welcome to "worldwide exchange." i'm karen cho. these are your headlines from around the world. a cautious reaction from around the globe to the overflow of egyptian mohamed morsi with president obama calling for a swift return to civilian democratic rule. portugal's stock market rallies while a ten-year bond yield falls back toward 7% as the junior coalition party vows to hold talks to try to save the government with the prime minister also standing firm. >> i will not resign because i don't have any reason to resign.

there is no big issue. a positive start to trading in europe with markets awaiting mario draghi's press conferences for assurances over the future of the euro and guidance of a policy. more wait and see expected from the boe but hopes are high that mark connie will rifle some furthers at his first meeting. portugal's junior coalition party says it will work with the governing social democrats to try to save the government from collapse. the vice president of the popular party told reporters yesterday that a meeting would be called with prime minister

pedro passos coelho as soon as possible to find a viable solution for the government of portugal. he added no other cabinet members would resign but warned they would carefully examine the future spending cuts. the ecb meets today for its monthly policy decision. jesse and annette are on the ground. just how much work is there for mario draghi today? >> karen, it is a fascinating story. welcome, viewers, on "worldwide exchange," this hour and those tuning in from north america. obviously portugal has, again, raised the concerns about contagion, but as you say, we had this easing back of the sovereign yield from 8 to something that looks more like 7

and 7.5 handle. we need to talk about whether this issue is going to be a more permanent problem for mario draghi. we have tolleson palit with us. >> the portuguese prime minister, we met him yesterday in bere lip because he came to berlin for a conference. essentially he was sort of overwhelmed or, yeah, overwhelmed by the developments in his country and so he invited the press to this -- to discuss the recent developments. austerity is the reason why portugal has a very, very unstable government right now. and even the way forward, the commentary i was reading is most likely we're heading in re-election, even though it looks a bit like a stabilizing effect. but the important thing one has to note is this austerity package agreed or the bailout

package agreed with the eu or european commission or the troika i should say is not agreed with the government. it is agreed with the state. nevertheless, even if the socialist party would win new elections, they would have to implement new reforms nevertheless. i think we saw a little overreaction yesterday, but more interestingly is what the prime minister himself had to say about his take on the economic outlook for the country. let's take a listen now. >> there is no room of maneuver to implement an austerity package and so implement an adjustment program when you are high in debtness levels in one country. that's why two years ago portugal request financial support from these partners, european partners and imf. our estimates points for the first time since the begin inin

of the prizes to send recovery in the economy. >> there you go. portuguese prime minister. also tolleson palit is with us. how different will this ecb meeting be as a result of the political problems that have emerged in portugal through the last three days or so? >> i would say the euro debt crisis is coming back. we see rising yields. we see increasingly political problems in various countries. only solution at the moment at least in the short run is the european central bank by providing more credit, more money and even low interest rates. i would say this is a very important meeting for investors for the european project as a whole going forward. >> is it too early to say the crisis is coming back, though. we have seen portuguese rates spike. we haven't seen the same kind of

contagion we saw last time this issue flared up. so you could actually make the case that things are a lot better now. are the markets behaving more rationally? >> i take your point and i would add, however, that the debt crisis is not over because even if there is political willingness in various countries to service outstanding liabilities, the economic realities are pretty different. i mean, there are huge debt burdens have been heaped up over generations, have been invested in basically essentially unproductive investment lines, and i would say much of this debt burden cannot be repaid and i think markets soon orrer la l will live up to this reality. >> what do you think about the austerity market? a lot of experts say after the germany election we might actually see a bit of a softening of the stance and as well some growth stimulus coming back, which eventually would as

well have those guys in here. >> we have according to my analysis, a credit bubble that has gone worse, that has popped. and the outstanding debt cannot be repaid. and if you now impose austerity policies on these countries, they go right away into recession and even depression. and i think sooner or later and we see already signs that policies try to ease these austerity measures and to get the european to monetize outstanding debt. i would say it is going to be a very difficult and even ugly process going forward. >> you could say that, like, the debt level of portugal and the lives are not sustainable and we should have a clear debt cut across the eurozone? >> various options on the table. the politically most delicate is certainly debt relief or debt restructuring, but i would say as an economist this is the best way to deal with this debt

crisis. otherwise, you have to start running the printing press and this is possibly the worst outcome. >> look, we had all those options. they were on the table the last time around. the politicians didn't feel they could embrace them then. i don't think they feel they can embrace them now. we're back to mr. draghi and what he can do to soothe market concerns at this stage. what's your best guess about what we might get today? >> they're going to signal that they're going to suppress interest rates. they're going to signal to the market that they're not going to let any country default on their debt. so if it comes to that, the european central bank will take measures like purchasing bonds or sending the snol thignal tha such an emergency situation they'll extend credit. that explains part of what you said earlier why the portuguese interest rate spike hasn't been followed by rising yields in other countries. people bet that european sentiment is going to run the printing press to deal with this crisis. >> okay.

tolleson, it has been a pleasure. thank you for joining us. tolleson polleit. we're going to catch up with jack koyo later on and give us his view on this monetary policy story and coverage from frankfurt on the ecb throughout the day. watch that on worldwide exchange and, of course, interest rates special focused not only on the ecb and the bank of england decision. for the time being, i'll send it back to you. >> we'll check in with you in a bit. let's return to the stories on markets, portugal in particular, ten-year yield now 7.2%. the retreat about 100 on basis points in the 24-hour period. significant improvement about the way investors are feeling around borrowing costs in portugal. joining us is laurent franzlo from barclay's. we saw that spike in yields yesterday, an extraordinary move

across the curve. why do you think investors have reversed positions so quickly in such a short time frame now? >> the question is whether investors have really reversed positions or not. let's keep in mind in particular portugal -- portugal and greece are very small markets, very fairly ill liquid markets especially in terms of prizes. so it is not that there is a lot of volume that is going through at these levels. that's why you've got jumps up and down of 30, 50 basis points on a daily basis. so clearly there is more reprising of the risk premium on portugal, there is more uncertainty. i don't think there is the same kind of potential for liquidations of positions that you had in 2011. >> so it is volatility on thin volumes, laurent, but perhaps you can give us a sense of who

is holding portuguese bonds and what that means when portugal comes back to the market for refinancing? >> that's an interesting question. it is only about something like 40 billion of portuguese bonds which are really held by foreigners outside of the ecb. so and that has been relatively stable for the past year. there has been a little bit of increase with the new syndicated issuance that has been done since the beginning of the year, but broadly speaking, the proportion of foreign debt, the proportion of the debt held by foreigners has been relatively stable. who owns that, i think it is mostly now european asset managers and probably the leverage funds which have bet on these markets. >> one of the issues around portugal is the impact on contagion and across equity markets we saw a little pressure on spain yesterday and felt as though investors are trying to get a grip on what portugal

really means in the bigger picture. today when you look at the german bond yield, you see the yield tracked a little lower, drifted off the 1.7% mark. the portuguese story, is an element that people are rushing in to some of the other safe haven investments in europe in the fixed income space. >> i think you to keep in mind as well there is a lot of things that have happened and still happening at the same time as this story. bond yields, like treasury yields, have been backing up quite a bit over the past two months. and they have been finding more stable level recently. the expectation is that the ecb is going to be a little bit more dovish today at the press conference. so that is helping the bond as well. the natural initial reaction when there is a widening in portugal of some of the countries is for the bonds to rally, but that relationship has been weakening, actually, over

the past year, if you look at it. >> i want to ask you about the political backdrop as the ecb meets today. let's dive in a couple of stories. the finance ministry won't meet a deadline by the end of this week. the greek government missed a june deadline to transfer some civil servants into a so-called labor mobility scheme. athens is awaiting the next aid tranche expected to be released at monday's euro group meeting. and meantime, italian prime minister will meet members of his coalition party today to try and soothe tensions. it is not to form a prime minister monty threatened to pull the support of his civic choice movement amid frustration of the slow pace of reforms. relation relations are also reported to be frosty. laurent, it doesn't seem story playing out in the backdrop.

