Developer Paddy McKillen challenges 'bad bank'

The High Court in Dublin will hear a challenge to the operation of the Irish Republic's "bad bank", the National Asset Management Agency, in the autumn.

The National Asset Management Agency (Nama) was set up to take all property and development loans of more than 5m euros off the books of the Irish banks.
It was set up in response to the property crash which has crippled Irish banks.
Under the scheme Bank of Ireland intends to transfer to Nama 80m euros in loans it made to the Belfast-born developer Paddy McKillen.
Mr McKillen is resisting the move saying it would have "a drastic and detrimental impact on his business and property rights."
He is arguing that even though Nama is taking both good and bad loans it has become associated with troubled developers.
He said his Bank of Ireland loans were "fully performing" - meaning he is repaying on the terms originally agreed with the bank.
Mr McKillen apear to have come through the property crash in better shape than many Irish developers - he has significant assets in the recovering London property market and also invested in Asia.
His London investments include a large stake in Maybourne hotel group - the company which owns the five-star Claridge's, Connaught and Berkeley hotels.
He co-owns a number of Northern Ireland registered property firms including Belfast Office Properties and Finbrook Investments.
On Monday Mr McKillen's barrister, Michael Cush, told the court he did not see the proceedings as a full frontal attack on Nama.
He said the action was in part related to procedures and definitions but it was hugely important to Mr McKillen.
However, Nama's barrister Brian Murray said the challenge "poses a very real threat to the vital work of the agency".
Mr Murray added that part of the challenge alleged that the definition of eligible assets used in the act was unconstitutional.
He said if that part of the act was struck down, it would have very significant implications for Nama's operations.
In a document sworn in on behalf of Nama, the court was told that if there was a perception that the system under which Nama operated was flawed, that would undermine building of confidence in the international markets, which the ongoing work of Nama seeks to foster.
Mr Justice Kelly said he was satisfied the case was one of very considerable urgency.

Theo BBC News 

Inflation-linked savings certificates cut by NS&I

Savings products linked to the inflation rate have been withdrawn from the market by National Savings and Investments after proving too popular.

Index-linked savings certificates were withdrawn from sale by NS&I at the start of the day because sales "far exceeded" the level anticipated.
Some savers have been attracted to products with interest linked to inflation because other rates are low.

NS&I said it had also withdrawn fixed-interest certificates.
The interest paid on Direct Saver and Income Bonds has also been cut by 0.25% with immediate effect by NS&I.
Building societies are likely to welcome the move as it removes a strand of competition from the market.
Returns The move will reduce choice for savers who have had few options during recent times of low interest rates.
"With savings rates at painfully low levels, it is no surprise that savers have been attracted to potentially higher returns in the form of index-linked savings certificates," said Andrew Hagger, of financial website Moneynet.
"No one knows what will happen to [inflation measure] RPI in the future, so it is not possible to say whether index-linked savings certificates will turn out to be a good investment, however at least you knew that you would always maintain the spending power of your savings.
"It is another door slammed in the face of savers who now have fewer options as they desperately seek a decent return on their nest egg."
There are currently 587,000 holders of NS&I index-linked savings certificates, and 866,000 have fixed-interest savings certificates. People could save a minimum of £100 and a maximum of £15,000.
With the Retail Prices Index (RPI) being high, the level of interest in index-linked savings certificates has shot up in the first few months of the year, the group said. Latest figures show RPI was at 5% in May.
It has withdrawn both products from the market for new customers and has not set a date for when they might be offered again.
Rules NS&I, which is backed by the government, works under rules that state that it must not dominate the savings and investments market.

The latest decision was made because sales of these products "far exceeded those either anticipated or required by NS&I".
"NS&I has a unique position at the heart of the UK savings sector and we continue to follow a policy of acting transparently and balancing the interests of our savers, the taxpayer and the stability of the wider financial services market," said chief executive Jane Platt.
"The volume of sales over the past few months is such that our forecasts show we were at risk of exceeding the top end of the range, so we needed to take action to reduce sales."
The group's website and call centres stopped selling savings certificates from midnight, and Post Office counter sales of these products have also been suspended.
Postal applications posted before the announcement and received on Monday would be honoured, NS&I said, but all postal applications received from Tuesday would be returned to the customer.
On maturity, existing savings certificate customers can continue to roll over their investment on the same terms they currently hold.
They can also reinvest into any of the savings certificate terms and issues - either the three or five-year issue of index-linked savings certificates or the two or five-year issue of fixed-interest savings certificates - regardless of which savings certificate they currently hold.
But customers who have invested in other NS&I products would not be able to reinvest their money into savings certificates, the group added.

Theo BBC News 

Vince Cable: Banks continue to rip customers off

Britain's banks are "ripping off" their customers, Business Secretary Vince Cable has told the BBC.

Mr Cable said forcing banks to change their practices would be a key test of the coalition government.
His comments come as research for Panorama reveals that high street banks surveyed are charging as much as 167% interest on unauthorised overdrafts.
Authorised overdrafts are charging an average of 32% interest, despite advertised rates of around 19%.
Fine print
In response to the findings, Mr Cable said: "When we talk about restructuring the banks what's going to come out of this is a more competitive system where the customers are not ripped off."
He said customers are paying the price for a lack of healthy competition in a banking marketplace dominated by a few big players.
"One of the negative side effects of this crisis is that our banking system that was already very concentrated is now even more concentrated so there's less competition, less choice and bigger temptation for banks to earn margins at the expense of their customers," he said.

