China’s banking regulator set capital targets for the nation’s five biggest lenders above the minimum 11.5 percent ratio amid concern that credit risks may rise, three people with knowledge of the matter said.
Industrial & Commercial Bank of China (1398) Ltd., the world’s largest lender, and three rivals were told last month to maintain capital adequacy ratios of at least 11.8 percent in 2011, one of the people said, declining to be identified as the plan isn’t public. Agricultural Bank of China Ltd. (1288), the nation’s fourth-biggest, should target 11.7 percent, two of them said.
The move may help China’s policy makers curb loan growth after inflation accelerated and real estate prices rose following a $2.7 trillion two-year credit boom. The central bank this month raised the amount of deposits lenders must set aside to the highest in at least two decades, while the banking regulator ordered a new round of stress tests on property loans.
The China Banking Regulatory Commission “has set differentiated targets and ‘triggers’ on the five banks’ capital levels, with the target for all the banks’ capital adequacy ratios being no lower than the 11.5 percent minimum,” the watchdog said in an e-mailed response to questions April 24.
The regulator also set differentiated targets last month including loan-to-deposit ratios for the five banks, which include China Construction Bank Corp. (939), Bank of China Ltd. (3988) and Bank of Communications Co., following discussions with the lenders, the people said. The watchdog plans to amend those requirements every year, they said.
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Decades-Old Chemical Laws Must be Revised for Kids, Doctors Say
Environmental regulators should be able to demand more safety data about toxic chemicals and halt sales if the products are suspected of harming children or pregnant women, the American Academy of Pediatrics said.
The doctors group, based in Elk Grove Village, Illinois, called yesterday for an overhaul of a 1976 statute that requires companies to notify the U.S. Environmental Protection Agency before manufacturing the products and to test them when concerns arise. The group’s policy statement is published in the journal Pediatrics.
Chemical companies such as Dow Chemical Co. (DOW), based in Midland, Michigan, produce or import about 27 trillion pounds of products each year, the statement said. Children’s smaller bodies take in proportionately more toxins that may be in air or water than adults, and changes as they grow make them more vulnerable to chemical exposures, according to the academy.
The academy wants testing to include studies on reproductive and developmental toxicity as well as post-market surveillance on the effects of a chemical. They also call for additional federal research to evaluate the effects of child exposure to chemicals.
Congress didn’t act when the EPA made six suggestions in 2009 about modifying the Toxic Substances Control Act of 1976.
The EPA will lose $1.6 billion as part of a deal between President Barack Obama and congressional leaders to produce $38 billion in spending cuts for the rest of the 2011 fiscal year, according to legislation made public April 12.
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U.K. Fraud Office Future Said to Create Cabinet-Level Split
The future of the U.K. Serious Fraud Office, which prosecutes Ponzi schemes and corruption, has created a rift among government leaders with some officials giving late support to its bid to remain as a stand-alone agency, according to two people familiar with the talks.
The solicitor general supports SFO Director Richard Alderman’s plan to preserve the agency and give it expanded powers, said the people, who declined to be identified because the talks are private. The Home Office, in a report as soon as next month, may recommend abolishing the SFO and combining part of it with the Crown Prosecution Service, the people said.
The SFO has been under siege since Chancellor of the Exchequer George Osborne announced plans to fold the department into an economic crime agency last year. While Osborne dropped his initial plans for a white-collar fraud prosecutor that also took insider-trading enforcement from financial regulators, the SFO’s future is still in doubt.
Home Office spokesman Andrew Bell said that no decisions have been made on the crime agency or on whether the Home Office will propose any changes. An announcement won’t come until after local elections next month, he said. The Home Office is the lead agency for counter-terrorism, policing and crime policies.
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Korean Banks Asked to Lower Bad-Loan Ratio to Below 1.5 Percent
South Korean banks will be asked to lower the ratio of bad loans to outstanding credit to less than 1.5 percent this year, from 1.7 percent last year, the Financial Supervisory Service said today in an e-mailed statement. The regulator also asked lenders to maintain a sufficient amount of reserves against possible bad debt, the statement said.