this is what mario draghi wants, he doesn't want to be the one pointing the finger of the government saying you need to do more. he wants pressure to be coming from the home markets, doesn't he? >> you want a little bit of pressure so that there is continued reform. but you don't want the pressure to become a vicious circle that is putting the deficit at risk. it is a difficult balancing act. it is from the ecb point of view you're pretty far away from a crisis situation here. you probably hear some suiting words from mario draghi, but i don't think that you'll get much more than words. and the potential for omts to be actioned in portugal is still very far away from here. >> wonder what those words will look like, forward guidance and such or more language about standing ready to act. laurent, thank you for your perspective this morning.

>> thank you. let's tap back into the equity market sentiment throughout the morning session in europe. we're looking a little brighter than yesterday as we saw red across the charts on the portuguese situation. but there is much hope around central bank speak today. and we're coming up to the u.s. nonfarm payrolls tomorrow. a bit of positioning for the month of july as well. factor this in today and we're tracking up .6%. if we drill down to the individual markets, you can see where some of the support is coming from. let's start off with the ftse, 18%. we're recovering a lot that we lost yesterday across the charts. the xetra dax almost 15% on the charts. the general market has been one of the worst performers has been the selling pressure and big names in germany. today it is a move into the positive side of the major.

the ibex in spain, up .3%. a little concern around the spanish banking sector yesterday. some of the trades seeing pressure in the morning session, but today more calm in spain because the situation in portugal seems to be stabilizing. this market balanced 3.3%. was down 5% yesterday. not recovering all the territory. but it is a step in the right direction. and in terms of bond rates, this is how we're shaping up across the curb. a little pressure on some of the core prices. we have bonds and yields both tracking lower before the key central bank meetings. the yield 1.67%. up a fraction. still off the is 1.7% we had as bonds were tracking closely behind u.s. treasuries. we're at 2.4%, a lot more elevated on general bonds. this is where the focus has been and the action has been even if it is on low volumes. the ten-year spanish yield,

7.77%. a little higher on portugal intraday but off the 8.2% we saw yesterday. buying activity, asia saw a sprinkle across markets today. to singapore for more. >> thank you, karen. taking the cue from wall street, most asian markets in the green today ahead of friday's key u.s. jobs report. making back some of yesterday's 2.5% sell-off. the shanghai composite reversed early losses closing higher by .6%. chinese banks and property developers rebounded after the recent tumble. the nikkei 225 was the market lager ending lower by .25%. shares of softbank pulled back 1.6% despite getting the final approval from u.s. authorities for the sprint nextel takeover deal. the stock had gained over 80% year to date on hopes for the

largest overseas acquisition in japan's corporate history. another standout loser was denshoot. they plan to issue $1.2 billion of new shares to help fund a uk acquisition. higher metals prices today. a jump of almost 7% today. and atlas iron surged up nearly 10%. back to you. >> thank you very much for that. let me tell you what's coming up on today's show. as egypt swears in an interim leader, looks to new elections, we'll be live on the ground for a look at the post-morsi transition. and singapore's sovereign wealth fund is facing questions over exposure to chinese banks. we'll hear from the head of the markets group at 10:30 cet in

the first on cnbc. and we cross into toronto for a close look at new bank of england governor mark carney before he delivers his first policy decision. how is the new central bank chief perceived in his home country canada? we'll find out at 11:45 cet. one year on from the libor expander, barclay's ceo speaks to cnbc about the future of banking in london. we'll bring you that exclusive interview in a few minutes time. and straight from the big apple, america's burger craze lands in london! university in time for the fourth of july. perhaps you can celebrate if you're around london with a burger. plenty coming up on the show today.

in tahrir square, a night of celebrations after president morsi was forced out of office by the egyptianer army. they called it a military coup. reports claim he's being held by authorities. the head of the armed forces is vowing to hold new elections as part of a political road map agreed with liberal opposition

groups. but u.s. president barack obama says he's deeply concerned by events overnight and called on the military to transfer power back to a civilian leader as soon as possible. let's get to yousef gamal el- n el-din. this would be a temporary measure, i gather. >> reporter: absolutely. the euphoria continues this morning in the early hours of this morning in egypt. the best way to describe how the last 12 hours played out is the response of a host nation to winning a world cup, ground trembling, people roaring in celebration, an incredible atmosphere. and to witness that, also thisp, a lot of jubilation saying welcome back, egypt, and saying dismissal of the president on the order of the people. that gives you an idea of the sense on the ground here. you mentioned, of course, the ouster of former president, now former president mohamed morsi,

the military and the statement making it clear it tried to reach out and tried to work out a power sharing agreement and that's the former president rejected that and forced the military to take action in terms of that road map. what is also notable is this time around they brought in people from across this political sphere, from the islamist parties, from the coptic church and the religious circles and even mohammad al baradei, they put out this road map which includes a suspension of the constitution, dissolving parliament and now imminently expecting a new president to be inaugurated. he's the head of the supreme constitutional court. and we'll just wait the next few minutes, that should come through. >> yousef, there has been overwhelming support to drive morsi from office, that's one thing. you got to wonder about the precedent this steps in to remove a democratically elected president. what happens next time around

when we see fresh elections and more policies that are unpopular down the track? doesn't this leave egypt trapped in a policy vacuum because unless the policy is popular, the president can be removed from office down the track. >> reporter: it does set a dangerous precedent. the army and observers around the world will hope this was an exception, a popular coup. but it is still a coup. the interesting response from the u.s. president didn't mention the word coup once. it puts a lot of leaders outside of egypt's borders in quite a fix as well because they can't condone a military coup. even if it is a popular coup and puts the u.s. military assistance at risk. so we'll have to see how this all plays out on the ground here. the election -- i mean consider it a second chance, both for the people and for the possibly new represented government that will come along. a lot of unknown factors. are they going to get it right this time? what if the policies don't

translate into what people expect? there is this idea and understanding that a lot of people have that if we are not okay with our president, we know how to remove him, given our experience with former president mubarak and morsi. >> appreciate the update, yousef. you can read more about the developments in egypt and the impact it can have on oil, on our website. don't forget to follow us on twitter at cnbcworld and cn cnbckaren. barclay's ceo denied any conflict between his bank and its regulators. cnbc spoke to jenkins and asked if he was under pressure to meet stricter capital requirements. >> let me be clear what i actually said, the levers we have to work with to address the leverage ratio issue. i was very clear at the end of my remarks that reducing lending to the real economy is something that we want to avoid. that's what i said.

and by the way, we love lending. that's our business. >> clarification there from antony jenkins. more of that exclusive interview with the ceo of barclay's in the next half an hour. we find out where he thinks banking's reputation stands. still to come, u.s. burger joints are flocking to london with new york favorite shake shack set to make its debut tomorrow. we'll speak to the chain's founder and ceo of union square hospitality group in the next hour. who do you think is the best burger in the business? is it the golden arches, burger king, or more up market chains? george osborne cast his opinion. get in touch with us at worldwide@cnbc.com and by both of the twitter handles, @cnbcwex or direct @cnbckaren.

