EU Gambling, Mortgage-Broker Extinction, U.K. Bank Levy Rate: Compliance
Online gambling companies including Bwin Interactive Entertainment AG (BWIN) and Unibet Group Plc (UNIB) will demand pan-European Union rules as regulators consider a possible overhaul of the EU’s patchwork of national gaming laws.
The EU’s top court in recent years has examined a series of cases brought by betting companies including Bwin, Ladbrokes Plc (LAD) and Betfair Ltd. over whether it is legal for state monopolies to block them from operating freely across the 27-nation region. Online gambling firms have also called on the EU to take action against what they say are unjustified national restrictions on cross-border online gambling.
Since 2006, the Brussels-based commission has probed whether national rules in states such as Germany, France and Italy comply with EU laws. Most of these investigations are ongoing.
The EU agency said today’s consultation will “determine if the differing national regulatory models for gambling can continue to coexist, and whether specific action may be needed in the EU for that purpose.”
Banks, Insurers Resist U.S. ‘Funeral Plan’ Crisis Breakup Rules
Banks and insurers are pushing back against U.S. rules that will require some financial companies to show how they can be dismantled during a crisis.
Under the so-called living will plans, firms might have to divide themselves into separate entities that could be sold if the company were in danger of failing. Such breakup plans are costly and would hurt financial companies by forcing them into illogical management structures, industry groups say.
Regulators say they need an orderly wind-down mechanism to avoid a repeat of the panic that gripped markets such as Lehman Brothers Holdings Inc. (LEHMQ) floundered in 2008. Proposed rules on living wills, due from the Federal Reserve and Federal Deposit Insurance Corp. as soon as next week, are part of the debate between Wall Street and Washington over how tightly firms should be supervised and how the markets will react to such scrutiny.
Lobby groups including the American Bankers Association are voicing concern to regulators in a series of comment letters seeking to limit the impact of the new rules. FDIC Chairman Sheila Bair is defending the need for a detailed rule.
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Mortgage Brokers Fear Extinction Under New Rules on Commissions
Independent mortgage brokers are mounting a last-ditch effort to halt new federal rules banning higher commissions for subprime loans and requiring them to pay salaries to loan officers.
Brokers, who process mortgage applications and rely on lenders such as banks to provide the financing, say their industry depends on paying officers commissions tied to the interest rate or points of the mortgages they originate.
The brokers say that if the rules go into effect, the only survivors will be large lenders including Bank of America and Wells Fargo & Co. (WFC) who have their own loan officers and can afford to pay them salaries.
The Federal Reserve wrote the new rules, scheduled to go into effect April 1, to remove financial incentives for loan officers to steer customers into high-interest mortgages such as subprime loans.
The National Association of Mortgage Brokers and the NAIHP are seeking an injunction against the rules in federal court. They are also lobbying and have convinced lawmakers in the House and Senate to write letters to the Fed seeking a delay.
The Federal Reserve has declined to comment on the lawsuit.
The battle is the latest effort by mortgage brokers to protect their industry after the collapse of subprime lending, which was helped drive loan volume during the housing bubble that began to burst in 2007.
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Egypt Central Bank to Speed Up Process on Recovery of Bad Loans
Egypt’s central bank will review its laws to speed up the process of recovering non-performing loans.
The Cairo-based central bank will also tighten banking regulation in the Arab country, it said in an e-mailed statement yesterday. The new rules will be drafted within four months, it said.
EU Seeks Views on Rules for State Support for Public Services
European Union regulators are seeking views on changes to rules for how governments can fund public services, such as transport and broadcasting, the European Commission said yesterday.
The EU’s antitrust agency must approve large subsidies from states to companies and can demand repayment if its rules aren’t followed. It said it will publish details of planned changes in July and the new rules would take effect in November.
Italy to Allow Some Companies to Delay Shareholder Meetings
The Italian government passed a decree law yesterday allowing some companies to delay their annual shareholder meetings beyond regulated deadlines, according to an e-mailed statement.
The decree comes one day after France’s Groupe Lactalis agreed to boost its stake in Italian dairy Parmalat SpA (PLT) to 29 percent, just short of the 30 percent threshold that requires a full takeover bid under Italian law. Finance Minister Giulio Tremonti has said the government is studying new measures to prevent foreign takeovers of key Italian companies.
The decree would allow Parmalat to delay its shareholder meeting scheduled for next month, when a new management list proposed by Lactalis is set to be voted. A spokeswoman from Parmalat didn’t have any immediate comment on the decision.
Juncker Says Germany Has an Issue With ESM Paid-In Capital
Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said Germany has an objection to the proposal on paid-in capital for a permanent bailout facility to be established in 2013.
Chancellor Angela Merkel will press for changes to the pay- in period for the European Stability Mechanism, which will open in mid-2013, a German government official said yesterday in Berlin. Payment installments for the ESM should be prolonged to ease the impact on the German budget, the official said on condition of anonymity because the discussions are private.
Germany isn’t questioning the 80 billion euros ($113 billion) of paid-in capital to be made available to the ESM fund, the official said.
Juncker said he will report to the March 24-25 summit of EU leaders in Brussels on the March 21 meeting of finance ministers that hammered out the ESM proposal.
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U.K. Chancellor Osborne Raises Bank Levy Rate for Next Year
Britain’s Chancellor of the Exchequer George Osborne raised the bank levy rate for next year to offset a planned cut in corporation tax.
The levy will rise to 0.078 percent from January and will raise an additional 100 million pounds ($162 million), according to the Treasury. Corporation tax will be reduced by 2 percentage points next month and by 1 percentage point in each of the following three years, Osborne said while delivering his budget to the House of Commons in Westminster yesterday.
