Royal Bank of Scotland is considering approaching the market for extra money to avoid handing more control to the government. The bank, now 70% owned by taxpayers, is preparing to join the government’s Asset Protection Scheme (APS) to stop some toxic investments going bad. But it is also considering asking shareholders to invest further to prevent the government’s stake rising to a possible 84.5% if it insured all its bad assets with the APS.

According to official figures released on Friday, the UK government posted a record budget deficit for an August as the recession continues to bite into government tax receipts, The Office for National Statistics said the public sector net cash requirement (PSNCR) stood at £10.379 billion in August. That was lower than the 12 billion pounds expected by analysts but still twice the level of the same month a year ago and a record for the month of August. July’s PSNCR was also revised up by some £1.5 billion. The government’s preferred accruals-based measure, public sector net borrowing came in at £16.119 billion s, also weaker than expected and a record high for August, versus £9.876 billion pounds in 2008.

The flow of net lending to companies fell in July by the largest sum on record, according to a statement issued by the Bank of England on Friday. The figures provide further indication that more action may be needed to get credit flowing in the UK economy.

On a more positive note, mortgage approvals by major UK lenders rose in August for the seventh consecutive month to 57,000 from 53,000 in July. The net flow of lending to UK businesses fell £15.5 billion in July after a £3.6 billion pounds fall in June, making for the largest single decline since 1998.

UK Business Secretary Peter Mandelson has called on the European Union to intervene to prevent governments using state aid as a bargaining chip to protect jobs during Magna International Inc.’s takeover of General Motors Co.’s EU plants. Mandelson has joined the list of European politicians concerned that a German plan to provide €3 billion in loan guarantees to support the GM-Magna deal will sway the company. As the carmaker struggles with overcapacity, Magna has said it plans to cut about 10,500 jobs.

According to senior officials at the State Bank of India,(SBI) India’s largest lender, are looking at acquisitions of up to $1 billion in the UK and expect to maintain a 40 per cent growth rate in its UK business.

The bank’s overseas business plans, expected to be driven by both expansion and acquisitions, include the opening of 40 overseas branches, according to SBI chairman OP Bhatt. The bank was looking at all regions of the World, including the UK, for acquisitions. Besides the UK, the regions where the bank plans to open new branches include North America, Bangladesh and Nepal, where its subsidiary will set up 11 more outfits. It will open five more in branches in the UK by June next year and make London a hub for its European operations to boost international business. At present, the lender has seven branches in the UK and plan to open another, hopefully in October.Currently, the UK contributes over $3 billion to SBI’s turnover.

British Sky Broadcasting has accused the media regulator of making elementary errors in an official review of the pay-television market, and said that Ofcom, the independent regulator and competition authority for the UK communications industries, was exceeding its powers. BSkyB delivered its detailed response to the regulator’s findings that it should sell its most valuable content, including Premier League football and first-run films, to rivals at prices set by Ofcom. In the document, the broadcaster accuses the regulator of producing a financial analysis is fundamentally flawed, as well as challenging Ofcom’s right to even rule on the case, that has taken two years to decide. The pay-TV review was prompted by a complaint from four of BSkyB’s competitors, Top-Up TV, BT Vision, Virgin Media and the now defunct Setanta.

The biscuit group that makes Jammie Dodgers and Wagon Wheels, Burton’s Foods have been taken over by its lenders in a debt restructuring move that leaves Duke Street Capital, its private equity owner, nursing a considerable loss. The fate of Duke Street’s investment in Burton’s comes just over two years after its plans to close one of the biscuit maker’s factories caused the private equity group to be invited to a parliamentary inquiry for questioning.

On the FTSE Standard Life rose 1.8 per cent to 283 pence after Goldman added the insurer to its “buy” list.

Leading property stocks were higher. British Land gained 3.3 per cent to 528 pence after completing the sale of half its Broadgate development to Blackstone. Hammerson followed, gaining 2.6 per cent to 439½ pence.

The UK’s FTSE 100 index continued to climb but at a slower pace , rising 8.94 points to close at 5172.89, making for a 3.2 per cent gain for the week.

