Bank of America's Industry-Leading Neighborhood Champions(R) Protected Mortgage(TM) Provides Security, Peace of Mind for Community Heroes and their Fa

Wounded Sheriff's Deputy Inspires the Bank to Act for Professions of Honor

CHARLOTTE, Aug. 8 /PRNewswire/ -- Bank of America today announced a mortgage program exclusively for police officers, firefighters, teachers and medical workers with an insurance feature that will repay all or a portion of their outstanding mortgage balance, up to $300,000, in the event of accidental death, permanent paralysis or dismemberment.

(Logo: http://www.newscom.com/cgi-bin/prnh/20050720/CLW086LOGO-b )

Neighborhood Champions(R) Protected Mortgage(TM) includes an insurance benefit that provides a full or partial payoff of the mortgage loan in the event of a covered accidental death, paralysis or dismemberment. This industry-leading mortgage program is available to an estimated 16 million professionals, according to U.S. Census figures.

The significance of these loans extends well beyond protection coverage to basic housing affordability issues, according to Bank of America Consumer Real Estate and Insurance Services Group President Floyd Robinson. He says neighborhood champions are well deserving of these loans.

"Too many Americans in these professions of honor simply cannot find and afford quality housing, especially in metropolitan areas," says Robinson. "Neighborhood Champions Protected Mortgage not only helps these heroes realize the dream of homeownership, but also provides security and peace of mind should tragedy strike." Among the other advantages of Neighborhood Champions Protected Mortgage are the availability of 100 percent financing, competitive loan rates and flexibility on credit scores and credit histories.

The inspiration for Neighborhood Champions Protected Mortgage can be traced directly to Bank of America mortgage customer Adam Pierce, a 26-year- old Orange County, Florida, sheriff's deputy who was seriously wounded by a gunshot while on duty in 2005. Pierce recovered from his wounds but was unable to resume patrol duties. "Adam Pierce embodies what this loan program ought to do, and that is to protect these outstanding professionals," says Robinson, who was directly involved in the development of this innovative program.

"Law enforcement officers and firefighters face the danger everyday that we could be wounded or killed in an instant," Deputy Pierce says. "We understand those dangers and voluntarily put ourselves in harm's way. Neighborhood Champions Protected Mortgage and programs like this give us peace of mind that we would be covered should something happen to us."

Bank of America also has grandfathered more than 8,000 existing Neighborhood Champions borrowers into the program.

The insurance benefit, available in all states and Washington, D.C., provides an Accidental Death and Dismemberment insurance policy for the first two co-borrowers on the loan. All Neighborhood Champions protected mortgage loans, regardless of size, are eligible for insurance. The loan payoff will be based on the loan balance or $300,000, whichever is less, up to the policy maximum of $300,000. Moreover, borrowers do not have to qualify and receive coverage regardless of health status.

The availability of the Accidental Death and Dismemberment coverage is a significant enhancement to the program and is tied directly to concerns among workers in dangerous jobs, such as firefighters and law enforcement personnel, that injury or death on the job could jeopardize the financial stability of the family to keep their home. With low-to-no-down payment and credit guidelines combined, the program also makes it easier for these workers to realize the dream of homeownership.

Additionally, teachers, police officers, firefighters, medical workers and related occupations are eligible to receive a new rate discount on a Bank of America home equity line of credit or home equity loan. This special discount is only available by calling 1.888.870.9459.

    Highlights -- Neighborhood Champions Protected Mortgage program:

   -- The new feature of accidental death, dismemberment and paralysis
      insurance will cover the first two listed co-borrowers.

   -- All Neighborhood Champions Protected Mortgage loans, regardless of
      size, are eligible for the insurance.

   -- Insurance benefits are provided for covered accidental loss of life,
      limb, sight or hearing and include full or partial payoff of the loan,
      depending on the type of loss and the loan balance.

   -- The loan payoff will be based on the loan balance or $300,000,
      whichever is less, up to the policy maximum of $300,000.

   -- Insurance coverage also includes COBRA extension of up to $2,500 and
      adaptive home and vehicle coverage of up to $3,000.

   -- Insurance is provided by Minnesota Life Insurance Company.  In New
      York, insurance is provided by Securian Life Insurance Company, an
      affiliate of Minnesota Life Insurance Company.

   -- Insurance premiums paid by Bank of America may be taxable; customers
      should contact their tax advisor.

   -- Eligible borrowers include full time educational staff in primary,
      secondary schools, colleges and universities, and part time teachers;
      full time sworn officers and law enforcement employees; full time
      firefighters and fire department employees; full-time medical staff
      including nurses, nursing-pharmacy-dental assistants, medical
      technicians and employees of a hospital, nursing facility or doctor's
      office.

   -- Little or no down payment is needed from the borrowers own pocket.
      Gifts or other sources count toward the down payment.  Bottom line:
      this is ideal for workers with limited savings or assets.

   -- Flexible credit guidelines -- even for those without traditional credit
      histories.  We consider a wide range of credit scores.  A favorable 12
      month payment history (rent, three monthly bills) may be sufficient.

   -- Homebuyers in the designated occupations may apply for mortgage
      financing through the Neighborhood Champions Protected Mortgage
      Program, receive guidance about the process of financing a home or
      learn more about this exclusive program by:

         -- Contacting a national Bank of America mortgage loan officer at
            1.866.823.5446 or locate a local mortgage loan officer by calling
            1.800.344.9403

         -- Visiting our Web page, www.bankofamerica.com/loansandhomes

         -- Contacting a mortgage broker and ask for the Neighborhood
            Champions Protected Mortgage Program provided only by Bank of
            America

Bank of America is committed to help all borrowers achieve the dream of homeownership. In 2006, one in three home loans originated by Bank of America were for minority borrowers. More than one in five loans originated by Bank of America were for low- to moderate-income borrowers. The bank has earned Freddie Mac's Tier One Hall of Fame status, awarded for maintaining Freddie Mac's highest servicing performance rating for five consecutive years. Included in this rating is recognition of Bank of America's ability to prevent foreclosure for our customers experiencing financial difficulty.

About Bank of America

Bank of America is one of the world's largest financial institutions, serving individual consumers, small and middle market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk-management products and services. The company provides unmatched convenience in the United States, serving more than 57 million consumer and small business relationships with more than 5,700 retail banking offices, more than 17,000 ATMs and award-winning online banking with more than 22 million active users. Bank of America is the No. 1 overall Small Business Administration (SBA) lender in the United States and the No. 1 SBA lender to minority-owned small businesses. The company serves clients in 175 countries and has relationships with 98 percent of the U.S. Fortune 500 companies and 80 percent of the Fortune Global 500. Bank of America Corporation stock is listed on the New York Stock Exchange.

source : http://money.cnn.com/news/newsfeeds/articles/prnewswire/CLW018A08082007-1.htm

ROUNDUP - China central bank says inflationary pressures increasing

BEIJING (XFN-ASIA) - Inflationary pressures in China are increasing and may not ease in the short term, the central bank said in its second quarter monetary policy report.

