PRESS DIGEST - Financial Times - Oct 7

Financial Times

RBS DOWN AFTER COUNTERPARTY RATING CUT BY S&P

Royal Bank of Scotland's (RBS.L) share price fell 38.1 pence to 148.1 pence on Monday after ratings agency Standard & Poor's downgraded the bank's long and short-term counterparty credit ratings. The ratings were cut from AA-/A-1+ to A+/A-1, with RBS subsidiaries including NatWest and Ulster Bank also receiving downgrades. S&P said the move reflected RBS's weakening financial profile, describing the bank's capitalisation as "a relative rating weakness".

CREDIT INSURER WITHDRAWAL HITS JJB

JJB Sports (JJB.L) shares lost one quarter of their value on Monday after credit insurer Coface withdrew cover for the sportswear retailer's suppliers. Credit insurer Atradius, which is looking to reduce its exposure to the UK retail market, is in discussions with JJB over the health of the retailer's balance sheet. JJB's share price fell 9.25 pence to 27 pence. The shares have fallen 80 percent in the past year. JJB said Coface's decision "has no effect on our business".

CALL TO END BAN ON SHORT SELLING

A letter sent by the chairman of the Hedge Fund Standards Board has urged the Financial Services Authority to end its ban on the short selling of financial stocks. The letter from Antonio Borges expressed disapproval that the FSA's ban was to last until the middle of January 2009, which would make it longer in duration than that imposed by any other regulator. Hedge fund managers and investors have been angered by the severity of the ban, which they claim forces up trading costs whilst not preventing the downfall of banks. Numerous important figures in the hedge fund industry have supported Borge's letter, such as the chief executive of Man Group Peter Clarke, the founder of CQS Michael Hintze, and the co-chief executive of GLG Partners Manny Roman.

IBERIA INVESTORS COULD GET 40 PERCENT OF BA MERGER

The planned merger of British Airways (BAY.L) with the Spanish national airline Iberia (IBLA.MC) may give BA shareholders a smaller stake than first expected. When the negotiations between the companies were made public in July, it was indicated that Iberia shareholders would receive a holding of around 33 percent. However, due to the efforts of Iberia negotiators and the inferior performance of BA shares compared to Iberia's, this looks likely to rise to 40 percent. The Spanish savings bank Caja Madrid, which currently owns 23 percent of Iberia, will be the biggest shareholder under the new capital structure of the deal, owning nine percent of the combined entity. BA shares closed down 20.4 pence down at 145 pence, with Iberia falling 14 cents to 1.53 euros.

FSA TAKES A LONG, HARD LOOK AT SECURITISATION

In view of the financial crisis, the Financial Services Authority is planning "a significant reappraisal" of how banks use securitisation to offload risks and free capital for new businesses. The market for asset-backed securities has been revealed to be more complex and unpredictable than was previously believed by the credit crisis. "The message on capital is that a very significant reappraisal is needed on precisely what risks are being transferred, precisely what risks are being retained and precisely what new risks are being created," saidPaul Sharma, the FSA's director for wholesale and prudential policy, at a conference in London yesterday.

INSURERS FIGHT TO KEEP SUPERVISION SCHEME FREE FROM COMPROMISES

Europe's largest insurers were campaigning on Monday to prevent a watering-down of "Solvency II" regulations. A number of EU member states are thought to be concerned that regulators in large economies such as France, Germany and the UK could end up dominating under the proposed reforms, and compromises such as allowing states to decide on additional capital requirements locally have been suggested. However, the Association of British Insurers said: "Some governments are now becoming nationalistic and seeking to hold powers to themselves. This should be resisted."

EU LEADERS VOW TO USE ANY MEASURE NECESSARY

Leaders of all 27 European Union governments issued an unscheduled statement on Monday declaring that its members would take "whatever measures necessary" to protect financial stability. Denmark, Sweden, Iceland and Portugal followed Monday's move by Germany and increased their levels of deposit protection for savers. The moves have caused accusations from some EU states that the guarantees are a disguised form of state aid, which could further destabilise the banking system by encouraging savers to switch to countries with more generous deposit protection allowances. Sebastian Schich, an economist at the Organisation for Economic Cooperation and Development, said: "It is difficult to find hard evidence of large amounts of savers moving deposits to somewhere with a more generous deposit guarantee."

TNS BUCKLES TO ENDORSE WPP'S OFFER

The marketing research group Taylor Nelson Sofres TNS.L has given up its attempt to resist the hostile takeover from its rival WPP (WPP.L) and has recommended its shareholders accept the latter's 1.2 billion pound bid. WPP announced on Friday it had gained the support of 61 percent of the shareholder base of TNS. "The board now recommends that shareholders accept the WPP offer, as the directors intend to do in respect of their own beneficial holding," said the company, adding that it still believed that the offer undervalued the company but did not want TNS investors to be left with minority interests in an unlisted company. If successful, the deal will create the second-largest market research group in the world.

Prepared for Reuters by Durrants