Meanwhile the FTSE 250 lost almost all of its previous day’s gains on Friday, falling 57.15 points to wrap up for the weekend on 9,306.93

The dollar fell to fresh one-year lows this week as rising risk appetite stemmed haven demand for the US currency. Continued improvement in sentiment encouraged investors to abandon the low-yielding dollar to seek higher returns elsewhere. The pound continued to lose value against the main currencies on Friday’s trading.

• Pound/US dollar 1.6271
• Pound/Euro 1.1059
• Pound/Japanese Yen 148.7878
• Pound/Swiss Franc 1.6751

Another two US banks have been closed by the federal regulator, taking the total number of American banking failures this year to 94.

The Federal Deposit Insurance Corporation (FDIC), which controls the banking sector, has shut Irwin Union Bank & Trust and Irwin Union Bank.

The move comes after their parent firm – Irwin Financial – was unable to meet an FDIC demand to boost their capital.

The failure of the two banks is likely to cost the FDIC £522 million.

The Dow Jones Industrial Average continued to move upwards towards the weekend , up 36.28 points at 9,820.2. The NASDAQ consolidated a little, up 6.11 points to 2132.86.

Gold dominated trading this week with bullion inching towards its record high of $1,030.80 a troy ounce set in March 2008.

It reached $1,023.85 on Thursday but was back to $1,012 on Friday, up 0.7 per cent on the week. It found support from dollar weakness and concerns about the outlook for inflation.

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Tags: APS, Asset Protection Scheme, Bank, Bank of England, Banking, British Economy, British Pound, British Sky Broadcasting, BskyB, BT Vision, Burton’s Foods, Currency, Dow Jones, Duke Street Capital, Economy, FDIC, Federal Deposit Insurance Corporation, Financial News, FTSE, General Motors, GM-Magna, Irwin Financial, Irwin Union Bank, Magna International Inc, Money, Money Markets, NASDAQ, Ofcom, Office for National Statistics, Peter Mandelson, PSNCR, RBS, Recession, Royal Bank of Scotland, Setanta, State Bank of India, Top-Up TV, UK Banks, UK business, UK Economy, UK government, UK Recession, US Banks, Virgin Media

The news released on Friday that the U.K. economy had contracted less than was previously estimated in the second quarter raised a few eyebrows. Recoveries in the manufacturing, auto services industries as well as increased and government spending helped mitigate the biggest slump in business investment for close to a quarter of a century.

In truth, the Gross domestic product still fell, but by less than 0.7 percent, which was 0.1 percent less than estimated, according to a review issued by the Office for National Statistics. The review also stated that the economy had shrunk by 5.5 percent for the twelve month period, the highest since records began in 1955.

It was also revealed on Friday that UK business investment has fallen by more than ten percent in the second quarter of 2009, and by 18 percent annually, which again is the largest fall in its category since 1966. Both of these less than inspiring sets of statistics are playing a major part in forcing the pound down to its lowest level for the last two months.

The Icelandic parliament has voted in favour of compensating the governments of the UK and the Netherlands more than £3 billion for those who lost money in the Icelandic online bank Icesave

The so-called Icesave bill will reimburse funds paid by the governments to compensate the 400,000 savers who lost their savings when its owner Landsbanki collapsed last year.

The bill has not met with a lot of enthusiasm by the Icelandic people, who fear that their government’s unprecedented attack of conscience might bankrupt their nation.

The deal, agreed way back in June, t was only passed after an amendment was agreed that set various limits to the payments.

Rises in mining and financial stocks helped push the FTSE 100 to its second successive monthly gain. Among the day’s most prominent risers was Lloyds Banking Group up 6.3 per cent to 111 pence. The continuing possibility that the bank will increase its share capital, by reducing its exposure to the government’s Asset Protection Scheme has pushed shares in the bank up by close to 10 percent this week.

Shares in InterContinental Hotels rose 0.5 per cent to 764 pence, driven by reports that an Emirates investment group was interested in its small portfolio of luxury hotels.

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Tags: Asset Protection Scheme, Banking, British Economy, Credit Crunch, Economy, Financial News, FTSE, Global Credit Crisis, Icesave, Investment, Landsbanki, Lloyds Banking Group, Money Management, Money Markets, Office for National Statistics, Recession, Stock Markets, UK Banks, UK business, UK Economy, UK government, UK Recession