The People's Bank (nasdaq: PBCT - news - people ) of China (PBOC) said the trend towards economic overheating is becoming more apparent, reiterating the government commitment to 'moderately tighten monetary policy.'

It noted the difficulties in bringing down meat and grain price inflation in the short term and said that it remains on guard to watch if food price inflation spills out into other consumer goods, as well as energy, resources and labor costs.

Meat, particularly pork, and grain prices drove consumer price inflation (CPI) in June to its highest level since September 2004 at 4.4 pct year-on-year.

Most economists expect July CPI, which will be announced on Monday, to top 5.0 pct.

The PBOC said it still maintains its aim to control inflationary expectations and keep prices 'basically stable.'

It also reiterated its pledge to keep the yuan exchange rate 'basically stable at a reasonable and balanced level,' and cited economic theory suggesting that currency appreciation is an effective anti-inflationary measure.

The report added that the trade surplus will remain high in the second half of the year.

China recorded a trade surplus of 112.53 bln usd for the first half, with the June surplus at 26.91 bln usd, the highest monthly level since 2006.

The PBOC added that protectionism is 'unhealthy' for the world economy, noting the various articles of currency legislation working their way through the US Congress.

The bank said it will strengthen liquidity management using tools such as more reserve requirement hikes.

It said it will also steadily expand the Qualified Domestic Institutional Investor (QDII) scheme, launched last year to facilitate capital outflows from the mainland.

The bank acknowledged that to curb the widening of its trade surplus, China needs to also increase demand and adjust preferential policies for foreign investment and market opening.

The National Bureau of Statistics is expected to begin releasing July economic data later this week, with the producer price index (PPI) due out on Friday.

Source : http://www.forbes.com/markets/feeds/afx/2007/08/08/afx3998341.html

Australian central bank raises benchmark rate to 10-year high

SYDNEY: Australia's central bank raised its benchmark interest rate a quarter point Wednesday to its highest level in almost 11 years, and analysts said more increases were on the way.

The governor of the Reserve Bank of Australia, Glenn Stevens, raised the overnight cash rate target to 6.5 percent, the first adjustment since November, to curb an inflation rate running faster than he had forecast and to cool the biggest surge in lending since 1989.

Financial markets are already pricing in another move to 6.75 percent within the next six months.

Central banks globally are battling to curb inflation as booming world economic growth forces food and commodity prices up. England, Canada, New Zealand and South Korea all raised interest rates in the past month. The European Central Bank president, Jean-Claude Trichet, said last week that he might raise the benchmark rate from 4 percent next month.

"We see a still above-trend global growth, high commodity prices, easier fiscal policy, an ongoing investment boom and a rural recovery delivering 4 percent economic growth," said Scott Haslem, chief economist at UBS.

"At this point, we think the risks remain to the higher side and this underpins our expectation that a further hike at some point beyond August is a better than even bet," he added.

Investors seemed to agree, with interest rate futures pricing in around 28 basis points of tightening over the next 12 months, according to Credit Suisse.

Some were cautious, in case the squeeze in global credit markets took a toll on economic activity.

"I'm a little torn, seeing the domestic factors auguring strongly in favor of further rate increases, and the mess in the U.S. credit market suggesting the global economy may be in for a good bucketing," said Matthew Johnson, senior economist at ICAP.

The International Monetary Fund has played down the threat of a U.S. credit crunch crippling the world economy.

The fund raised its global growth forecast to 5.2 percent for 2007 and 2008, from its previous prediction of 4.9 percent for both years.

The rate move Wednesday will cost borrowers an extra 40 Australian dollars, or $34, per month on the average mortgage of 235,000 dollars, according to the Canberra-based Housing Industry Association.

The increase leaves consumers facing the highest borrowing costs since Prime Minister John Howard came to power in 1996.

Howard is behind in opinion polls, with an election due this year; the consumer price index is due on Oct. 24, but it is quite possible that the formal election campaign will be under way then, and the reserve bank has said it would be reluctant to move during the actual campaign.

Glenn Maguire, chief Asia economist for Société Générale, thinks the index could jump by 1.1 percent in the third quarter and add to pressure for a tightening.

"The RBA is now faced with a very real dilemma of the inflation fundamentals demanding a further rate hike in the midst of a federal election campaign where that decision will be highly politicized," said Maguire.

Source : http://www.iht.com/articles/2007/08/08/business/rates.php

Bank of England Signals Another Rate Increase Needed (Update4)

By Brian Swint

Mervyn King, the governor of the Bank of England.

Aug. 8 (Bloomberg) -- The Bank of England indicated it will have to raise the benchmark interest rate once more as record oil costs and rising food prices keep inflation above its target for the next two years.

The inflation rate will stay above the 2 percent goal until 2009, the central bank said in its quarterly inflation report today. The forecasts assume policy makers will raise the Bank Rate a quarter-point from the current 5.75 percent by the first quarter of next year.

The pound rose as investors increased bets that the central bank will raise the key rate beyond 6 percent in 2008. Inflation, which has exceeded the target for 14 months, may hold above the goal as the British economy grows this year at the fastest pace since 2004.

``Indicators of pricing and capacity pressures remain particularly important,'' Governor Mervyn King said at a press conference in London. ``If they do not fall back, that would be consistent with the upside risks to inflation crystallizing.''

The pound, which climbed to a 26-year high of $2.0654 on July 24, rose to $2.0389 at 2:50 p.m. in London.

King and policy makers around the world are keeping their focus on inflation even after a financial-market rout sparked by the U.S. subprime mortgage crisis prompted some economists to speculate they would take steps to safeguard growth.

`Predominant Risk'

The Fed, which yesterday kept its benchmark at 5.25 percent, said inflation is ``the predominant risk'' facing the economy, rebuffing calls for a more balanced take that may have presaged a rate cut. Australia's bank today raised its benchmark to an 11- year high of 6.25 percent and European Central Bank President Jean-Claude Trichet on Aug. 2 signaled the ECB would raise its main rate by a quarter point to 4.25 percent next month.

The U.K. benchmark is the highest among the Group of Seven countries. The rate is 4.5 percent in Canada and 0.5 percent in Japan.