Christine Ross, head of financial planning at SG Hambros which examined the true cost of overdrafts, urged consumers to read the fine print on their account details.
"What we found is that unless individuals really scrutinise the small print the overdraft rates charged are far higher than they could even imagine," she said.
Mr Cable also issued a renewed attack on the morality of the City over bonus payments: "I think the bonus culture which continues is unacceptable.
"The coalition agreement makes it very clear that unacceptable bonuses are continuing and that is something we want to try to stop and that reflects the lack of moral compass."
According to the Office of Fair Trading, in 2006, Britain's banks earned £2.6bn in profit from penalty charges.
The British Bankers' Association said in a statement that overdrafts are meant to be short term measures and are used by a relatively small number of banking customers for a few days at a time.
"As overdrafts are designed for accounts where the balance only occasionally tips into the red for a few days, it is impossible to calculate accurate annual lending rates. The estimated costs are based on average figures and the amount of time overdrafts are used."
'Very unfair' Bank customers also complained to Panorama about the Halifax, which is owned by Lloyds Group Plc, a recipient of more than £20bn from the taxpayer in the bailout in late 2008.
They said it was charging an effective annual rate of interest of 3,650% on an overdraft of just £10.
Instead of charging advertised interest on overdrafts, the bank is instead charging a flat fee of £1 a day. But over the course of a year, customers with small overdrafts end up paying a disproportionately high rate of interest.
The Halifax said in a statement that customers have said they "want a clear overdraft charging structure" and the £1 a day represents "a simple set of daily fees".
The bank said it offers a "buffer zone" for overdrafts of less than £10 that is free and that the vast majority of its customers do not go into overdraft.
Merryn Somerset Webb, editor-in-chief of MoneyWeek, said of the Halifax policy: "It is very unfair because the interest rates effectively are much, much higher for people with tiny overdrafts than for very big overdrafts. So you can be penalised extraordinarily badly."

Theo BBC News 

EADS eyes US in A400M plane deals

The troubled Airbus A400M military transport plane is expected to land orders from the US military, according to Louis Gallois, chief executive of Airbus' parent company EADS.

"The Americans are interested," he told BBC News. "They do not have an aircraft with the same capabilities."
Mr Gallois said he did not expect the US to order the plane immediately.

However, by the middle of the decade the US will need to replace their existing planes, he explained.
By then the A400M programme - which is several billion euros over budget and four years late - should be running smoothly.
"The programme is now on schedule," Mr Gallois said.
Still committed Seven European governments have each ordered dozens of the A400M aircraft in order to support the project.
In March this year, the seven agreed to inject 1.5bn euros (£1.3bn) in additional funding.
Ahead of the Farnborough air show, there were hints that some European customers were considering walking away from their commitments or reduce their orders, though Mr Gallois said he had not been told of any such plans.
"It is a contract we have with European nations," he said.
"But to become profitable we have to export it."

Tight budgets

Landing military contracts has become much tougher in recent months, however, with both the US and European governments cutting spending wherever they can.
Nevertheless, global military spending remains at a historically high level, having risen 50% since 2000, according to Stockholm International Peace Research Institute (Sipri).
The US increased military spending by 63% between 2000 and 2009, Sipri found.
EADS is eager to grow its share of the US pie, gunning for revenues of $10bn (£6.5bn) in the US, up from $1.2bn currently.
Tanker contract A contract central to this strategy is currently up for grabs.
After years of wrangling, EADS and Boeing have both just put in their latest bids to build an aerial refuelling tanker for US fighter jets.
"I think we have a good chance to win this," Mr Gallois said, insisting that its plane was not only the best, it had also been developed already and hence all the development risks had been absorbed by others.
He also vowed to compete aggressively on price, though stressed that although the $35bn contract was attractive and could be worth even more over time, it was not essential to its US strategy.
"We are not ready to lose money to win this contract," he said.

Theo BBC News

US Treasury releases delayed China currency report

The US Treasury has released its much-delayed semi-annual currency report.

The report, originally due to be published in April, says China's currency, the yuan, is undervalued.
It did not say - as some believe - that China manipulates its exchange rate to give it a competitive advantage.
US exporters in particular think that China uses its vast stocks of foreign exchange to depress the worth of the yuan - something that would keep the price of its goods artificially low.
China has an official policy of only allowing its currency to move within a certain band, rather than allowing it to float freely, as do the pound, the euro and the dollar.
US lawmakers have accused China for years of artificially weakening the value of the yuan and demanded that President Barack Obama label the country a currency manipulator.
China is under constant pressure to allow its currency to more fully reflect a free-market valuation.
Close eye Three weeks ago, the Chinese central bank said it would loosen its currency controls amid mounting international pressure.
The Chinese currency has been held at about 6.83 to the dollar since July 2008.
The US Treasury Secretary, Timothy Geithner, said in Thursday's report to Congress that he would be keeping a close eye on the yuan, also known as the renminbi.
"We will closely and regularly monitor the appreciation of the renminbi and will continue to work towards expanded US export opportunities in China that support employment in the United States," he said.
Mr Geithner's report was scheduled to have been sent to Congress in April but he had postponed it in a bid to give China more time to make the yuan flexible.
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German imports and exports rise sharply

German imports have risen at their fastest rate since unification in 1990, outpacing a sharp rise in exports.

