Chapter 566 More money is needed

The acquisition plan proposed by Barron's to Finance Minister Darling is very simple - didn't you inject 25 billion pounds of borrowings into Northrock Bank? After the acquisition is completed, DS Group can assume this part of the debt and promise to return it within three years. It can even use the corresponding assets of DS Group as collateral. In this way, the strong strength of DS Group is enough to ensure the safety of this part of the funds. The government can answer to taxpayers.

But the premise is that the DS Group needs the government to come up with at least another 25 billion pounds, whether in the form of investment or borrowing, and hand it over to the DS Group and let them invest, so that it can guarantee that within three years, or even more Complete the return of all 50 billion pounds and interest in a short period of time.

Of course, the whole process is very complicated. To put it simply, DS Group will issue a special bond, the interest of which will be equivalent to the interest of the 25 billion pounds that they injected into Northrock Bank from the Bank of England...

This special bond will be purchased by the government and the central bank, totaling 50 billion pounds, and will be redeemed within 3 years.

In this way, after receiving the 50 billion pounds of funds, 25 billion pounds of it will be used to return the funds lent by the Bank of England to Northron Rock Bank (the interest will be borne by Standard Chartered Bank), and the other 25 billion pounds will be Put it into an escrow account that can be supervised by the Ministry of Finance and the Financial Services Authority, and be operated by an investment fund specially formed by DS Group for this purpose, which can also ensure the transparency and security of the use of this part of the funds.

This series of operations will certainly be presented to the public in various legal and reasonable packages, but in fact the core is the public funds under the jurisdiction of the Bank of England and the Ministry of Finance. Buy DS Group's bonds to inject an additional £25 billion into it.

It seems that the government's "debt" has become 50 billion pounds...

But in fact, after DS Group obtains the funds and completes the acquisition of Northrock Bank, the loans they injected into the bank earlier can be returned immediately, and they must first complete the public disclosure on this matter. Explain that the government can completely withdraw from the North Rock Bank matter.

As for the 50 billion pounds added by DS Group, it comes from government debt...

DS Group itself is one of the largest fund management companies in the UK. This kind of "investment" is still acceptable if it is packaged.

Moreover, this fund is placed in a special custody account subject to government supervision, which is also very reassuring.

The difficulty here is whether the related funds of DS Group can use the remaining 25 billion pounds to earn 50 billion pounds within three years...including part of the interest?

This requires achieving a rate of return of more than 100% in just three years, and it is still a huge amount of 25 billion pounds. Considering that the next global economy is not optimistic, I am afraid no one will have that much confidence.

Except Barron.

Yes, according to Barron, this is not difficult, at least not as difficult as many people imagine.

Because in fact, he only needs to get about 30% of the income within three years...

why?

Because the current exchange rate of the pound against the US dollar has reached above 2, and by the beginning of November, it will reach the high point of 2.1163 in three years... or even in the next ten years.

But in November 2009, that is, two years later, the exchange rate of GBP to USD would fall to 1.35...

Even if Barron's did nothing and converted pounds into dollars next month, and then two years later, converted those dollars into pounds, the result would be...

The current £25 billion will become more than £40 billion!

Therefore, all Barron's needs to consider is how to turn 40 billion pounds into 50 billion pounds, a 25% increase.

However, considering that the exchange rate cannot be completely in such an ideal state during the two exchanges, and additional interest is required, a 30% rate of return is enough.

A three-year rate of return of 30% is less than an average annual rate of return of less than 10%, and it is not difficult even if the amount of funds exceeds 50 billion US dollars.

But for Darling, what he needs to consider is how to carry out such capital operations in compliance with regulations. After all, the government has injected 25 billion pounds into Northrock Bank, which can prevent the spread of panic and maintain financial order. reasons to proceed.

But the additional 50 billion pounds of capital injected into the DS Group (in fact, half of it will be returned to the central bank in the form of repayment by Northron Rock Bank) requires a name that can withstand scrutiny.

"I know that you can eventually choose to nationalize Northrock Bank and turn it into a state-owned bank, sir..."

Seeing Darin deep in thought, Barron said in time:

"But there are also risks, because Northenroc Bank itself has created a large number of non-performing assets. The disposal of these non-performing assets is also a risk that needs to be faced after nationalization..."

"And in the end, after reorganizing this bank, you will still privatize them again. The most optimistic estimate is that it will be in three years or four or five years? By then, many of the current decisions will still need to be made. And without the option of nationalization, would it be better than now?”

The hidden meaning in Barron's words is that there will be a general election in three years. If this matter cannot be solved perfectly before, then even if the nationalization of Northrock Bank can benefit the government more, it is likely to be the same as Brown. The government has nothing to do with it, and there is a high probability that it will no longer be Darling’s achievement...

And if nationalization can really solve problems so well, then why did Britain choose to privatize so many state-owned assets in the first place?

In the eyes of these people, privatization can make operations more dynamic... Nationalizing Northrock Bank was just their final and helpless choice.

"I can't give you a definite answer yet, Your Highness the Duke, but I can guarantee that we will carefully consider the plan you proposed today..."

Barron was not surprised by Darling's final reply.

After all, the final time point they gave has not yet reached, and they still have time to review the plans submitted by other bidders.

These institutions and consortiums negotiated the acquisition with the board of directors of Northrock Bank, and completed the acquisition plan, which was submitted to the Treasury, the Bank of England, and the Financial Services Regulatory Authority for review.

They have given a deadline at this time - by the end of October, if there is no acquisition plan that satisfies them, then the government will eventually consider nationalizing Northrock Bank...