Private-Trade Rules, Stress Tests, HAMP Suit: Compliance
The U.S. Securities and Exchange Commission is in the “very early stages” of reviewing rules on trading of shares in closely held firms such as Facebook Inc. and Twitter Inc., Chairman Mary Schapiro said April 8.
“What we have to balance at the end of this process is capital formation and its importance to companies with investor protection and the need for investors to have the information that’s important for them to make informed business decisions,” Schapiro told reporters at the Society of American Business Editors and Writers conference in Dallas.
Among the rules under consideration is one that would require companies with 500 or more shareholders to file public financial statements, Schapiro said in an April 6 letter to U.S. Representative Darrell Issa, a California Republican. Issa, who leads the House Oversight and Government Reform Committee, asked Schapiro last month to clarify the SEC’s position on the rules, saying some of them might be hindering firms’ ability to grow.
U.K. Should Seek Some Division of Consumer Banking, CBI Says
The British government’s Independent Commission on Banking should recommend banks separate parts of their consumer divisions to enable lenders to operate in a financial crisis, the U.K.’s biggest business lobby group said.
“Forcing banks to split different business lines into separate subsidiaries could result in banks being broken up by the back door,” Confederation of British Industry Director General John Cridland said in a statement April 8. “But ring- fencing critical operational services such as payment systems could help ensure they can continue to operate in a crisis.”
The commission may recommend banks ring-fence their consumer units and separate payment systems from other banking operations, people familiar with the situation have said. The panel will publish its interim recommendations on April 11.
Lagarde Presses EU for Position Limits on Commodities Trading
French Finance Minister Christine Lagarde called for stricter curbs on trading of commodity derivatives, including position limits, following concerns that speculation is driving up prices for raw materials.
“On commodities, we need to be as rigorous and demanding as we are for other financial derivatives,” Lagarde told reporters April 9 at a meeting of European Union finance officials in Godollo, Hungary, where the issue was being discussed. “We need mechanisms that produce good regulation. That means position limits so that market makers can’t hold positions that are too big.”
Lagarde is seeking a common position on the matter for EU countries before a meeting of Group of 20 finance ministers in Washington this week and of energy officials in Ankara on April 25. French President Nicolas Sarkozy has made regulation of commodity trading one of his priorities during France’s leadership of the G-20 in 2011. Sarkozy has stepped up his push for tougher commodities-trading rules this year as surging food and oil prices spur inflation, hurting purchasing power at a time when wage growth has slowed or stagnated in France and other European countries.
Johnson & Johnson (JNJ) to Pay $70 Million to Resolve Bribery Claims
Johnson & Johnson, the world’s second-biggest seller of medical products, will pay $70 million to settle U.S. claims that it bribed doctors in Europe and paid kickbacks in Iraq to sell products and win contracts.
Subsidiaries of J&J since 1998 paid bribes to doctors and hospital administrators in Greece, Poland and Romania, the Securities and Exchange Commission and Justice Department said April 8 in filings at U.S. District Court in Washington. The company also made illegal payments to Iraqi officials to win contracts under the U.N. Oil for Food program, the SEC said.
The company agreed to resolve the claims without admitting or denying the SEC’s allegations.
J&J Chairman and Chief Executive Officer William C. Weldon said in a statement April 8 that the company is “deeply disappointed by the unacceptable conduct that led to these violations” and has made “significant changes since then to improve our compliance efforts.”
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Stress Tests Toughened as 90 Banks to Face EU Capital Exams
European regulators will use a tougher measure of capital on 90 lenders in this year’s stress tests following criticism last year’s weren’t stringent enough.
Banks will be expected to maintain a Core Tier 1 capital ratio of at least 5 percent under the stress-test scenarios, the European Banking Authority said on its website. Lenders won’t be allowed to use some types of non-voting capital permitted by German bank supervisors, known as silent participations, to calculate the results, the EBA said.
Banks that fall below the EBA’s 5 percent level will have to arrange capital injections with their national supervisors.
Last year’s tests, which allowed national regulators to use their own capital definitions, were criticized by bank analysts for not being tough enough. Lenders in the 27-nation region were shown by regulators to need only 3.5 billion euros ($5 billion) of new capital, about a 10th of the lowest analyst estimate.