Imports rose by 14.8% in May compared with the previous month, while exports grew by 9.2%. Both figures were much higher than analysts had expected.
As a result, Germany's trade surplus narrowed to 10.6bn euros ($13.4bn; £8.8bn) for the month.
Analysts said the data showed Europe's biggest economy was growing strongly.
The reason, they said, was strong demand for German goods in Asia. A weakening euro, which makes the goods cheaper overseas, had also helped.
The euro has been hit in recent months by concerns about government debt levels and, more recently, by fears about the liquidity levels of banks.
'Ash cloud' "The strong economic upturn in Germany is continuing unabated. The reasons are well known - demand in Asia is strong and the weak euro is helping," said Unicredit analyst Andreas Rees.
"The strong increase in imports is an encouraging signal that shows the upturn is gaining pace. This all suggests the German economy grew quite strongly in the second quarter - we're expecting to see growth of about 1%."
The month-on-month import and export figures were also boosted by the comparison with the relatively weak data from April.
"Exports and imports have both risen considerably. A reason for that could be the catch-up effect from the ash cloud in April that brought air transport to a virtual standstill for a while. A lot of that was compensated for in May," said Citigroup analyst Juergen Michels.
He also predicted growth of 1% between April and June.
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ECB keeps eurozone interest rates on hold at 1%

The European Central Bank (ECB) has held eurozone interest rates at a record low of 1% for the 14th month running, as expected.

The bank has kept rates low to try and stimulate the eurozone economy following the global economic downturn.
Many analysts argue rates need to stay low as governments are cutting back on spending, which undermines growth.
Earlier on Thursday, the Bank of England announced that it had kept UK interest rates on hold at 0.5%.
Explaining the ECB's decision to keep rates on hold, president Jean-Claude Trichet said the eurozone's economic recovery continued in the first half of the year, adding "we expect the [area's] economy to grow at a moderate and still uneven pace, in an environment of high uncertainty".
He said that inflationary pressure remained contained, with inflation likely to remain at or below the bank's 2% target rate over the medium term.
Dangers to growth The eurozone economy has been in the international spotlight in recent months, with concerns about high government debt levels hitting global stock markets and threatening to derail the economic recovery.
Many governments have now introduced austerity measures, such as spending cuts and tax rises, designed to cut budget deficits.
For this reason, central banks are wary of increasing interest rates, which would also serve to cool economic growth.
In recent weeks, attention has turned to bank debt, with investors eagerly awaiting the results of stress tests designed to see how well equipped banks are to cope with future financial crises.
Mr Trichet said the tests should "build confidence" in markets as investors learnt how exposed banks were to bad debt. Transparency, he said, would be beneficial.
The results of these tests are due to be published on 23 July.
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By BBC 

EADS submits new bid for USAF refuelling contract

The European defence contractor, EADS, has submitted a new bid to supply refuelling aircraft for the US Air Force.

Arch-rival Boeing's bid is expected to be delivered to the Pentagon soon.
The contract, which has been long delayed, is worth $35bn (£23bn).
Earlier, a long-running World Trade Organisation (WTO) investigation into whether Boeing receives illegal subsidies from the US government postponed its decision on the matter.
Both the US and the European Union have reported each other's companies to the WTO, alleging illegal subsidies.
The WTO has already ruled - at the end of June - that the EU had paid illegal subsidies to the EADS subsidiary, Airbus.
The EU and Airbus criticised the delay over the Boeing decision.
"The time lag between this case, and the United States case against support to Airbus... has constantly increased over the six years this dispute has been running and the gap is now at nearly a year," the EU's executive Commission said.
Political decision Meanwhile, EADS is hoping that the US will find something to please within the pages of its 8,000 page-plus proposal for the defence contract, which it has submitted a day ahead of deadline.
The US hopes to have chosen a winner by November.
It is replacing its current fleet of tankers, some of which date back to the late-1950s.
Several previous attempts to choose a contractor have failed - one because of a dispute between Boeing and its then-rival Northrop Grumman.
The decision is highly political.
Although EADS plans to build its craft within the US, it is seen as very much a European business.
Boeing's supporters in Congress argue the recent WTO ruling shows EADS has an unfair advantage over Boeing.
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By BBC 

Fears over new mortgage squeeze, says Bank

Lenders have warned that homebuyers could face a fresh squeeze on mortgages in the next three months, according to a Bank of England report.

The availability of mortgages has risen since the end of the credit crunch, but anticipated tightening of wholesale funding could reverse the trend.
However, the rate at which mortgage holders and businesses default on loans has fallen "unexpectedly".
The predictions were contained in the Bank's Credit Conditions survey.
Demand Demand for new home loans fell slightly in the last three months, the survey found, even though availability rose.

Mortgage products available

Continue reading the main story

• 0% deposit: 8
• 5% deposit: 18
• 10% deposit: 176
• 15% deposit: 460
• 20% deposit: 327
• 25% deposit: 860
• 40% deposit: 437

Source: Moneyfacts. Figures for July 2010

"While the survey shows that costs of borrowing have eased over the last quarter, we think credit conditions have turned over the last three or four weeks," said Dougald Middleton, head of capital and debt advisory at Ernst and Young.
Jonathan Loynes, chief European economist at Capital Economics, said: "The Bank of England's latest credit conditions survey strikes a fairly downbeat tone, with banks expecting mortgage availability to decline over the next quarter."
Those who can offer a large deposit have been the homeowners who have benefited from the recent rise in mortgage availability, a separate survey by the financial information service Moneyfacts found.
Borrowers with a 40% deposit have seen a 10.6% increase in the number of new deals available in July compared with June, compared to a 2.8% fall for those with only a 15% deposit, Moneyfacts said.
"Rates continue to decline as lenders try and tempt borrowers off record low standard variable rates and on to new deals, so much so that the average two year fixed mortgage now stand at its lowest level in seven years," said Michelle Slade, of Moneyfacts.
Defaults However, the Bank's report said that the number of people wanting to remortgage had risen for the first time since the end of 2008.
Few people have been looking to remortgage in recent times, owing to the low cost of standard variable rates.
The drop in mortgage-holders defaulting on loans in the April-to-June period continues a trend seen with home loans since last year.
However, the Bank's Credit Conditions Survey said that the default rate was expected to remain unchanged in the third quarter of 2010.
Lenders warned that the rate could rise if the economic outlook worsened.
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by news bbc

Google enters travel market with flight data purchase

Search engine giant Google has entered the travel market after acquiring flight information firm ITA Software.