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a cautious reaction from around the globe to the overthrow of egyptian president mohamed morsi with u.s. president obama calling for a swift return to civilian democratic rule. portugal's stock market rallies while ten-year bond yields fall back toward 7%. as a junior coalition party vows to hold talks to try to save the government, the prime minister coelho also standing firm. >> wii will not resign because don't have any reason to resign. there is no big issue in political terms justifying a fall. >> a positive stock trade in europe with markets awaiting mario draghi's press conference. reassurances over the future of the euro and guidance over policy. singapore state sponsored investor announces a record high portfolio and reassures investors that china's big banks are well capitalized. we'll have a first on cnbc interview coming up next.

we have seen some support for european equities this morning. let's check back in with some of the action across on the charts. the main markets of the call tracking firmer, almost 18% for the ftse. we are seeing an improvement throughout the session. the dax half a percent pop, 7% on the cac. almost a third of 1% for the mid. you can see the outside performance by the portuguese market as it recovers from that 5% sell-off yesterday. really headed to recovery. not all the way yet first up this morning. bond markets, let's dive into the pressure you've been seeing across on the charts. we are seeing jgb falling .87%. but yields across the board are a little firmer this morning on bounds, gilts and spanish paper.

8.1% on the periphery. on portugal, an enormous retreat from the levels yesterday, spike to 8.2% on portugal, coming back to 7.25% this morning on the ten-year, 7.35%. inching a little higher as we keep on checking on it across the yield curve. there has been a little flattening with the short end in particular. 6% on two years, little off 7 on a five-year. to steven isaacs. steven, the big headline for mash ets today is what happened at the ecb. you to think there is going to be any commentary on portugal pressures across the periphery? >> i don't, no. i think until the german elections in september, i think draghi has managed the situation pretty well from last summer, the announcement of omt and the various rhetoric we had since then. i think, you know, though the economy is still weakening, sharply across the region, i think the financial markets have

been calmed down. i don't think he needs to a great deal to maintain that sense of calm. now, after the german elections going into the autumn, if the european economies and let's face it, we're now seeing six calls of negative growth, which is unprecedented, so to be quite frank, form a depression, will there then be some more bold moves by the ecb going into october and november. i think that's when we can expect some fireworks. >> the commentary is so wide. this is from baronburg bank, some people are saying we need the ecb to tell us it is not going to be moving when the time when the data is still negative. we're not even flat or positive. >> i think you're right. during the press conference, it is quite likely that draghi will make some reassuring noises much in the way the fed governors have been coming out in the last

few weeks making reassuring noises to calm things down. there has been a policy change in the fed. i think for markets not to take note of that, i think it is rather naive. the policy change is that we all as strategists were under the assumption that the bar for taking away the punch bowl, taking away ongoing stimulus was very, very low. we didn't need to worry about it. we need to get unemployment down to 6.5%, inflation to 2.5% and so on and so forth. what bernanke is saying that bar isn't so low any longer. we're not quite sure where the bar is, and there are plenty of variables namely of course the performance of the economy, which put the terms of the bar, but whether we like it or not, there has been a change of policy. >> high jump analogy, you get a sense some want to jump out further from the bar and some closer to the bar. when it comes to the ecb, so much has been spoken about

negative and positive rates an option, more stimulus to small to medium size enterprises, whether there will be another form of rtlo, forward guidance. what is the most likely measure that draghi will use next? >> the situation in europe is a mess. has been effectively 100 basis points tightening, which is the last thing the european economies needed. so you're absolutely right. what can the ecb do. i still think from a timing point of view, the policy dictates unfortunately it will be several months away. what they can do is negative interest rates. they mentioned it. to some extent they laid the ground work, getting the idea across that that is their most favored outcome. >> stephen staying with us. we do have more events unfolding on the ground in egypt. some pictures from cairo where we're expecting the new interim prime minister or president to be sworn in. this is adly mansor, 67 years of

age, about to be installed as the new president. the constitution has been suspended. what do we know about mansor, the vice president of the court since 1992. so yes he was at the court when we saw the former president hosni mubarak in power for 30 years. so this is the interim measure supposedly as the country waits for fresh elections down the track. you notice the u.s. hasn't used the term military coup in disposing what we're seeing from the president. >> there is a reason for that. the foreign aid is dependent upon not being a military coup. it is a very clear part of the legislation. if there is a military coup, then the foreign aid, which is over $1.5 billion and is absolutely crucial to the egyptian economy has to be suspended automatically. i think obama was cautious in dancing around the words. whether we like it or not,

members of congress made it quite clear they see this as a coup. it is hard to argue under any other circumstance there isn't a coup. whether it is a popular coup is a matter of semantics. i think that is a real problem for egypt. there is a degree of relief this morning that the country hasn't collapsed into civil war and let's hope that continues. i think this whole revolution, if you can use it, was driven by the economy. and they had another big prop taken away from the economy. i see further turmoil and a great concern. >> maybe not in the long-term given the test to democracy. thank you for that. we'll come back to you in a moment. let's dive into the story around the japanese market in particular, a couple of big stocks. softbank cleared the final hurdle on the race for sprint as u.s. regulators aprove the merger. with the latest on that deal, we go live to tokyo. >> the s.e.c. gives the all

clear snol to softbank's $21.6 billion deal to take control of the number three u.s. wireless provider buying up 78% of sprint. this marks the largest ever overseas acquisition by a japanese company. the fcc has reportedly approved the bid to make u.s. broad bank move a provider clear wire too. softbank's deal is set to close by early july, nearly nine months since it made the first announcement last october. the fcc's approval marks the final hurdle for softbank after getting the thumb's up from u.s. security regulators. softbank shares go 1.5% today as investors feared that the huge acquisition cost could weigh heavy. japanese carrier's interest bearing debts are projected to increase two followed to more than $40 billion in the current fiscal year through march 2014. that's all from nikkei business report. back to you. >> thank you for joining us

today. still to come on the show, a year on from libor, how has barclay's changed? the bank's ceo tells cnbc exclusively. that's coming up next.