The Bank of England has lifted borrowing costs five times in the past year, and interest rate futures suggest the Bank Rate may rise to 6 percent by 2008. The implied rate on the December contract rose 0.07 percentage point today to 6.23 percent, while the March contract was at 6.25 percent, as of 2:50 p.m.

The contract settles to the three-month London interbank offered rate for the pound, which averaged about 15 basis points more than the central bank benchmark for the past decade.

Growth Forecast

``The bank appears to be leaving the door at least slightly ajar as regards another two rate hikes from here,'' said Richard McGuire, an economist at RBC Capital Markets.

The bank said its projection for economic growth was ``somewhat weaker'' than in May, when it forecast gross domestic product to expand an annual 2.8 percent in the second quarter of 2009. Charts published today suggest that growth may touch about 2.5 percent. The expansion will be slower than it previously estimated because of the rate increases, the forecasts show.

Britain's economy grew 3 percent from a year ago in both of the first two quarters of this year, stronger than most economists had forecast. In May, the bank expected growth to average 3 percent in 2008 and 2.8 percent in 2009.

``We are not convinced that a further increase in rates is necessary, as such a move would cause damage,' said David Kern, economic adviser to the British Chambers of Commerce, a business lobby group.

Risks `Diminished'

While ``upside risks'' to inflation have ``diminished somewhat,'' the bank pushed back by about a year the date when inflation will drop below the 2 percent target.

``The scope for further upwards pressure on commodity prices, the limited margin of spare capacity and the continued elevation of some measures of inflation expectations and pricing intentions mean that the balance of risks'' to inflation ``is judged to be slightly on the upside,'' the central bank said.

The Bank of England is weighing the risks to inflation as gains in commodity costs and faster domestic economic growth push prices higher. At the same time, turmoil in global credit markets has increased the cost of borrowing for companies while consumers are shouldering record debts.

The Standard & Poor's 500 Index posted its biggest monthly decline in three years in July and in the U.K., the benchmark FTSE 100 index has fallen 4.5 percent since July 16.

If the bank declines to move the key rate to 6 percent, inflation is unlikely to return to target, the forecasts show. The bank releases minutes of the Aug. 2 meeting in a week.

Inflation slowed to 2.4 percent in June, down from a decade high of 3.1 percent in March, the government said July 17.

Crude oil prices rose to a record $78.77 a barrel on Aug. 1. An outbreak of foot-and-mouth disease in English cattle may also drive up food prices in the next few months, adding to inflation pressures, economists at BNP Paribas in London said yesterday.

Source : http://www.bloomberg.com/apps/news?pid=20601087&sid=a.tjf.ZGe99E&refer=home

National City buys Chicago bank for $1.9B

May 2, 2007, 21:00 GMT

CLARENDON HILLS, IL, United States (UPI) -- Cleveland`s National City Corp. plans to become Chicago`s fourth-biggest bank by buying the parent of MidAmerica Bank for $1.9 billion, National City said.

National City, with $140 billion in assets, said it would pay $56 a share for MAF Bancorp Inc., whose assets are $11.1 billion.

MidAmerica, based in suburban Clarendon Hills, Ill., had tried to grow beyond retail banking and home loans, but decided a merger would better serve its purpose, MAF Chairman and Chief Executive Allen Koranda told The Chicago Tribune.

'We`ve been working hard over the past five years to build capacity as a business banking lender, and we`ve made good progress, but we still had a long way to go to get into areas like credit cards, wealth management and small-business lending,' he said.

The purchase is the second in Chicago banking in a week.

Bank of America Corp. last week agreed to buy Chicago`s LaSalle Bank for $21 billion from Dutch parent ABN Amro Holding NV, although that deal may be derailed.

After the MAF acquisition, set to close in the fourth quarter, National City will have more than 1,400 branches in the Midwest and Florida.

Source : http://news.monstersandcritics.com/business/news/article_1299473.php/National_City_buys_Chicago_bank_for_$1.9B

Venezuela to repay debt post-IMF, World Bank

Venezuelan finance minister reassures foreign bondholders before country breaks with international lenders.

May 3 2007: 6:51 PM EDT

QUITO, Ecuador (Reuters) -- Venezuela Thursday reiterated it plan to leave the International Monetary Fund and the World Bank, despite investor concerns over a possible technical debt default the withdrawal may trigger.

Venezuelan Finance Minister Rodrigo Cabezas told Reuters in Quito, Ecuador, that he was confident bondholders would not ask for a swift debt payback and said Venezuela would honor all its foreign obligations despite separating from the lenders.

We don't believe that there will be any circumstances that will take us to an acceleration of payments," Cabezas said after a regional meeting of finance ministers.

"There is no possibility that Venezuela will stop paying its foreign obligations," he said.

Venezuelan President Hugo Chávez, who has promised to implement a socialist revolution to counter U.S. influence, this week said he would pull out of the World Bank and IMF, which he blasts as pawns of U.S. imperialism.

The left-wing leader, a former soldier, on Thursday repeated that his country did not need the IMF as he seeks to create an alternative banking cooperation program with like-minded allies in the region.

"The decision of the president has already been announced about the withdrawal from these two multilateral bodies who belong to the capitalism of old," Cabezas said.

But Chávez's government has sought to ease investor jitters that the planned withdrawal could force a technical default as Wall Street banks urge clients to reduce their exposure to Venezuela's sovereign debt.

Clauses covering sovereign deals mean Venezuela's bonds would be in default should it leave the IMF, allowing investors to demand the government pay them back immediately. Cabezas has not said when the withdrawal would take place.

Cabezas declined to specify under what terms Venezuela will pull out of the IMF and if it will keep its membership.

Finance ministers meeting in Quito said a clear blueprint for the creation of a South American multilateral lender named Bank of the South could be announced in late June.

Chavez wants out of IMF, World Bank

Venezuela hopes a new multilateral institution would substitute for the World Bank and IMF as a source of credit for poor Latin American countries. Brazil also reiterated interest in the bank.

Ecuadorean President Rafael Correa, a leftist and close ally of Chávez, in April expelled the World Bank representative in Quito and has paid off the country's debt with the IMF.

Chávez often berates the multilateral lenders for promoting the U.S.-backed free market system, which he blames for Latin America's high rates of poverty. Allied with Communist Cuba and bolstered by high oil prices, he says he wants to promote regional integration to counter capitalist ideas.

Venezuela recently kicked out foreign oil companies, which affects the regional operations of such players as Exxon Mobil (Charts, Fortune 500), ConocoPhillips (Charts, Fortune 500) and BP (Charts).