Last month, Osborne increased a tax on U.K. bank balance sheets to raise 2.5 billion pounds in the current financial year ending in April.
The revenue will pay for a program to provide interest-free loans for first-time homebuyers, Osborne said.
Libor Probe Spurs Witness Call-up at Citigroup, Deutsche Bank
Citigroup Inc. (C), Deutsche Bank AG, Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) have been asked by U.S. regulators to make employees available to testify as witnesses in a probe of potential interest-rate manipulation, two people briefed on the plans said.
The banks, members of the panel that sets the interbank offered rate known as Libor, were asked to appear voluntarily for the interviews in London in April with the U.K. Financial Services Authority, the people said, speaking on condition of anonymity because the proceedings are confidential. The people didn’t say who from the banks would testify.
The U.S. Department of Justice, Securities and Exchange Commission and Commodity Futures Trading Commission may be investigating whether banks colluded to artificially reduce Libor, another person with knowledge of the probe said. U.K. regulators often cooperate with their U.S. counterparts in enforcement probes.
Officials from Frankfurt-based Deutsche Bank, Germany’s biggest bank; Charlotte, North Carolina-based Bank of America, the largest U.S. lender by assets; New York-based Citigroup, the U.S. bank that received the biggest taxpayer bailout; and New York-based JPMorgan, the second biggest U.S. lender by assets, declined to comment.
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Goldman’s Blankfein Says Gupta Violated Firm’s Policies
Lloyd Blankfein, chief executive officer of Goldman Sachs Group Inc. (GS), testified at Galleon Group LLC co-founder Raj Rajaratnam’s insider-trading trial that former Goldman board member Rajat Gupta violated the firm’s confidentiality policies.
Blankfein took the stand as a witness for the prosecution before U.S. District Judge Richard Holwell in Manhattan federal court yesterday morning. He said Gupta violated Goldman policies when he revealed details of the firm’s strategic planning discussions to Rajaratnam in a wiretapped phone call in July 2008.
Prosecutors called Blankfein to help build their case that Rajaratnam traded on inside information about Goldman Sachs he obtained from Gupta. On the stand, Blankfein identified a photo of Gupta and said Gupta was on Goldman’s governance, audit and compensation committees.
John Dowd, Rajaratnam’s lawyer, said he doesn’t intend to question Blankfein about any pending investigations related to Goldman Sachs. He said he may recall Blankfein later in the trial as a witness for the defense.
Rajaratnam has denied wrongdoing.
The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
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UBS Hid Madoff Role in Fund From French Investors, Lawyer Says
UBS AG (UBSN) misled French investors by concealing the role Bernard Madoff played in handling LuxAlpha Sicav-American Selection Fund assets and should reimburse their losses, their lawyer told a Paris court yesterday.
UBS, Switzerland’s biggest bank by client assets, should have disclosed in the LuxAlpha prospectus that the fund’s assets were being invested through Madoff’s firm, Jean-Pierre Martel said. The investors learned of the connection after Madoff was arrested in 2008 for fraud, he said.
The investors’ suit is one of many against UBS for its role as custodian for LuxAlpha, which invested 95 percent of its assets with Madoff and is being liquidated. Irving H. Picard, the trustee liquidating Madoff’s firm, sued for $2.6 billion last year, claiming UBS aided the Madoff fraud partly by setting up feeder funds like LuxAlpha.
UBS “never, never distributed the slightest false information,” said Denis Chemla, a lawyer for the Zurich-based bank. UBS, as the custodian, didn’t have to disclose in the prospectus how the assets were ultimately invested as “the sole purpose of this fund was to invest in the American market with Madoff.”
The investors are seeking to recover the 30 million euros ($42 million) they lost.
Almunia Sees ‘Significant’ Progress on Spain Bank Restructuring
European Union Competition Commissioner Joaquin Almunia said Spain has made “significant” progress on restructuring its banking system.
“The mechanism for restructuring and reforming the Spanish banking industry, including the cajas, is operating, and there have been very significant steps,” Almunia said at a question- and-answer session in Madrid today. “We are in the process of recapitalizing those institutions. We are doing what has to be done.”
Ackermann Says He Remains ‘Strongly Opposed’ to List of SIFIs
Deutsche Bank AG (DB) Chief Executive Officer Josef Ackermann said he remains “strongly opposed” to plans by regulators to draw up a list of banks deemed systemically relevant, also known as SIFIs, and to introduce extra capital surcharges for such lenders.
Ackermann made the remarks at a speech in Frankfurt yesterday.
The definition of a SIFI constantly changes and there’s an incentive to manipulate lists of SIFIs for political reasons to protect a country’s own national champions, he said in the speech.
Ackermann also said new regulations are already having and will have a “material impact” on banks’ profitability and balance sheets. Lower return on equity at banks may mean investors will choose not to buy banking stocks and invest in other industries instead, he said.
Internet Firms Face Too Many Privacy Rules, U.S. Official Says
Google Inc. (GOOG) and other U.S. Internet companies may be hampered by a multiplicity of data protection rules in Europe and beyond that are “potential barriers to the free flow of information,” a U.S. official said.
Daniel Weitzner, an Internet policy official in the U.S. Commerce Department, said regulators don’t always recognize companies’ efforts to set basic data protection standards that are adequate to stem abuses of privacy.
“It’s awfully difficult to adapt privacy practices for a hundred or more different” jurisdictions, Weitzner told reporters in Brussels the day after a meeting with Viviane Reding, the European Union’s justice commissioner.
Google, based in Mountain View, California, and Palo Alto, California-based Facebook Inc. are among several Internet companies under scrutiny in the EU for possible privacy-rule breaches over their use of personal data.
Matthew Newman, a spokesman for Reding, said “the EU and the U.S. should work together,” without giving any details.
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