we have the latest results from the spanish auction today. three-year paper being auctioned up in terms of what has hit the markets. 1.02 billion euros worth of paper was sold by spain. this is the july 2016 contract. the bid to cover ratio on that was 3.5. also some 2018 papers, some five-year debt over to the market. a bid to cover on that was 1.7 in terms of some of the -- some of that paper, that was almost 3 billion worth, so 2.89 billion. the last time spain saw a five-year bond was on june 20th, that was when it tapped the markets. the yield on the five-year is 3.79%. and on the shorter term paper, three-year, 2.87%. it is slightly higher than we saw last time by 17 basis

points. a little push higher on borrowing costs for spain. a year since the libor scandal rocked banking systems around the world with bob diamond's departure. the new barclay ceo promised integrity and not profit. cnbc spoke to antony jenkins and asked him about the state of the banking reputation. >> i think we got to be very honest about how the banking industry is viewed. the banking industry is viewed as responsible for the crisis in 2008. what we need is a banking system that delivers fair products for customers and clients, supports the real economy and is safe and sound. we have to eliminate too big to fail. and the debate that is going on now is a very legitimate debate, within the political field about how to create that system going forward. >> on that very issue, european

regulators are talking about how best to proceed forward with future bailouts or bail-ins. where do you stand on that very issue? we have seen some very worrying signs in terms of how the europens dealt with the troubled financial institutions most recently in cyprus? >> regulation is operating at different paces and different places around the world. you got the eu, the uk, the u.s. with dodd/frank. for a global institution like us, we operate in all of those markets. harmonization is very important. we support a resolution and recovery regime, which has clarity about what happens to various different creditors of the institution. and the discussion going on now in europe is a good discussion, but it does need to be resolved so everybody knows where they stand. the shareholders know where they stand, the bond holders know where they stand. >> what about, you know, the

issue yesterday, talking about the federal reserve, talking about perhaps making the regulations a little tighter for u.s. financial institutions, sending a clear message to the investment community that the banks need to adopt basel iii. do you think that's the right step? >> i think the task is to create a regulator regime that ensures we eliminate too big to fail and taxpayers don't have to back up the banks again. to do that, you have to look at risk-weighted assets and gross balance sheet. if you just look at gross balance sheet, then the temptation is to put on riskier assets and higher return where risk-weighting comes in. it is a fair acquisition to say different banks may view the same asset in different ways because of the models they built around it. in my view, you need to have both things operating in harmony. you also alhave to look at liquidity and what is important is we have a global regime for

institutions like ours that is harmonized in those areas. >> let's bring in heller brahimi. it seems like the bank chiefs are tiptoeing around the regulators and the public. >> in this case, we all are fairly confident that barclays doesn't like this 3% leverage ratio. i think antony jenkins is very diplomatic in his results, but he did make the point and this is where we have to think about it. leverage ratios have been around for decades. and the issue is that they could be a very crude way of looking at assets and you could just put on your balance sheet the riskiest asset that will get you the highest return if you have a look at the overall balance sheet. the problem is that politicians don't trust risk-weighted assets or don't trust how banks aarere assessing them.

if all else fails and we don't know what numbers you have on, at least we know it is not less than this percent. but is it the right way and i think barclay's and other banks as well say it is too crude, and it is not going to help. the other point he made, and i think was that it is all about more importantly in systemic risk is bank resolutions and i think barclays and other banks have done a lot of work here to make sure that when things do go wrong there is a way for banks to fail with bail-s in and things like that. >> what is interesting is there is a view out there that these living wills has given banks ability to exert. >> i think the biggest problem is a conflict of interest between regulation to make banks sounder which involves a number of factors. leverage amount of capital they hold, et cetera. and politicians want banks to lend and support the economy.

i find it quite extraordinary that the chief executive of a major bank feels that he's obliged to mention supporting the economy as one of his biwords. this comes hot on the heels of steven hester being ousted from rbs because he was trying to turn the bank around and not paying enough attention to lepdinlepd i lending. it is a conflict of interest. it's been dressed up as an independent review. what it is going to do is give the government the cover to lower lending standards. so we are -- it is a conflict of interest. it can only be resolved by the politicians. do they want to debate lending standards? it looks like they do. >> and, of course, we have corporates that are deleveraging all the time at the moment. so it is a question of who are you lending to? we had rbs on yesterday. so we're looking for people to lend to and earlier i think antony jenkins said on the tape, we love lending, which is a kind of odd thing for a bank to say. well, of course they like

lending. it is about the right kind of -- >> the kind of risk they can embark on, put the hammer down on investment banking and profits and risk was, where else can you go except to the credit markets but how healthy is that for the uk banking system? >> exactly. i think -- again, going back to the bank resolution here, that's the point he's making, is that what we should be -- what is more important than capital ratios if we're talking about systemic risks and the problem with the financial crisis that we have is making sure that we have a system that goes across different jurisdictions. in europe, in the u.s., in asia, that if barclays was to fail, if they had a short fall that somehow there is a system, a regulator that knows what to do that over a weekend, the doors will stay open on monday and not have another lehman brothers. >> we had --

>> it is another mess. the problem we got is the western regulators in particular in the uk seem to think that investment banking is the big bogey. and they're trying to steer most of the uk banks away from investment banking, claiming that that is where the risky spectrum is. but if you look at the facts, northern rock, which had a bank run did not have an investment bank and most recently the only bank that got into serious trouble was the cooperative. a lot of problems here. a lot of confusion. the politicians are leading the process and the politics are dictating it, at least in most eye eyes a certain form of regulation. >> steven is staying with us around the set this morning. any questions or comments, send them through to us. the financial heavy portfolio singapore state sponsored investment fund has

been a source of concern for some stake holders, tried to ease investor worries by announcing a record level of portfolio while reassuring investors that china's big banks are well capitalized. the traditional media shy investment giant jospoke to cnb. are those investments still looking sound? >> temporarily they have lost a bit of money. they have limitations in what sort of information and level and depth of transparency of the actual results. if you go to any of their annual briefings, a lot of that information is very big picture bulk numbers. they don't actually break down the nitty-gritty of it all. temporarily they did address that issue in the press conference and were many questions asked about that.

over the course of the last few years, they have placed a lot more emphasis on taking stakes in companies in high growth areas, economies that are in transition like china and they are still long-term believers of that growth model in china. they said, yes, you know, there are difficulties and challenges that the economy is facing at this point in time. however, they say that overall an economy that is growing in excess of 7 plus percent is still a decent number and still believe that financials is one of those areas where they can actually do that. they have, yes, picked up quite a few stakes in chinese banks, most notably icbc, the largest financial institution over the last few weeks and, in fact, you may remember, when goldman sachs pretty much has been selling down their stake, it is tamasek picking up the shares and chinese banks have seen a lot of pressure in the last couple of

weeks. primarily because one the chinese economy is slowing down and, two, we heard this -- we saw, we witnessed this huge scare in the interbank markets, seven-day repo rates rising to 12 plus a percent from an average of three. we spoke to boone sim. the first time that tamasek has spoken to us on air. listen to what he had to say. >> we remain cautious with investments, whether in china or the u.s. we recognize that there are issues in china. like my colleague said, previously, it is an area of interest to us when you look longer term. i would say almost any economy will take a 7% long-term growth rate, despite the issues that china has. so we're cautiously optimistic that we'll get true to spirit

and growth of return to more normalized fashion. >> when you're on the ground in countries like china doing the due diligence across many of the investments, how do you approach that process when the economic numbers themselves can often be unreliable? how do you know what you're buying into? >> we, like everyone else, we look at the data. we look at multiple sources of data. we look at longer term trends of the economy. like everyone else, we're concerned we're not investing in these banks blindly. we're realistic, but realize there are banks that are very well capitalized, which are banks that we're invested in and regional banks that may not be as well capitalized. i would say that even though there is clearly a situation in china, you can't just with one brush paint all the banks to be in the same situation.