ITA provides software that organises fares, flight and journey times that are used by airlines, travel agents and flight comparison sites such as Orbitz.
Google said it may well expand the scope, enabling users to search directly for flight destinations.
Google paid $700m in cash for the US-based company, founded in 1996 by a team of MIT computer scientists.
"What we're going to do is build new flight search tools that focus on end users," said Google chief executive Eric Schmidt.
However, he said that the firm would not be selling airline tickets to consumers and that it would honour "all existing agreements that ITA has with its partners".
Those partners include some of Google's direct competitors - such as Microsoft's own flight comparison website, Bing Travel.
Other firms which had been bidding for ITA included Travelport, Expedia and Kayak, many of which are also dependent on ITA for their flight data.
A spokesman for Kayak told BBC News that, for now, they were not concerned.
"In the short term, it's not an issue, because Google said it's honouring existing agreements," he said.
The deal could see Google controlling a significant amount of flight data However, there are fears within the travel industry that Google could have an excessive influence. Google says the acquisition is "pro-competitive" and "pro-consumer" but said regulators were likely to examine the deal.
"I would expect that it would be a significant review," said Mr Schmidt.
The Independent's travel editor, Simon Calder, told BBC News that the biggest loser may be the old legacy booking systems, should Google expand ITA's remit.
"If anything, the airline industry used a system that you could describe as the forerunner to the internet," said Mr Calder.
"The aviation industry used GDS - the Global Distribution System - for decades, because there were computers in travel agents, airports and airlines across the globe.
"Now it consolidates around Amadeus, Sabre, Galileo and World Span and these still have legacy aspects. For example, if you book a flight from London to Mexico City via Dallas, you will still have to pay $3 for each segment.
"If Google can do something to rival that, it would be very interesting and exciting.
"But, as with all things to do with Google, the issue of market domination comes up," he added.
Collision course Google confirmed it was also working on a project that would enable users to search for hotels, with the results displayed on Google Maps. That could put put it on a collision course with firms like Expedia, Travelocity and Opodo.
Mr Calder said that while he could see merit in Google running a flight information firm, he was not convinced that it should launch a travel comparison website of its own.
"While there is great competition when it comes to transatlantic flights, from smaller airports, the choice for a passenger is more limited," he said.
"There are plenty of price comparison sites already and for someone booking flights, the system is almost perfect, so I don't see how Google is going to get a slice of that."
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Iceland holds talks with UK and Netherlands on Icesave

Officials from Iceland, the Netherlands and the UK have held two days of talks in Iceland's capital Reykjavik over the settlement of a £2.3bn banking dispute.

The money was lost in Iceland's banking crash in 2008, when British and Dutch depositors were left out of pocket after the Icesave bank collapsed.
The latest talks, on hold due to elections in the UK and Netherlands, were the first since March.
It is hoped that further talks can be held at the end of the summer.
Iceland has said it will honour its commitments, but the nation's voters rejected an agreement at a referendum in March.
The UK government has indicated it is prepared to block Iceland's accession to the European Union unless the dispute is sorted out.
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Thames cable car to link 2012 Olympic Games venues

A £25m cable car across the Thames is being planned to link 2012 Olympics venues.

It will cross the Thames between Greenwich Peninsula and the Royal Docks, carrying up to 2,500 passengers an hour 50 metres in the air.
It is designed to cut journey times between the 02 arena and the ExCel exhibition centre - both of which are Olympic locations.
The privately-funded system could provide a crossing every 30 seconds.
'Spectacular views'
Discussions are ongoing with a number of private sector organisations that have expressed interest in the project, Transport for London (TfL) says.
London Mayor Boris Johnson said it would provide "a unique and pioneering addition to London's skyline".
He added that passengers would be able "to drink in the truly spectacular views of the Olympic Park and iconic London landmarks".
London's Transport Commissioner Peter Hendy said: "A privately-funded cable car system offers a relatively quick and cost-effective way of improving connections across the river for pedestrians and cyclists while road links are progressed in parallel."
Former Labour Mayor Ken Livingstone said: "I would have no objection to a cable car, as it would be a development for the area.
"But what is really needed is a road bridge that would carry more commuters."
Cities already operating cable car systems include Barcelona, Cologne, Hong Kong, Lisbon, New York and Singapore.
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Minister plays down 40% departmental cuts planning

Government departments will not have to axe 40% from their budgets - despite being ordered to plan for cuts on that scale, a cabinet minister has said.

Transport Secretary Philip Hammond said some departments may see cuts "a bit higher" than the 25% announced in the budget and some "a bit lower".
Trade unions claim ministers are using the 40% figure to make eventual cuts seem more acceptable.
Labour said the plans went too far and would hit frontline services.
In his budget last month, Chancellor George Osborne said departments would face average cuts of 25% when the government's public spending review is completed in October - potentially bigger than anything attempted by a previous UK government.
Health and aid spending will be ring fenced, while defence and education will face cuts of between 10% and 20%.
But Mr Hammond said other departments have been told to go through their budgets "line by line" for savings of between 25% and 40%.
'Difficult questions' He said ministers wanted to avoid a "salami slicing" approach, with each department taking an equal hit.

