Saudi + Bahrain: Decaying dictatorship shored-up by Gulf Union?

Fighter Jets In Skies Over Chicago On Friday Morning Before NATO Summit

U.S. fighter jets will be actively flying over Chicago on Friday as part of a security drill in the days before the NATO Summit.

The U.S. North American Aerospace Defense (NORAD) Command Region fighters–including Air Force KC-135 tankers, Air Force F-16s, and a Coast Guard HH-65 Dolphin helicopters–will be visible on Friday morning, beginning around 9 a.m.

Residents in the Chicago area can expect flights to continue for approximately two hours.

“Providing the air defense for special security events like this year’s NATO Summit is a part of our day-to-day mission,” said Lt. Gen. Sid Clarke, Continental U.S. NORAD Region commander said in a statement. “Our interagency partnerships are a key component to the air defense shield for events like this.”

During the NATO Summit,Air Force fighter jets will be on alert to enforce the Federal Aviation Administration’s Temporary Flight Restriction (TFR) zone during the summit. Military jets have been authorized to shoot down any aircraft that violates secure airspace over Chicago.

Also on Thursday, the Pentagon commented about a You Tube video posted earlier this week that purportedly showed a surveillance drone flying over an athletic field in Elgin–about 40 miles from McCormick Place, where NATO leaders will meet on Sunday and Monday.

The Chicago Sun-Times’ Lynn Sweet reported the issue came up at a Pentagon press briefing.

Defense Department spokesman George Little said he couldn’t comment on the specific incident but added that “the U.S. military is providing a support role .. to support security for the summit. That’s in accordance with American law.”

It is unclear whether the video is authentic. Military sources contacted by CBS 2 said they did not recognize the markings on the unidentified object.


CBS

Spain's Bankia plunges on report of huge withdrawals

AFP - Shares in Spain's Bankia, taken over by the state because of its troubled loans, plunged Thursday after a newspaper said that clients had withdrawn more than one billion euros ($1.27 billion) in the past week.

Shares in the bank, created in 2010 from a merger of seven savings banks, dropped by 27.49 percent to 1.2 euros in early afternoon trading, less than one-third of their value of 3.75 euros when the shares were listed on July 20, 2011.

The daily newspaper El Mundo reported Thursday that Bankia managers told the board that in the past week, the bank had lost a "similar amount" of deposits as the 1.16 billion euros ($1.5 billion) withdrawn by clients in the first quarter of the year.

The newspaper said the new numbers were presented during a Bankia board meeting on Wednesday.

The bank had 112 billion euros in deposits from clients at the end of the first quarter.

Bankia had the sector's largest exposure to the property market at 37.5 billion euros at the end of 2011, of which 31.8 billion euros were classed as problematic.

Spain announced on May 9 that it would take a controlling 45-percent stake in Bankia by nationalising its parent group Banco Financiero de Ahorros (BFA).

Last week, Bankia said it would set aside 4.7 billion euros -- by far the highest amount among Spanish banks -- to cover potential losses in case loans to the property sector went bad, in line with a government reform plan.

Fitch Says Top 29 Banks May Need $556 Billio

The world's top 29 banks may need a total $556 billion to meet tougher new capital rules, cutting returns by a fifth and forcing them to curb investor payouts and raise customer charges, Fitch Ratings said on Thursday.

The credit rating agency studied 29 banks named by world leaders (G20) as being globally systemically important financial institutions and required to hold core capital buffers of up to 9.5 percent by the start of 2019.

The list includes Barclays [BCS 11.3492 -0.6108 (-5.11%) ], Deutsche Bank [DB 36.596 0.206 (+0.57%) ], Goldman Sachs [GS 97.405 -0.795 (-0.81%) ], HSBC [HSBA.L 513.20 -7.70 (-1.48%) ],JPMorgan Chase [JPM 33.56 -1.90 (-5.36%) ], and UBS [UBS 11.44 0.09 (+0.79%) ].

Fitch said the banks represented $47 trillion in assets and may need to raise $566 billion common equity to hit core ratios of around 10 percent to satisfy new global Basel III requirements being phased in over several years from January.