>> he makes a fairly good point, karen, largely because the biggest capitalized lenders in china they are a lot safer. they are not as reliant on the interbank funding markets, problems that, you know, are certain among midsized lenders. that probably explains why if you look at theier to date performances of the top banks in china, yes, they're down double digits in line with the shanghai composite performance, but overall, there is a stock difference between the caps and midcaps. midcaps lost a lot more ground. they had been a lot more risky, in terms of lending out money in china and they're much more reliant on the interbank markets. we have seen the rates come all the way back down to 3 plus percent. so the problems in the -- in terms of credit crunch and cost of credit seem to be relayed or late for now. >> we are getting fresh news out of egypt. the share market has been

suspended after jumping to the upside. we saw the market 6.4% higher. this is why trading has been suspended. let me come back to you quickly. what is your view on china? worried about the assets in the banking system? >> i think it is a very interesting situation. driven by the new government. chinese governments, no democracy there. they are fixed for ten years, that's how the political cycle works there. so it seems to me that the new leadership are able to take a much more longer term or medium to long-term view and they are orchestrating some big changes. effectively they're saying growth had been based upon mass exports to western markets. >> indeed. we got to go. we'll be right back. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art.

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welcome to "worldwide exchange." these your headlines from around the world. a cautious reaction from around the globe to the overthrow of egyptian president mohamed morsi with the u.s. president barack obama calling for a swift return to civilian democratic rule. portugal's stock market rallies while ten-year bond yields fall back toward 7%. a junior coalition party vows to hold talks to try to save the government. the prime minister coelho also standing firm. >> i will not resign because i don't have any reason to resign. there is no big issue in

political terms justifying a fall. >> and a positive start to trading with markets awaiting mario draghi's press conferences for assurances over the future of the euro and guidance over policy. more wait and see from the boe, but hopes are high the new governor mark carney will ruffle some furthers at his first bank of england policy meeting. let's get you up to speed with the story around portugal. the country's coalition party says it will work with the governing social democrats to try to save the government from collapse. the vice president of the popular party told reporters yesterday that a meeting would be called where prime minister pedro passos coelho as soon as

possible to guarantee a viable solution for the government of portugal. he added that no further cabinet members from his party would resign, but warned they would carefully examine the future spending cuts. joining us now is jacques, the chief economist at numura. it seems the market settled around this story and that portugal itself is trying to come to some form of deal between the coalition partners. >> i think that the market sort of is returning to some calm in portugal as warranted. we don't think that the odds of an early election are that high. obviously i think the shock was that someone like gaspar could resign because it is a european figure among policymakers and market participants in terms of the drive towards rebalancing the economy and having a fiscal austerity package that could be seen to be credible by market participants and by -- i think

there was a stronger message than just the reshuffling in the government, which is what does that mean maybe for other countries, what does it mean for portugal. in the short-term, we play constructive around the idea that we don't think that the risks of an early election are so high and in fact if there was an early election, we're not that worried either because we don't think that the new government, if it was to come after new elections, would be that against the restructuring of the economy and furthering of the adjustment there. >> draw the links to the ecb for us out of the story. portugal was held up as almost -- going through the austerity, it some form of recovery in the market, and holding this up as a bit of a success story. now it is seeing a little friction around the austerity program. does this make it more or less likely the ecb will embark on further assistance for the program. >> we know it would have always been a bumpy road. very clear in that cop tentext.

there will be hiccups on the way. we have seen what is happening in greece, which is a bit of a setback within the last month. having said that, i think the only question you have for portugal and for ireland is what is the exit strategy they have from the packages, is it going to be a fully fledged bailout on top of current bailout or more flexible type of contingency credit line that could protect them from market anxiety. that's where the debate is. we don't think there is much chance of a psi around that. we think this is all about whether they get an eccl credit line attached to it with a sort of access to ont. and that's something that we have to be debated in the coming weeks and months. not a medium term discussion, coming soon. >> jacques, we just got jeff on the ground in frankfurt today. there is tensions in portugal as the ecb meets for the monthly policy decision. it felt like the ecb had so many

different policy tools discussing, but none of it was going to happen anytime soon. what is the tone going to be today and do you think there will be any progress toward some of the mechanisms? >> i think they'll be hard to find, too much progress from here, karen. we know the omt is now mired in this german court decision. that will run through to september. really are we going to find out on an sme lending program with securitization? the asset-backed story at the moment is on the back burner. mr. draghi has a window of opportunity at this meeting because some of the pmi data is showing signs of stabilization. i think he'll talk about that, want to point out how that indeed indicates that current policies are working here. often the portuguese story, yes, the timing isn't great for him. this is not a funding crisis at this point. this is very different from the greek story. there is still plenty of time

here before portugal needs to worry about refinancing, so even as rates appear to spike, which indicates the degree of distress politically, it is not going to cause significant contagion at this stage. that's how it appears at the moment. but you've been talking, annette, with the portuguese prime minister. what is his take on how this crisis is going to unfold? >> of course, we have been seeing him yesterday in berlin, he was on the marketing campaign that he'll solve the political crisis very soon and try to calm the markets. but nevertheless, besides that marketing campaign, one has to say that portugal was actually quite a successful candidate in getting his deficit down and having started balances improving. so this political setback might mean a setback, but might not mean the end of the world for portugal, but nevertheless, let's take a listen what you had

to say to us yesterday in berlin. >> the confidence that the secondary market and the investors has shown to portugal until very recent days are very encouraging. since yesterday, the yields to the treasury bonds, ten years, increased by 30 or 40 basis points. that's the result of the political instability. but as prime minister, i'm very committed to assure the -- in my range, the necessary conditions to re-establish political stabilization agreement to

support the government. >> so the portuguese prime minister there talking to you, annette. our sense here is that this will be a holding statement, reaffirmation of what we saw in june from the ecb. not a lot of progress on some of these other measures. but perhaps a continued dovish tone as mr. draghi continues to try to show there is clear water between the fed's tapering conversation on the one hand and the policy stance that the ecb continues to adopt on easy monetary policy. back to you. >> thank you very much, jeff. so we're going to be covering what is happening to the ecb and full coverage of the bank of england rate decision and press conference. all this kicks off at 12:00 cet. in the interim, we have a lot of political disruption playing out across the many countries. portugal we're talking about. also in egypt, let's just go back out to egypt, we see some -- we got live pictures coming through from cairo. we're expecting egypt's new interim president to be sworn in

so you can see some of the formalities taking place on the ground there. this is seen to be an interim measure before fresh elections can be called. there has been a lot of rejoicing on the streets as a result of president morsi being removed by the military. some are calling it a military coup. others refusing to give it that tag. but nonetheless, this is what you're seeing playing out on the ground in some of the official holes. we had gains across the asian markets today. to sixuan li to check on the trading activity we're seeing there. >> asian markets mostly in positive territory ahead of the jobs report on friday. chinese shares staged a mine rear bound to push the shanghai higher. but didn't managed to hang on to its gains. dragging the nikkei down by a

