hello. you're now watching "worldwide exchange." i'm ross westgate. here are the headlines today. the ecb puts its credibility on the line unveiling a plan to check the health of the 128 european banks. it's going take a year to conclude. the italian spanish bank stocks are lower in an already down market. european indices snapping a nine-day winning streak. chinese banks are also taking a hit on reports of bad loans t top banks triple the first half

of the year. european earnings something of a dwrag. heineken lost its fizz, saying the strength of the euro is going to hit its 2013 profit. very good morning. we see euro/dollar up at two-year highs on the session. more on that to come. also on today's show, shares in india slumping after revenue growth has lagged rivals despite a profit beat. we'll tap into the company's cfo in a first on cnbc interview in around ten memberships. the ecb is preparing to unveil the good, the bad and the ugly from european banks.

we'll hear from one bank who says they're the lending mark. and detroit has its day in court as a judge decides whether to give the green light to america's biggest municipal bankruptcy. what does it mean for bondholders and public employees with pengs at stake? is. boeing is flying high. we'll discuss this issue, cargo aerospace giant gears up for its first quarter figures the. on top of all of that, the latest ipad has been unveiled for the latest holiday season. we'll speak to pc goods mag.com to talk about the new ipad air. and if you have any thoughts or comments about what we're going to discuss today, pleat let us know. worldwide@cnbc.com.

>> all right. we kick off with the european central bank. it's outlined which need to improve their balance sheets. over recent weeks, the dr eo's biggest tell cnbc they welcome the health check. >> i think we are heading in the right direction and i do hope that the stress test performance by the stress test that shows that there are banks being undercapitalized. that's what creates some confidence in the overall structure and the process around restoring confidence in the banking sector and restoring the capital needed to get the more sustainable banking sector across europe. >> we are not particularly concerned. i mean, we work very hard in the past couple of years in terms of fixing our capital liquidity and

asset quality. so we go to a test shows that we have been quality lasted it would not be a surprised. >> it's fundamental that we have a stress test as soon as possible. we're going to come out on top. we want a rigorous stress test fast with an international adviser present. spain is the best. in spain, we've had stress tests all over. >> those are the thoughts of various ceos that we've been speaking to, as well. mr. angeloni is giving a briefing right now at the ecb. while that is going on, we're joined in studio by chris. thanks very much for joining us. i see there's a morgan stanley survey. they reckon results of the survey suggest between five and ten of the banks be tested by

the ecb and further tests could be raised up 40 billion euros. would that seem right to you? >> i would think the stress tests are quite intriguing and based on the different scenarios of unemployment levels and ratio rates and the bank's levels themselves in terms of the debt theorizing down. so i would say it's much higher than that overall. the balance sheet a couple of years ago in the stress tests. the european supervisor sets came out and said that it was about six or seven banks that were really im compared. i thought it was more like 30. >> what the ecb can't have is a stress test that is too weak. can they go over way and have one that is too stringent? >> the whole idea is to instill confidence in the eurozone. they're not going to create a

test that makes the euro system look bad. they node to create one that's credible. >> what would credit knowledge look like? >> well, i think, you know, under the different rules coming in, an eight to one ratio coming in as to be the minimal level of capitalization. right now, a lot of them, certainly spanish banks aren't going to pass that test. they have improved, but they haven't reached -- >> they're going to have a year dodd it. are they going to create that in a year? >> well, they have short-term loans to cover their capital impairments. that's improved the capabilities right now. there's a bit on of a political football going on between the european commission, the ecb and the member states. >> he says, look, we don't want to take over supervisory unless we have a common back stop in place. the common insurance scheme

seems to have gone by the way. what's the hans chance of getting that mechanism in place? >> that's where the argument lies right now in that margo draghi, the head of the ecb is saying if a bank is undercapitalized, then they should be able to go to the public sector and get some form of support. where the european commissioner is saying, no, if they have some problems, they should go to the bondholders. there's quite a big issue there in terms of the approach to supervisor. >> it's hard to get a government that's already in programs. if you get bondholders, that presumably destroys investor confidence. >> why would you invest in corporate bonds & bonds of banks if year going to see that they might be exposed and turned into shares that you don't want. >> the other interesting part about this is this testing, you know, the risks and confidence

building and asset quality. i'm not sure right now that holding these kind of bonds is high quality assets. >> looking at balance sheets and how comfortable you are of the actual loans and liabilities on those balance sheets. how many banks have written off huge amounts of debt saying they have impairments, they're not going to have confidence in their corporate lender loans being paid back. a couple years later, they bring them all back again. right now, there are questions still around spain, italy, ireland, france and other countries around the quality of their debt, the quality of their loans. and that net present liability is where the focus should be. >> you mentioned spanish banks. what do you think is happening with the french banks?

>> for a couple of years, there's been a question of the quality of their books. it's something that everyone has an attitude about right now. but i think there's a question whether the french bank reporting is actually accurate. >> right. that's quite a challenge to make. you can make that challenge about many banks. some have had intriguing ways in which they've reported year on year. each year, some of their loan books have been really bad and the next year it's not quite so bad. that's where the challenge comes in. it's also with how banks accounts are prepared and how they can make those look like quality tests. >> where does this exercise, where does this move to this single regulator leave those not in the eurozone? how are they going to be left by this whole exercise? >> there's a huge argument over this in terms of a closer union and the argument of dwafd

cameron has to leave with the uk government saying we don't want to close the union. there is now a banking union because amongst the eurozone, it makes absolute sense to have one single bank regulator, one single bank structure, because it is one single zone, one single currency. >> angela merkel turned around and said there was no such thing as a eurozone bank. we thought there was a eurozone bank, but there is no eurozone banks. there's a german bank, an irish bank, and the governments are responsible for those banks. actually, has germany changed its tune on that? >> absolutely. the ecb is going to become the sympathy bank. >> when they get into trouble, is there a collective -- we still don't know if there's a collective pot to bail them out. >> the assurance on the ecb and they get bailed out by the ecb in the future. >> good. we've made some progress. chris, good to see you.