Source : http://money.cnn.com/2007/05/03/news/international/bc.venezuela.imf.reut/?postversion=2007050318

Bank of America suggests it will fight for LaSalle after court freezes sale

The Associated Press
Published: May 3, 2007

CHARLOTTE, North Carolina: Eager to fill one of the few holes in its coast-to-coast business, Bank of America Corp. hinted Thursday it is not likely to back down without a fight after a Dutch court blocked its purchase of LaSalle Bank Corp.

"We have a binding contract and intend to take all necessary steps to protect our legal rights," said spokesman Scott Silvestri, a few hours after a court in the Netherlands ruled ABN Amro, that country's largest bank, must receive the approval of shareholders before completing the $21 billion (€15.43 billion) cash deal.

But such determination might not matter. The bank's deal for LaSalle is one piece of a much larger transaction, in which Britain's Barclays PLC would buy the rest of ABN Amro's assets for $91 billion (€66.85 billion). Thursday's ruling appears to increase the chances a rival $98.5 billion (€72.36 billion) offer for ABN from a three-bank consortium, led by Royal Bank of Scotland PLC, will win out.

"The Dutch court's decision seems to keep the sale of LaSalle linked to the bidding process for ABN Amro," wrote CreditSights analyst David Hendler in a research note. "As a result, we think the decision tips the 'jump ball' for ABN in favor of the Royal Bank of Scotland consortium."

Silvestri said the bank would not have any further comment beyond his statement. Investors in Bank of America appeared indifferent to the news, pushing Bank of America shares up 22 cents to $51.23 (€37.63) on Thursday.

LaSalle, which has $113 billion (€83.01 billion) in total assets and is one of the top 20 banks in the U.S., has long been coveted by Bank of America chairman and chief executive Ken Lewis for its large share of customers in the Chicago area, the nation's third largest financial services market.

In the last four years, Bank of America has increased its retail presence in Chicago from a single financial center to 56 locations. But when combined with LaSalle's 141 Chicago area offices, Bank of America would have more than 14 percent of the deposit market share in Chicago and move past JPMorgan Chase & Co. to become the largest bank in the area.

"There isn't another American bank that is positioned to get as much value out of LaSalle as Bank of America," said Tony Plath, an associate professor of finance at the University of North Carolina at Charlotte.

The deal would also expand Bank of America's presence in Michigan, where the bank had only 25 ATMs and not a single branch office at the end of 2006, further extending the reach of the nation's second largest bank by assets into the upper Midwest — one of the few areas in the U.S. where the company isn't entrenched.

Under the original deal, ABN Amro is allowed to entertain a higher offer for LaSalle until Sunday. ABN Amro has also provided a "go shop" clause, which gives Bank of America five business days to match a higher offer. Should ABN accept another offer, Bank of America gets a $200 million (€146.92 million) breakup fee.

Bank of America could potentially raise its bid for LaSalle, and other bids could surface for all or parts of ABN Amro. But, Hendler said in his research note, "our sense is that BofA will wait for the next move by RBS & Co. before deciding its next steps."

Either way, Plath said it would be foolish to think Bank of America — a company built on a series of blockbuster mergers and acquisitions — wouldn't continue its efforts to expand. Lewis has expressed an interest in Chicago for months, taking care to note the strength of LaSalle in speeches and conference presentations.

"Even if they lose LaSalle, they are not going to lick their wounds and go back to Charlotte," Plath said. "They are already in Chicago and they will find other means to grow there. You can build a hell of a lot of branches with $21 billion (€15.43 billion)."

Bank of America Corp.: http://www.bankofamerica.com

Source : http://www.iht.com/articles/ap/2007/05/03/business/NA-FIN-US-Bank-of-America-LaSalle.php

Wolfowitz rebuts critics over tempest at World Bank

Paul Wolfowitz, right, president of the World Bank, was repeatedly asked about the scandal at the bank while attending a conference on education for the poor. With him were Louis Michel, center, the European aid commissioner, and Gordon Brown, Britain's chancellor of the exchequer.

(Pool Photo by John Thys)

By Steven Weisman
May 3, 2007

WASHINGTON: In a new rebuttal to charges that he violated ethics rules at the World Bank, Paul Wolfowitz said Thursday that he had helped arrange a generous pay and promotion package for his companion soon after he became bank president in 2005 as "a settlement of her potential claims" if she sued for being relocated against her will.

Wolfowitz's new explanation of his motives came in a 10-page letter to the bank committee investigating him for ethical misconduct for awarding the salary increase and promotions to his companion, Shaha Ali Riza, when he arrived at the bank.

The statement shows that Wolfowitz is making more of an effort to explain his motives and disprove the charge of favoritism as the pressure for him to resign grows. Wolfowitz had earlier indicated that he was concerned about her suing, but the new letter on Thursday was the most extensive and specific argument he has presented.

He submitted the statement as a rebuttal to public testimony earlier this week by two former bank officials who charged, contrary to Wolfowitz's recollections, that they had not approved Riza's salary arrangement.

One of the officials, Roberto Dañino, a former general counsel, said he had heard from Wolfowitz that Riza deserved compensation for being transferred to the State Department against her will because she could have sued the bank. Though he agreed she should be compensated, he said she had no standing to sue.

That contention was disputed by Wolfowitz in his rebuttal on Thursday. He stated: "You have asked me whether Riza could have sued the bank. She could have."

He said she had recourse to use a bank administrative tribunal to obtain "substantial relief, regardless of the immunity of the World Bank in U.S. courts."

In presenting this argument, Wolfowitz opened a window into the relationship with his companion, who had been at the bank for seven years when he arrived. When she worked at the World Bank, he was deputy defense secretary, and the two shared an interest in spreading democracy in the Middle East, especially Iraq.

Because of their friendship, Wolfowitz testified that Riza, a British citizen of Arab descent, initially rejected the ruling of ethics officials that she had to leave the bank once he arrived. Wolfowitz at first tried to keep her and to maintain occasional professional contact, but Dañino rebuffed him.

All sides agree that he then tried to recuse himself from the arrangements for her transfer and compensation but that the top ethics official on the bank board, Ad Melkert, ruled that it was up to him to arrange her compensation package.

Melkert testified this week that he did not mean to give Wolfowitz permission to engineer such a large package. He said that both he and Xavier Coll, the human resources vice president, felt he had violated the rules by arranging for such a large package himself.

Wolfowitz, who is fighting to avert a committee conclusion that he had violated a ban on conflicts of interest, suggested in his letter on Thursday that he had no choice but to make it a generous package given Riza's unhappiness and the fact that she had hired lawyers to fight the move.

He also repeated his contention that everything he did was authorized by top bank officials and subsequently known to them when they took no action in early 2006.

"The terms and conditions of Riza's relocation were the only practical, achievable resolution, and I had reason to believe that they were known or available to the committee," Wolfowitz said, referring to the ethics officials on the bank's board.