UTI Worldwide Latest Stock Halted by Circuit Breakers
UTI Worldwide Inc. (UTIW) became the latest stock to be interrupted by circuit breakers when trading in the stock was halted yesterday.
The curbs were created after the 20-minute rout on May 6, 2010, erased $862 billion from the value of U.S. shares before prices rebounded. The pause lasts five minutes for Standard & Poor’s 500 Index and Russell 1000 Index companies as well as more than 300 exchange-traded funds when they rise or fall at least 10 percent within five minutes.
New rules proposed by exchanges on April 5 would shift the market to a limit-up/limit-down system that prevents shares from moving more than a certain amount.
For a table listing the securities that have been halted by U.S. circuit breakers since they were implemented in June 2010, according to data compiled by Bloomberg, click here.
Apple, Google Privacy Meeting Sought by Illinois’s Madigan
Apple Inc. (AAPL) and Google Inc. (GOOG) executives were asked to meet with Illinois Attorney General Lisa Madigan to discuss reports their products collect, store and can relay information about their users’ locations.
Madigan wrote to both companies asking what information they store, its purposes and for how long, according to a statement issued yesterday by her office.
Apple, based in Cupertino, California, is the maker of iPhone mobile telephones and iPad computer tablets, each of which was cited in the attorney general’s statement, as was the Android software developed by Google for use in mobile phones.
Aaron Zamost, a spokesman for Mountain View, California- based Google, didn’t immediately reply to voice-mail and e-mail messages seeking comment. Steve Dowling, a spokesman for Apple, didn’t immediately return a call seeking comment.
MetLife Subpoenaed by California in Probe of Unpaid Benefits
“MetLife failed to pay life insurance policy benefits to named beneficiaries or the state even after learning that an insured had died,” California Insurance Commissioner Dave Jones said yesterday in a statement, citing preliminary findings from a state audit on the New York-based company.
Jones and California Controller John Chiang are widening a probe into whether life insurers held funds that were owed to beneficiaries or, in cases when they couldn’t be located, to the state. Jones demanded in the subpoena that MetLife send a representative to a May 23 hearing in Sacramento into the insurer’s conduct.
Christopher Breslin, a spokesman for MetLife, didn’t immediately return a call seeking comment.
Supreme Court Won’t Expedite Review of U.S. Health-Care Law
The U.S. Supreme Court yesterday declined an opportunity to review President Barack Obama’s health-care overhaul, rejecting Virginia’s bid to have its challenge to the law considered on an unusual fast-track basis.
Virginia, one of 28 states suing to invalidate the measure, urged the justices to schedule arguments without waiting for the four appeals courts that are poised to consider the law. The states say Congress overstepped its authority by requiring Americans to either obtain insurance or pay a penalty.
The rebuff doesn’t preclude the Supreme Court from hearing the case later, perhaps even before the 2012 election. For the time being, yesterday’s action is a victory for the Obama administration, which urged the justices not to grant Virginia’s bid for a hearing.
The step sought by Virginia, known as certiorari before judgment, is one the court has taken only a handful of times.
The Obama administration argued that the health-care dispute doesn’t rise to the level of urgency required for an expedited hearing, in part because the disputed provision doesn’t take effect until 2014.
U.S. District Judge Henry Hudson ruled in December that Congress’s authority over interstate commerce didn’t give it the power to enact the insurance mandate. A federal appeals court based in Richmond, Virginia, is scheduled to hear the Obama administration’s appeal of that ruling May 10 -- alongside an appeal of a different judge’s decision upholding the law.
Another appeals court, based in Cincinnati, will consider the issue June 1, and a third, based in Atlanta, will hear arguments June 8 in a case involving the other 26 states challenging the law. An appeals court in Washington will consider the matter later this year.
The Supreme Court case is Virginia ex rel. Cuccinelli v. Sebelius, 10-1014.
