PRESS DIGEST - Financial Times - March 26

Financial Times

HOARDING BY BANKS STOKES FEARS OF CRISIS

Efforts by central banks to ease strains in the money markets are failing to stop financial institutions from hoarding cash, stoking fears the recent easing in equity markets may not signal the end of the credit crisis. Banks' borrowing costs in the United States, eurozone and Britain have risen again even after moves by the Federal Reserve to lend to banks against weaker than usual collateral. The three-month Libor rate was set in London on Tuesday at 5.995 percent, its highest for the year and nearly 0.9 percentage points above the level investors demand for risk free money. However, equity markets ignored the stresses in the financial system with the FTSE 100 rising 3.5 percent on Tuesday and Japan's Nikkei rising 2.1 percent.

CITY'S FRAUD SQUAD POISED TO STEP UP DRIVE AGANST MORTGAGE SCAMS

Under a plan that highlights alarm about the impact of mortgage fraud on business and residential property markets, City police are preparing a big increase in probes into mortgage fraud. Fifty new investigators are due to arrive next month, increasing the force's anti-fraud strength by a third. The lending industry has challenged a police chiefs' report which says mortgage scams rake in at least 700 million pounds a year. The police have stressed their desire to work with the private sector as part of a crackdown on mortgage crime which manifests itself in the overvaluation of "new build" houses and the ramping up of existing commercial property values.

RISE IN DEBT AMONG OLDER PEOPLE

A study by Help the Aged and Barclays, commissioned by the Personal Finance Centre at Bristol University, has found more people are reaching retirement age in debt, with some owing four times as much as a decade ago. A quarter of all people approaching retirement age have outstanding credit commitments. The report warns that "levels of credit use may already be forcing people to delay the timing of retirement". New retirees face "the double whammy of living on a fixed income while managing existing credit commitments" and that unlike borrowers in other age groups "older people use credit cards to cover essentials such as food". The report called on the government to provide greater financial support to improve financial education for older people and to reduce pensioner poverty.

INDUSTRIAL DEMAND BEHIND BOOM FOR METALS

New research has found that despite investors being blamed for driving up commodity costs, demand from industrial users is the reason for a price boom in a range of metals. The prices of metals that are traded privately between producers and customers, such iron ore and cobalt, have risen faster than others, such as copper, which are traded on exchanges. Lehman Brothers says this lends weight to the argument that supply and demand factors, rather than just financial flows, are behind the boom in prices. The investment bank's new index of non-exchange traded metals rose 598 percent from January 2002 to early 2008, but during the same period an index of exchange-traded metals rose 246 percent.