How UK Banks, ETFs Cope With Crisis | ETF Trends

Royal Bank of Scotland (RBS) shares it’s wealth over borders, but after the crash of global markets, and related exchange traded funds (ETFs), the bank retreated and resorted to protectionism for the first time this century.

During the recent trend in globalization, Royal Bank of Scotland ventured out into markets, other than those sharing borders, to locales such as Kazakhstan, China and Rhode Island. That flow of credit and capital across borders was pinched as the government took majority control of the venerable bank four months ago after it suffered the worst corporate loss in British history.

Anthony Faiola and Mary Jordan for The Washington Post report that government authorities are going to plan B: RBS, which had been in private hands since 1727, would have to sharply boost lending to British companies and home buyers stung by the global credit crunch – effectively curtailing lending to its equally hard-hit customers overseas.

Billion of dollars will be redirected into British markets and banks, while re-tracting in 15 other countries, areas such as Vietnam and Romania. European Central Bank is being urged to do the same as the U.S. Federal Reserve and RBS, and use central bank money to buy assets, including public debt. The Economist reports that the ECB is not thrilled or in a hurry to do this, as its policy-setting council meets on April 2. The council seems likely to cut the bank’s benchmark refinancing rate to 1% from 1.5%.

Firms and households in Europe, unlike in America, rely more on banks than capital markets for their debt financing.

  • iShares MSCI United Kingdom (EWU) down 12.2% year-to-date; up 15.2% for one month

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.