ANALYSIS

Continue reading the main story

Norman Smith,
Chief political correspondent, BBC Radio 4

There's a standard trick in the world of car salesman known as "the hot water cold water" technique.
And it looks as if the government is applying the same selling skills of the car dealer to the business of selling cuts to the public services.
Basically, what it amounts to is that when a potential buyer comes in to look at a car he is first quoted an exorbitant price.
This is the hot water from which the buyer immediately pulls his hand out.
Then the price is lowered (this is the cold water) and hey presto the price/hot water becomes a lot more bearable even though it's still pretty painful.
Now looking at the government's call for some departments to estimate the impact of forty per cent cuts - could that possibly be the hot water to make us much more amenable to the rather less scorching prospect of twenty five per cent cuts ?
Even so 25% still looks pretty scalding.
Cuts threaten new road projects

The purpose of asking departments to suggest cuts of up to 40% now was to help the government decide its overall spending priorities and it was unlikely any would be forced to make savings on that scale, he said.
Mr Hammond told BBC One's Andrew Marr show: "I don't expect any departments will see a 40% cut but some departments may see cuts a bit higher than 25%...some departments may then see cuts a bit lower than 25%."
He added: "We are going to look at the priorities of the coalition. We are going to look at the individual impacts on departments - and that's why departments are being asked to prepare not only a 25% case but also a 40% case".
He admitted it would be "challenging to take out even 25%" from budgets but added "that does not mean we should not look at each line of our budgets and ask the difficult questions".
In his own department, transport, he said the cuts would effectively mean a halt to new road building - but he said big infrastructure projects that helped the economy would still be prioritised.
And he said the emphasis would be on making the existing road network work more effectively by tackling bottlenecks and road works.
'Fantasy land' He accused his predecessor as transport secretary, Lord Adonis, of announcing "all sorts of eyewatering projects without funding them".

Shadow home secretary Alan Johnson described the notion that 40% cuts could be made without affecting frontline services as "fantasyland"

Shadow Home Secretary Alan Johnson, for Labour, said any suggestion that the scale of cuts being proposed by the coalition government would not affect frontline public services was "fantasy land".
He told Andrew Marr the coalition had added an extra £40bn in cuts to the £70bn proposed by Labour to halve Britain's record £156bn annual budget deficit over four years.
He said the government was going "far too far" and there was "no need to do this".
Public sector unions are threatening "co-ordinated industrial action" if ministers try to implement cuts as deep as 40%.
Mark Serwotka, general secretary of the UK's Public and Commercial Services union, said there was "no economic case to put people on the dole queue".
"We are already drawing up plans with other public sector unions to ensure that if the government attacks our pensions, our jobs and public services, they will face resistance the like of which we haven't seen in this country for decades," he said.
"We will see not just co-ordinated industrial action by unions but campaigns in every community."
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Bank of China to raise up to $8.9bn in share issue

The Bank of China says it plans to raise up to 60bn yuan ($8.9bn;£5.9bn) by issuing new shares in Hong Kong and Shanghai.

It is part of a $42bn fund-raising effort by China's four biggest lenders, designed to boost their capital bases.
The Agricultural Bank of China is preparing for what is expected to be the world's largest share issue.
The banks have to boost their balance sheets after increasing lending as part of government stimulus measures.
The government has ordered them to keep more money in reserve after they embarked on a massive lending programme which left reserves out of kilter with loans oustanding.
"All the proceeds to be raised from the rights issue... shall be applied towards strengthening the capital base of the bank and to improve the capital adequacy ratio of the bank," Bank of China said.
Bank of China's shares were suspended pending the announcement.
The country's top two lenders, ICBC and China Construction Bank, have said they too have plans to raise extra funds.
World record Agbank, China's third largest bank, is in the process of boosting its funds by selling a 14% stake for $23bn (£15.3bn).
If that goes according to plan, it will become the world's biggest initial public offering (IPO).
The IPO, taking place in both Hong Kong and Shanghai, has fired investors' appetites.
So-called retail buyers - individuals - queued outside bank branches in Hong Kong to pick up the AgBank prospectus.
Major international investors have also expressed strong interest in AgBank.
UK-based bank Standard Chartered has said it will invest $500m in Agbank.
Qatar and Kuwait are already set to invest $3.6bn in the IPO.
Other likely investors include Singapore's sovereign wealth fund Temasek Holdings, Hong Kong businessman Li Ka Shing and Rabobank of the Netherlands.
Some observers think the two activities, which could suck in $30bn of investors' funds, will weigh heavily on the market.
Jin Lin, a Shanghai-based analyst at Orient Securities, told the Reuters news agency: "Bank of China's fund-raising plan would be another blow to an already fragile market, and could also sap demand for AgBank shares and drive down valuations of banking stocks,"
The issues are taking place against a background of stronger-than-expected economic growth in China.
The government raised its forecast of last year's growth from 8.7% to 9.1%.
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Cable puts brakes on UK car industry

Business Secretary Vince Cable has told the UK motor industry that the government will rein in financial support for the sector.

"Our starting point is very clear. We've moved on from the era of subsidies," he said. "We just have to be realistic about what's affordable."
But he also insisted that "we're not walking away from the industry".
And he left the door open for investment in research and in carbon reduction measures.
Affordable assistance Speaking at a conference in London arranged by trade body, the Society of Motor Manufacturers and Traders (SMMT), Mr Cable said he realised that the motor industry is "incredibly important to the UK economy".
"We are now in a different world," he said.
"I don't see the future as one of large scale support for individual companies."