>> right. so we want to know today, do you trust the ecb to get this stress test right? chris is good enough to leave his own opinions on how they do that. go online to vote at cnbc.com. that's today's trader poll. now, the timetable said tapering may be getting pushed back further. the banks will likely delay its bond buying program until march. i think they're getting in with consensus. that follows a disappointing u.s. september jobs report. the economy added 148,000 jobs, well below the 180,000 that was the consensus forecast. the unemployment rate good fall 1.72%. the report showed low growth in the private sector and a weakening trend over the last few months. and it's that employment report which we'll find out about now.

take a look at this shot of the dow jones stoxx 600. decliners outpacing advancers at the moment by a ratio of 7 to 3. we're an hour into the session right now and we're down towards the session low. we had a rally yesterday for european stocks. we hit fresh five-year highs. today, we've snapped a five-day winning streak with european equities. we'll put the prices up for you. but the ftse yesterday kwas was up some 41 points after the five-month highs. today we're down 36 points. the xetra dax, cac 40 down 0.5%. the ftse mib down 1.37%. we talked about how banks are suffering today. but there is a sense that european equity markets have been overbought. bond yields coming down. bonds on a bit of a rally. here we go, look at this. ten-year treasury yield, now

2.48%. it's the lowest since the beginning of the summer right now. we were 2.723% the yooeld just before the end of the government shutdown in the united states. so we've come down from 24 basis points in a matter of a week or so. italian yields, 4.12%. gilt yields down 23.6%. we'll keep our eyes on the minutes of the bank of england coming out in around about 18 minutes or so. we'll get into that. on the currency markets, the dollar index has been down near a fresh eight-month low. more companies coming out and complaining about the strength of the euro. dollar/yen, 97.21 is where we go. we're on a t200-day average, lower. more on that. aussie/dollar has come down, off

that four-my height at 0.9758 to .9625. meanwhile, more concerns over china's banking system, as well. reports say the bad loans at its banks tripled from a year earlier. it adds chinese banks wrote off over $3 billion in uncollectible loans. this is where we stand at the moment. we are down. let's get more on this. li sixuan has the updwat for us out of singapore. si sixuan. >> thank you, ross. the nikkei 225 reversed morning gains, having its worst daily showing in about 20 days as the wronger yen hit exporter stocks. meanwhile, china markets lost ground with some profit taking, some smaller cap stocks lost

evaluation. media and agricultural shares took the brunt of the selling. on the other hand, despite that low concerns, banksing shares, in fact, got a boost in the mainland on ping an's strong results. the shenzhen tumbled over 2%. meanwhile, chinese banking shares struggled in hong kong on possible concerns over bad debt write-off. the hang seng index lost 1.4% today. australia's asx 200 pulled back a bit, ending down by a modest 0.3%. now for a look at apple's asian suppliers, that was mostly getting down after apple's new product launches. apple's contractmaker foxconn lost 0.9% today.

lg display bucked the trend up 1.23%. but other apple suppliers, tpk holding and casetek are under heavy pressure in today's selling. still to come, stock has opened down 4% on the back of an earnings beat. add a 28% rise in profit. why? we'll get into it. we'll be joined by the cfo right after this. 0 that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, they could save you in out-of-pocket medical costs.

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now, india's wipro down at the open the. the main drag on the bse indwex. but the firm says its clients are responsible for much of the uptick of spending it saw in the third quarter and that confidence is more on the rise. let's get more from bangalor. i'm joined by the cfo of wipro. always good to speak to you on these occasions. your stock is down today despite

fairly good numbers. why do you think that is? >> more and more, i try to understand this capital market, but the less i understand about it. fundamentally, we had a good quarter. the first half of the -- more than the mid point of the guidance we were given. followed by a marginal expansion 450 basis points. that has resulted in a net income growth about 19% quarter on quarter. very, very pleasing quarter. to know top ten growing at 0.1 is%. more than the company average. so client additions have been has good.

the cash flow has been far superior more than 80% after net income operating at cash flow. so good, good overall quarter. >> maybe in the sense that your growth has lagged that of your rivals. are you confident you can catch up now to the money level they're seeing? >> clearly, the top customer has gro grown faster. as you know, we have been working on the mining piece of the activity stwls the hunting. i think the hunt sg showing good results by making sure we have gone from 10 to 11, which are more than 100 million dworls hundred. we have added 45 new customers. and we have been trying to mine more and more out of the existing client base. as far as the hunting engine is

concerned, we're invested a lot. we are making decent success, but we are still not there. the hunting engine starts firing, we should be able to come to industry growth leading rate. >> how much have you helped to buy the strength of the weakness of the strength of the dollar against the rupee? >> well, quite sdweently. i think if you look at the marginal expansion of 250 basis points, coming from operational efficiencies because we had an account in compensation krez on 1st of june which means last month was affected by one month and quarter two got impacted by two months. we had operation efficiencies which mitigated that completely. plus we got something else in terms of the improvement. as a result of which we have our margins of 24.5. in the past few quarter webs we have been investing a lot in marketing and some of that has

started and in more has to come through as you go forward. overall, definitely the currency appreciation has to be able to get our margin back. >> so it's kind of important that it stays where it is i supposed at this particular juncture. the biggest consumer of i.t. is financial services. have you been able to gain any new contracts or gain some ground in that sector of -- segment of the market? >> absolutely. our growth has been from health care sciences, and from financial services. one is the retail banking which we have been doing fabulously well. so as far as insurance is concerned, we have been holding ground. we haven't got good growth, although there are lots of opportunities there and we are looking at that. so where the capital market is concerned, it's a little weak at this point in time, but i think from a retail banking where typically a lot is happening in

terms of rick management, in terms of compliance driven and in terms of more business being automated in a big way, we are getting a little of market share in those accounts and getting long-term contract events. >> all right. good to talk to you out of bang lore. thanks very much. i hope you have a good afternoon. let's turn our attentions from indian earnings to here. nordea, down 1 .3%. hydro's stock up 7.2%. good news for britain's home retail as the holiday season approaches. they posted a 53% jump dm first half net profit. the company is revamping its stores. this comes after five straight

years of decline. down day for heineken. they talk about the strength of the euro weighing on profit, prompting the company to cut its full year outlook. lets go back here to nordea. did post a rise in third quarter profits. slightly below market expectation. the nordic region's biggest bank by value says its credit quality continues to improve, especially in shipping. and psa peugeot citron is up 4.28% today. it could scale back after general motors is posting a 3.7% decline in third quarter revenue. stmicro, down 6.5% after selling off after the chipmaker suffered from weaker demand in asia.

