PRESS DIGEST - Financial Times - May 2

SUSPEND BIOFUELS RULES, SAY MPS

MPs warned the government on Thursday that regulations mandating the use of biofuels must be suspended. Growing concern about their effect on the environment and food prices has led ministers to concede that they may have to rethink biofuels policy from the bottom up. Alarm bells were sounded by the Commons environmental audit committee as the industry warned that Britain only has enough surplus wheat to support three large ethanol plants, even though plans for several more already exist. High costs mean the future of biofuels production in Europe looks bleak, according to Richard Lucas, an analyst at Ambrian Partners.

BANK OPTIMISM MEETS WITH SCEPTICISM

Economists reacted with a degree of scepticism on Thursday to the Bank of England's claim that the worst of the global credit crisis is behind us. The road to stability outlined in the Bank's twice-yearly financial stability review, published on Thursday, was likely to be more bumpy than was implied, according to economists. Birgit Specht, managing director in Citi's securitised products division, said the Bank was spot on in its analysis of the market for residential mortgage-backed securities. But according to Michael Saunders, an economist at Citi, the narrow focus on housing missed the bigger picture. "At its heart, the financial crisis has been triggered by the mix of surging private debts, booming asset prices, strong private spending and plunging private savings," he said.

CALL FOR CREDIT CONTROLS TO STOP EXCESSIVE RISK-TAKING

The National Institute of Economic and Social Research argues in a report published Friday for tougher controls to stop lenders and people taking excessive risks. According to the think-tank, credit needs to be more expensive and harder for risky borrowers to obtain to lessen the chance of a new bubble emerging. "I'd like to fly the flag for regulating what banks can do with their money," said Martin Weale, the institute's director. "The reality is that entrepreneurs and speculators often have poor judgement of risk, and regard the result of excessive risk-taking as honest failure," he added. "If the UK has a problem, it's much more acute in the US."