Headlines

When the details of Portugal’s rescue package are announced next month, pay attention to the economic growth assumptions that are negotiated between the European authorities, the International Monetary Fund and the Portuguese government, the Real Time Brussels blog reported in an analysis. If the loan package for Greece is any guide, the EU and the IMF tend to be too optimistic about growth prospects in countries that are about to slash spending and raise taxes in the face of already-high unemployment.

Chinese banks may have to raise about 860 billion yuan ($131 billion) of stock over six years to meet stricter capital rules, according to estimates from the industry regulator, a person with knowledge of the matter said, Bloomberg reported. Lenders are likely to need an additional 1.26 trillion yuan in supplementary capital by the end of 2016, the person said, declining to be named because the calculations aren’t public. The estimates, compiled in January, assume economic growth of 8 percent a year and 15 percent credit expansion, the person said.

The number of British companies in serious financial distress soared in the first quarter with restaurants, professional services businesses and the leisure industry in particular difficulty, a report showed, Reuters reported. Begbies Traynor, a corporate recovery company that helps wind up or restructure firms, said its Red Flag Alert database showed 186,554 UK businesses were facing significant or or critical problems in the first three months of this year.

AIB would consider writing off debts for some mortgage holders who cannot repay loans as a long-term way of resolving problem cases, the bank’s executive chairman David Hodgkinson said. Debt forgiveness was one option being considered, the bank said, as it posted a record loss of €10.4 billion for 2010 and unveiled plans to shed more than 2,000 staff – one in seven jobs at the bank, the Irish Times reported. Mr Hodgkinson said there was a range of possibilities for distressed borrowers, including a reduction on repayments by extending a loan period or writing off some debt.

Debt has forced a major Australian vegetable grower of tomatoes, capsicums and zucchinis into receivership, The Australian reported. Barbera Farms employs more than 500 people and grows produce at Bundaberg and Childers in southern Queensland and Bowen in the state's north. The receivers, Justin Walsh and Chris Munday, partners at accounting firm Ernst & Young, expect the farm will sell within months.

WestLB's owners and management are still working on three plans for the troubled German lender, two people familiar with the matter told Dow Jones Tuesday. The three options that owners and management are working on are a complete sale of the bank, downsizing the bank by 30% and transforming WestLB into a bank focusing on the Verbund business, which provides central banking services to the region's savings banks, the people said. More detailed plans for all three proposals will be handed in to the European competition authority on Friday.

The woes of Irish banks, unlike those at peer institutions elsewhere in Europe's suffering periphery, are not a concern merely for the banks' own solvency. They are a national solvency problem, too—or at least they became one when the government decided to insure bank creditors in September 2008, The Wall Street Journal reported in a commentary. It is this, more serious aspect of the Irish crisis that remains unaddressed in the government's new bailout plans. Ireland's public debt is clearly unsustainable.

International creditors started discussing the terms of a bailout for Portugal on Tuesday amid concerns that their initial challenge would be to sort out the country’s political disputes rather than its financial situation, the International Herald Tribune reported. The negotiators will seek to persuade feuding political parties to bury differences that have intensified in the buildup to a general election on June 5, which was called because of a parliamentary standoff over how to clean up the Portuguese government’s finances.

The National Asset Management Agency (Nama) is looking at ways of providing mortgage finance to banks in an attempt to energise the Republic’s moribund property market, the Irish Times reported. State agency chairman Frank Daly told a group of property professionals yesterday that he wants to begin talks with the State’s two biggest banks on means of providing finance to homebuyers. Such a move could require a change in the legislation that established Nama, depending on what steps it finally decides to take.

Two of Germany's public-sector lenders are expected to fail European "stress tests" if they can't find a way around new regulations prohibiting inclusion of some non-voting government stakes in their core capital ratios, The Wall Street Journal reported. NordLB and Helaba were among the rare German banks that survived the financial crisis without any state aid. However, both banks are dangerously low on capital when their silent participations, a special type of subordinated debt that makes up as much as half of the banks' capital, is discounted.