German Banks, EU Financial-Transaction Tax, Schapiro Grilled: Compliance

Germany’s private banks plan to cut voluntary guarantees on consumer and investor deposits, drawing on the lesson from systemic crises such as the one triggered by the collapse of Lehman Brothers Holdings Inc. (LEHMQ)

The lenders, including Deutsche Bank AG (DBK) and more than 170 others, will reduce minimum guarantees for deposits to 437,500 euros ($586,700) per account from today’s 1.5 million euros over a decade from 2015, the Berlin-based BDB private bank group said. Some 95 percent of all private-bank deposits will stay guaranteed, the group said yesterday.

New capital reserve rules that have pushed up costs since the international bank crisis in 2008 and 2009 as well as the role of the government in bailing out lenders during the turmoil, prompted the BDB to review its guarantees, Hans-Joachim Massenberg told reporters in the capital yesterday. Fears of a run on banks in October 2008 led the government to offer “unlimited guarantees” for all consumer deposits.

The German government in October 2008 created a 480 billion-euro bank bailout fund, dubbed Soffin, though it has avoided putting into law its pledge to underwrite all deposits without limit. The revamped voluntary system still has to go to a member’s vote next month.

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Compliance Policy

EU to Propose Financial-Transaction Tax, Official Says

The European Commission will soon propose a financial- transaction tax that targets a broad range of trades with low rates, a European Union official said.

The tax plan will be unveiled by Oct. 5 and will target the EU’s 2014-2020 budget cycle, said the official, who didn’t want to be identified because the proposal isn’t public yet. Algirdas Semeta, the EU taxation commissioner, is scheduled to discuss the topic on Oct. 6 with the European Parliament’s economic affairs committee.

The tax would cover financial transactions involving stocks, bonds, derivatives, structured products and other types of trades. The tax needs a broad scope so that financial activity won’t move from one product to another to evade the levy, the official said.

The proposal will include different rates for various kinds of products. In general, the proposed tax would be at a low rate, although the proposal doesn’t specify what the rates should be, the official said, adding that the plan won’t have different rates for retail and institutional investors.

Earlier this year, the EU said the tax ought to be available by 2018 as a European budgetary resource. The goal would be to implement it as soon as possible -- possibly by 2014, depending on when it is enacted by the Parliament and ratified by the 27 EU member states.

The levy should be imposed when at least one party to a trade is located in the EU, with broad territorial coverage, Germany’s Wolfgang Schaeuble and France’s Francois Baroin said in a Sept. 9 joint letter to the European Commission.

Basel Said to Weigh Bank Criticisms of Too-Big-to-Fail Levy

The Basel Committee on Banking Supervision will next week consider the need for changes to capital surcharges on the biggest banks amid warnings from lenders that the measures may stymie the financial system’s recovery, according to two people familiar with the talks.

The Basel group will weigh the criticisms from banks including BNP Paribas (BNP) SA and Citigroup Inc. (C) as it seeks to agree on the final version of the surcharge proposals, according to the people, who declined to be identified because the talks are private. Reserves that banks must hold to guard against the risk of a derivatives clearinghouse default and ensuring new capital requirements don’t hurt global trade also will be discussed at the Sept. 27-28 meeting in the Swiss city, they said.

The Basel group agreed in June to impose stricter minimum capital requirements of as much as 2.5 percentage points of core reserves on banks whose failure could send shock waves throughout the financial system. Since then, sentiment toward European banks has been eroded by fears of a Greek default and speculation that Italy and Spain will be forced to seek international bailouts.

The euro-region crisis has left European lenders with as much as 300 billion euros ($404.4 billion) of credit risk, according to an International Monetary Fund report on Sept. 21. Twenty-eight lenders would face surcharges if the rules were already in force, the Basel committee has said, without naming the companies. At least four banks would qualify for the top 2.5 percentage-point requirement, it said.

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Dutch Banks’ Compliance to Bonus Code Improved, Report Shows

Dutch banks including ING Groep NV (INGA) and Rabobank Group are increasingly limiting bonus payments to their top executives, according to a committee that monitors compliance with an industry code of conduct.