modest .25%. softbank shares down almost 2% to date. this despite reports that it has received the final approval from u.s. regulators to acquire sprint nextel. sprint will use the proceeds from softbank to buy out wireless service provider clear wire, also an important part of softbank's interests. and clear wire's minority share holders were set to vote on the takeover deal next monday. the biggest loser on the nikkei was dentsu. shares tumbled more than 9% after the company announced plans to raise $1.2 billion in new capital. remember, yesterday's losses in china's coal stocks, all but forgotten. coal companies were the biggest gainer in hong kong today. they gained about 5%. now that's partly due to short covering after yesterday's sell-off. and in fact, the region's resources were broadly high

toward thanks to stronger commodity prices. back to you in london. >> thank you for bringing us the latest. let's look at some of the european action today. we have green across. ftse is tracking higher by .9%. this is the market that sold off almost 1.2% yesterday. we're regrouping and claiming back some of the lost territory. the xetra dax getting closer. the ibex 35 further now, 17%. a little pressure this morning on borrowing costs in spain. this is linked to the portuguese story. but yesterday we saw some of the spanish names sell down heavily. we're seeing some stocks buy back today. the portuguese stock market bouncing back after the 5% sell-off yesterday. 3% on the charts. let's look at what is happening on the government bonds across the board. i want to show you spain in particular.

1.83% on the ten-year. there was pressure at auction today with three and five year paper because of the portuguese story. in terms of portugal, 7.42%. it is interesting, isn't it, we were right up at 8.2% yesterday at the worst of it. we came right back to a little bit above 7% first up this morning. just creeping a little higher on this yield, getting closer to the 7.5% mark. so there is some stability coming into this play, but you can see there is still elevated fears across in the backdrop as well. one player was saying to us, this is just the volatility playing out in the market, because it is very thin trading on the portuguese debt market. let's look across on forex. eurodollar tracking below 130. dollar/yen rates across the 100 mark, peeling back a little bit,

99.66. the australian thar finely show something green. at a three-year trough, so 90 on the chart this week. we're at 91.3 almost. and sterling dollar say little softer also. what is carney going to say? just tracking a little weaker ahead of the first comments from mark carney. one leader is pushed out, another is sworn in. we look at the future for egypt and its government. that's all coming up next. stay tuned. 123450 ♪ ♪ unh ♪ ♪ hey! ♪ ♪ let's go! ♪ [ male announcer ] you can choose to blend in. ♪ ♪ yeah! yeah! yeah! or you can choose to blend out. ♪ oh, yeah-eah! ♪

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. the political situation continues to unfold in egypt. mansor has been sworn in as interim leader of egypt. let's get out to yousef gamal el-din with the latest. tell us more about the type of talk we can expect in the interim before elections are called. >> reporter: a bit of the sense of the atmosphere here as the swearing in ceremony goes on, people are honking and you can hear music and several formations of military planes hovering over the sky as the swearing in was going on. now this is a man who has been with the constitutional court

since 1992. keep in mind, that before he was sworn in just now, he was sworn in as head of the supreme constitutional court and now the temporary president of egypt. setting the first step in this transition period and make no mistake, this will be a very difficult and challenging period. the economy is in shambles. growth is lackluster. the problems are much more intense than back in january of 2011. i also want to take your attention to the egyptian stock exchange. which halted trading. trade has now resumed and it is trading into excess of 7%. that gives you a very good indication of how investors are feeling about the latest changes, about that is effect evlyev ly a military coup. >> the appointment today is interesting because he was a judge during the time when hosni mubarak was in charge of the country. how much of a linkage is there

to the old sense since morsi was disposed of as the leader? >> a lot of people will tell you it is difficult not to have any links to the time of former president hosni mubarak. this is a man who was well respected, not just in the legal community and beyond. this candidate was also approved by the opposition. he is one that was actually suggested by them. so this is a consensus candidate, if you will, to lead the country in this difficult and tumultuous period of transition. >> just to sum it up, after two parliamentary elections, two constitutional referendums and presidential election, we now have a leader installed by the military. thank you very much for that, yousef. still to come, shake shack founder danny myer joins us to tell us about his london launch. that's straight after the break.

as americans prepare to heat up the grill in celebration of the july fourth hole taidholid n londoners are getting ready for a burger invasion. shake shack is making its london debut tomorrow, just a few

minutes away, the u.s. rival five guys is launching its first restaurant set to open today. joining us now is danny meyer, ceo of union square hospitality group. he is the founder or the group's founder of shake shack. and joins us now around the set. nice to have you on board. >> great to be here. >> it feels like when you talk about burgers and how to win the burger wars, it has to come down to taste. is that the right sumtion? >> i think the right assumption is there is no war whatsoever. we have such a long tradition of people loving burgers, that when it comes down to it, it is a piece of meat between two pieces of a bun and really the joy is how did you cook it, how did you source the meat, and how much fun are you having while you eat it. there is room for a lot more than one burger. >> that's a positive spin on it. looking at your backdrop, you worked in fine dining before. you had gramercy tavern, which you launched an iconic

restaurant on the new york scene. to talk about burgers is just die metically opposed to what you've been doing in the past. this is big business. the margins on burgers and the volumes you can sell is still a significant business model. >> americans love burgers so much. we always served burgers at our three-star restaurants and even at our italian restaurant. when we landed upon shake shack, it was really to create a kiosk in the middle of madison square park so people would use the park and the rent goes right back into the park. we had no idea that new yorkers would line up, you know, every single day of the year for this burger or that we would have a second one of them, let alone one in london. we're excited to be here. >> jacques, are you a burger man? >> yeah. i'm french, but still that can be the exception. but -- >> hamburger. >> exactly. what is your expansion plan in

france? >> our expansion plan is to do one in london, which we're so excited -- >> cover the whole set of -- >> if londoners react to the burger the way we hope they will, we would love to have another one this day here in london. >> so we're the test market. >> you're the city that feels as close to new york's hearts as any city in the world. we hope it will be a good job here. >> the press was suggested he forked out a lot for meat between two buns, but the reality is, when you compare this to the price of what it would cost you to go elsewhere -- >> what we're seeing in the united states is the fine casual market. and what is happening is this. people eat that many burgers in fast food restaurants, $80 billion in the united states. the better burger or fine casual market is just starting to take

a small bite out of that, and basically if you can take a fine dining quality, a place like gramercy tavern units, and offer the same beef, our beef is coming from scotland here, very, very proud of that, the same quality of beef we use in fine dining restaurant for a fraction more than fast food, i think he has really good taste. >> someone in the queue over the weekend, that would be me. we have been asking our viewers who do you think is best in the burger business. bill tweeted a trip to las vegas is never complete without a trip to in and out burgers. alex tweeted it's got to be byron for sure. this is george osborne's favorite chain. especially when twinned with milk shakes. keep your ideas coming on "worldwide exchange." i say anything with cheese is popular with me.

e-mail us at worldwide@cnbc.com. jacques, we have been talking about the ecb. you've suggested that they're a little hamstrung coming up to the general election. maybe a long rtlo could be one of the things they embark upon. >> the idea for the rtlo is to fight against the fed tapering type of situation. the biggest development we had in the last four weeks is essentially the fed talking about tapering. and the contagion effect this has had on the euro. the euro is not prepared for that. we have seen the contagion in two countries like spain, italy. you need to think about ways to protect yourself about this job, which is completely different from the credit shock those countries had in the past year or so.

new challenges for the ecb today and it is all going to be about signaling they are completely ready to protect themselves from -- >> more than die lock this time. last time investors were incredibly disappointed that nothing transpired. >> compared to the may meeting there was a big disappointment. may was about promises and june was about underdelivering relative to the promises. it is an important meeting. i think the market lost a bit of patience around the talk. it wants the walking to walk, basically to strategy here. i think here on balance, this is setting us for a slight disappointment again. >> we'll wait for the press conference later today. thank you for that. jacques, chief european economist. still to come, the mpc meets today for the first time. mark carney, will he change qe or keep the brakes on? we'll discuss that in the next hour of the program.