At least five banks were added to the list of those examined last year. Ireland’s Irish Life and Permanent Plc, Norway’s DnB NOR Bank ASA, Nykredit Bank from Denmark, Slovenia’s Nova Kreditna Banka Maribor and Oesterreichische Volksbank AG from Austria will be tested for the first time. The EBA is due to announce the results by the end of June.
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Lloyds Said to Hire McKinsey to Plan Future After Bank Report
Lloyds Banking Group Plc (LLOY) hired McKinsey & Co. to advise on possible asset sales and restructuring after the U.K. government-appointed Independent Commission on Banking reports this week, according to two people with knowledge of the matter.
The consulting firm is providing advice on ways the 41 percent state-owned bank might reorganize its operations as the biggest mortgage lender and provider of checking accounts in the U.K., the people said, declining to be identified because the discussions are private. Other U.K. banks have held meetings with Treasury ministers and officials in recent weeks, a third person said.
The commission, led by John Vickers, a former chief economist at the Bank of England, will announce its interim findings today after examining possible measures to improve competition and make the financial system more resilient in the event of a banking crisis. It will provide a final report to Chancellor of the Exchequer George Osborne in September.
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U.S. Chamber Says Dodd-Frank Swaps Deadlines Should Be Delayed
Congress should pass legislation extending the July deadline under the Dodd-Frank Act for most new derivatives regulations to be completed, 19 industry trade-associations told lawmakers.
The U.S. Commodity Futures Trading Commission and Securities and Exchange Commission need “sufficient time to develop a transparent and orderly system that minimizes unintended consequences,” the associations wrote April 8 to the top Democrats and Republicans on the Financial Services and Agriculture committees in the House and the Agriculture and Banking committees in the Senate.
Gary Gensler, CFTC chairman, said the agency will miss some of the mid-July deadlines. Gensler told House lawmakers on March 31 that he didn’t think Congress needs to push back the date because of “latitude” that Congress has already given the agency for phasing in rule implementation.
RBS Said to Delay FSA Report Into Lender’s Near-Collapse
Royal Bank of Scotland Group Plc (RBS) is delaying the publication of a Financial Services Authority report into the lender’s near-collapse amid a dispute about its contents, two people with knowledge of the matter said.
The FSA, which planned to publish the report at the end of this month, needs to get approval from all the people it interviewed confidentially during the investigation because no enforcement action was taken, said one of the people, who declined to be identified because the talks are private. Former and current employees say the report contains factual inaccuracies, the other person said, without giving details.
The FSA said in December it wouldn’t take action against former RBS executives or publish the contents of its review of RBS’s purchase of ABN Amro Holding NV, a decision that forced the lender to seek the world’s biggest government bailout. The FSA later reversed its decision after pressure from lawmakers.
Sky News reported on the delay April 8.
Lloyds Attacks Committee Plan to Expand Branch Sales
Lloyds Banking Group Plc, Britain’s biggest provider of checking accounts, criticized plans by the Independent Commission on Banking to make it divest more than the 600 branches it’s selling to meet European state aid rules.
The plan “would not be in the interest of our customers,” Lloyds said in a statement today. Lloyds said in the statement that the option appears to be based on “limited evidence” and “may paradoxically potentially delay a new competitor coming into the U.K. market.”
The commission today recommended that Lloyds should sell “substantially” more branches to bolster competition in the British banking industry, without specifying how many.
Lloyds became the U.K.’s biggest provider of checking accounts and mortgages with its takeover of HBOS Plc during the 2008 financial crisis. The bank is seeking a buyer for outlets to comply with a 2009 European Union ruling after it received more than 20 billion pounds ($32.7 billion) in government aid.
“Although Lloyds is required to divest a package of assets and liabilities to satisfy conditions for state aid approval set by the European Commission, this divestiture will have a limited effect on competition unless it is substantially enhanced,” the commission said in today’s report.
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Portugal Is Pressed for Sustainable Cuts to End Euro Crisis
Europe’s wealthy countries looked to Portugal to resolve the year-old euro debt crisis by coming up with “sustainable” deficit cuts to pave the way to an 80 billion-euro ($116 billion) bailout.
