FSA to test banks against 8% economic contraction - papers

The FSA is to step up its monitoring of banks’ financial health by testing them against 8.1% economic contraction, from peak to trough until 2014, and a 13.3% unemployment rate.

The scenarios compare with the 6.9% contraction and 12.5% unemployment measures used last year. The economy shrank 6.2%, the sharpest fall since record began, but started to grow again at the end of last year. Read more...

Banks, insurers and investment companies will have new products scrutinised as they are developed, under a tough regime being formulated by the Financial Services Authority reports The Times.

Lord Turner of Ecchinswell, the FSA chairman, gave the first hints of the new approach yesterday as he lamented the failure of the regulator to anticipate and head off past consumer scandals.

In future FSA officials would be scrutinising the product design and development operations of member companies, as well as - as now - the marketing and distribution of products. Read more...

Liberal Democrat leader Nick Clegg has called for a £10bn "down payment" in the next financial year in a bid to cut the UK's record post-war deficit says the BBC.

Mr Clegg told the Independent he hopes this would calm financial market nerves if there is a hung Parliament. The BBC understands he will make clear at his party's spring conference that he favours paying down debt entirely by cutting spending rather than tax rises. Read more...

The US government recorded a budget deficit of $221bn (£147.6bn) in February - the largest monthly deficit in its history according to the BBC. The total deficit since the beginning of the fiscal year in October now stands at $651.6bn, the figures from the US treasury show. That puts it on track to beat last year's record annual budget deficit of $1.4tn.

Treasury Secretary Timothy Geithner called the deficit "unsustainable". However, he maintained that running the deficit was helping the US continue its recovery from the recession in the short-term. Like the UK, the US is suffering from a fall in tax receipts due to tough economic conditions, while relying on increased spending to drive the recovery. Read more...