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you own your chair. and most importantly, 9 out of 10 people got their hoveround for little or no cost. call now for your free dvd and information kit. and now every hoveround comes with this tote bag and cup holder for handy access to your favorite items. you don't really have to give up living because you don't have your legs. call now for your free consultation. and right now, get this limited edition hoveround america travel mug free with your hoveround delivery. call or log onto hoveround.com right now! welcome to "worldwide exchange." these are your headlines from around the world. cautious reaction from around the globe from the overthrow of egyptian president mohamed morsi. the new interim president sworn in minutes ago. portugal stock market rallies while bond yields fall back to 7% as a junior coalition party vows to hold talks to try

and save the government with the prime minister coelho also standing firm. >> i will not resign because i don't have any reason to resign. there is no big issue in political terms justifying a fall. >> markets are awaiting mario draghi's press conference for assurances over the future of the euro and guidance over policy. more wait and see expected from the boe, but hopes are high the new governor mark carney will ruffle some feathers at his first policy meeting. consistent sweep agreement across the charts today. u.s. markets out of action for the fourth of july holiday, for independence day. none tthele less, we have the e

meeting and the boe meeting, the first one for mark carney. we'll see if there is any change in guidance and what tone the central bank is going to strike today. so far, the ftse, tracking firm, 1% firmer. the periphery has been one of the stronger performers today after seeing a lot of pressure in trade yesterday. don't forget the ibex was down 1.5% by the finish. recovering about .75% today. the portuguese market has been stronger than what we're seeing on the charts. up 3% plus after yesterday. still holding on to 2.5. speaking of just giving back a little bit on bond markets, the ten-year portuguese paper is yielding 7.42%. close to the 7% mark first up in the morning trading session. more pressure on borrowing costs, but trading has been

described as very thin, why we are seeing more volatile moves there. this is what mark carney is looking at as he settles into the job at the boe. 2.41%. across on the markets, the ten-year spanish paper is inching closer to 5%, a little bit worrying. we had a spanish auction which showed a tickup in short-term paper. the five year an increase of 20 on basis points from the last auction a couple of weeks ago. on ten year bonds, 1.67%. foreign exchange markets, the trades coming up to -- comes from the central bank meetings with softer on eurodollar. 99.66 on dollar yen rates, drifting off a quarter of 1% of the australian dollar holding. a little risk appetite translated into the commodity currency, but welcome after a severe dive in the currency of later at three-year low. sterling dollar rates down .2%.

on the question as always in the volatile markets, how do you make money? this is what experts are telling us this morning. >> crisis has to get worse before it gets better. something has to happen again. the old state foreign names are the good ones. >> current correction is another entry point if you're a holder. now our clients continue to steadily buy them because the markets are very volatile. it can be clever in jumping in on one bid, spread it through your six months and i think we are still in that war.

>> i would actually say a little bit more risk taking that you want to buy some of the more go-go names, some of the more exciting asset classes on dips like we have seen earlier this month and last month. so portugal, dislocation, creates an opportunity to buy portuguese debt and short-term bank debt in the country. >> portugal's junior coalition party says it will work with the governing social democrats to try to save the government from collapse. the vice president of the popular party told reporters yesterday a meeting would be called with prime minister pedro passos coelho as soon as possible to guarantee a viable solution for the government of portugal. he added that no further cabinet members from his party would resign and warned they would examine future spending cuts. the political tensions in portugal come as the ecb meets in frankfurt today for the monthly policy decision. jeff and annette have been on

the ground for coverage today. let's dive into the ramifications across the markets. even though the portuguese situation seems to be unsettling a little bit, we're seeing some pressure on spanish paper today and spanish auction. what tone do you think draghi will strike? >> this is interesting. there are those, karen, who thought that he sounded a little too hawkish or not quite dovish enough at the last press conference. the data is improving a little bit or some of the italian and spanish pmis have come through firmer. we saw the jump in the inflation number from 1.4 to 1.6 for the euro groups. so in a way he can make the case that, look, the current policy mix is working. push portugal to one side. that's an isolated story about political differences there. and the reason that we got some movement across the yield curve in the other european sovereigns, it is about the fed. it is about some of the

tightness that has come through 100 basis points as a result of the tapering conversation. so it will be interesting to see how dovish he feels he needs to be today. >> a lot of commentators are making that point he will probably be accommodate the market even more after the fed went out and spooked the markets. he wanted to make it pretty sure the yields are not spiking in any kind of fear that you might withdraw liquidity from the system. and the not functioning credit channel, the eurozone will never recover, ie growth will never come back if loans won't be made. >> he can't point to some of the progress that's been made on banking union. and although there is a long way to go here about joint deposit protection schemes, and also on the issue of what happens on the regulator side, so a couple more pillars really still on the banking union. but there is the first platform,

this 100,000 euro limit and the bail-in approach above that, so he could point to that and say, look, the european politicians are making progress here. let's give them a little bit of time. and give us time to continue with this monetary policy experiment that we're pursuing. omt waiting in the wings. we still have a little bit of flexibility left on the rate. we can do that and we can continue to talk to the mash rk the main method in recent meetings of trying to convince investors to stick with the euro story? >> that's very true. but one other area of new expertise will be the supervisory bord. might be that we hear something about how harsh the testing will be because the ecb promised to test the eurozone banks or big eurozone banks harshly and recapitalize them in a very strict manner.

that would be perhaps -- might be a point which we will discuss later on as well, jeff, right? >> okay. it is interesting, i know you've been looking a lot at the german banks and about what still lies under the surface in terms of nonperforming assets. this story will continue to come out through the day here, karen. we obviously have a european central bank, bank of england interest rate special that will cover the decisions as they're announced and we got a number of guests that will help us out with the conversations once we know what today's announcement is going to be. make a point of staying with us, and we'll push the story. back to you for the time being, karen. >> thank you, jeff and annette, on the ground in frankfurt. one year on from the libor scandal, antony jenkins speaks to cnbc about the future of banking. we'll bring you that exclusive interview coming up next. with the spark miles card from capital one,