speaking earlier today on cnbc's outlook, the group's ceo discussed it. >> no, i can confirm that we are in all the major problems, the smartphone customers in the world. i think bought in america and also in asia. and we see opportunities to pervade more with our new products. but, between, absolutely confirm that we are in in all major projects and with our major customers. >> let's get more from paris. stephane is there. >> hey, ross. obviously, the situation knot positive for st micro.

it's no secret the company lost the contract for the iphone 5s. it's a supplier for blackberry. it will probably bear the consequences of the company. yes, ross, the loss was significantly reduced in the third quarter. but it's only because there were lower charges, impairment and restructuring charges in the quarter. because if you look at the actual margin of the company, it's deteriorated from 34.8% in the third quarter last year to 34%. that is a significant decline. the revenue was lower because the company is face ago tough competition on the asian market. and as i was saying, it has some stronger contracts. the end of the year is not very bright, either. the stock is down 6.5%.

peugeot citron posted a decline of its sales in the quarter. that's the confirmation that a french carmaker is working on something bigger. you know we had press reports last week saying peugeot was about to launch a capital of 3 billion euros. that would become the largest share hold of peugeot citron. the company, therefore, would face a significant dilution. it would lose the operating control of the company.that.

quite a bit of news has been breaking in the last few minutes. the finance minister says the state -- available is no market options are possible. esm is not a new back stop. we talked about the ecb wants sort of a common back stop. that's the german position on this. s&p, meanwhile, has a recession, but the recovery is fairly fragile. and the bank of spain suggests the economy grew some 1% in the quarter from the april to june quarter. it would be the first quarterly expansion from the iberian

country for around two years. they say gross domestic products shrunk 1.2% in the third quarter from a year earlier. but up 0.1% on the previous quarter. and we're hearing more from mr. angeloni, the head of the ecb. they're fleshing out more details of the eurozone bank test and we will get more details on that, as well, in the second half to come. if you have any thoughts or comments on anything today, you can e-mail us, as well. there's another story we're looking at, including bank of england minutes. the bank of england said not to do anything the last time around. and right now they say british unemployment seems to be falling slightly faster than expected growth.

they predicted it would take three years to fall from that 7% knockout period. it's now, therefore, seeing the problem with that unemployment growth would be faster in the second half of 2013 than expected. it can avoid the policy close to being breached. but they are still divided about how rapidly productivity would pick up and by extension how fast unemployment would fall as the economy recovers. so we'll get more on this in a few moments time. you can see sterling/dollar steady after that, 161.72. if anything, it picks up slightly from the session lows. "worldwide exchange" continues.

the headlines from around the global, the ecb puts its credibility on the line unveiling the plan to check the health of 128 european banks that will take a year to conclude. italian and spanish bank

stocks are lower on an already down market. chinese banking shares are down on reports that bad loans at the top institutions triple in the first half of the year. and european earnings aren't helping out. heineken loses its fizz saying the strength of the euro is going to hit 2013 profits. heineken his a two-year low this morning. british unemployment appears to be falling slightly faster than forecast against a back drop of stronger than expected growth. this is the summation of the minutes from the last bang of england minutes when they voted naturally to keep rates on hold,

as well. the central bank noted the strengthening in sterling which would push down on inflation. rob wood is joining us now. thanks very much indeed for joining us. they have talked about now that it's probable that unemployment in the outfaster. where does that leave us where their three year horizon on foreign guidance, do you think? >> i think tun employment figures are moving broadly in line with that. falling faster than the bank of england expected and growth momentum pick up over the summer. it will mean probably 18 months, two years down the line we get to 7%. >> how long will it take for the bank to change their forward guidance and what were the

implications when they do? >> i don't think they're going to change the forward guidance in the sense of saying they're owning to 7% unemployment. they still have these knockouts. in terms of the actual date when they hit the 7%, they'll probably bring it forward six months or so to q1, 2016 maybe to the end of 2016 with a push and say their forecast was optimistic about how long it would take. >> what would be the reaction, then, from that in asset markets or will it have already been priced in? >> i think this bank of england guidance it will take into late 2016 i think it's been more or less dwounted as being far too long a period to be plausible. and markets also pricing in rate rises in 2015 now and i think the bank of england will move closer in line with that in the next inflation report. >> there's a big division about how rapidly productivity is going to pick up. what's your view? >> i think productivity growth will pick up to a 1 1/2, 2% year

on year growth rate which is a historical trend. i don't think we're going to see a surge in productivity over the next few quarters and years. that means it takes years and years to get down to the 7% number. but i think it will pick up. that is the key risk, of course. if it doesn't, we will get 207% a lot earlier than late 2015. >> at the same time, the latest average earnings gate shows no increase in average earnings. what's going to happen to average earnings? >> average earnings i think will stay around this week, around level year on year for the next two months. next year, we should see it pick up a bit. i think that will start to sharpen inflation, we should have inflation coming down, pay growth pick up a bit. while i say the end, that means

that they stop falling, not that they start rising dramatically. for me, that is one really key risk to this recovery, continuing at the rapid pace we've seen in the pmis recently. people's real wages are still falling and they're probably not going to stabilize until late next year. >> all right. just stay there. lawmakers, as well, in the uk expect concern that policy forecast is pushed up long-term interest rates. the treasury select committee in parliament pushed in the last month gathering more evidence for some of the state's leading economists. apparently, rob, that includes you. you're now one of the country's leading economists as advertised by treasury. can you tell us first what you're going to sell for the treasury select committee or do we have to wait? >> no, no, you can have the positive summary. i think forward guidance was worth fitting. i think it helps have more information about the bank than

yes. it disappointed the markets because the unemployment threshold wasn't as low as expected. i think rates have gone up over the past few months because of the data as well as that disappointme disappointment. it's fought going to take until 2016 to hit the threshold. >> very quickly, i like with you say ross, i look forward to hitting it later. you're man enough to do that. mortgage approvals in britain, 89.6% higher on the year in september, just under 43,000 seasonally adjusted. how much of a potential bubble are we building the housing market? >> well, i think we are putting a lot of upward pressure on housing. >> i expect house prices to go up 10% year on year next year. i think real health prices. we just talked about earnings.