The worst thing he was guilty of, Wolfowitz added, was a misunderstanding.

The committee to which Wolfowitz addressed his letter consists of seven members, out of the 24-member bank board, headed by Herman Wijffels, a former development official.

The panel on Thursday was still drafting its conclusions about Wolfowitz's conduct, bank officials said.

The committee's plan is to finish its draft by the end of Friday and to give Wolfowitz until Tuesday to submit a written response. The full 24-member bank board plans to deliberate Tuesday and make its views known Wednesday.

Source : http://www.iht.com/articles/2007/05/04/america/04wolfowitz-web.php

Abu Dhabi Islamic in bid to buy Egyptian bank

ABU DHABI • Abu Dhabi Islamic Bank said yesterday it was competing with Saudi banks to take over Egypt's National Development Bank and enter the most populous Arab country.

It could be the first foreign acquisition for Abu Dhabi Islamic, the Gulf's sixth-largest Islamic lender by market value, which wants to expand outside the increasingly competitive United Arab Emirates market.

The Abu Dhabi bank wants to buy at least 51 per cent of the Egyptian lender and could bid for as much as 100 per cent with its partner, Emirates International Investment Co, a company owned by the ruling family of Abu Dhabi.

Saudi banks were also in the race to buy National Development Bank and the outcome could be decided by Friday, Amjad Younes, Abu Dhabi Islamic's senior vice president said yesterday, declining to name the other bidders. UAE daily Al Bayan reported on Saturday Saudi Arabia's National Commercial Bank, the Gulf's largest bank by assets, was among three bidders for the Egyptian lender. A National Commercial Bank spokeswoman had no immediate comment.

Egypt's central bank is encouraging consolidation in the banking sector and wants the government to reduce its holdings in lenders. Bank of Alexandria was the first of four big state-owned banks to be privatised last year. "Getting a licence is very difficult in Egypt and the only way to enter that market is by acquiring a bank," Younes said. "We do not want to lose the opportunity now," he said, declining to comment on the value of the bid. National Development Bank, which has market value of around 993 million Egyptian pounds ($174.3m), is a commercial bank operating some branches under Islamic rules that ban lending on interest.

It will be converted into an Islamic bank if Abu Dhabi Islamic wins the bid, Younes said. "Abu Dhabi Islamic Bank covers almost all of the UAE, including remote areas. So, now the bank needs to expand to other markets to diversify risks," Younes said.

Growing competition is forcing Gulf Arab banks to consider mergers and acquisitions as their governments open up markets to foreign banks to comply with international agreements, including with the WTO.

Source ::: REUTERS
http://www.thepeninsulaqatar.com/Display_news.asp?section=Business_News&subsection=market+news&month=April2007&file=Business_News2007041003819.xml

Royal Bank, BMo raise mortgage rates by one-fifth of a percentage point

TORONTO (CP) - RBC Royal Bank (TSX:RY) and Bank of Montreal (TSX:BMo) are raising a wide range of mortgage rates by about one-fifth of a percentage point, effective Tuesday.

The Royal, Canada's largest bank, said Monday its mortgages with terms of one year to 10 years will each rise by 0.20 of a percentage point. A five-year mortgage, for example, will have a posted rate of 6.64 per cent.

Rates for Royal's six-month mortgages will rise by only five-100ths of a per cent. Open six-month mortgages will have a posted rate of 8.2 per cent while six-month closed mortgages will have a posted rate of 6.5 per cent.

Bank of Montreal, meanwhile, will also boost rates, reflecting the rising cost of borrowing in the bond market, where banks finance their mortgage lending.

A five-year loan at Bank of Montreal rises a fifth of a point to 6.64 per cent, while a three-yer loan increases to 6.7 per cent, up .21 of a percentage point.

Source : http://www.cbc.ca/cp/business/070409/b040965A.html

Thailand's Central Bank May Cut Rate for Third Time This Year

By Suttinee Yuvejwattana

April 10 (Bloomberg) -- Thailand's central bank will probably cut its benchmark interest rate for a third time this year to spur the slowing economy and curb gains in the baht as confidence slides and anti-government protests mount.

The Bank of Thailand will lower its one-day bond repurchase rate to 4 percent from 4.50 percent, according to 10 of 16 economists surveyed by Bloomberg News. The other six economists in the poll expect a quarter of a percent cut. The decision is due at 2 p.m. tomorrow in Bangkok.

``The Bank of Thailand is likely to cut the rate to kick- start the economy and tie down the ever-appreciating baht,'' Frederic Neumann, an economist at HSBC Holdings Plc. in Hong Kong wrote in an e-mailed note. ``Policy makers have become worried about the growth outlook given recent political and policy upsets.''

Protests are planned in Bangkok this week by as many as 12 groups opposed to the September coup and critical of the military-installed government's performance plan. The nation's finance minister has called for lower rates to spur spending after investment curbs and terrorist attacks eroded confidence.

The central bank has cut its key rate by 25 basis points at two previous meetings this year. A 50-basis-point cut at tomorrow's meeting would be the biggest reduction since June 2003. A basis point is equivalent to 0.01 percentage point.

Baht Gains

The baht is trading near its highest level against the dollar in nine years after Bank of Thailand measures to curb the currency's 16 percent surge last year by penalizing foreign investors backfired. Limits on bringing money into the country eroded consumer and business confidence, crimping imports, and caused rifts within the government.

``This baht scenario is obviously not good,'' said Catherine Tan, head of emerging markets at Forecast Singapore Pte. ``Exporters are still receiving money and they have to sell the dollars they receive,'' which is pushing the baht higher.

Inflation slowed to 2 percent in March, the lowest in three years, from 2.3 percent a month earlier as consumption cooled amid a slump in confidence.

A measure of business sentiment tumbled to the lowest in more than five years in February. An index of consumer confidence fell for a fourth month in February, dropping to a six-month low. The gauge has slid for 15 of the past 17 months.

The International Monetary Fund on March 23 cut Thailand's 2007 economic growth outlook for a second time in six months, lowering it to 4.5 percent from 5 percent. The economy expanded 5 percent last year, with fourth-quarter growth of 4.2 percent the slowest pace in almost two years.

Cut Rates

Finance Minister Chalongphob Sussangkarn, a critic of the central bank's currency controls before joining the government, said last month the benchmark rate must be cut to encourage consumer spending and spur the slowing economy. Chalongphob replaced Pridiyathorn Devakula, a supporter of the investment restrictions who quit citing disputes with other Cabinet members.

``Given that the central bank's capital controls have thus far failed to curb the baht's strength, the Finance Ministry is believed to be advocating for more aggressive interest rate cuts,'' Usara Wilaipich, a Bangkok-based economist at Standard Chartered Bank, wrote in a note to clients.