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these are your headlines today. egypt swears in a new interim president as world leaders call for swift elections. portugal markets rebound amid cybsigns of hope of a

compromise. mark carney delivers his first rate announcement. we have got fresh news out of egypt now. a short time ago we had a president sworn in following the military coup. we also had news out from the egyptian prosecutor's office saying that arrest warrants have been issued for the top muslim brotherhood leader and his deputy. so that is the latest unfolding on the ground in cairo. it has been a year since the libor scandal rocked banking systems around the world. with bob diamond's departure, the new ceo plans to measure the bank's success through integrity, not profit. cnbc spoke exclusively to antony jenkins and asked about the state of banking's reputation. >> i think we got to be honest about how the banking industry is viewed. the banki ining industry is vie

as being spom fresponsible for crisis in 2008 and the anger that goes along with that. what we need say banking system that delivers fair products for customers and clients, supports the real economy and is safe and sound. we have to eliminate too big to fail. and so the debate going on now i think is a very legitimate debate, within the political sphere about how to create that system going forward. >> on that very issue, the european regulators are talking about how best to proceed forward with future bailouts or bail-ins. where do you stand on that very issue? we have seen some very worrying signs in terms of how the europeans dealt with some of the troubled financial institutions most recently in cyprus. >> one of the things happening is that regulation is operating at different paces, different places around the world. you got the eu, you got the uk, you got the u.s. with dodd/frank. for a global institution like ours, we operate in all of those markets. and harmonization of regulation

is very important. we support a resolution and recovery regime, which has clarity about what happens to various different creditors of the institution. and the discussion going on now is a good discussion, but needs to be resolved so everybody knows where they stand. shareholders know where they stand, bond holders know where they stand and depositors know where they stand. >> what about, you know, the issue yesterday talking about the federal reserve, talking about perhaps making the regulations a little tighter for u.s. financial institutions, sending a clear message to the investment community the banks need to adopt basel iii. do you think that's the right step? >> i think the task is to create a regulatory regime that ensures we eliminate too big to fail and taxpayers don't have to back up the banks again. to do that, you need to look at both risk-weighted assets and gross balance sheet. if you look at gross balance sheet, the temptation is to put

on riskier assets, higher return, where risk-weighting comes in. risk-weighting is a subjective process and it is a fair acquisition to say different banks may view the same asset in different ways because of the models they built around it. in my view, need to have both things operating in harmony. you have to lock at thiok at th liquidity and average. we have a global regime for institutions like ours that is harmonized in those areas. >> let's discuss the banking system a little further. joining us is heller ebrahmi. we know a new realm has come into take the top jobs. >> i think antony jenkins won the first proponent of this new more boring barclays. we have to remember still a key

demand comes from the investment bank. when he took over, i think we're a year on from when bob diamond left the bank, he really wanted to say, look, new regime, new -- i'm in charge of the culture and we're going to change everything completely. new suites. we had senior bankers leave, along with bob diamond and a new board kind of put in place. he's trying to do that because we still got bank scandals like ppi, a year on from libor and the regulators are looking at not just libor but other serious benchmark rates and seeing if there is any manipulation there. i think earlier on he did mention, look, we can't guarantee that isn't happening now. but we have to create a culture and i think i've done that that ensures we're picking that up. it is not going unnoticed, we will be able to stop conduct that is risky. >> it is curious, there has been an enormous change when it comes

to the pay structure at banks, the risk-reward scenario that used to be there in terms of bonuses has been knocked off the system because people have had bonuses locked up for so long now. wouldn't that have changed the culture from the outset? >> well, first of all, it is very hard to change a culture overnight. whatever the politics demands. but in terms of pay, i think a lot -- a huge complaint that shareholders had with barclay'ss in the past is the money they had out of the bank over the years has not been enough in comparison to what employees have taken out. i think antony jenkins, and across the banking industry, people know there has to be a new balance put into place where employees take less money out of the bank. and the risk-reward is not skewed toward the bankers. >> thank you very much for that. i'm curious to know what mark carney thinks of the banking system here. no doubt we'll get a sense of

that. more importantly in the interim, the bank of england's mpc gathered for the first time today with mark carney. what will the canadian bring to the table? we'll discuss that coming up next. ñ

the bank of england delivers monthly policy decision today, first on a new govern are mark carney. it is widely expected the central bank will not move on policy until at least august. at recent meetings, three of nine members voted for more stimulus, but markets will have to wait for another two weeks until it is known what direction carney favors to get the uk economy moving again. joining us from toronto is eric lasalle and in the studio, jeffrey diekstra.

and hillier is staying with us as well. jeffrey what is the task of carney as the data is improving in his first week of office. >> he's come in with high hopes. the chancellor has given him a remitt this is tended to be growth friendly. the pmi survey this week was very strong. the british traders of commerce said the economy is looking good. some of the survey data, the best we had since 2007. >> eric, come in here, because you've been familiar with carney and his work and the bank of canada. the viewpoint is one size does not fit all. if carney does try to bring some measures over here that he's used in the past, perhaps not going to be the right fit for the uk economy. what are your thoughts on that? >> i think it is absolutely fair to say the two countries are very different right now. canada did sail through the crisis and you quite frankly -- some of it does have to do with an economy that happened to do

well. i think some of the halo is deserved. when we look at the innovations he introduced, the forward targeting being explicit about when policy stimulus will be removed, perhaps even the sorts of economic conditions that will be necessary, that is innovative, something likely to come to the uk. canada didn't engage in quantitative easing. the uk has -- it is notable the bank of canada laid out an explicit framework under carney and what the bank of canada could do if necessary. i think he's more willing to act and bolder than we may give him credit for looking purely at the canadian experience. equally fair to say there is a limit to what central bankers can accomplish and shouldn't expect absolute miracles here. >> don't forget, here in the uk, it is not just about carney as we'll see from today. it is a decision that has to be made across the mpc. i think we have forgotten that slightly because everyone is talking about carney's going to come and revolutionize everything from today. he actually has to make sure

that he carries the other mpc members with him today. we all think he's going to be in favor of quantitative easing, but nobody is expecting him to vote in favor of more qe today because we had king outvoted in the last five months. so would it be a good start to have -- to come in and vote for qe and be outvoted? probably not. >> perhaps that is the first task for carney. because you've noticed in the past you've seen carney remake his board of the bank of canada. >> that's right. when we look at the way the decisions are made in canada, it is consensus, not vote, but when he came in, there was almost a complete cleaning of the house in terms of decisionmakers, reworked how the bank of canada operated, much more focused on financial markets. i can't say he will necessarily persuasive enough to pull six to his side, but over the span of the next year or two, will work

hard to be persuasive and shift things up in terms of who is doing the voting. i think there is a fair chance and particularly given all of that musing about nominal gdp targeting, i doubt that will be an explicit mandate or goal, but it is a policy in the uk. i think the case for more quantitative easing may be still there be, even in the context of stree case of strong economic data. there was a recent revision to the gdp assets and the british economy is behind in terms of the economy than previously imagined. >> we might see mpc minutes that are much more detailed than we have seen in the past. for example. and things like forward guidance, which we're expecting in august, is all about making the bank of england more transparent. and that's something he's been very strong at. >> forward guidance, you look at

what has been playing out on gilts, a close correlation between the gilt market, so forward guidance would sever that connection which would be helpful for borrowing costs in the uk. are designed to draw crowds.s ♪ ♪ others are designed to leave them behind. ♪ the all-new 2014 lexus is. it's your move.

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