“The important principle that the variable part of a board member’s remuneration can’t exceed the fixed salary, is fully applied by all bigger Dutch banks,” the committee, led by former Unilever Chief Executive Officer Antony Burgmans, said today in a statement. Bonuses for management below the board, however sometimes exceeds fixed payouts, the committee’s report said.

While several issues still need attention, the committee found overall Dutch banks’ observance of the pay rules is “acceptable,” the report said. Finance Minister Jan Kees de Jager in March said he would introduce legislation if banks fail to meet the self-regulatory code. Lawmakers voiced their concerns about the return of high bonuses after Burgmans in December said banks hadn’t fully endorsed the risk-management and executive-pay guidelines.

The finance ministry expects to send a first reaction on the report to parliament later today, spokeswoman Lies Weitenberg said.

Dominican Republic Seeks Commodity Limits, New York Times Says

The Dominican Republic will propose a resolution to the United Nations seeking to limit so-called large trading positions in food and oil as it blamed speculators for price swings, New York Times said, citing the president.

The nation will ask the UN to set position limits and require investors to post more margin payments when trading, the newspaper said, citing President Leonel Fernandez.

Compliance Action

Schapiro Grilled by Lawmakers Over Ethics ‘Breakdown’ at SEC

Lawmakers grilled U.S. Securities and Exchange Commission Chairman Mary Schapiro over what they called a breakdown in ethics that allowed the agency’s former top lawyer to work on policy related to the Bernard Madoff fraud after he inherited money from the Ponzi scheme.

Yesterday’s hearing in Washington was called by members of the House Financial Services and Oversight and Government Reform committees to highlight a 119-page report issued earlier this week by the SEC’s inspector general. The report concluded that the agency’s former general counsel, David Becker, may have violated criminal law by taking a lead role in deciding how Madoff investors should be compensated for their losses.

Becker, who sought and received clearance from the SEC’s ethics counsel to work on the matter, told lawmakers he “did precisely what I was supposed to do.”

Schapiro told the lawmakers that she is overhauling the agency’s procedures for vetting conflicts of interest, and she took part of the blame for the firestorm over Becker’s work.

Axa’s Barr Rosenberg to Pay $2.5 Million in SEC Fraud Claim

Axa Rosenberg Group LLC’s co-founder Barr M. Rosenberg agreed to pay $2.5 million to settle claims by the U.S. Securities and Exchange Commission, which accused him of securities fraud for concealing a coding error in his firm’s investment model.

Rosenberg, 68, who learned of the error in June 2009, directed others to conceal it and didn’t inform clients until April 2010, according to a statement on the agency’s website. Rosenberg agreed to a lifetime securities industry ban, the SEC said.

Axa Rosenberg, a unit of Paris-based insurer Axa SA (CS), last year said it overhauled its management team after learning of the error, which cost clients $217 million in losses. Rosenberg stepped down as part of the overhaul, while Axa Rosenberg in February repaid clients the $217 million in losses and agreed to pay the SEC a $25 million fine.

Jonathan Bass, an attorney for Rosenberg, said his client “is distressed by the events that occurred at Axa Rosenberg.”

“He never acted with any intention to cause harm to Axa Rosenberg clients or to gain any advantage or benefit for himself,” Bass, a partner with Coblentz, Patch, Duffy & Bass LLP in San Francisco, said in a telephone interview. “He is relieved that the matter is now concluded.”

EU Denies Shift in Stress-Test Date for Bank Capital Raising

The European Union said that there were no plans to push banks such as Banco Comercial Portugues SA (BCP) and HSH Nordbank AG to raise capital faster than previously required after they came close to failing this year’s region-wide stress tests.

The April 2012 deadline for these lenders to recapitalize hasn’t changed, Franca Congiu, a spokeswoman for the European Banking Authority, said today in a phone interview. HSH Nordbank also denied it had been asked to accelerate efforts to bolster its reserves. The Financial Times earlier reported that European officials would speed up the recapitalization plans.

A total of 16 banks passed this year’s stress tests with 1 percent or less of core reserves above the minimum needed. These lenders should “take specific steps” to bolster their reserves, the EBA said in July, suggesting measures including deleveraging, issuing fresh capital or curbs on dividends.