The baht has climbed 2.3 percent this year to 34.92 per dollar onshore. An offshore rate, spawned by the investment restrictions, has surged four times faster.

Groups, including some backed by the Thai Rak Thai political party founded by deposed Prime Minister Thaksin Shinawatra, last month began holding anti-government and coup rallies in Bangkok.

The following is a table of economists' estimates of where the central bank's one-day bond repurchase rate will be after the April 11 policy meeting. Figures are in percentages:

Thailand Benchmark Interest Rate Estimates
-------------------------------------------------
                        April 11 May 23  End of
Firm                                        2007
-------------------------------------------------
Median                     4.00%   4.00%   3.75%
% Estimates at Median     62.50%  71.43%  33.33%
Average                    4.09%   3.93%   3.64%
High                       4.25%   4.00%   4.00%
Low                        4.00%   3.75%   3.00%
Number of Estimates           16       8      10
-------------------------------------------------
Action Economics           4.25%      --      --
Capital Nomura Securities  4.00%      --   3.50%
CIMB Securities            4.25%   4.00%   4.00%
Citigroup                  4.25%   4.00%   4.00%
Credit Suisse              4.00%      --   3.50%
DBS Group                  4.25%      --      --
Forecast Singapore         4.00%   4.00%   3.75%
HSBC                       4.00%   4.00%   3.50%
ING Groep NV               4.00%      --      --
Kasikorn Research          4.00%      --      --
Lehman Brothers            4.25%      --      --
Phatra Securities          4.00%      --      --
Standard Chartered Bank    4.00%   3.75%   3.75%
Thomson IFR                4.00%      --      --
UOB Kay Hian               4.25%   4.00%   3.75%
Westpac Banking Corp       4.00%   3.75%   3.00%
-------------------------------------------------

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net

Source : http://www.bloomberg.com/apps/news?pid=20601080&sid=a4WLILEk0aOc&refer=asia

Japan central bank meets; interest rate expected to stay unchanged

TOKYO: Japan's central bank began a two-day policy meeting on Monday amid market expectations that interest rates will stay unchanged. Among the issues it will be weighing are recent price declines and concerns about the U.S. economy.

In February, the Bank of Japan raised a benchmark interest rate to 0.5 percent from 0.25 percent. But economists do not expect another hike for a while, partly because recent data showed that core consumer prices fell 0.1 percent in February compared with a year earlier, dipping for the first time in 10 months, partly because of a drop in oil prices.

That undermined hopes that Japan has fully escaped deflation, or a downward spiraling of prices that also drags on wages and overall growth, despite other signs of growth, including rising corporate profits and expanding gross domestic product.

The Bank of Japan's quarterly tankan survey, released a week ago, showed that confidence among manufacturers slipped in March for the first time in a year, even as it found that large businesses planned to boost investment in the year ahead.

The Bank of Japan's deputy governor, Toshiro Muto, has also pointed to nervousness about the economy in the United States, Japan's biggest export market. "The U.S. has both downside risks for the economy and upside risks for inflation," he said last week.

Although the Bank of Japan is in principle independent from the government, some analysts say that the bank is unlikely to raise interest rates until after the nationwide parliamentary elections scheduled for July.

Source : http://www.iht.com/articles/2007/04/09/business/yen.php

Wolfowitz defends conduct over World Bank lover row

World Bank president Paul Wolfowitz, under fire for massive pay raises given by the powerful development organization to his girlfriend, insisted Monday he had always upheld staffing rules.

In an extraordinary statement to staff that did not mention the name of his Libyan-born partner, Shaha Riza, Wolfowitz accepted "full responsibility" over the case but said he had "acted on the advice" of the bank's ethics committee.

Heading into an annual World Bank meeting, the Riza row has stoked criticism of the former Pentagon deputy chief's management style as he steers through a controversial campaign against corruption.

"I would like to assure the staff that I have always acted to uphold these rules to the best of my ability, and I will continue to do so," Wolfowitz said in his statement to the World Bank's 10,000 employees.

"As president of this institution, I accept full responsibility for the actions taken in this case," he said. On Thursday the bank's board of governors, who are appointed by national governments, ordered an investigation into a "possible violation of staff rules in favor of a staff member closely associated with the president."

"I have already indicated to the board my intention to cooperate fully in their review of the details of the case," stressed Wolfowitz, who separated from his wife in 2001.

"What remains of the utmost importance to me is the protection of the interests of this institution as a whole, and our need to remain focused on our agenda of helping the world's poor."

A circular last Tuesday from the World Bank's internal staff association said it had been "inundated with messages from staff expressing concern, dismay and outrage" over the Riza case.

She was pulled off her job as a communications officer at the World Bank and seconded to the US State Department in September 2005, shortly after Wolfowitz took over at the lender's helm.

The move was reportedly made over Wolfowitz's objections at the insistence of the board of governors, to abide by bank rules that forbid members of staff who are romantically linked from working under each other.

Riza was then rapidly promoted and ended up earning nearly 200,000 dollars at the State Department, more than Secretary of State Condoleezza Rice herself, sparking the internal fury.

Staff have highlighted apparent discrepancies between accounts of her employment given by Wolfowitz and members of the World Bank's board and ethics committee.

According to the Washington-based Government Accountability Project (GAP), neither the committee nor the board approved Riza's hefty pay hikes as claimed by Wolfowitz's office.

The row risks undermining Wolfowitz at a time when he is leading his campaign to clean up corruption in the World Bank's multibillion-dollar lending.

The drive will again be under the spotlight when the bank, in conjunction with the International Monetary Fund, holds its spring meeting this weekend.

"It's ironic that Mr. Wolfowitz lectures developing countries about good governance and fighting corruption, while winking at an irregular promotion and overly generous pay increases to a partner," said Bea Edwards, the GAP's international director.

Wolfowitz has also ruffled feathers among staffers by appointing Republican allies to key World Bank positions, including in charge of its anti-corruption unit.

The March issue of Vanity Fair, meanwhile, said that Riza served as a consultant to military contractor SAIC while a World Bank employee in the run-up to the 2003 Iraq invasion, which Wolfowitz helped engineer.

Source : http://rawstory.com/news/afp/Wolfowitz_defends_conduct_over_Worl_04092007.html

China bank makes IPO offering

Apr 9, 2007, 22:15 GMT

BEIJING, Chile (UPI) -- An initial public offering by China CITIC Bank Co., the country`s eighth largest in terms of assets, could raise up to $5.7 billion.

The IPO is planned simultaneously in Hong Kong and Shanghai, Xinhua reported Monday quoting sources.