it's not too difficult to imagine us getting back to those real peaks in years. in terms of a bubble, we're approaching that outside of london. we're rising pretty quickly and it's happening across the country. house prices do worry me a bit. >> what time are you down in parliament? >> 2:15. >> good. all the best. rob, now one of the country's leading economists. we've had more comments out meanwhile from the ecb's head of financial stability, mr. angioni, who has been talking about the ecb stress tests ahead of them taking over supervision of over 100 eurozone banks a little later. and he says they're going to be very, very broad based on the assets that they're going to look at. on the risk-based exercise, we want the exercise to encompass all the sources of risk. we don't want this to be a

partial exercise. that's why we talk about a risk-based exercise and it's an incredibly important step for europe's preparation, as well. we think banks have significant but interesting enough not exceedingly large amounts of sovereign bond. that depends on your view on whether you think sovereign bonds are a good value or not at the moment. nevertheless, he says the exercise is to dispel bank sector certainty. and they're inviting the ceos of banks in the next coming weeks. this is good news for us, by the way. i'll tell my producer they're going to have constant dwie log with the press on methodology, but no results until the end. so they are going to try and tell us how they're going to do it. we'll also hear from jeffrey

a little later on his thoughts, as well. he's still in that briefing with mr. ang loney. they've been up for nine sessions in a row. you'll forgive them if they have a day off. the fdz fdz going r and xetra dax down 0.4%. the cac 40 down 0.68%. treasury yields now hitting 2.94%. we hit 2.48% which is the lowest since the beginning of the summer and we are down something like 24 basis points since just before the end of the government shutdown on the treasury yields. on the currency markets, the dollar has been down to eight-month lows. euro/dollar, just shy of 98. sorry, 1.38. just come off that level at the moment. dollar/yen, 97.27, right on the 200-moving day average. and for everybody that likes a

tab et, apple has thinned out the ipad. it's announcing upgrades to its tablet line at a media event on tuesday. it's taken a swipe at the competition. cnbc's jon fortt was in san francisco for all the action. he filed this report. >> yesterday, we saw apple roll out the new ipads, also some new software. as we're looking forward to today, probably the most important thing about this is the longer term impact on margins pt in the nearer term, over the last week or so, we're speccing to see earnings. expect that to be heavily influenced after, a,arter injec. apple being more specific on their guidance, also what they have to say about the supply of their new iphone. longer trm, taking a three impact of apple's announcement

today, now you have four ipads in the lineup. you have the mini in a retina dwis play at $399 and a nonretina dwis play at $299. you have the full size ipad air at $299 and the ipad dwdz 2 still sticking around to $299. that's mainly for education customers who don't want to pay full freight and don't care about the high resolution. that's interesting because what it does to margins, apple is clearly not willing to sacrifice margins on the mini by bringing it down with the latest chip and retina display. also giving away the software. we'll have to see how that place, they're giving away os10 match rick. that should bring people to the latest and greatest software including the new vrgz of i like and ilap websites are completely free.

analysts expect that to be good for longer term margins, which is likely to cheer the streets. it's probably why we saw the stock not fall as much as spengted. find out the names of stars you may in every have heard of. it's all at cnbc.com and cnbc world. carl icahn sold half his stake in netflix this month. icahn says he bought the shares around $58. so based on the sale price in the filing, he made a cool $826 million profit. yes, my director just issued a response to that.

icahn cites the appreciation in netflix stocks to the sale, but points out the company is still undervalued. in a tweet, he sank the ratings management and last but not lease, kevin spacey who stars in house of cards, which is actually based on a uk series from about 15 years ago. now, twitter meanwhile has revealed it's secured a $1 billion credit line ahead of its ipo. the company disclosed that its underwriters, goldman, morgan stanley, jpmorgan bank, american dwoich ya arranged the deal, but it hasn't tapped the money. twitter is expected to begin its investor road show on friday. first it was long coming, then it's new york. but perhaps london isn't down and out. alibaba could still be listening on the london stock exchange to

raise about $105 billion. there are now reports that suggest high level meetings have taken place between alibaba and officials. if it happens, it will be the biggest ipo in britain in years and the biggest ipo globally since facebook's listing since 20123. mean wile, japan is going global and it's starting fairly early. we have the story from tokyo. >> hi, ross. yes, the nikkei is reporting that japan's ministry of education is planning to make english classes mandatory for children in the third grade to better prepare students for a globalized world. currently fifth graders are taking this class as a curriculum. but its focus is mainly on games.

when they enter the fifth grade, english studies will include reading and writing and will be given grades. one of the challenges will be training enough english teachers as the ministry ames to bring in the new curriculum by 2020. back to you, ross. >> that's interesting, mikuko. where do they start at the moment? what's the change? >> they start at the fifth grade and they're lowering the starting age as well as managing it more -- lesson oriented, reading and writing included from the fifth grade. that's the key. >> thanks very much. your english is perfect. you've done your studying very well. thank you very much. meanwhile, royal watchers are camped outside of st. james' palace today ahead of prince george's christening. he will be baptized in a private

ceremony. like his father, george is expected to have six god parents with the remaining names set to be announced at 11:00 cet. in other words, in around of

rate, low utilization of plans. it results in low margins for

both companies. and once again, the news is that peugeot is launching its own model platform along without any support from gm. >> is it harder to be a french company restructuring? >> it is hard to be a french company, probably much harder than being an italian company like others who have had similar troubles in the past. yes, there is a comment from the industry government a couple of days ago. what does it mean? the stake would take stakes on the company. this sfot possible.

gnt will not be willing to give cash. but yes, there is high resist yantance. peugeot today still has 80% of the jobs in france. >> good to see you today. thanks so much for joining us. still to come on the program today, the ecb is vowing to make balance sheets in the uk more transparent. it's setting out new standards for the stress tests. will the eurozone lenders make the grade? and will these stress tests this time back up for investors? the second hour of "worldwide exchange" coming up after this. . i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare,

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you're watching "worldwide exchange." i'm ross westgate. the ecb puts its credibility on the line, unveiling a plan to check for health of 128 european banks. it will take a year to conclude. italian and spanish bank stocks are leading the way lower in an already down market. european indices mapping a nine. session winning streak. chinese banking shares are also down, this on reports that bad loans at top institutions tripled in the first half of the year.