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Rajaratnam’s Fate Now Rests With Bookkeeper, Nurse, Teachers
Galleon Group LLC co-founder Raj Rajaratnam’s fate rests with jurors including a retired bookkeeper, a nurse and a customer-service representative for the New York subway system, as deliberations began at his insider-trading trial.
U.S. District Judge Richard Holwell in Manhattan yesterday instructed jurors on the law of conspiracy and securities fraud and asked the panel to weigh the evidence presented at the trial of Rajaratnam, who prosecutors said was worth at least $1 billion the day of his arrest in October 2009.
The deliberations follow six weeks of trial testimony in the largest crackdown on hedge-fund insider trading in U.S. history. Jurors heard parts of four dozen conversations secretly recorded by the U.S. government of Rajaratnam talking to fellow traders, business executives and corporate consultants.
Rajaratnam, 53, who faces 14 criminal counts, is accused of gaining $63.8 million from tips leaked by corporate insiders and hedge-fund traders about a dozen stocks, including Goldman Sachs Group Inc. (GS)
The Sri Lankan-born money manager denies wrongdoing, saying he based his trades on research including analyst reports, news accounts and stock trading trends.
The jurors hail from Westchester County, the Bronx and Manhattan.
The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
Microsoft Appeal of 899 Million Euro Fine Will Be Heard May 24
Microsoft Corp. (MSFT)’s appeal of an 899 million-euro ($1.3 billion) European Union fine for failing to comply with an antitrust ruling will be heard on May 24.
The EU General Court, the 27-nation region’s second-highest tribunal, will hear oral arguments in the case next month, according to the court’s online calendar. Microsoft, the world’s largest software maker, is seeking to overturn or cut the fine levied by the European Commission in 2008.
The commission in 2004 found that Microsoft overcharged for patent licenses that rivals needed to connect products to the Windows operating system. The additional fine in 2008 brought the total penalty against Redmond, Washington-based Microsoft to 1.68 billion euros.
Microsoft was the first company in 50 years of EU competition policy to face a penalty for failing to comply with an EU order.
Continuing Oil Company Tax Subsidies Is ‘Crazy,’ Carney Says
Continuing about $4 billion in tax subsidies for oil companies would be “crazy,” White House press secretary Jay Carney said.
President Barack Obama on April 21 reiterated his call for an end to oil company tax breaks, saying that “instead of subsidizing yesterday’s energy sources, let’s invest in tomorrow’s.” Obama also said a Justice Department probe will examine the role of “traders and speculators” in rising gasoline prices.
RCM Asia Pacific’s Konyn and ISI’s Straszheim on China Banks
Mark Konyn, chief executive officer at RCM Asia Pacific Ltd. talked about the outlook for Chinese banks and the central bank’s announcement of capital requirements. He spoke with Susan Li on Bloomberg Television’s “First Up.”
Donald Straszheim, senior managing director at International Strategy & Investment Group, talked about China’s economy, bank-capital targets and central bank policy, and his expectation on whether the bank will raise rates.
He spoke with Mark Crumpton on Bloomberg Television’s “Bottom Line.”
For the Konyn video, click here.
For the Straszheim video, click here.
Comings and Goings
Draghi Said to Be Seen by Sarkozy as Trichet’s Successor at ECB
French President Nicolas Sarkozy considers Bank of Italy Governor Mario Draghi the leading candidate to succeed Jean- Claude Trichet at the helm of the European Central Bank, a person familiar with the matter said.
Support from Sarkozy after signals from German officials that Draghi is their preferred banker would add momentum to a campaign that has been pushed by Italian government officials. The French leader may disclose his views as early as today at a briefing in Rome with Italian Prime Minister Silvio Berlusconi, a Sarkozy aide told reporters last week.
The key decision maker, German Chancellor Angela Merkel, has yet to tip her hand. With a late-June deadline looming, the appointment may become entangled in German opposition to bailouts.
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To contact the editor responsible for this report: Michael Hytha at firstname.lastname@example.org.