:00:00. > :00:00.Now for the latest financial news with Jamie Robertson
:00:00. > :00:19.Calculating the Brexit fallout in Europe:
:00:20. > :00:22.The European Central Bank meets for the first time
:00:23. > :00:23.since the referendum, but expectations are low
:00:24. > :00:32.We look at how banks are coping after the years of scandals, fines,
:00:33. > :00:40.recession, job losses and poor returns.
:00:41. > :00:46.In a minute we'll have more on a US justice department lawsuit that
:00:47. > :00:50.implicates Malaysia's Prime Minister, but first:
:00:51. > :00:53.In a few hours time, the European Central Bank
:00:54. > :00:54.will make its latest policy announcement.
:00:55. > :00:56.Investors will be keeping a keen eye on events
:00:57. > :00:58.following the UK's decision to leave the EU.
:00:59. > :01:01.Sluggish demand and the collapse in oil prices saw
:01:02. > :01:05.the Eurozone slip into deflation in April and May.
:01:06. > :01:09.The ECB's job is to maintain price stability, which means not allowing
:01:10. > :01:10.either inflation or deflation to get too much
:01:11. > :01:21.In recent weeks, political uncertainty,
:01:22. > :01:23.especially surrounding Brexit, has put a squeeze on bank lending
:01:24. > :01:25.as businesses and individuals hold off from taking decisions
:01:26. > :01:31.In March, the ECB launched a landmark stimulus
:01:32. > :01:37.It has an aggressive bond-buying scheme, but it can only buy certain
:01:38. > :01:39.types and now some economists are saying these constraints
:01:40. > :01:47.are tying the hands of the central bank.
:01:48. > :01:55.With me is Simon French, chief economist at Panmure Gordon.
:01:56. > :02:04.Let's have a look at what the Brexit effect on Europe has been. We have
:02:05. > :02:13.some idea of what the effect will be on the UK, but what about the effect
:02:14. > :02:18.on the continent? In terms of hard data coming out of the eurozone, we
:02:19. > :02:23.have seen the tip downwards in German consumer confidence, but thus
:02:24. > :02:28.far fairly muted in terms of people waiting to see that first move from
:02:29. > :02:33.the UK government. We did see problems with the Italian banks,
:02:34. > :02:36.what is going on there? What is the chain of connections between Brexit
:02:37. > :02:43.and an Italian bank? A lot of it was off the back of Brexit, meaning that
:02:44. > :02:47.lower for longer in terms of global interest rates, which has been
:02:48. > :02:53.really damaging in the banking sector, both in the eurozone and
:02:54. > :02:56.globally, has really put pressure on non-performing section of the
:02:57. > :03:01.Italian economy. Why that is relevant is of course that that is
:03:02. > :03:09.the thing that puts credit into an economy that hasn't grown since
:03:10. > :03:13.joining the eurozone in the early 2000s. That has meant investors
:03:14. > :03:19.pulling money out and questioning the viability of the Italian banking
:03:20. > :03:25.system. The EU is trying to push money in by buying bonds, but why is
:03:26. > :03:30.that not working? Have they not put enough money in? There is an eye
:03:31. > :03:34.watering amount of money, a 3.2 trillion euros balance sheet is what
:03:35. > :03:39.the ECB has already created. It continues to buy at a pace of 80
:03:40. > :03:43.billion euros per month, and that is both government debt and now
:03:44. > :03:48.corporate debt. How was that working? That is driving down the
:03:49. > :03:53.yields that these corporate and governments have to pay on their
:03:54. > :03:58.debts, which should give them an appetite in theory. Why is it not
:03:59. > :04:01.working? Mario Draghi will almost certainly say, I have provided the
:04:02. > :04:04.conditions for the corporate sector to go out there and borrow, to take
:04:05. > :04:08.on investment, but they are not doing it. He is providing the supply
:04:09. > :04:13.that there is not yet the demand. He will ask, again like he does most
:04:14. > :04:19.every month, for governments to reach into their pockets and start
:04:20. > :04:22.spending money. Thank you very much indeed.
:04:23. > :04:25.British banks system suffered some of the worst damage of the financial
:04:26. > :04:28.But fast forward, and banks are still suffering.