Continue reading the main story

We can't fight and win a subsidy war

Vince Cable Business Secretary

Among the measures that could be on the block was a promise made by the last government to offer a maximum £5,000 subsidy for buyers of electric cars.
The former government had vowed to set aside £250m to the scheme, which had been scheduled to come into effect next year.
"It is still actively under consideration," Mr Cable told journalists in a briefing on the sidelines of the event, though he did not hint at when a decision would be made.
Earlier Mr Cable had spoken of the need to send "price signals" to change the behaviour of the industry and consumers, but when asked to clarify he said this related to differentiated vehicle taxes rather than to subsidies.
Electric motoring Senior industry officials stressed the need for continuing support for the UK motor industry's efforts to cut emissions from cars and to help transform the UK into a low carbon economy.
Nissan is to begin production of its new Leaf electric car in the UK in 2013 "The UK is becoming a bit of a hub for electric vehicle and hybrid vehicle production," said Richard Parry Jones, co-chairman of the Automotive Council.
Nissan will produce the all-electric Leaf model here, Toyota this week started making its petrol-electric hybrid Auris here and GM Europe is considering the UK as a location for its Ampera extended range electric vehicle.
Mr Cable agreed that Nissan and Toyota's investment in the UK was warmly welcomed and said "the Ampera project would be great, it would be great for the UK", but he added that GM Europe's chief executive, Nick Reilly, had not asked him for any money.
Earlier this month, GM suggested the Ampera production would go to an Opel or Vauxhall factory in a European country where electric motoring was supported, for instance, in terms of backing for the supplier base and in terms of infrastructure.
Strategic approach Mr Cable stressed the dangers of countries getting into a situation where they offer better and better terms and conditions to inward investors in order to attract job-creating firms.

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We are calling for the government to offer strategic support

Paul Everitt Chief executive, SMMT

"It is completely self-defeating at the end of the day, with governments getting poorer and companies being encouraged to produce too much, resulting in overcapacity," Mr Cable said.
"We can't fight and win a subsidy war."
Senior industry officials insist carmakers and others in the sector never asked for subsidies in the first place and that they are certainly not doing so now.
"We're not saying 'give money for this, give money for that', but we are calling for the government to offer strategic support," said Paul Everitt, chief executive of the SMMT.
Mr Parry Jones agreed: "We've never asked for handouts to failing companies."
Low carbon initiatives Mr Everitt and Mr Parry Jones both welcomed Mr Cable's suggestion that the government would focus on developing skills and on making the UK more attractive to investment from abroad.
Central to this was the government's efforts to tackle the UK's crippling deficit, Mr Cable insisted.
Moreover, the motor industry is particularly eager to attract major suppliers back to the UK, according to Mr Parry Jones.
Mr Cable insisted that this is happening already, in part because sterling has fallen 25% to 30% against currencies in other major economies in recent months.
And he said the government is working hard to make banks resume lending to suppliers.
"It is one of the major preoccupations of the government," he said.
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US to provide nearly $2bn for two solar energy projects

Nearly $2bn (£1.3bn) in loan guarantees will be given to two companies to kick-start the US solar energy industry, President Barack Obama has announced.

One of the firms, Abengoa Solar, says that it is planning to build the largest solar power plant in the world in Arizona.
Mr Obama said the projects would provide more than 5,000 new jobs.
The Arizona plant should power 70,000 homes and cut carbon dioxide emissions.
The money will come from government stimulus funds designed to boost the economy during the recession.
Outlining the "Solana" project at Gila Bend near Phoenix, Abengoa said it would have an area of 1,900 acres, using thermal storage-equipped parabolic trough technology, with 280 MW of power output capacity.
According to the company's website, 1,500 new jobs will be created during the plant's construction with 100 positions for staff to maintain it.
'Aggressive' The second company, Abound Solar Manufacturing, will manufacture state-of-the-art thin film solar panels, the first time anywhere that such technology has been used commercially, the BBC's Jane O'Brien reports from Washington.
Plants will be built in Colorado and Indiana, creating 2,000 construction jobs and 1,500 permanent jobs, the Associated Press reports.
President Obama had promised during his election campaign for the White House to create manufacturing and construction jobs in the green power industry.
"We're going to to keep competing aggressively to make sure the jobs and industries of the future are taking root right here in America," he said on Saturday.
The renewable energy industry in the US faces tough competition from developers in China.
Mr Obama also acknowledged the loans would not be an instant solution.
Around 125,000 jobs were lost in the last month, the government reported.
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BBC pensions overhaul 'tough' says Mark Thompson

The BBC's director general Mark Thompson has said overhauling the corporation's pension scheme is "by far the toughest thing we have had to do in recent years".

It comes days after the BBC announced plans to change its pension scheme in an attempt to tackle a £2bn deficit.
The proposals include closing the final-salary scheme to new joiners.
They also include imposing a cap on the amount pensionable salaries of existing members can grow by to 1% a year.
Mr Thompson also backed plans to publish stars' earnings in pay bands, but said revealing individual wages would be "wrong".
'Outside world' The BBC's pensions moves are the first major changes by a publicly-funded organisation.
"We recognise this is painful, and it does mean a change from past expectations," Mr Thompson told the BBC's Andrew Marr Show.

