UPDATE: UK BOE Bailey: Living Wills To Question Bank Structures

UPDATE: UK BOE Bailey: Living Wills To Question Bank Structures

(Adds details, background.)

By Adam Bradbery

Of DOW JONES NEWSWIRES

The preparation of "living wills" to enable banks to be wound down when they run into financial difficulties will result in hard questioning about their business models and organizational structures, a senior Bank of England official said Tuesday.

"They will be a tool for the authorities rigorously to ask the question, 'with this structure and business model, could I achieve a resolution at an acceptable cost'," said Andrew Bailey, executive director for banking services at the BOE at a banking conference in Spain.

The U.K. regulator, the Financial Services Authority, is working with the biggest financial institutions in the country to help them develop living wills which are designed to act as blueprints for supervisory authorities to wind them down and manage their exposures quickly at times of financial trauma.

Bailey said the BOE and the FSA, which are part of the tripartite authority of financial oversight, will jointly assess whether these living wills are workable and whether they show that a company's business model or organizational structure need to be changed.

"Resolution plans need to be there to be used, and I can assure you that the Bank of England, in its role as a resolution authority, will be placing great emphasis on the existence of credible and useable resolution plans," said Bailey.

The BOE official said this questioning will take place for both domestic and cross-border banks but that a large amount of work will need to be done in making sure resolution regimes in different countries adequately cover international firms.

The FSA published a discussion paper last month on how to deal with banks that are deemed "too big to fail" in which it suggested that, if a firm's living will indicated it would be difficult to wind down, the bank might need to be restructured and, potentially, have its retail and trading arms separated.

Paul Myners, the U.K. Treasury's financial services secretary, said earlier this month he believes the use of these resolution plans would force more banks to structure themselves as subsidiaries, which operate as standalone units, rather than branches, which rely on their parents in other countries for capital and liquidity.

-By Adam Bradbery, Dow Jones Newswires; 44 20 7842 9305; adam.bradbery@dowjones.com

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Gold Rally To Keep Going To $1,200/Oz By Year End - Analysts

LONDON (Dow Jones)--Spot gold hit yet another record high Monday and market participants struggled to be bearish saying while the rise in gold has been driven largely by momentum buying, there is little to stop gold from rising to $1,200 a troy ounce before the end of the year.

"We think this rally is sustainable based on dollar weakness, central bank buying and inflation volatility," said Deutsche Bank analyst Michael Lewis. "The target is now $1,200/oz."

At 0856 GMT, spot gold was trading at $1,105.15/oz, having hit a record high of $1,108.30/oz earlier in the day.

Commodities across the board were up spurred by U.S. dollar weakness against the euro and European equities were higher.

Finance ministers from the Group of 20 leading economies pledged to maintain their fiscal stimulus measures at their meeting over the weekend and that weighed on the dollar.

"It looks as if we will have another period where we may see the euro/dollar make new highs for the year," said Mitsubishi analyst Tom Kendall.

On top of the supportive backdrop of a weakening dollar, central banks are set to be net buyers of the precious metal this year after 20 years of being net sellers, said Deutsche's Lewis.

Last week, India's central bank bought 200 metric tons out of a total of 403.3 tons of International Monetary Fund gold earmarked for sale and Sri Lanka's central bank said it has been buying gold to diversify its reserves amid volatile currency markets.

Online Forex Currency Exchange Trading FAQs

What Is Foreign Exchange?

The Foreign Exchange trading market, also referred to as the "Forex" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.3 trillion. Forex is the simultaneous buying of one currency and selling of another. The world's currencies are on a floating exchange rate and are always traded in pairs, for example EURO/USD or USD/CHF.

Who Are The Participants In The FX Market?

The Forex market is called an 'Interbank' market due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators.

What Is Margin?

Margin is required collateral for taking a forex trading position. It allows traders to take on leveraged positions with a fraction of the equity necessary to fund the trade. In the forex market leverage ranges from 1% to 2%, giving investors the high leverage needed to trade actively whereas equity market only provides leverage of 50% (double the buying power).

What Are Commissions And Fees charged By MoneyForex?

Unlike many other forex brokers, MoneyForex does not charge any commission in executing a forex trading order. We are a market maker and our major revenue is generated from the spread from currency traded; usually 3 to 5 pips. There is a small cost of holding positions overnight.

What Does It Mean Have A 'Long' Or 'Short' Position?

A long position is one in which a forex trader buys a currency at one price and aims to sell it later at a higher price; the investor is benefiting from a rising market. A short position is one in which the trader sells a currency in anticipation that it will depreciate; the investor is benefiting from a declining market. The risk of having either long or short position will be the same.

How Do I Manage Risk?

The most common risk management tools in forex online trading are the limit order and the stop loss order. A limit order places restriction on the maximum price to be paid or the minimum price to be received. A stop loss order ensures a particular position is automatically liquidated at a predetermined price in order to limit potential losses should the market move against an investor's position. The liquidity of the Forex market ensures that limit order and stop loss orders can be easily executed.

Colombia's IGBC Stock Index Falls 2.1%, Following DJIA

Colombia's IGBC Stock Index Falls 2.1%, Following DJIA

BOGOTA (Dow Jones)--The Colombian stock index fell Friday, dragged down by stocks in the U.S.

The benchmark IGBC stock index ended 2.1% lower at 10,921.26 points.

U.S. stocks also tumbled Friday, with the Dow Jones Industrial Average falling more than 240 points as investors are concerned whether the DJIA's 48% increase since March is justified after seeing mixed economic data over the past couple of days.

"The market here is concerned about what may happen in the U.S.," said Monica Agudelo, a market analyst with local brokerage Asesores en Valores. "The good GDP growth on Thursday in the U.S. made people worry on Friday as it seems the growth was boosted by government spending," she said.

The most-traded shares were those of Colombia's largest holding firm, Grupo de Inversiones Suramericana SA (GRUPOSURA.BO), which fell 4% to 22,500 Colombian pesos ($11.28), while the preferred shares of the country's largest bank, Bancolombia SA (CIB), fell 3.5% to COP19,700.

The Colombian peso weakened to COP1,994.1 to the dollar from COP1,975.05 Thursday, while the yield on the 2020 benchmark peso-denominated government ended at 8.400%, from 8.395% Thursday.