The main financial news at the start of the week involved the G20 summit in Washington over the weekend. The leaders of the 20 major industrial countries in the world met to discuss and propose solutions to the global financial crisis which appears to be worsening day by day. The leaders pledged to reform financial systems, and institutions – including the IMF ("International Monetary Fund") and World Bank – across the glob, with the tightening of the regulation of multinational banks, as one specific aim. British Prime Minister, Gordon Brown was quoted on the Sky News website hailing the outcome of the summit as "an historic agreement" but that agreement was more in terms of principle than hard and fast practical measures; finance ministers were left in the main, to develop their own strategies which will be discussed again at further summits planned for the spring and summer of 2009. British Chancellor of the Exchequer, Alistair Darling, was optimistic about the outcome of the summit, however, and was also quoted on the Sky News website saying "It's inevitable that at this stage you won't get details. What is very encouraging is you've got a commitment that goes far further than you'd ever see in international gatherings of this sort."
Elsewhere, the London Stock Exchange fell in response to the news that a rival bid for HBOS – which is currently involved in controversial merger talks with Lloyds TSB – from financier Jim Spowart (a former executive of HBOS), had been abandoned due to lack of political support.
On Tuesday, the new CEO of recently nationalised bank Northern Rock, Gary Hoffmann – appearing before the Treasury Select Committee in the House of Commons – responded to criticism of the company over its rate of repossession compared to other lenders, by promising extra help for mortgage customers who find themselves in financial hardship. Despite Northern Rock currently repossessing 50% more properties than the average across the industry Mr. Hoffmann refuted criticism that its approach was "overly aggressive" and insisted that repossession was only ever a "last resort", according to the BBC website. There was however, some good news for one sector of the construction industry – that of sustainable building – as figures released by the UKBGC ("United Kingdom Green Building Council") indicated that 56% of its members had seen an increase in focus on sustainability as a result of the credit crunch, while only 18% had seen any adverse effects.
On Wednesday, it was announced that a financial forum, hosted by French President, Nicola Sarkozy, and former British Prime Minister Tony Blair, is to be held in Paris on the 8th and 9th of January. The forum is intended to bring together finance ministers – senior and junior – and industry experts, in an effort "to define a new model of capitalism" said Mr. Blair on the BBC website. Elsewhere, it was announced that a £1.4 billion (€1.65 billion) loan had been approved by the IMF for Iceland. Iceland will also receive loans totalling nearly £1.7 billion (€2 billion) from its Scandinavian neighbours in an effort to stabilise its economy in the wake of the banking system collapse in October. Lloyds TSB shareholders voted by a 96% majority, in favour of the proposed takeover of HBOS ("Halifax Bank of Scotland"), which will create the Lloyds Banking Group – with nearly 150,00 staff, and 3,000 branches – subject to a favourable vote by HBOS shareholders next month.
Continuing the banking theme, on Thursday, Sir Tom McKillop, the outgoing chairman of Royal Bank of Scotland (RBS) apologised for the cost, financially and in human terms of the difficulties which the Bank had experienced recently, calling it "most difficult experience in over 40 years of my working life" according to the Sky News website. He was speaking prior to a vote by RBS shareholders on a £20 bailout of the ailing bank – expected to report an annual loss for the first time in its 300-year history – by the British Government. The vote was carried, with 99% of shareholders in favour of the plan, which could leave up to 60% of the Bank in the hands of the British taxpayer, depending on how the share price moves. Legal & General Investment Management (L&G) also announced that it would be voting for rather than against, a move by Barclays – in which it holds a 5% stake – to raise £7 billion (£8.2 billion) from Middle Eastern sources. L&G stated, however, that it had changed its mind only because any fall in Barclays' share price would adversely affect its own clients. Figures from the CML ("Council of Mortgage Lenders") revealed a 7% rise in mortgage lending in October, compared with September but still down 44% on the same month last year. Other predictions, however, suggest that the housing market may fall anything between 25% and 35% compared to its peak in the middle of last year and that prices may not attain the same level for another 5 years.
Some better news for business borrowers on Friday, with the announcement that British Chancellor of the Exchequer, Alistair Darling was considering legal changes to force banks to lend money to small businesses. Mr. Darling is to deliver his pre-budget report on Monday next and the report is expected to contain several measures to stimulate the economy. There has been anger expressed at the reluctance of banks to pass on interest rate cuts to mortgage borrowers and to make credit available to small businesses, so Mr. Darling is expected to announce a new scheme for underwriting business loans, and legislation if necessary to loosen lending policy. This announcement cam alongside news from the CML that repossessions have increased by fully 70% in 2008, compared to 2007, and that 20% of British homes are being placed on the market because their owners can no longer afford their mortgage repayments.