PENSION SCHEMES EXPLAINED

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• Occupational scheme - one organised by an employer
• Final-salary scheme - guaranteed pension based on earnings at end of career and length of service. Also called defined benefits
• Defined contribution scheme - investment fund, determined by contributions and investment returns, used to buy an annual pension. Also called a money purchase scheme. Usually worth less than final-salary pensions

Q&A: Final salary schemes Pension basics explained BBC boss backs revealing star pay

"But look outside the doors of Television Centre and Broadcasting House at the rest of the world, at the public sector.
"Times are tough for everyone and pension arrangements, across the public sector, are going to be looked at very hard over the coming months."
He said there had already been "massive changes" in the private sector, and that across the UK final-salary schemes were increasingly being closed.
Mr Thompson said staff could ensure the contributions they had already made to the final-salary scheme would continue to rise in line with inflation by moving to join the BBC's new defined contribution scheme.
'Tough time'
Pension contributions currently take up 3.5% of the licence fee, but Mr Thompson said unless action was taken "it could very credibly become 10%".
"Although I think it is a difficult and tough time, it is no different than it is in many other institutions," he added.
"Everyone in the BBC has got to recognise that we cannot be exempt from a fundamental change in the British economy and in the expectations of the public."
The director general also said that the pension deficit - which he put at between £1.5bn and £2bn - had not been caused by poor management of the scheme.
And on staff pay, which was frozen last year and is subject to a constrained pay offer this year - Mr Thompson said "for the people who pay for the BBC, licence payers - their pay is very constrained as well".
'Pensions grab' The government has ordered a review of public sector pensions, chaired by ex-Labour minister John Hutton.
The BBC has said the changes are needed to tackle the ballooning deficit in the pension scheme, which is now estimated at as much as £2bn, compared with £470m just two years ago.
Broadcasting union Bectu has condemned the proposals, which will be subject to a three-month consultation period.
And the NUJ union's NUJ General Secretary Jeremy Dear has called the BBC's move "an audacious pensions grab".
Under the proposed changes, from 1 April 2011, an employee's pensionable salary will rise by no more than 1% a year, even if that employee gets a substantial pay rise.
From 1 December, members of the existing final-salary scheme will have the choice of continuing to contribute to it or of paying into a new defined-contribution plan.
However, no change is planned to the current BBC retirement age of 60.
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Toyota recalls 270,000 vehicles over faulty engine fear

Toyota is to recall 270,000 cars worldwide - including 138,000 vehicles in the US - because of an engine fault.

Toyota said the recall included seven luxury Lexus models - some of them in the UK - and the popular Toyota Crown.
The latest quality problem follows the recall of more than 8m vehicles which had problems with sticking accelerator pedals earlier this year.
The company was fined $16m (£10.6m) in the United States for its slow response to the accelerator fault.
The company is still facing more than 200 lawsuits tied to accelerator accidents.
Labour disputes

THE STORY SO FAR

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• September 2009: Toyota recalls almost 4m vehicles globally on fears that accelerator pedals could become trapped in floormats
• January 2010: Toyota recalls about 2.3m vehicles in the US to fix potentially faulty accelerator pedals
• February 2010:Toyota's president apologises to the US Congress and Toyota owners for safety problems that led to deaths and the worldwide recalls
• April 2010: Toyota agrees to pay a record fine of $16.4m (£10.7m) in the US for failing to report defects

A spokeswoman for the firm said some vehicles might have a problem with the valve spring in their engines, which could cause the car to stall while being driven.
"Due to slight variations during the manufacturing process, some foreign material may have contaminated a small number of the valve springs," the firm said in a statement.
"If a vehicle is affected, there is a remote possibility that abnormal engine noise or idling may occur. In extremely rare instances, the engine may stop while the vehicle is in operation."
The defective 4.6-litre V8 and 3.5-litre V6 engines had been installed in eight top-line models including some hybrids - the Lexus GS350, GS450h, GS460, IS350, LS460, LS600h and LS600hL as well as the Crown sedan.
No accidents had been reported, the spokeswoman said.
Some 90,000 of the affected cars were sold in Japan. Another 180,000 on the roads elsewhere in the world will also be recalled.
Some 3,200 Lexus vehicles in the UK were involved, a spokesperson said, but no Toyotas.
"Lexus will do whatever it can to ensure that our customers' inconvenience is minimised as much as possible, decide on the details of any action, and inform our customers promptly," a company statement said.
Owners with concerns should contact their local dealer.
Car recalls are not uncommon in the car industry, with 227 in the UK alone last year, according to the Vehicle and Operator Services Agency.
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Lagarde eyes release of EU bank stress test results

The result of stress tests carried out to show if Europe's banks can cope with more economic shocks will be published later this month.

French Economy Minister Christine Lagarde said the results of tests, designed to boost confidence in the sector, will be known on 23 July.
And she predicted the tests will show European banks are "solid and healthy".
The tests on banks came after investor concerns about the health of the European banking sector.
Bond worries The tests are designed to examine how certain banks would perform if there were a repeat of the financial crisis.
There are continued concerns that some European banks' balance sheets are burdened by bonds from Greece, Spain and Portugal.
These bonds have lost significant value over the course of the ongoing debt crisis.
Banks also face pressure from tighter capital requirements, extra taxes and additional regulation.
Last week the EU said it was to treble the number of banks that would be subject to public stress tests, as it tries to allay a growing global anxiety over Europe's finance sector.
'Exact criteria' However, some analysts believe the exact criteria of the stress tests needs to be disclosed if the tests are to convince markets.
"You will soon be seeing the number of banks that will be submitted to the stress test, you will have better understanding of the exact criteria we apply and of how heavily we stress the system," said Mrs Lagarde.
"And then later on 23 July, the result of the stress test will be issued."
She added: "You will see that banks in Europe are solid and healthy."
The number of those forced to take part in the EU exercise will expand from the 22 big banks examined last year to include a further 60 to 120 banks, meaning that many not included in last year's stress-tests will now feature.
They include, for the first time, banks such as German Landesbanken, which are not among the biggest institutions but whose potential weaknesses have contributed to uncertainty in financial markets.
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Geoff Thompson named 2018 World Cup bid chairman

Ex-Football Association chairman Geoff Thompson has been appointed chairman of England's 2018 World Cup bid team after Lord Triesman resigned on Sunday.

