Headlines

The International Monetary Fund raised a cautionary flag Wednesday over the possible consequences of lofty campaign promises made by Iceland's new prime minister and the small island nation's inability to make progress on lifting capital controls, The Wall Street Journal reported. The IMF said in a report that Iceland's economic recovery remained fragile because of Sigmundur David Gunnlaugsson's costly electoral commitments and lingering concerns related to a 2008 banking crisis. Elected as prime minister in the spring, Mr.

Raghuram Rajan, the incoming governor of the Reserve Bank of India, once called modernising the country’s inefficient and under-developed financial sector a “moral and economic imperative”, the Financial Times reported. Proposing detailed reforms of the sector in a 2008 report, Mr Rajan bemoaned that the primary source of loans for most Indian households was still usurious informal moneylenders, while the financial system was “not able to meet the scale or the sophistication” of India’s large companies, smaller businesses or public infrastructure projects.

The Bank of England broke with tradition on Wednesday, planning to keep interest rates at a record low until unemployment falls to 7 percent or below, which it said could take three years, Reuters reported. Its attempt to steer expectations about future rate moves and bolster a fledgling economic recovery underwhelmed many investors, who brought forward expectations for when rates would rise from 0.5 percent - the opposite of what the central bank was hoping for - although the move faded later in the day.

The scandal-ridden bank Monte dei Paschi di Siena reported its fifth consecutive quarterly loss on Wednesday as it struggled with the cost of a state aid package and the Italian recession, the International Herald Tribune reported. However, the second-quarter net loss of €280 million, or $373 million, represented a significant improvement over the €1.6 billion loss the bank posted a year earlier.

The U.S.-based company whose train derailed in Lac-Mégantic, Que., last month announced Wednesday that it has filed for bankruptcy protection in both Canada and the United States, The Globe and Mail reported. Montreal, Maine & Atlantic Railway issued a statement Wednesday afternoon saying it has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Maine. The Canadian division of the company also filed a petition under the Companies’ Creditors Arrangement Act with the Superior Court of Quebec in Montreal, according to the statement.

Ratings agency Fitch has downgraded the ratings on six tranches of Irish residential mortgage-backed securities (RMBS), saying the absence of a credible threat of repossession helped drive up mortgage arrears, the Irish Times reported. “Arrears levels across the majority of transactions continue to worsen,” the agency said.

UK Coal rejected a bid to buy its surface mines and run its deep mines under contract in favour of a restructuring that could cost British companies millions in pension payments, documents show, the Financial Times. The revelation is contained in the report to creditors compiled by PwC, which handled the administration and liquidation of Britain’s largest coal producer, hiving most of its assets into linked businesses. Hargreaves Services, the listed coal miner and importer, is believed to have made the bid on June 5, a month before UK Coal entered administration on July 9.

Vietnam’s state asset management company, tasked with cleaning up bad loans, said it will acquire as much as 10 trillion dong ($474 million) of spoiled debt over the next two months as it considers possible foreign funding, Bloomberg reported. Vietnam Asset Management Co. will issue special bonds to about 10 banks in exchange for as much as 10 trillion dong of non-performing loans in the next two months, Chief Executive Officer Nguyen Huu Thuy said in an interview in Hanoi yesterday. The lenders will be able to use the bonds to secure funding from the central bank, he said.

Irish government debt is still vulnerable to a Greek-style restructuring, Capital Economics said in a note, the Irish Times reported. The country still hasn’t fully regained the competitiveness lost inside the euro region and remains vulnerable to swings in the global economy, Jonathan Loynes, chief European economist at Capital Economics, said. Debt levels, the housing market and a fragile banking sector may also hamper economic growth, Loynes said.

Insolvent home improvement store chain Praktiker has secured financing to pay suppliers and keep shelves stocked as it seeks an investor, Reuters reported. Praktiker filed for insolvency last month after talks with creditors failed, triggering fears of heavy job losses. Administrators have kept the business running while reviewing options for the chain, a household name in Germany. "We reached an agreement on financing for the supply of goods following intensive negotiations with credit insurers, banks and suppliers," insolvency administrator Christopher Seagon said in a statement on Tuesday.