Citibank has come to an agreement with the US Securities and Exchange Commission (SEC) to buy back several billion dollars worth of auction rate securities, the risks of which had been misrepresented.
The SEC had recently looked into the situation and decided Citibank had mismarketed and sold the securities as being less risky than they were. Citigroup had promoted them as being as safe as similar cash based products though this is not the case.
Although Citibank are buying the securities back it is something they could really do without since they have been hit very hard by the collapse of the sub-prime lending market. Financing the buyback will damage the bank further as they will have to reimburse any customers who sold for a loss, on top of paying fines worth USD100 million.
Tesco Finance is understood to be aiming for a full retail bank status, offering the full range of bank products and services to customers.
The 50 percent stake RBS hold in Tesco Finance is to be bought back by Tesco itself, at a cost of GBP950 million. The initial plan appears to be an expansion of the current product range offered, with home insurance the first to receive the extra attention. After that Tesco Finance are expected to start offering basic bank accounts, placing themselves in direct competition with the high street banks.
The position of Tesco Finance, using its core Tesco brand to win customers through supermarket retailing, is a strong one. Most people in the UK use Tesco at some time, so the chance to promote a full bank operation via the stores and online could prove an excellent opportunity.
The recent decision by the Bank of England to keep the base rate at 5 percent was as per expectations according to the Abbey National.
A spokesman from the Abbey National explained that the need to manage an economy that is slowing down meant it was highly unlikely to see the interest rate increased, since that would slow it further. The rise in inflation, up to 3 percent in April also meant that a rate reduction was not going to happen since that would further fuel the inflation rate.
Looking forwards the Abbey National feel there may be a cut in the interest rate later in the year, though it needs the inflation rate to be kept under control for that to happen.