plus, european earnings are also something of a drag. stmicrohas unveiled a loss. heineken has lost its fizz saying the strength of the euro will hit 2015 profit. and a very good welcome to you. heineken is a whole bank of companies this week xlabing about the strength of the euro. meanwhile, as far as u.s. indices are concerned, updating new highs for the russell 2,000, the s&p, s&p home builders, dow transports yesterday were indicated lower at the moment. the dow was up 75 points yesterday. right now, dow futures are some 67 points below fair value. the nasdaq at the moment is some 18 points below fair value and

the s&p 500 at the moment is around about 9 points below fair value. european equities are down today after rallying yesterday. but we've had nine straight sessions of gains for europe. we're coming off five-year highs. they look perhaps a little overvalued. the ftse 100 down about 0.5%. a little less for the xetra dax, and the ftse mib off 1.1%. sectors, banks down 1.69%. telecom is off again. gold has been up to a four-week high today because of the weakness we've seen on the dollar, as well. treasury yields, look at this, 2.48%, the yield at the moment. and we've dropped something like 24 basis points just before the end of the government shutdown.

yields lower across the board. italian yields getting down to 4%, as well. despite the bank of england coming out half an hour ago and saying we might have to trim, saying that the employment will hit targets earlier than we previously thought, potentially. and on the currency markets, talked about the dollar index down at eight-month lows. euro/dollar, 1.32358. we did nudge up a little earlier on today. the aussie/dollar has come back from its 4 1/2 month high after it looked like inflation was going higher sxwt reserve bank of australia will move. sterling up a little bit. but the dollar is still on the back foot generalry, as well. reports suggest that bad lobes trip tripled.

chinese banks wrote off over $3.5 billion in unrecoverable loans. let's get more on what happened in asia today. sixuan. >> thank you for that, ross. most asian markets came under pressure today. the nikkei 225 had its worst day in about 20 days as a stronger yen hit exporter stocks. china markets lost ground with profit taking and smaller cap stocks after the recent gains. this, for example, some media and agriculture shares took the brunt of the selling. but on the other hand, banking shares, in fact, got a boost this after pingan bank's strong results. and the shanghai deposit lost 1.2%. the shenzhen stumbled over 2%. the hang seng index lost 1.4%.

over in south korea, did kospi down about 1% in australia's asx 200. pulled back modestly from its five-year highs. asian markets are in the green today possibly on hopes of further stimulus. now for a look at apple's asian suppliers, mostly getting the thumbs down after apple's new product launches. lg display understanding higher by 1.2%. tpk dumbled over 6% in today's session. back to you. >> sixuan, thanks for that. the european central bank has outlined how determined which of the region's financials still need to improve their balance sheets. the man in charge of that says european back stops will be availability through the esb bailout fund. but he also expects national bank stocks to exist, as well.

phillipe is joining us with his thoughts. thanks for joining us. the idea is that the ecb has all the information it needs before it becomes the regulator of the european banks next year. part of this exercise means they'll have to hold 8% of tier one equity capital. they say using the basel 3 definition. you say it's not y high enough. why? i think it's an very ambitious exercise. i think the eyb has a lot of sta stake. the 88% number itself is not low. when you think back in the ecb stress tests or even the stress test as the 5% level, so the 8% is not at a very low level. but i think for the sake of suspensi suspension, the market is operating on fully loaded

bubbles to be measured, it would be more inspired to use that. i think the other piece on capital, which is much greater emphasis, is the fund on leveled ratio. european banks are quite weak by that metric. but generally speaking, i think it is a very encouraging exercise. it's a very ambitious exercise. we're going to have to be very patient. we're not going to know very much until a year. but i think many banks will feel the pressure that it has to -- that they need to do something as they grow into the process. i think we will see capital raising in european banks in 2014. >> morgan stanley had a survey that said between 5 and 10 of the banks tested by the ecb would fail the test and be forced to raise 50 billion

euros. kite be more? could it be less? >> it's very speculative at this stage. we don't know the assumptions. we have very little information that allows us to comment on that. what i would offer, though, is that i think the ecb understands what's a successful stress test, a stress test that rebuilds confidence, that brings the formations into the market and what is a bad stress test like what the ecb did in 2011. you can first look at credible assumptions. we don't have that information yet, but i think they'll be committed to provide that. the second point you do want some victims. you want some banks to fail the stress test. it's an example that 100% of banks can pass, it doesn't have much value. so i think they understand from a peer perspective they need to fail some banks. and look, you said this is

ambitious exercise. the european central bank is starting from scratch here to become regular. it has to hire up to 800 people from -- tomorrow almost. do you think, actually, they're up to the task just in terms of managing the process? >> i think it's going to be an epic endeavor. that's why they're wise to take their time. but, you know, if you look at something like the quality review, which is basically an attempt to -- accounting practices into nonperforming loans and collateral, it's a very, very complex exercise. so they will be joined a lot of the resources from the existing national supervisors. but hopefully, given that, you know, there's some question

marks about what the jobs have done, they'll be able to pin them down and afford them to take extra measures. >> phillipe, thanks for that. joining us from pimco. and we want to know, as fill leap said, do you trust the ecb to get the tests right? where is that marker? go online to vote on our trader poll today. that's on cnbc.com. and don't miss also a little later at 1600 on an extended european closing bell, cnbc will bring you an interview with the ecb president, mario draghi. how do they get this right? and how, actually, do they get around to the problems of getting back stop. there are other stories we're looking at today, as well.

the time taip table for fed tapering is getting pushed out further. in a note late tuesday, goldman sachs say they expect the central banks to delay its bond buying program until march. this follows a disappointing jobs report yesterday. the economy added 148,000 jobs, well below the 180 consensus forecast. the report showed low growth in the private sector and a weakening trend over the last few months. staying with banks, jpmorgan has struck a tentative settlement with the justice department and other regulators, but it may end up paying less. reports say details are being finalized, but the final tax could be around $9 billion. jpmorgan may be able to write off a large part of the deal as business expenses, even though the u.s. tax codes bars the deductions of fines paid to the

government. other reports, meanwhile, say is government is close to a $6 billion deal, to settle mortgage claims. as for the agenda stateside today, we have september import prices. they're out at 8:30 eastern. boeing is reporting earnings before the opening bell. we'll hear from bristol myers, caterpillar, boeing, and us airways. more to come after this.

