I was hoping to get a blog done yesterday to discuss the ongoing crisis but didnt…with the news that the FSA chief has resigned due to the whistleblower comments of yesterday, I have more discuss!

In fact, rather than prattle on like so many currently do as to the why’s and wherefores, I’d like to offer another solution. Split the retail and investment banks completely…. Of course, it is likely that the investment bank is funded from the retail banking part of each Group, so whether this ever happened is open for debate. However, with banks running to the taxpayer tail between their legs, it’s about time the taxpayer demanded and got what they were after.

What is it the taxpayer wants you may ask? A secure and well run bank for starters. A return to the days when you could call in at your local branch and talk to someone who could make a decision. I recently walked into my local branch to get some old bank statements and was told I had to write off and I would be charged £30 for the pleasure! The fact that a printer was right next to my personal banker did not seem to help…

Bank customers also want a return to customer service as at least an equal to a bank’s other primary objective of making money (it is not keeping your money safe!). If a bank wishes to gamble with funds through its investment division it is quite entitled to, but not at the loss of security for its customer’s deposits. The only alternative can be that the two divisions are split, with tax payer money funding the retail bank only (and therefore its improved service) whilst the investment bank fights on it own to get itself out of the trouble it got itself into…..In this instance retail banking would not suffer.

Unfortunately this is not the case, and as a result retail banking will continue to suffer whilst the cash machine known as taxpayer funds are diverted into the investment division to prop it up (or retain the usual profit margins, commonly known as “re-capitalising”).

Businesses that are failing are left to die, as we all saw with Woolworths. Why shouldn’t that be the same for investment groups? Split the banks, nationalise the retail side until it improves, and let the investment division fight like we all have to…saying sorry to government this week is not, and should not, be enough!

As we like to do at Discover and Invest, let’s look for the solutions to our needs…

The Euro has been the major benefactor overnight as markets await a series of important data from the US and UK this week. The Dollar is broadly weaker in the run up to the Federal Reserve interest rate decision and Sterling remains low against the single currency as markets contend with more economic gloom in the UK.

Pound Sterling - UK Markets

The Pound has climbed back to the 1.5 level against the US Dollar this morning although is still sitting close to record lows against the Euro. This week is laden with important data and Sterling is likely to remain under pressure as the UK outlook remains bleak and budget deficits continue to rise.

This morning the UK government has ruled out intervention to stop the slide of the Pound, which has lost around 25% against the Euro since this time last year. As a higher yielding proxy to Sterling, the Euro is being favoured by investors at present for its perceived stability throughout the global economic crisis. This morning John Varley, the head of Barclay’s bank has admitted house prices could fall by up to 30% and the UK is only ‘halfway’ through the downturn. This is ahead of official unemployment figures on Wednesday which are expected to show a sharp increase. Lack of confidence in the UK economy is extending pressure on the Pound as it appears the recession will not be as short or shallow as initially thought. Today is light for UK data with the Bank of England inflation letter and consumer and retail price inflation figures due tomorrow. A decline in consumer and price inflation is expected as aggressive discounting and VAT reductions make goods cheaper in the run up to Christmas.

US Dollar - US Markets

The US Dollar is broadly weaker this morning ahead of the Federal Reserve interest rate decision and inflation figures due in the US this week.

A 0.5% reduction in the benchmark interest rate of 1% is expected when the FOMC meet tomorrow. The availability of liquidity is still proving a significant barrier to financial recovery and central banks are expected to keep cutting interest rates until we see and upturn in lending and more generous distribution of credit. Global stocks gained this morning as President Bush signalled the financial bail out for auto manufacturers would be swift and decisive. Lengthy or collapsed negotiations at this point could prove a hazard to market confidence and stability. Crude oil has gained, climbing to $46 a barrel ahead of production meeting on Wednesday where cuts are expected. A series of soft data is due in the US today with the consumer price index and FOMC decision likely to be the big market movers tomorrow.

Euro - European Markets

The Euro has become the ‘darling’ of currency markets and continued its ascent this morning, buoyed by market nervousness ahead of important figures from the US and UK this week. The Euro is currently trading at 0.89 versus the Pound and 1.34 versus the Dollar.

ECB President Trichet has called for financial discipline and stability this morning as Ireland has announced a €10 billion package to recapitalize the countries financial institutions. The stability of the 15 nation Euro has provided a significant degree of confidence in the currency in recent weeks and leaders have argued for continued recognition of the fiscal rules that govern the Eurozone. Producer and import prices released this morning from Switzerland show a decline for the fourth consecutive month. Today is light for data in the Eurozone with unemployment figures due tomorrow.