The EBA, which coordinates the work of national bank regulators in the 27-nation EU, gave banks that failed the tests until Oct. 15 to present plans for raising more capital, and until the end of the year to execute the measures.

Special Section: MILA Conference

Leaders in Andean Finance Gather at MILA Conference

Bloomberg LINK yesterday convened leaders in finance and economics to discuss the future of the Integrated Latin America Market (MILA), which saw its first trade take place on May 30, and has struggled to compete with the Brazilian stock exchange.

Participants discussed what the integration of the Colombia, Chile and Peru stock markets means for the region, regulatory concerns and investment opportunities created by the exchange at the Bloomberg MILA conference yesterday at the New York Academy of Sciences in New York City.

The Mila stock market may expand beyond Colombia, Chile and Peru to include securities from Mexico and Panama in coming years, said Emilio Echavarria, the president of Valores Bancolombia.

Gerardo Hernandez Correa, Colombia’s chief securities regulator, said talks should be held among members of the Mila stock exchange to ease rules on pension funds investing in the market.

There also needs to be coordination among Colombia, Peru and Chile on tax policies that affect stock investors, Hernandez Correa said yesterday at the conference.

Standard & Poor’s will lead negotiations with providers of exchange traded funds to create an ETF for the MILA exchange, Maria Jose Ramirez, vice president of the Bolsa de Valores de Colombia said at the New York conference.

Galvis, Laub, Mendez-Penate, Oberoi on MILA Regulation

Sergio Galvis, head of the Latin America group at Sullivan & Cromwell LLP, Christian Laub, head of corporate banking at Banco de Credito BCP, Carlos Mendez-Penate, co-chair of Latin America and the Caribbean practice at Akerman Senterfitt LLP, and Siddhartha Oberoi, senior director of exchange-traded products in the Americas at Standard & Poor’s, participated in a panel discussion about regulatory issues facing the Integrated Latin America Market (MILA ).

They spoke at Bloomberg Link’s MILA Conference in New York. Bloomberg’s Drew Benson moderated.

For the video, click here.

Stenning, Ramirez Say MILA Working on Technical Issues

Francis Stenning, chief executive officer of Bolsa de Valores de Lima, and Maria Jose Ramirez, vice president at Bolsa de Valores de Colombia, talked about the outlook for the Integrated Latin America Market.

James Attwood moderated the conversation at Bloomberg Link’s MILA Conference in New York.

For the video, click here.

Rocca Says Peru May Seek to List State-Owned Companies

Lilian Rocca, Peru’s chief securities regulator, and Gerardo Hernandez Correa, Colombia’s chief securities regulator, talked about the integration of stock exchanges in Peru, Colombia and Chile, and the possible listing of state-owned companies on bourses.

Rocca says Peruvian companies may list in the Lima exchange next year. Rocca and Correa spoke with Bloomberg’s John McCorry at Bloomberg Link’s MILA Conference in New York.

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Del Ama, De Bedout, Templeton on MILA Economic Ties

Bruno Del Ama, chief executive officer of Global X Management Co., Juan de Bedout, a partner at Corredores Asociados SA, and Gavin Templeton, director of institutional investors at Corpbanca (CORPBANC), participated in a panel discussion about the impact of the Integrated Latin America Market, or MILA, on economic ties between Chile, Peru and Colombia.

They spoke at Bloomberg Link’s MILA Conference in New York. Bloomberg’s James Attwood moderated.

For the video, click here.

For a discussion about trading activity and listings on the MILA, click here.

For a discussion about equity and fixed-income investing on MILA, click here.

Interviews/Speeches

Barofsky Says BofA Would Be Bailed Out if Needed

Neil Barofsky, former special inspector general for the U.S. Treasury’s Troubled Asset Relief Program and a Bloomberg Television contributing editor, talked about Moody’s Investor Service’s downgrade of Bank of America Corp. (BAC)’s credit rating and the outlook for the Dodd-Frank financial regulatory overhaul.

Barofsky spoke with Erik Schatzker and Deirdre Bolton on Bloomberg Television’s “InsideTrack.”

For the video, click here.

To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net

To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net

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