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the devil is in the details. the ecb outlines stress test standards for european banks. the announcement sends financials in italy and spain lower. and jpmorgan could be set for tax breaks on its massive $13 billion mortgage settle t with the u.s. government ace it reportedly nears a separate settlement with investors. and the earnings, meanwhile, continue here in europe. quite a lot to get to, as you can see.

the norwegian aluminum produces beating expectations, more than offsetting a 10% fall in the aluminum prices. home retail, the owner of home base up nearly 4% today. a 53% jump in the third profit. maybe we're seeing the end of that. heineken, a bit of drop here for the dutch brewer today, prompting the company to cut its full year outlook. it's forecasting net profit will decline in the low single digits after third quarter sales disappointed. and another company today complaining about the strength of the euro. meanwhile, nordea down 1.3% today. a rise in third quarter profits, but that was slightly below market expectations.

peugeot up 4.5% today. the french carmaker announcing it could sail back its alliance with general motors after posting a decline in its third quarter revenue. and the other big drag in european equities today, sdmicroselling off after the chipmaker suffered from weaker demand in asia. speaking earlier on cnbc, the group's ceo talked about the outlook for the region. it was a little bit more mixed the. still to come on the show, we'll be out in detroit where a judge is set to review the legality of the largest mups bankrupt in history. we're hear from them straight after the break. in checked bag fees. [ delavane ] priority boarding is really important to us. you can just get on the plane and relax. [ julian ] having a card that doesn't charge you foreign transaction fees

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all right. the s&p up to fresh record close along with the russell 2,000, s&p midcaps, as well. right now, the s&p 500 implied lower by 7 points. the down side lower by 68 points and the nasdaq called lower by just under 20 points. elsewhere, a u.s. on judge will be considering today whether detroit is really broke and,

therefore, qualifies for bankruptcy protection. the city in july saddled with $18 billion in debt. the largest municipal bankruptcy in u.s. history. but nothing can go forward until the judge determines whether detroit is eligible. cnbc's senior correspondent scott cohen is on the phone from detroit. scott, they split this case up into two parts. how important is this next stage? and what is going to be considered? >> well, it's a pivotal phase, ross. judge steven rose has to decide whether detroit is eligible for the protections of the bankruptcy code and whether it can go ahead with what would be a sweeping reorganize of the stid's finances. but there are a number of entities that are objecting to that, primarily the city's employee unions and retirees who would likely see big cuts in their pension benefits if this

reorganization goes forward. they say that those are -- those cuts that the emergency manager who is now running the still is unstieshl. they're not legal. that's what they will say in front of a judge when this trial begins today. even if the judge says the city can go ahead and reorganize and make all these cuts and be free from some of that south si$18.5, then there begins the whole process of the reorganization plan. then the city would reorganize by march of next year, which would be incredibly fast trafficked. first, they have to get through this trial that starts today. >> it seems incredibly complex. joining us also from detroit is sharon levine, lawyer for the local council of the american if he will federation of state,

county and municipal employees. sharon, very good morning to you. thanks for joining us. is on up for debate is whether kevin orr overstepped his powers in recommending bankruptcy protection. >> that's correct. we are concerned that the filing of a bankruptcy here in detroit violated both the federal constitution of the united states and the michigan state constitution. the michigan state constitution contains what we've been calling a pension clause, which provlt is any xhin usety kies. the afsme employees, their pension benefits, those retirees are only about $18,000 now. if they're cut, it's going to

create starnl hard times for those folks. >> there's a question on whether this is a plan po cut pensions. >> well, that is one of the issues that the judge is crappeling with right now. we have said that people right now, because of the uncertainty, really don't know what to do. so you have retired people living on the edge a little bit. wondering day-to-day if they can feed themselves, if they can feed their kids, if they should be taking their prescription drugs or if they should be putting off a day, putting off two days. and what the judge is saying is that you don't really know whether or not the em is going to cut the pensions until he actually file eggs the plan of adjustment, which scott was

mentioning earlier. >> why should pengs be treated differently from debt, the bondholders and other critters? i mean, the point here is, isn't it, to adjust the city's debt. doesn't that mean all of the debt? >> well, two points with regard to that. first of all, michigan is different than a lot of other states because the state constitution itself contains a provision that says it's illegal or unconstitutional to change the pensions. so there's a conflict between what the em is trying to do under the federal bankruptcy law and what michigan state law says is permissible. secondly, in some of the other chapter 9 cases that we've seen in the united states, there are

cases where the pensions have not been cut and bond has been cut. there are other cases where the pensions and retiree benefits unfortunately have been cut. >> is there a principal that if you have unfunded liabilities, you have to negotiate on them? >> under the bankruptcy code, the emergency manager has an obligation to negotiate with critters before filing a bankruptcy. one of the things that we are talking about with the judge right now is we believe detroit is uneligible. here, there was one meeting on june 14th where there was a discussion of pension, but there was no back and forth the way you normally see a negotiation take place. auto either a negotiation in a labor contexts with unions where you sit down and negotiation. it was very formalistic.

it was very short and in our view, given the size of the issues that are at stake, clearly not enough time to try and work this through without first going into court. now tho that we're in bankruptcy, there's a second step. in addition to appearing before judge rose and arguing the issues. it could potentially change chapter nine. thanks so much for joining us. will the defense budget fear fears have affected the giant? plus, the ecb is setting out standards for new stress tests. are the banks going to make the grade? jeff will join us from frankfurt.

the ecb put its credibility on the line to check the health of over 100 european banks that will take a year to conclude. italian and banks stocks leading the way lower in an already down market.

european indices snapping a nine-session winning streak. chinese banking shares taking a hit on reports that bad loans at leading institutions tripled in the first half of the year. and jpmorgan says, give me a break. the bank struck a mortgage settlement in week. the reports now say it may be able to write off a lot of that on its next tax return. right. the s&p, the russell 2 2,000, s&p, 400, midcaps all closed at record highs yesterday. right now, futures suggest we're going to turn tail a little bit today. the s&p 500 is currently eight points below fair value. the nasdaq at the moment is some 21 points below fair value and the dow at the moment is around 77 points below fair value. european equities have snapped a

nine-day winning streak. turning next, the ftse was up 41 points, currently down 34. 0.5% lower for the ftse 11 00, the xetra dax, as well. the cac 40 down 0.75% and the ftse mib off 1.25%. meanwhile this morning, the european banking will be outlining which of the regions financials need to improve their balance sheets. the marn man in charge of the exercise, ignacio angioni says the stocks will be available through the bailout fund and expects national back drops to exist, as well. geoff has just come from that briefing in frankfurt. he's talking to mario draghi a little later. geoff, how does the ecb make this credible? the eba stress tests basically convinced no one.

