Banking, Personal finances and Commerse :: Money news

Money markets spanish downgrade piles pressure on banks


* Downgrade likely to hike repo costs for Spanish banks* Spanish banks seen increasingly reliant on ECB cashBy Emelia Sithole-MatariseLONDON, June 8 Fitch's credit rating downgrade of Spain compounds funding problems for the country's struggling banks which may leave them even more reliant on the European Central Bank's cheap loans. Fitch slashed Spain's credit rating late on Thursday, leaving it just two notches short of junk status. It signalled more downgrades could follow as expectations grew Madrid would ask the euro zone for help with recapitalising its stricken banks. Cuts to individual Spanish banks' ratings are due to follow, which could complicate their use of repurchase markets which have been an important source of short-term cash. Many of the big Spanish banks use clearing houses to reduce the risk and cost of repo trades using government bonds but the ratings downgrade will boost the cost, or the initial margin clearers require to offset risks.

"This means that for a number of banks...(that) clear through LCH. Clearnet the financing will become much more expensive through repo and it's possible that some banks will not be allowed to clear if they fall below BB+," said Don Smith, an economist at ICAP."LCH uses the most conservative of the ratings so this will have an impact of raising, if not immediately but after a short period, the cost of repo financing to banks which increases their reliance for short term funds from the ECB," he said. Already earlier this week, banks' use of the ECB's weekly funding more than doubled as Spain's troubles left its institutions increasingly dependent on central bank support and as four Greek banks returned to mainstream ECB operations following a two week ban.

The ECB's weekly offering of limit-free 7-day funding saw a total of 96 banks take 119.4 billion euros, the highest since the second of its two 3-year injections at the end of February and more than double the 51.2 billion euros taken a week ago. BANK RESCUE DETAILS EYED

Spanish banks have increasingly seen their access to funding markets shrink as they slid deeper into a crisis caused by a burst real estate bubble and the country's deteriorating fiscal situation."Effectively they were already locked out of the market...so it's not of huge concern as they were prevalent in tapping the ECB's liquidity operations," said Suki Mann, a credit strategist at Societe Generale."The latest downgrade doesn't help and it will mean they will need accommodative policy from elsewhere either from the ECB or some form of aid from the troika for the recapitalisation.". The cost of insuring against a default by the country's banks jumped after Fitch's downgrade of the country's rating, with five-year credit default costs for Banco Santander rising by eight basis points to 412.5 bps while those for BBVA were up five bps at 447.5 bps, according to provider Markit. Both Smith and Mann said they would wait to see the details of any planned Spanish bank rescue to see how far it would go in tackling the sector's problems.

Q&a for comedian george lopez, money is not always funny


For one of America's favorite funnymen, George Lopez has a life story that is anything but hilarious. Despite challenges that would topple many of us, from growing up without a father to suffering kidney failure, Lopez made it atop the entertainment world with shows like the ABC sitcom "George Lopez" and the new TV Land series "Lopez."For Reuters' series "Life Lessons," we sat down with Lopez to dig into the wisdom he gathered along the winding path to stardom. Q: Growing up poor in Mission Hills in the San Fernando Valley, when did you know you were destined for something big?A: I didn't have a family that was cohesive or supportive in any way. The first time I heard anyone say that I could be anything I wanted to be, it was in elementary school when I was 8 years old. A minor league baseball player from the area spoke to our school, wearing his Orioles jersey, telling us that if we stayed in school and worked hard and dreamed big, we could accomplish anything. At that moment my eyes were opened. I had never heard anybody say that before. I don't even know the guy's name, but I never forgot that moment. My whole career started with that day. Q: What did your family teach you about money and work?A: I lived with my grandfather, whose job was digging ditches with a shovel. My grandfather told me 'In life you can work with your hands, or you can work with your head, and you need to decide.' I knew right away that life wasn't for me.

Q: You eventually hit it big with your own show. What was it like to be the boss?A: I remember the first Thanksgiving on set, when everybody on the crew brought food and were having a good time. I just stood there and started crying, and had to go to my dressing room and close the door. I wasn't used to seeing people happy like that. I had spent so much time alone and on the road -- life beats you down like a dog. I had to learn how to be around happiness. Q: How did you deal with having significant money for the first time?

A: I didn't have high-level financial guys when I started out, and looking back now, I probably should have. I had to hire someone who was used to handling successful people, and could take me to the next level. The most important thing for me was to never owe money to people. I wanted to be someone who always pays my bills on time. Q: What did your kidney transplant teach you about life?A: I was sick from 1998 to 2005, and the last couple of years were really bad. I was still doing my show, and I don't think people knew how sick I was. I couldn't remember my lines, my blood was tainted, my kidney function was destroyed.

I got the amazing gift of a kidney from my wife at the time. I woke up from the operation feeling better than I had ever felt in my life, and ever since, I have spent as much time as I can helping raise money and awareness for sick kids. Q: Do you still go back to where it all started?A: I remember at school when I was growing up, none of the kids in the neighborhood had much, but every Christmas we would get a toy or a book. So when I made it, I decided I would do the same thing. For the last 10 years I have gone back for the holidays and personally handed a toy to every kid in my old school. This is in the same auditorium where that baseball player told me I could be whatever I wanted to be. Now that auditorium is named after me - so everything good in my life traces back to that one place. For more Life Lessons, click on this link (here).