Sweden guarantees $200 billion in bank loans, Oil Heads Toward $50, India Lowers Key Rate for the First Time Since 2004

The Swedish central bank (Riksbanken)
Photo courtesy of Focus on Sweden
Sweden pledged on Monday as much as 1.5 trillion kronor to guarantee bank loans and created a fund that may buy shares in banks as it looks to revive lending in the financial system.

The guarantee for the equivalent of $205 billion will cover "more or less all types of bonds, bank certificates and other loan obligations" with an original maturity of between 90 days and five years, the Finance Minister Anders Borg and Mats Odell, Sweden's financial markets minister, said in Stockholm. The government raised the guarantee on bank deposits to 500,000 kronor from 250,000 kronor on Oct. 6 to ease concern about the stability of the financial system. That is financed by an existing bank deposit guarantee fund which has 18 billion kronor.

The India Central Bank
Photo courtesy of Flickr
While India's central bank unexpectedly cut the nation's key lending rate by one percentage point Monday, its latest move to boost liquidity in the face of the global credit crisis. The Reserve Bank of India cut the benchmark repo rate from 9 percent to 8 percent, its first cut since March 2004, according to Goldman Sachs.

The bank, which until recently had focused on tightening the money supply to battle double-digit inflation, said the move was necessary to alleviate pressure from the global crisis and maintain domestic financial stability.

"The global financial situation continues to be uncertain and unsettled," the bank said in a statement. "Even as countries directly affected by the turmoil have taken aggressive action to manage the crisis, confidence and calm is yet to be fully restored in the financial markets."

"India too is experiencing the indirect impact of the global liquidity constraint as reflected by some signs of strain in our credit markets in recent weeks," the bank added. India's key wholesale price inflation slowed more than economists expected to 11.44 percent in the week to Oct. 4, a four-month low. Crude oil prices have halved since their peak in July. The Reuters/Jefferies CRB Index of 19 commodities dropped to the lowest in four years on Oct. 17.


Meanwhile Options contracts that allow holders to sell 1,000 barrels of oil for $50 each by December traded for $500 on the Nymex on today due to OPEC plans to cut output for the first time in almost two years as the worst financial crisis since the 1930s. The plan sends crude toward $50 a barrel, up from $10 on Oct. 3. Oil rose a second day today, gaining 2.4 percent to $73.60 a barrel at 10:53 a.m. in London.

Related Posts :

1. Will Hungary be the next Iceland?
2. Netherlands Injects ING $13.4 Billion, China's Economic Growth Slowed, South Korea Guarantees Foreign Deposits
3. Iceland Meltdowns

Sources :

1. International Herald Tribune: Indian central bank unexpectedly cuts lending rate, October 20, 2008
2. International Herald Tribune: Sweden guarantees $200 billion in bank loans to revive financial system, October 20, 2008
3. Bloomberg: OPEC Plans Supply Cut as Crude Oil Heads Toward $50 (Update2), October 20, 2008 06:52 EDT
4. Bloomberg: India Lowers Key Rate for the First Time Since 2004 (Update3), October 20, 2008 07:43 EDT

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