because then we had bank crises after them. what is going to be different about this des did he tell? >> yeah. it's interesting. the man you described, angeloni, was asked that very question. and his point was there are a number of differences here, but the key one is that the ecb will conduct the tests and then ultimately become the supervisor. so it is not in the ecb's interest to not absolute nice these organizations very closely. any unfinished business will come to land at its door here. it was a very interesting meeting in the round, ross, because we got some clarity on some other issues here. the one about the backstop that i think is fascinating and while it is true that the ecb wants ultimately both a national level and then an esm and ecb level backstop, if you like, it's

still not quite clear whether that is all going to come together by the time the stress tests are completed. because, of course, some of those decisions relate to what national governments themselves will agree and whether the germans in particular are very happy to see the esm used in that role before the supervisor is in place. i don't want to get too technical about all of this. because anybody can go and have a look at the hard copy. but i think the point that needs to be made here is that there is going to be something of a beauty contest. the banks themselves will have to open their balance sheets for examination in, really, the first meaningful path of this three-part process. and at that stage, it will be down to the ecb to scrutinize the risk of each asset that is on the books here. and far be it from me to suggest that the banks themselves may want to get rid of some of this stuff before that happens or

they may want to find a way of temporarily taking it off the books. but there is always the possibility here that there is a bit of makeup and powder that goes on to these balance sheets before they get examined by the ecb. no doubt, the technicians at the ecb will work out if there is anything untoward going on. but i flag that up as a warning here. sxwt other thing is, as this rolls forward into the stress test itself, the other thing you have to be very aware here is of the credibility of the stress test assessment. what we learned in this meeting was so far the details on that have not been decided. the eba is involved in discussions with the ecb and working out the criteria, but we do not have detail on that at this point. so we can't give any more specifics about exactly what the bar will be for the banks when the stress test is put out there. but hopefully, ross, this does take us further down the road on trying to resolve what is still

a pressing issue for europe and still holding back growth the state of our financial system. back to you. >> and china's restoring investor confidence and divorce banks from so often as we happen. geoff, just one question, how big a task is this for the ecb to become the regulator from the banks? they're starting from scratch, right? can they achieve this in the time scale available? >> yeah. well, that, again b, is a very interesting question. because over the next 12 months, they've got to find somewhere between 700 and 800 staff, which will then become responsible for the subsupervisory role. and many of the staff that they're taking on now to fill the jobs that need to be done over the next 12 months are coming from the national regulators and they will also try to hire out in the open market here. but i mean, there's the big irony. the ecb has been building a new

headquarters. and once they take up this role, ultimately, they won't have space in the new headquarters building for all the new staff that they're going to take on. so that's just a -- if you like, a loblgistics issue that they will have to resolve at some point. one other thing i think is worth bringing up in passing is the treatment of soveng debt. but just to say when the press conference was held, the point was made sovereign would be the get any special treatment. it would be treated the same as any other risk asset on the books. for those companies in spain and others that do hold large amounts of the so much, this is something that will have to go into the assessment for these banks. but we're going to talk a little bit more about what has been achieved here today with mario draghi. i'm going to tootle off in just a moment back into the ecb

building that they certainly have. we'll sit down and ask him a few questions about how he thinks he may have moved the needle on getting us closer to a resolution of some of the banking problems that europe still seems to be grappling with, ross. >> sovereign bonds at this juncture, whether they're a good investment, that's darchbt debate. geoff, good stuff. thanks for that. we'll look forward to your interview with mario draghi, as well. that's coming up later, as geoff said. we are also asking you, the viewer, do you trust the ecb to get the stress tests right? please go online to vote. that's today's traders poll at cnbc.com. now, the timetable for fed taper sg getting pushed out further. in a note late tuesday, goldman sax is just the latest to suggest the central bank will likely delay reducing its bond buying program until march.

the know adding below the consensus of 180,000. the report showed low growth in the private sector and the weakening trend over the last few months. and we've seen market reaction to that, which we'll detail more, as well, coming up. jpmorgan is itemizing the bills. the bank has struck a $13 billion deal this week. the bank to uncle sam. it may end up paying much less. details, straight ahead. ♪ ♪ [ male announcer ] more room in economy plus. more comfort, more of what you need.

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but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. when is a $13 billion settlement not a $13 billion settlement? that was the amount that jpmorgan agreed to this week, but the justice department to settle mortgage-related claims. but in the way things work, they may not have to pay all of that. kayla tausche has more for us from cnbc hq in the states. look, i thought a fine is a fine is a fine. clearly, that may not be the case. >> well, ross, the devil is in the details. in this situation particularly, now a new report says the

settlement could end up only costing the bank about $9 billion because much of the deal is expected to be tax deductible. report say jpmorgan and the justice department are finalizing the tax treatment of the settlement. they can't bet benefits for penalties or breaking the law. for now, the pact is expected to include $9 billion paid to the government is $4 billion in relief for consumers. of thatment amount, reports say 2 billion will come in the form of a penalty. but the consumer relief fund will be used to aid mortgage borrowers is deductible. much of the re maining $7 billion will campaign investors from bad mortgage securities they bought from jpmorgan as well as bear stearns and washington mutual which were failed banks jpmorgan bought during the financial crisis. tax experts say those payments can normally be written off as a, quote, business expense. the government could negotiate

terms under which jp north yant would agree not to deduct those to settle charges in 2010. that deal specifically prohibited the company from claim ago deduction on that portion of the settlement that went to compensate investors. mean wile, reports say jpmorgan is close to a $6 billion settlement with institutional investors who settled mortgage-related claims. the group includes blackrock and pimco. checking jpmorgan futures, right now they're down about 3%. even though, ross, the company came out and said, listen, in $23 billion in our war chest to save for items like this. but getting a $20 billion charge in a matter of days is not good for any company. >> no. no. whatever the amount is, you're right. thanks, kayla. good to see you. have a good day there in the states. if you've just joined us this morning, a recap of your

headline. the devil is in the detail as we've heard, the announcement has sent financials lower in a largely down day for european equities. jpmorgan could be getting a tax break of its massive $13 million mortgage settle with the u.s. government has reportedly nears a separate settlement with investorses. still to come, in at a pound and at a price of $499, will the new ipad air knock out the competition? will it cannibalize its own product line? more on apple's new offering, coming up. i love having a free checked bag