:04:29. > :04:30.Hit by mis-selling, Libor scandals, money-laundering claims,
:04:31. > :04:32.a global economic slowdown and now the shock of Britain
:04:33. > :04:35.And now a new high-tech challenger is challenging
:04:36. > :04:39.As part of our global banking series, Simon Gompertz takes a look
:04:40. > :05:02.Eight years ago, the panicked queues as first Northern Rock and then
:05:03. > :05:07.other banks had to be rescued. The UK's financial crisis was one of the
:05:08. > :05:12.worst, and today, British banks are still struggling. RBS lost over $1
:05:13. > :05:17.billion in the first three months of this year. Berkeley is worse blamed
:05:18. > :05:23.in the Libor scandal and has been tainted by attempted rekeying of the
:05:24. > :05:30.foreign exchange market. HSBC, held back by China's stumbling economy
:05:31. > :05:33.and cutting 50,000 jobs. And Lloyds, crippled by a $21 billion bill for
:05:34. > :05:39.mis-selling loan insurance. Now, they all face brick and leaving the
:05:40. > :05:45.EU. The seriousness of Brexit for the banking community cannot be
:05:46. > :05:48.understated. I don't want to be overly pessimistic, but it is
:05:49. > :05:54.actually a question that keeps coming back to uncertainty. Now
:05:55. > :06:00.there is a new threat for the traditional players. Ultra- low-cost
:06:01. > :06:12.banks like this one, which operate only or mainly from phone apps, or
:06:13. > :06:18.Tandem or Starling, had just launched, and promised to steal
:06:19. > :06:23.billions of customers. People have transformed shopping, but nobody has
:06:24. > :06:29.yet transformed banking, and we hope to do that. One of the greatest,
:06:30. > :06:35.contactless payments, is something the big banks claim as their success
:06:36. > :06:38.story, which needed massive reach to be managed effectively, and they say
:06:39. > :06:45.for the moment their control of payment systems make them hard for
:06:46. > :06:48.Challenger banks to beat. The battle for customers will now have to be
:06:49. > :06:53.fought against the background of Brexit. Economists are saying that
:06:54. > :06:57.interest rates will have to be lower for longer, and that would hit the
:06:58. > :07:02.profits of tanks. Then there is the question of how much banks based in
:07:03. > :07:07.the city of London, for instance, will be allowed to trade across the
:07:08. > :07:12.EU. As competition from new players hots up, the uncertainty over Brexit
:07:13. > :07:18.could not have come at a worse time for banks.
:07:19. > :07:21.The US Justice Department is looking to recover more than a billion
:07:22. > :07:23.dollars in assets as part of its investigation
:07:24. > :07:30.It claims the money came from 1MDB, a fund set up and overseen
:07:31. > :07:35.But he's not directly named in the lawsuit and has
:07:36. > :07:40.Now Singapore's authorities say they've seized $176 million
:07:41. > :07:50.in assets during their own investigation.
:07:51. > :07:52.Karishma Vaswani, our Asia business correspondent,
:07:53. > :08:03.To Points I want to get sorted out. One, what this fund is alleged to
:08:04. > :08:09.have done, and how the Prime Minister is implicated in the
:08:10. > :08:14.allegations. Actually, the fund has not done anything at all. What the
:08:15. > :08:18.department of justice says is that money was misappropriated from the
:08:19. > :08:23.fund, 1MDB in Malaysia, and that money found its way to the US. It
:08:24. > :08:32.was spent on making, for instance, the production of the film, The Wolf
:08:33. > :08:38.of Wall Street, many of our audiences will have seen that. It
:08:39. > :08:46.was also spent on buying famous paintings and property in the US and
:08:47. > :08:56.UK, and even the private jet. The US attorney general, Loretta Lynch,
:08:57. > :09:03.called it the biggest deception of the Malaysian people. It really will
:09:04. > :09:05.be a large-scale investigation, and the evidence in the court finding is
:09:06. > :09:19.quite astounding. Let's have a look at the markets. We
:09:20. > :09:23.have been the gate up half of 1%, and the Hang Seng. A fairly mixed
:09:24. > :09:30.picture to date with the yen looking a touch stronger against the dollar.
:09:31. > :09:33.The US markets as well, which I think I can get up for you, a
:09:34. > :09:39.reasonably strong base of the NASDAQ that is about it. The euro is still
:09:40. > :09:54.looking quite weak. That is all we have time for, that shortly.
:09:55. > :09:56.Newly released files have revealed that the government was prepared
:09:57. > :09:59.for armed troops to shoot anti-nuclear protestors
:10:00. > :10:02.The previously classified documents describe plans for dealing