"Banks will likely pursue a mix of strategies to address these shortfalls, including retention of future earnings, equity issuance, and reducing risk-weighted assets," Fitch said.

Return on equity (ROE), a key indicator of profitability, could fall from a median 11 percent seen in recent years to about 8-9 percent under the new capital regime, Fitch said.

This would be below the average cost of equity, put at 10-11 percent by analysts.

"For banks that continue to pursue mid-teen ROE targets, for example 12-15 percent, Basel III creates potential incentives to reduce expenses further and to increase pricing on borrowers and customers where feasible," Fitch said.

HSBC said on Thursday it had an ROE near 11 percent in the first quarter, below the 12 percent target it set itself a year ago.

Fitch said banks could also seek riskier activities to bump up ROEs.

While banks have until the start of 2019 to meet Basel III requirements, many lenders will comply earlier due to investor and market pressures, Fitch said.

A typical bank would be able to meet its capital shortfall by retaining earnings for three years, it estimated.

CNBC

Moody’s downgrades 16 Spanish banks

Moody’s Investor Service carried out a sweeping downgrade of 16 Spanishbanks on Thursday, including Banco Santander, the euro zone’s largest bank, citing a weak economy and the government’s reduced ability to support troubled lenders.

All the banks’ long-term debt ratings were downgraded by at least one notch, and some suffered three-notch cuts.

Spain’s banks, awash in bad loans after a real estate boom went bust, are at the heart of the euro zone debt crisis because markets fear a state bailout would put a severe strain on the country’s already stretched public finances.

Spain relapsed into an economic recession in the first quarter and likely faces a prolonged slump as the government tries to shrink itsbudget deficit by slashing spending.

“Amidst the ongoing euro area debt crisis, the Spanish government’s rising budget deficit and the renewed recession, sovereign creditworthiness has declined,” the ratings agency said. “This decline is a driver of today’s bank rating actions.”

Moody’s had cut Spain’s sovereign rating by two notches to A3 in February, placing it in the middle of its investment grade rating scale. It maintains a negative outlook on the credit.

Thursday’s move came after Moody’s downgraded 26 Italian banks on Monday and followed a press report about a run at troubled lender Bankia, Spain’s fourth-largest bank. The Spanish government, which took over Bankia last week, denied the report.

Santander suffered a three-notch cut to its long-term rating to A3 from Aa3.

Moody’s also cut BBVA’s long-term rating by three notches to A3 from Aa3 and put the credit on a negative outlook. BBVA is Spain’s second-largest lender.

Moody’s said on April 13 it would begin issuing conclusions to various reviews for European banks and global financial securities firms, including big U.S. investment banks. This process was to begin in mid-May and conclude by the end of June.

The agency cited restricted bank access to funding and rapid deterioration of asset quality for all the downgrades.

Spain’s banks have €307-billion ($391.15-billion U.S.) of exposure to a property market that crashed in 2007-2008, of which €184-billion is considered problematic, according to government estimates.

Four separate government reforms of the financial sector have failed to persuade investors that the banking system is safe, even though banks have set aside enough funds to absorb losses in up to 45 per cent of their total exposure, including performing and non-performing loans and real estate holdings.

Caixabank’s long-term rating was cut by three notches to A3. Moody’s cited the bank’s having reported a 32 per cent increase in problem loans at the end of 2011.

The ratings agency cut Bankinter’s long-term rating by three notches to Baa2, two notches above junk status. It cited the bank’s heavy dependence on wholesale funding and restricted access to market funding.

Rival ratings agency Standard & Poor’s took negative ratings action on 16 Spanish banks in April, days after it downgraded Spain’s sovereign credit rating by two notches to BBB-plus.

Fitch Ratings has Spain’s sovereign credit rating at A, about the mid-point of its investment grade scale.

The government’s borrowing costs shot higher on Thursday after data confirmed the economy was back in recession.

Prime Minister Mariano Rajoy said Wednesday his government, which is struggling to reduce the budget deficit, could soon have trouble financing itself in the bond market unless the pressure eases. The government’s strained finances are another risk for banks, since many have used cheap loans from the European Central Bank to buy three-year and five-year government bonds.