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watchers out there, the son of the duke and duchess of cambridge will be baptized in a private ceremony at st. james palace. so we've been asking you, if you can choose absolutely anyone to be a god parent to your child, who would be and why? chris tweeted in to say i would just carl icahn to be my fairy godfather. i have $826 million for reasons. and someone else tweeted in and said joe kernen gets my vote for god parent. but he didn't say why! and talk about carl icahn, the reason why he's be a good god parent is because he knows when to sell. he sole nearly half his stake in netflix this month. he bought the shares around $58.

when you base that on the sale price and the filing, he's made, get this, a core $826 million profit. he's cited the appreciating netflix stocks for the sale and pointed out the company is still undervalued. and in a tweet he thanked read hastings and ted sarandos, last but not least, kevin spacey. there you go. netflix stock yesterday closing at $323.12. all right. apple meanwhile has thinned out the ipad. it's announced upgrades to its tablet line upat a media event on tuesday. the tablet liter facing increasing competition in the field. he's at the cnbc studios in the states. dan, what do you think, then?

do you hope a wow buy it? was it good enough? what is the fuss all about? >> i think it got good enough. i don't think we've got a lot of apps. >> but we're missing that wow factor, that things that blows us away. i think they're going to do very well in the market, but the competitors are getting better and they're moving very, very fast. >> so, look, this ipad air, right, we've had four generations of i pads. so what -- the weight is the big thing about this? >> yes. and actually, the weight is -- it seems like a small thing, but it really can't be overstated. they shaved a half pound of weight off the full sized ipad. that's a huge amount. now it's a one-pound device.

that is a big step, a great technological achievement. but, you know, irving go into the event thought it was going to be thinner and faster. and it's thinner and faster. i don't know that that gives you the i have to rush out and buy it impulse. but customers, if they're upgrading their ipad have a reason to stay with the plaid form. >> are they still going to dominate with this, the 10-inch tablet market which they created? >> yes. yeah. and there are many companies that try to release tablets before apple. all of them failed. the ipad really made the tablet market. the tablet market has taken off since. and it's only been three years. you have to remember that. before that, there was no ipad. we lived in a world without ipads. but i think that they've done what they need to do. they've done a lot on the software side. they're going to give away a free copy of i works, they're going to give away a free copy of ilife.

by giving those away, they're creating a stickiness that i think customers will enjoy. >> and there's no keyboard casings that you would have put in. what is the fact that it's lighter and you can walk around with it in one hand for quite a long time? what does that do to the ipad mini? because people might say, actually, why don't i get the bigger one? or did people buy the mini to, i don't know, punish it in their clutch bag or something? >> i carry the mini. the only upgrade to the mini, they have the faster processor, and the retina display, which we also expected. so the mini has the same full number of pixels on it. so i think the mini is going to do really well. but if you start to look at the wore rise yop, there was a period of time for two years where no one had a competing device with the ipad. and now you look at what's on the market. the samsung galaxy 10.1 is a great tablet running android.

amazon is building some great tablets. nokia came out with some tablets yesterday. so the market is getting crowded and apple is going to have to either innovate or cut costs on the devices. so far, they haven't shown any decide to cut costs. >> which leaves us with innovation. away from apple to the aerospace giant, boeing. it releases third quarter earnings today before the bell. it posted a 5.7% drop in profit. despite being on track to release a record number of commercial airplane these year, boeing is facing higher costs. investors have become debt dead lock in washington with the defense cuts if washington to split the defense margins have given it concern.

peter is joining us now. good morning to you, peter. what do you expect to hearing from boeing today? >> good morning, ross. i think boeing will have a very good quarter. they're executing well on the commercial side. the defense side is being some headwind, but they are seeing some ramp in their international programs. and i think that's helping offset some of the issues that they've seen on the domestic side and the defense bit. so weir looking for the a slightly above consensus number. >> and look, something happens over the last month or so. airbus got its first ever order in japan. boeing was preparing to sell the 777x. how big of a blow is that and what does that show that they need to concentrate on?

it was a bit of a surprise. but both companies are doing well n what we call the twin engine body craft. i think that particular order was also about the diversification of the airline, wanting to have two vendors. so it wasn't entirely a competition that i think boeing was assured to win. but i think both companies, i think, are going to continue to see a lot of volume for both marketing the a-350 in airbus's case and i believe the 777x when that gets launched in dubai in a few weeks, you'll see that's an enormous stock. >> what do the do with the stock? >> yeah. we think that the boeing stock -- there's feedback here now, is right now the upside from the $164, our current

target. clearly, we have a lot of runway left in terms of where we think boeing can go. the catalysts near term are clearly we think the 777x launch in november, the new buyback program which would probably be announced before the end of the year setting them up for 2014. when you ever 5,000 aircraft in backlowses. all right. just a bit of time before we go to remind you of what's going on with euro/dollar. we hit a fresh two-year high today for the euro against the dollar. we've come back down to 1.3758. heineken is the latest european company today to explain about the strength of the single currency. meanwhile, u.s. futures after

hitting records yesterday on the s&p are lower. as are european stocks. we'll track all the action right now with "squawk box" getting under way. whatever happens, we hope you have a profitable day. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has. investment management combined with investment servicing. bringing the power of investments to people's lives. invested in the world. bny mellon.

good morning. today's top stories, earnings central. quarterly results from boeing, caterpillar and eli lilly among many others. crude realities, oil prices dropping to their lowest level since late june. like that. and in overseas news, japanese and chinese stocks selling off overnight on fears of bad bank debt. and tight liquidity in china. it's always somewhere, isn't it? it's wednesday, october 23rd, 2013 and "squawk box" begins right now.

good morning, everybody. ike becky quick along with joe kernen and steve liesman. andrew will be back tomorrow. we have quarterly results before the opening bell from eli lilly, boeing, caterpillar and a lot of numbers are koumth pop among the newsmakers, we have caterpillar's ceo doug oberlehman. also lily's cfo, derica rice. at 9:00, we have the fafh house price index. this afternoon, the treasury holds an auction of five-year notes. our top story this morning, china fears there was heavy selling in asia's afternoon session. traders are citing reports that top chinese lenders expunged about $3.7 billion in bad debts for the first six