The report said the Beijing-based bank, owned by China International Trust and Investment, plans to offer 2.3 billion new shares in Shanghai, representing a 6 percent stake, to raise up to $1.82 billion. It may sell an additional 4.89 billion shares, or a 12.8 percent stake, in Hong Kong to bring in $3.86 billion.

IPOs are doing well in China because investors want to benefit from the country`s booming economy.

'This is not a bargain price for stock in (CITIC). It leaves little room for future upside gains if it`s priced at the top end,' an analyst said.

Depending on the price, the IPO values CITIC Bank at 2.48 times to 2.81 times its estimated book value this year, the report said.

The lead underwriter for the IPO is China International Capital.

Source : http://news.monstersandcritics.com/business/news/article_1289157.php/China_bank_makes_IPO_offering

Citigroup to buy Bank of Overseas Chinese

April 10 2007

TAIPEI: Citigroup said it will pay T$14.1 billion, or US$426 million (US$1 = RM3.46) for Taiwan's Bank of Overseas Chinese (BOOC), its third Asian purchase in recent months as it looks to boost overseas earnings.

Citigroup's US-based chief executive Charles Prince said last month he wanted to increase earnings from foreign markets to up to 65 per cent of its total from a current 45 per cent.

"The most important global strategy for Citi is to expand our international presence and profitability. It is the same strategy we are using in Taiwan," the group's Taiwan country officer Morris Li told a news conference yesterday to announce the deal.

The acquisition reflects a broader worldwide consolidation as major global players beef up their international portfolios, particularly in fast- growing Asian markets.

Citigroup, the world's most valuable bank, is also buying Nikko Cordial Corp, Japan's No.3 brokerage, for US$14 billion and, in November, it led a group buying control of China's Guangdong Development Bank for US$3.1 billion.

Citigroup also plans to raise its stake in Shanghai Pudong Development Bank to 19.9 per cent from below 5 per cent.

The acquisition will boost Citigroup's Taiwan-based assets to US$22.8 billion, ranking it 13th on the island, and increase its number of branches to 66 from 11.

Citigroup said it will set up a subsidiary to buy BOOC, with completion set for the second half of this year.

The deal is subject to Taiwan and US regulatory approval.

Li said BOOC should turn a profit next year. In the 2006 first quarter, the bank posted a net loss of T$510 million. - Reuters

Source : http://www.btimes.com.my/Current_News/BT/Tuesday/Corporate/BT617346.txt/Article/

Citigroup CEO: Bank to be 'nimbler' after cuts -- The largest U.S. bank plans to announce cost cuts and may slash 5 percent of its work force to help

NEW YORK (Reuters) -- Citigroup Inc. Chief Executive Charles Prince told employees he plans Wednesday to announce cost cuts that will make the bank "nimbler" and should help boost revenue, even as he acknowledged, "you can't shrink your way to greatness."

The cuts follow a nearly four-month review by Chief Operating Officer Robert Druskin of expenses at the largest U.S. bank.

Shareholders are pressuring Prince to bolster Citigroup's share price and slash its $52 billion operating expense base even as the bank grows, especially outside the United States.

Operating costs increased 15 percent, compared with a 7 percent gain in revenue. Saudi Prince Al-Waleed bin Talal, the bank's largest individual shareholder, last July called for "draconian" cuts.

In a memo to employees Monday, Citigroup's Prince said the bank plans to consolidate some back-office, middle-office and corporate functions; move some work to lower-cost areas; and make its technology platforms more efficient.

"This review has not been undertaken on the basis of giving the entire organization an arbitrary number to cut," Prince wrote. "I firmly believe that you can't shrink your way to greatness. Our ultimate objective is to drive growth."

Reuters obtained a copy of the memo, and a Citigroup spokesman confirmed its contents.

Published reports have said Citigroup might eliminate 15,000 jobs, or about 5 percent of its work force of 327,000.

Analysts have said the cuts could, and might need to, go deeper to meaningfully improve the bank's bottom line.

Citing unnamed people within the bank, CNBC television on Monday said Citigroup might cut 45,000 jobs, though it wasn't clear if the cuts would come through firings or attrition.

Citigroup (Charts) shares closed Monday up 1 cent at $51.58. They are little changed since news of the extent of the possible cuts was first reported on March 26.

Since Prince became chief executive in October 2003, the shares are up 13 percent, trailing the 29 percent gain in the 24-member Philadelphia KBW Bank Index.

Source : http://money.cnn.com/2007/04/09/news/companies/bc.citigroup.expenses.reut/?postversion=2007040918

Australia's Central Bank Poised to Raise Rate to 6.5% (Update1)

By Hans van Leeuwen

April 3 (Bloomberg) -- Australia's central bank meets today, with economists and traders predicting it will raise the benchmark interest rate either this week or next month to stem inflation.

There is a 50 percent chance the Reserve Bank of Australia will raise the overnight cash rate target by a quarter point to a 10-year high of 6.5 percent when it makes its announcement at 9:30 a.m. tomorrow in Sydney, according to the median estimate in a Bloomberg News survey of 25 economists. Twelve economists predict the bank will move this week. Three say it will wait until next month after it has seen an inflation report due on April 24.

Traders price a 67 percent chance of an April interest-rate increase into futures contracts, according to Credit Suisse, after recent reports of buoyant consumer spending and jobs growth raised the prospect of faster inflation. The bank last month said inflation may be ``too high'' this year, even as U.S. economic growth slows and global interest rates climb.

``Many of us are wobbling on either side of even money,'' said Rory Robertson, an interest-rate strategist at Macquarie Bank Ltd. in Sydney. ``The bank prodded us two weeks ago to think harder about an April interest-rate hike.''

The outlook for underlying inflation ``is still higher than ideal,'' Reserve Bank Assistant Governor Malcolm Edey said on March 16. ``It implies that inflation is more likely to be too high than too low in the period we can foresee.''

Following Edey's comments, some economists began predicting an April interest-rate increase and traders raised the probability of a move from zero percent to more than 50 percent, according to Credit Suisse's index of interest-rate futures.

Retail Sales

The index rose further, and more economists revised their view, after the government yesterday released reports showing retail sales rose twice as much as expected in February and home-building approvals had their biggest monthly gain in more than three years.

Rising household spending had already driven the fastest economic growth in more than a year in the fourth quarter, according to a government report in March that was also twice economists' expectations.

That came even after the Reserve Bank raised interest rates three times last year as it battled to get inflation back into its target range of between 2 percent and 3 percent.

The annual inflation rate has topped the target since the second quarter of last year, and was 3.3 percent in the three months to Dec. 31.

