21/07/2016 World Business Report

Now for the latest financial news with Jamie Robertson

Calculating the Brexit fallout in Europe:

The European Central Bank meets for the first time

since the referendum, but expectations are low

We look at how banks are coping after the years of scandals, fines,

recession, job losses and poor returns.

In a minute we'll have more on a US justice department lawsuit that

implicates Malaysia's Prime Minister, but first:

In a few hours time, the European Central Bank

will make its latest policy announcement.

Investors will be keeping a keen eye on events

following the UK's decision to leave the EU.

Sluggish demand and the collapse in oil prices saw

the Eurozone slip into deflation in April and May.

The ECB's job is to maintain price stability, which means not allowing

either inflation or deflation to get too much

In recent weeks, political uncertainty,

especially surrounding Brexit, has put a squeeze on bank lending

as businesses and individuals hold off from taking decisions

In March, the ECB launched a landmark stimulus

It has an aggressive bond-buying scheme, but it can only buy certain

types and now some economists are saying these constraints

are tying the hands of the central bank.

With me is Simon French, chief economist at Panmure Gordon.

Let's have a look at what the Brexit effect on Europe has been. We have

some idea of what the effect will be on the UK, but what about the effect

on the continent? In terms of hard data coming out of the eurozone, we

have seen the tip downwards in German consumer confidence, but thus

far fairly muted in terms of people waiting to see that first move from

the UK government. We did see problems with the Italian banks,

what is going on there? What is the chain of connections between Brexit

and an Italian bank? A lot of it was off the back of Brexit, meaning that

lower for longer in terms of global interest rates, which has been

really damaging in the banking sector, both in the eurozone and

globally, has really put pressure on non-performing section of the

Italian economy. Why that is relevant is of course that that is

the thing that puts credit into an economy that hasn't grown since

joining the eurozone in the early 2000s. That has meant investors

pulling money out and questioning the viability of the Italian banking

system. The EU is trying to push money in by buying bonds, but why is

that not working? Have they not put enough money in? There is an eye

watering amount of money, a 3.2 trillion euros balance sheet is what

the ECB has already created. It continues to buy at a pace of 80

billion euros per month, and that is both government debt and now

corporate debt. How was that working? That is driving down the

yields that these corporate and governments have to pay on their

debts, which should give them an appetite in theory. Why is it not

working? Mario Draghi will almost certainly say, I have provided the

conditions for the corporate sector to go out there and borrow, to take

on investment, but they are not doing it. He is providing the supply

that there is not yet the demand. He will ask, again like he does most

every month, for governments to reach into their pockets and start

spending money. Thank you very much indeed.

British banks system suffered some of the worst damage of the financial

But fast forward, and banks are still suffering.

Hit by mis-selling, Libor scandals, money-laundering claims,

a global economic slowdown and now the shock of Britain

And now a new high-tech challenger is challenging

As part of our global banking series, Simon Gompertz takes a look

Eight years ago, the panicked queues as first Northern Rock and then

other banks had to be rescued. The UK's financial crisis was one of the

worst, and today, British banks are still struggling. RBS lost over $1

billion in the first three months of this year. Berkeley is worse blamed

in the Libor scandal and has been tainted by attempted rekeying of the

foreign exchange market. HSBC, held back by China's stumbling economy

and cutting 50,000 jobs. And Lloyds, crippled by a $21 billion bill for

mis-selling loan insurance. Now, they all face brick and leaving the

EU. The seriousness of Brexit for the banking community cannot be

understated. I don't want to be overly pessimistic, but it is

actually a question that keeps coming back to uncertainty. Now

there is a new threat for the traditional players. Ultra- low-cost

banks like this one, which operate only or mainly from phone apps, or

Tandem or Starling, had just launched, and promised to steal

billions of customers. People have transformed shopping, but nobody has

yet transformed banking, and we hope to do that. One of the greatest,

contactless payments, is something the big banks claim as their success

story, which needed massive reach to be managed effectively, and they say

for the moment their control of payment systems make them hard for

Challenger banks to beat. The battle for customers will now have to be

fought against the background of Brexit. Economists are saying that

interest rates will have to be lower for longer, and that would hit the

profits of tanks. Then there is the question of how much banks based in

the city of London, for instance, will be allowed to trade across the

EU. As competition from new players hots up, the uncertainty over Brexit

could not have come at a worse time for banks.

The US Justice Department is looking to recover more than a billion

dollars in assets as part of its investigation

It claims the money came from 1MDB, a fund set up and overseen

But he's not directly named in the lawsuit and has

Now Singapore's authorities say they've seized $176 million

in assets during their own investigation.

Karishma Vaswani, our Asia business correspondent,

To Points I want to get sorted out. One, what this fund is alleged to

have done, and how the Prime Minister is implicated in the

allegations. Actually, the fund has not done anything at all. What the

department of justice says is that money was misappropriated from the

fund, 1MDB in Malaysia, and that money found its way to the US. It

was spent on making, for instance, the production of the film, The Wolf

of Wall Street, many of our audiences will have seen that. It

was also spent on buying famous paintings and property in the US and

UK, and even the private jet. The US attorney general, Loretta Lynch,

called it the biggest deception of the Malaysian people. It really will

be a large-scale investigation, and the evidence in the court finding is

quite astounding. Let's have a look at the markets. We

have been the gate up half of 1%, and the Hang Seng. A fairly mixed

picture to date with the yen looking a touch stronger against the dollar.

The US markets as well, which I think I can get up for you, a

reasonably strong base of the NASDAQ that is about it. The euro is still

looking quite weak. That is all we have time for, that shortly.

Newly released files have revealed that the government was prepared

for armed troops to shoot anti-nuclear protestors

The previously classified documents describe plans for dealing