Through March, Spanish banks held almost €150-billion of Spanish government bonds, up from about €76-billion at the end of November.

U.S. bank stocks are likely to face pressure because of investor concerns about their exposure to Spain, analysts said.

But because the Spanish bank downgrades were expected and because U.S. banks had ample time to reduce or hedge exposure, the financial impact is likely to be limited.

“The downgrades have been pretty well telegraphed but I don’t think that means U.S. bank stocks won’t sell off,” said Keith Davis, an analyst with Farr, Miller & Washington. “There’s a knee jerk reaction; when things go wrong people sell first and ask questions later.”

The Globe Mail

Euro crisis ensnares Spain

Moody's slashed the ratings of 16 Spanish banks on Thursday evening, citing the reduced ability of the Spanish government to provide support to the sector, as well as the "adverse operating conditions" characterised by a renewed recession.

The rating agency also downgraded Santander UK, although, at "A2," it is still rated one notch above its parent bank Banco Santander. Moody's highlighted that Santander UK has "no direct exposure to the Spanish government (or regional governments)".

Earlier in the day, shares in Bankia, the country’s fourth biggest bank, plunged by as much as 29pc amid reports that depositors had pulled out €1bn in the past week.

Madrid was then forced to pay 50pc more than in March to drum up interest in a €2.5bn (£2bn) bond. By then end of the day, borrowing costs for benchmark 10-year sovereign debt in Spain rose 2 basis points to 6.21pc, while gilts and German bunds dropped to fresh lows of 1.834pc and 1.41pc respectively. Britain’s debt management office was swamped with record demand for a 'safe haven’ £1.5bn gilt auction.

As pandemonium struck Spain, Fitch slashed Greece’s credit rating deeper into junk, from B- to CCC, to “reflect the heightened risk that [it] may not be able to sustain membership of the monetary union” and warned that all eurozone members would be at risk of a downgrade if Greece exited.

Markets across the world slumped as fears gathered that a new and incalculable crisis was approaching. In London, the FTSE 100 fell to a six month low, dropping 1.2pc to 5,338 points, while France’s CAC and Germay’s DAX also dived 1.2pc, and Wall Street dropped almost 1pc in early trading

In Spain, Nicholas Spiro, managing director at Spiro Strategy, said the high cost of the Madrid bond auction was evidence that “'break-up contagion’ is seeping into Spanish yields”. “Make no mistake about it, these are painful auctions for the Treasury,” he added.

In a desperate plea to Brussels, Spain’s economy secretary Fernando Jimenez Latorre said: “Spain is making every necessary adjustment to fiscal police, structural reforms and there should be some kind of reaction from the European Central Bank to support us.”

Mr Latorre was bounced into denying claims that there was a run on savings at Bankia or that the banks’s shares were being suspended. “It’s not true that there is an exit of deposits at this moment from Bankia,” he claimed.

Bankia’s chairman, Jose Ignacio Goirigolzarri, said depositors could remain “absolutely calm”. Following the intervention, the shares recovered a little to close 14pc lower. The day had already begun badly with confirmation that Spain was back in recession, shrinking 0.3pc in the first three months of the year.

As the crisis in the euro periphery spiralled out of control, divisions at its core deepened further. Pierre Moscovici, France’s newly-appointed finance minister, reiterated that the fiscal pact “will not be ratified as it stands” in the face of German Finance Minister Wolfgang Schaeuble’s call “to create a political union now”.

David Cameron also demanded urgent action by Europe’s leaders for closer integration to spare the world economy from disaster ahead of crunch talks at the G8 meeting today in Camp David.

With the odds on Greece leaving the euro shortening, economists warned a messy exit could cost the eurozone up to $1trillion (£630bn). Even the International Monetary Fund could be at risk of losing its bail-out contributions.

Fabrice Montagne at Barclays Capital said: “Even though the IMF prides itself on never having made any losses on a programme, a Greek exit would certainly challenge this record.”

The Telegraph

Cameron slams Euro bosses as people pull the plug