropriate purchases, says Katherine Nixon, chief investment officer for the personal financial services business of Northern Trust Corp.
"I try to keep my girls very grounded in separating needs versus wants," says Nixon, the mother of two girls (nine and 16 years old) and a boy, 13. "I find myself not having to do that with my son. You're fighting an uphill battle with that social pressure."
To help girls establish priorities, share household bills.
"Go over the charges and show her, 'this is what we've spent on clothing, this is what it costs to go on vacation,'" says Nixon.
To help you help your kids, there are a host of free online tools, including Edward Jones' money-smart kid program ().
RETHINK THE BIRTHDAY, AND THE PARTY
What to do for the birthday girl who asks for makeup, the latest boots or a spa party?
Ignore her.
Consider hosting an active party such as bowling, or give non-appearance gifts such as a colorful piggy bank with separate money slots for "save," "spend," "donate" and "invest," found on toy retailer websites such as Amazon.com.
Check out classic games, like Hasbro Inc's Monopoly or The Game of Life. Buy her shares in companies that make products that are catnip for kids. Is she a fan of natural macaroni and cheese maker Annie's Inc? How about cereal from Kellogg Co or toys from Mattel Inc?
Or you can follow the lead of Ganesh Subramanian, a director of business development finance for Sanofi Pharmaceuticals and a father of four. He gave his son Anik, then nine, the option of having a birthday party or having $300 to put into a bank account.
Anik chose the deposit, then bought shares of SPDR Dow Jones Industrial Average ETF.
Subramanian plans to make the same offer to his younger son and twin daughters when they turn nine.
Will his girls, now six, accept the cash over a party? Probably, since they have their brother's example, says Subramanian.
"I'm hoping (the desire for big parties) is just a phase and they'll grow out of it," he says.
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Were you a Farepak customer or agent? How do you feel about the compensation decision?