PRESS DIGEST - Financial Times - March 31

Financial Times

BROWN AND BUSH PLAN JOINT BANK WATCHDOG

Gordon Brown and George W. Bush have agreed to increase cooperation over the crisis in the financial markets by setting up a joint UK-U.S. working group to develop proposals to regulate and monitor the banking system. The working group will comprise senior treasury and regulatory figures from London and Washington. Chancellor of the Exchequer Alistair Darling and U.S, Treasury Secretary Hank Paulson have also discussed a UK proposal for a system of "individually tailored" international supervision for leading banks and financial institutions with significant cross-border activity.

FINANCE SECTOR PREPARES FOR "LONG SIEGE"

The CBI and PwC will report on Monday financial services institutions are cutting jobs and investment plans in preparation for a "long siege" as they believe they have not yet felt the worst of the credit squeeze. In a quarterly survey, conducted just before the Bear Stearns implosion, the majority of respondents said they thought market conditions would deteriorate, with 90 percent of them saying they saw little hope of a return to normality within the next six months. Fears of growing funding constraints and a prolonged slump in demand are spreading gloom to areas relatively insulated from the immediate problems in the credit markets. Twenty-five percent of respondents said they had cut jobs over the last few months, and a third said they planned to reduce headcounts in the next quarter.

HOUSE PRICES CONTINUE TO SLIDE

A survey from property information group Hometrack has found house prices fell by an average of 0.2 percent in March. The survey, coupled with data released by Nationwide last week, shows this was the sixth consecutive month in which house prices slowed and also suggests London house prices may come under pressure. The average agreed price on a property sold was 93.5 percent of the price asked. Hometrack are forecasting a 17 percent drop in transactions over 2008 from that of last year.

FAILURE TO INFLUENCE EU LAW COSTLY FOR BUSINESS

A study by the British Chambers of Commerce, in collaboration with the London and Manchester business schools, has found that ministers' failure to engage early in the EU decision-making process and influence new laws has added 45 billion pounds to the burden on British business over the past 10 years. The study finds a disconnect between UK efforts to assess the impact of EU legislation and the actual process of adopting and implementing those laws. The report concludes efforts by UK authorities to estimate in advance the financial impact of EU legislation are deeply flawed.

OPEN SKIES ERA COMES TO TROUBLED HEATHROW

A new era in aviation began on Sunday as flights from U.S. cities headed for London Heathrow with the introduction of the "open skies" agreement struck last year between the European Union and the United States. The new rules replace a patchwork of bilateral deals with a single one as until Sunday only four carriers -- American Airlines (AMR.N), US Airways (LCC.N), British Airways (BAY.L) and Virgin [VA.UL] -- could fly from Heathrow. EU transport commissioner Jacques Barrot said prices will now fall as competition increases. Barrot predicted 12 billion euros in gains and the creation of thousands of jobs over the next five years.

BA TO CANCEL MORE FLIGHTS THIS WEEK

British Airways (BAY.L) is expecting this week to have to cancel hundreds more flights at Heathrow airport as it battles with the problems at Terminal Five. BA is struggling to deal with the mountain of over 15,000 misplaced bags which has been growing since the terminal was opened last Thursday. The baggage handling issues are also causing problems for other airlines with American Airlines (AMR.N) saying on Sundayit was waiting for 2,000 bags caught up in the chaos. All BA's T5 flight cancellations are on domestic and short-haul European routes and the airline is now rerouting some passengers on to rival airlines.

HSBC PAY PLAN REVEALED

Over the weekend, activist investor Knight Vinke stepped up its campaign against HSBC's (HSBA.L) corporate governance practices by making public a confidential document on the bank's proposals for next year's pay schemes for executives. The documents indicate HSBC is proposing that it will increase the maximum annual bonus permissible from 250 percent of an executive director's salary to 400 percent for bonuses paid in 2009. In recent weeks several big investors have expressed their dissatisfaction with the bank's proposals for executive pay schemes, saying they are concerned at proposed performance criteria on grounds they might offer high reward for average performance.

M&S STANDS ITS GROUND OVER ROSE REVOLT

Marks & Spencer (MKS.L) was standing its ground over its decision to promote Sir Stuart Rose from chairman to executive chairman, despite increasing investor revolt. Shareholders said pressure was growing on the company to offer a better explanation of the move as another of its largest investors, Schroders, went public with stinging criticism of the promotion. Richard Buxton, head of UK equities at Schroders, told newspapers that the "undue concentration of power" in a single role would leave Rose unchallenged in the boardroom and set "an appalling example".

FRIENDS LIKELY TO REJCT FRESH FLOWERS OFFER

Life assurer Friends Provident FP.L is expected on Monday to reject a 3.5 billion pound takeover approach from U.S. private equity group JC Flowers. The Friends board was due on Sunday night to convene to consider the approach, but those familiar with the situation said the directors were likely to take the view that the offer was pitched too low. Friends is understood to believe the approach is below the company's embedded value of 160 pence a share and that once the final dividend is paid the value of the proposal will drop. The company believes shareholders will think likewise and is expected to talk to investors this week.

PATEL SELLS NEARLY ALL OF STAKE IN THE PRIORY

Former Priory Group chief executive Chris Patel has sold the bulk of his remaining stake in the hospital group in a move that should quash long-running speculation the entrepreneur would partner a financial backer to buy the company. Last March, The Priory found the spotlight moved from its celebrity clientele to its management when Patel and two other directors resigned with no warning or explanation. The departures were a blow to ABN Amro, which many analysts thought had paid too much for the Priory Group 20 months earlier. It is understood there was a deterioration in relations between Patel and the Dutch bank over the company's strategic direction. However, with Patel's stake now reduced to less than one percent, chief executive Philip Scott is now in a comfortable position to press ahead with his turnaround plans for the group.

Prepared for Reuters by Durrants.