Triesman was caught up in a newspaper sting suggesting Spain could drop its bid if rival bidder Russia helped bribe referees at this summer's World Cup.
Thompson is vice-president of world football's governing body Fifa.
And fellow 2018 board member Sebastian Coe insists the bid can overcome the setback of Triesman's abrupt departure.
Coe, who masterminded the 2005 campaign to bring the Olympic Games to London, has devised a rescue plan for the 2018 bid.

Damage to World Cup bid 'not fatal'

"It has been traumatic but it does not become a bad bid overnight," said Coe.
"Solid foundations are in place: we have the best venues, the most passionate fans, the best market for sponsors and an unparalleled ability to deliver this tournament in safe and secure surroundings.
"The only thing we don't have is the private views of the former chairman."
Thompson is well known in the upper reaches of football administration, having previously served as FA chairman for nine years before Triesman.
The 64-year-old is also vice-president of European football's governing body Uefa and was part of the five-man delegation that presented England's bid book to Fifa in Zurich on Friday.
Coe, who is a lifelong Chelsea fan, has already briefed Fifa general secretary Jerome Valcke and is set to speak to president Sepp Blatter on Monday.
Although the healing may begin when Thompson attends a meeting of the International FA board (the body which oversees the laws of football) in Zurich on Tuesday.

DAVID BOND'S BLOG I am told that at least one other newspaper was offered the story and turned it down

Meanwhile, Coe - along with Thompson, 2018 chief executive Andy Anson, 2012 official Sir Keith Mills and other board members and bid executives - will continue talking to Fifa to explain the circumstances behind Triesman's departure.
Double Olympic gold medallist Coe took leave of absence from his position as chairman of Fifa's ethics committee in February 2009 after he was appointed as a non-executive member of the bid board.
Mills, the deputy chairman of the London Organising Committee and a Tottenham director, stepped down from the 2018 bid board when it was streamlined late last year.
Russian bid chief Alexey Sorokin responded by describing the allegations as "absurd" and urged Fifa to "take appropriate measures" ahead of the decision on who will host the showpiece event, which is expected to be made in December.

England fans 'fed up' with press

But former England keeper Peter Shilton believes there will be no long-term impact on the World Cup bid.
"One person does not make a bid," said Shilton, who holds a record 125 England appearances and is an ambassador for the 2018 bid.
"Everybody makes mistakes, it has happened in the past and will happen in the future.
"I am part of the World Cup bid, and feel it does not take anything away.
"Things do die down, and it is the actual substance of the case, which I think is very strong for us to host the World Cup, is what will be the deciding factor."
Triesman was secretly recorded allegedly divulging sensitive information to a former aide, including a claim that Spain and Russia, rival bidders for the 2018 World Cup, were conspiring to bribe referees at next month's finals as part of efforts to win the right to host the tournament.
The former Labour peer accused the Mail on Sunday newspaper of engaging in "entrapment" tactics in order to cause him personal embarrassment.

Lord Triesman resigns as FA chairman

"In that conversation I commentated on speculation circulating about conspiracies around the world," said Triesman.
"Those comments were never intended to be taken seriously as indeed is the case with many private conversations."
Before Triesman's unwanted spell in the headlines England's 2018 World Cup candidacy was generally viewed as having a good chance of success.
But the bid team now faces an uphill task to persuade Fifa's executive to award them the event for the first time since 1966.
Triesman has also resigned as FA chairman and will be replaced by board members David Sheepshanks and Roger Burden who will be drafted in as acting joint-chairmen.
The revelations came only two days after the FA submitted their 1,752-page bid book to try to persuade Fifa to award England the 2018 event.

2018 BID TEAM BOARD Geoff Thompson - chairman Andy Anson - chief executive Brian Mawhinney Paul Elliott Lord Sebastian Coe

A European bid is tipped to get the 2018 tournament with England up against Russia and joint bids from Spain/Portugal and Belgium/Netherlands.
The other bidders, although they are mainly focused on the 2022 tournament, are Australia, the United States, Japan, Qatar and South Korea.
And the new the minister for sport and the Olympics, Hugh Robertson, is certain England's bid team can recover.
"I don't think anybody would pretend it's been particularly helpful," Robertson told BBC Radio 5 live.
"But London 2012 went through exactly this process. You may remember there was an extraordinarily unhelpful Panorama programme that attacked the entire integrity of the IOC.
"After that, London 2012 were told that their bid was dead but they overcame that.

COMMENT FROM PAPERS AND BLOGS This was a very English coup, not the result of some fierce row over principle

"Whatever Lord Triesman may or may not have said, he didn't attack Sepp Blatter personally, or the entire integrity of either Fifa or Uefa.
"In some ways this is an offence of a much lesser order."
As for the validity of the reported claims from Triesman, Robertson said: "Nothing I have heard at any stage in the process, either in opposition or in Government, suggests there is any truth in these allegations whatsoever."

By BBC