Confident that Portugal will be the last aid seeker, German Finance Minister Wolfgang Schaeuble pushed the feuding political parties in Lisbon to unite behind an austerity package in the thick of an election campaign.
“It’s up to Portugal to decide,” Schaeuble told reporters April 9 at a meeting of European finance officials in Godollo, Hungary. Portugal “has to deliver sustainable measures for reducing the deficit.”
Finance ministers agreed yesterday to send European Commission, European Central Bank and International Monetary Fund officials to Lisbon this week to start negotiations over the package, with the goal of wrapping it up on May 16, three weeks before Portugal’s June 5 election.
In a sign of how Portugal has surrendered control of its fate, the European Union will intrude on the political campaign by trying to broker a cross-party budget-cutting deal between Socrates and the opposition party led by Pedro Passos Coelho.
Anibal Cavaco Silva, the largely ceremonial Portuguese president, said he will play a role in forging an initial accord on an economic overhaul that will be followed up by the future government.
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Bank of America Asks Judge to Throw Out Loan-Modification Case
Bank of America Corp. (BAC), accused in a lawsuit of violating obligations to homeowners seeking to modify mortgage loans and avoid foreclosure, asked a federal judge to throw the case out.
Borrowers say the bank “systematically failed” to comply with a U.S. government program aimed at stemming foreclosures and violated contracts for modifying loans, according to a complaint in federal court in Boston that consolidates cases from across the country.
Bank of America, the biggest U.S. lender by assets, asked U.S. District Judge Rya Zobel at a hearing April 7 to dismiss the complaint. The bank argued that not all homeowners are eligible for inclusion in the government’s Home Affordable Modification Program, or HAMP, and that it isn’t required to permanently modify all loans that are eligible.
The complaint consolidates 26 lawsuits from around the country with another 10 to be added, Gary Klein, a lawyer for the plaintiffs, said in an interview. If Zobel dismisses the complaint, all the lawsuits would be thrown out, Klein said after the hearing.
Bank of America isn’t complying with obligations for evaluating borrowers and modifying loans, the plaintiffs said in court papers. Citing unidentified former employees as for some of its allegations, the complaint accuses the Charlotte, North Carolina-based bank of breaching HAMP requirements, misleading homeowners and putting processes in place to avoid modifying loans because it has financial incentives to do so.
The case is In re Bank of America Home Affordable Modification Program (HAMP) Contract Litigation, 10-md-02193, U.S. District Court, District of Massachusetts (Boston).
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U.K. Management Consultant Denies Insider-Trading Charges
Rupinder Sidhu, a management consultant, pleaded not guilty to 23 counts of insider trading and one count of money laundering at a London court.
Sidhu is charged with dealing in securities of companies such as Julius Baer Group Ltd. (BAER), Swatch Group AG (UHR), Reed Elsevier Plc (REL) and Michael Page International Plc (MPI), while knowing London hedge fund AKO Capital LLP planned transactions in the same shares, according to the indictment. The trades took place in 2008 and 2009.
Judge Nicholas Loraine-Smith said the trial should start on Nov. 28. It’s scheduled to last as long as three weeks. The U.K’s Financial Services Authority brought the case.
Hilton Says U.K. Report Encourages Banks to Act Riskier
Andrew Hilton, director of the Centre for the Study of Financial Innovation, talked about the findings from the U.K.’s Independent Commission on Banking. He commented on capital, ring-fencing, and bank failures, among other topics.
He spoke with Mark Barton on Bloomberg Television’s “On The Move.”
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G-20 Needs Common Rules for Systemic Banks, EU’s Rehn Says
The European Union is pushing for a common international approach to so-called systemically important banks whose collapse could undermine financial stability.
The Group of 20 countries needs a “consistent framework” for such large lenders, EU Economic and Monetary Affairs Commissioner Olli Rehn said April 9 after a meeting of European finance officials in Godollo, Hungary. ”We must ensure a level playing field.”
The G-20 said in November that lenders that threaten the wider financial system in case of collapse should face tougher capital rules to help them to cover any losses. The requirements would go beyond global standards, known as Basel III, that were agreed on by governments and regulators last year and apply to all internationally active banks.
Past commitments at the G-20 “have to be implemented,” Rehn said.
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