Still, the fourth-quarter rate was slower than the previous three months as fruit and fuel prices fell. The Reserve Bank forecasts the so-called underlying inflation rate, which strips out volatile price movements, will cool to 2.75 percent this year from 2.9 percent at the end of 2006.

`Why Rush?'

``The arguments for an interest-rate increase are reasonably compelling, the data has been firm, but why rush?'' said Stephen Walters, chief economist at JPMorgan Chase & Co., whose forecasts for the rate and probability both match the survey median.

``At the moment, we're still looking at the same inflation numbers we had when the bank met last month, which showed the annual rate was slowing.''

A slowing U.S. economy and rising interest rates in Europe and Japan may also put a brake on Australian economic growth and inflation.

The U.S. economy grew at a revised annual pace of 2.5 percent in the fourth quarter as home-building cooled.

The European Central Bank has raised interest rates seven times since December 2005 to 3.75 percent, and both China and Japan have raised their benchmark interest rates in the past year.

Following are economists' forecasts for the overnight cash rate target after the Reserve Bank's April meeting, and the probability of a move. The table also shows the economists' forecasts for the benchmark rate at the end of the second and fourth quarters of 2007:

Rate by End of:        April  Probability 2nd-Qtr 4th-Qtr
-----------------------------------------------------
Median                 6.25%    50%       6.50%   6.50%
High Forecast          6.50%    90%       6.50%   6.75%
Low Forecast           6.25%    31%       6.25%   6.00%
No. of replies          25      25        25      25
-----------------------------------------------------
4Cast                  6.50%    75%       6.50%   6.50%
ABN Amro               6.25%    40%       6.25%   6.25%
AMP Capital            6.25%    50%       6.25%   6.00%
ANZ Bank               6.50%    60%       6.50%   6.75%
Ausbil Dexia           6.25%    40%       6.50%   6.50%
Barclays Capital       6.25%    40%       6.25%   6.25%
BT Financial           6.25%    31%       6.50%   6.50%
Citigroup Australia    6.50%    60%       6.50%   6.50%
Commonwealth Bank      6.25%    40%       6.25%   6.25%
Deutsche Bank          6.50%    60%       6.50%   6.50%
Goldman Sachs          6.25%    45%       6.25%   6.00%
Grange Securities      6.50%    65%       6.50%   6.50%
ICAP Australia         6.25%    45%       6.25%   6.25%
IDEAglobal             6.25%    40%       6.50%   6.50%
JPMorgan Chase         6.25%    50%       6.25%   6.25%
Macquarie Bank         6.25%    45%       6.25%   6.25%
Merrill Lynch          6.50%    65%       6.50%   6.50%
National Australia     6.25%    50%       6.25%   6.25%
RBC Capital Markets    6.50%    60%       6.50%   6.50%
Societe Generale       6.50%    90%       6.50%   6.75%
St.George Bank         6.25%    45%       6.25%   6.25%
Suncorp                6.50%    60%       6.50%   6.50%
TD Securities          6.50%    70%       6.50%   6.75%
UBS Australia          6.50%    65%       6.50%   6.50%
Westpac Bank           6.50%    70%       6.50%   6.50%
=====================================================

To contact the reporter on this story: Hans van Leeuwen in Sydney at hvanleeuwen1@bloomberg.net .

Source : http://www.bloomberg.com/apps/news?pid=20601081&sid=ay9hxeLmdEPo&refer=australia

Sensex crashes 617 pts on interest rate jitters

The Reserve Bank`s latest CRR and repo rate hikes reverberate across markets

BS Reporter / Mumbai April 03, 2007 Second biggest single-day fall erodes Rs 1,39,086 cr of investors' wealth. Indian markets would like to forget the first trading day of the new financial year in a hurry. Stocks slid, posting their biggest drop in 10 months, on concerns over rising interest rates and their possible impact on the earnings momentum of Indian companies. High crude prices and selling by foreign funds also contributed to the weak sentiment, triggering the second biggest single-day fall for the Sensex and wiping out Rs 1,39,086 crore of investor wealth. The index today plunged 616.73 points (4.73 per cent) to 12,455.37. The biggest single-day fall was on May 18 last year when the index plunged 826 points. The broader Nifty-50 Index fell by 187 points (4.92 per cent) to 3,633.60. All the 30 Sensex stocks declined. Foreign funds were net sellers of over Rs 1,000 crore in March. Elsewhere in the region too, the markets fell. The Morgan Stanley Capital International Asia-Pacific Index slipped 0.9 per cent to 143.41. “The markets are reacting to the interest rate hikes. There has been a tightening of liquidity. This is likely to result in a slowdown in the earnings growth momentum of companies,” said R Sreesankar of IL&FS Investsmart. Auto stocks were the hardest hit as the interest rate increases following the Reserve Bank of India’s surprise hike in the cash reserve ratio (CRR) — the amount banks are required to keep as reserves — for the third time since December. The BSE Auto Index dropped by 6.15 per cent, the sharpest fall among the sectoral indices. Maruti Udyog was down 8.09 per cent to Rs 753.40, Tata Motors went down by 8.04 per cent to Rs 669.25, and Hero Honda slid 6.68 per cent to Rs 639.35 on concerns that prospective car and two-wheeler buyers may postpone their purchases till liquidity eases. Banking stocks, which will bear the brunt of the tight liquidity regime, also dropped sharply. The BSE Bankex shed 5.95 per cent, with the State Bank of India, which fell by 6.31 per cent to Rs 930.25, becoming the fifth sharpest declining stock today. HDFC, the country’s biggest home loan provider, fell by 5.77 per cent to Rs 1,432, while ICICI Bank, the biggest private sector bank, shed 5.70 per cent to Rs 804.50. Realty stocks too cracked under the weight of the rate hikes. Unitech Ltd hit the lower circuit of five per cent to touch Rs 368, while Mahindra Gesco Developers shed 4.72 per cent to Rs 541.50. Recently listed Sobha Developers plunged by 7 per cent to Rs 745.10, and Indiabulls Real Estate, which was demerged from Indiabulls Financial Services, dived by 7.67 per cent to Rs 275.25. Analysts said the tightening of liquidity would hamper fund flow into the realty sector from the banking system. “The hikes will hurt the banks in terms of profitability and reduce margins by 6-8 basis points. The likely increase in lending rates should chip away at demand,”said Citigroup analyst Aditya Narain. Among other losers, Bajaj Auto fell Rs 124.85, or 5.2 per cent, to Rs 2,300.6, and Grasim Industries slid Rs 36.65, or 1.8 per cent, to Rs 2054.6. Source : http://www.business-standard.com/common/storypage.php?leftnm=lmnu6&subLeft=1&autono=279799&tab=r