Prime Minister Mario Monti’s government scrapped some of its special takeover defenses in former state-owned companies, seeking to end a dispute with the European Commission over Italy’s so-called golden share.
The changes adopted at a Cabinet meeting in Rome March 9 will limit the use of the golden share to block takeovers in key industries such as defense, energy, telecommunications and transportation, the prime minister’s office said in an e-mailed statement. Italy still has golden shares in companies such as Telecom Italia SpA (TIT), oil producer Eni SpA (ENI) and defense contractor Finmeccanica SpA. (FNC)
In the energy, transportation and communications industries, the new rules restrict the government’s takeover veto to buyers outside of the European Union and only under specific circumstances, such as when they can’t offer sufficient financial guarantees or the potential buyer may be linked to organized crime.
For companies in the defense industry, the government veto can also apply to EU buyers though only if there is an “effective threat” to national security, according to the statement.
The EU has repeatedly urged Italy to modify its law on golden shares to comply with the region’s rules. The government expects the March 9 overhaul to lead to the closing of an EU infraction procedure against the country opened in 2009, according to the statement.
Italy will present a draft of the changes to European Union Financial Services Commissioner Michel Barnier “very quickly,” Chantal Hughes, Barnier’s spokeswoman said.
China’s Sanya Resort Keeps Rules to Curb Housing Speculation
Chinese resort Sanya is keeping rules aimed at curbing property speculation, according to its province’s deputy governor, in contrast to other parts of the country that want to ease limits and reverse declines in prices.
The city on Hainan will limit home sales to non-island buyers to the equivalent of 5,000 100-square-meter apartments a year, Jiang Sixian, deputy governor of Hainan and secretary of Sanya’s Communist Party committee, said in an interview in Beijing March 8. As a result, home sales will keep falling in 2012, he said.
The resort on the tropical island off China’s southern coast is trying to reduce speculation from outsiders that’s “depleting our resources” and boost its year-round population, Jiang said. Hainan’s goal is to become an international tourism destination and win visitors away from Indonesia’s Bali or Thailand’s Phuket.
Hainan’s willingness to maintain property curbs contrasts with recent efforts in Shanghai to loosen home-purchase restrictions and in the eastern city of Wuhu to subsidize some sales.
China’s home sales by square meters fell 16 percent in January and February combined from a year earlier, the National Bureau of Statistics said March 9.
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Tocom to Discuss Alliance With CME Next Week, Ezaki Says
Tokyo Commodity Exchange Inc. will discuss an alliance with Chicago Mercantile Exchange as Japan’s biggest raw-material bourse aims to revitalize trade.
Tadashi Ezaki, president of the bourse known as Tocom, told reporters in Tokyo March 9 he will discuss a product listing and trading system alliance with CME next week during his visit to the U.S. He did not rule out the possibility of discussing a capital tie-up with the exchange.
Tocom, once the second-largest commodities bourse after the New York Mercantile Exchange, ranked 11th in 2010 and has been surpassed by China’s Shanghai and Dalian exchanges.
Japan’s cabinet approved a plan March 9 that would allow the formation of a one-stop platform where investors can buy equities, futures and commodities at a single venue, even as competition regulators review a proposed tie-up between the country’s two biggest stock exchanges. If the legislation is passed by parliament, the Financial Services Agency would become responsible for oversight of stock, commodity and grain exchanges. Oversight is currently divided between the FSA and the trade and agriculture ministries.
The proposal comes as Japan’s Fair Trade Commission reviews a planned merger between Tokyo Stock Exchange Group Inc. (TSEGZ) and Osaka Securities Exchange Co. (8697) The FSA, trade and farm ministries drafted the legislation to lay the groundwork for a more comprehensive unification of Japan’s bourses.
The new rules would categorize commodity futures as financial products that could be traded as derivatives. Permission to list the derivatives would be granted by the FSA in consultation with concerned ministries.
Basel Group May Reach Deal on Changes to Bank Liquidity Rule
Global banking regulators will seek an accord later this month on changes to draft liquidity rules criticized by some governments and lenders as a threat to economic recovery.
The measures will be considered at a meeting of the Basel Committee on Banking Supervision on March 20 and 21, Rene van Wyk, who represents South Africa’s central bank on the committee, said in an interview.
The Basel group will “present some calibration points and technical calculations” without changing the “fundamentals” of the standard, he said. The group will also work on options for toughening oversight of lenders whose failure could roil domestic markets, he said.
The so-called liquidity coverage ratio is part of an overhaul of bank regulation, known as Basel III, that was agreed on by the committee to avoid a repeat of the events that led to the 2008 collapse of Lehman Brothers Holdings Inc. It would require lenders to hold enough easy-to-sell assets to survive a 30-day credit squeeze.
The LCR plans have been attacked by some governments and banks as overly restrictive as few assets other than sovereign debt would be recognized as highly liquid.
The Association for Financial Markets in Europe has said that the measure may make it harder for lenders to spread their risks, so making them more vulnerable in a crisis, while also forcing them to curb some lending.
The measures would mark an extension of an agreement last year by the Group of 20 countries to impose capital surcharges and tougher oversight on lenders, known as G-SIFIs, whose failure would threaten global stability.
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Broker-Dealer Audits to Intensify Under U.S. Regulator Proposal
Broker-dealers and public companies would be subject to stricter audits that probe relationships with subsidiaries, shareholders and executive officers for any hint of manipulation or fraud under new standards proposed by the Public Company Accounting Oversight Board.
Under the plan, auditors would also dig into executive compensation agreements and “significant unusual transactions” -- those that seem outside a company’s normal course of business -- for signs of the types of abuses that led to corporate financial failures involving Enron (ENRNQ) Corp., WorldCom Group (WCOEQ) and others, according to Bloomberg’s Financial Regulation newsletter.
The plan calls for penalties -- including potential fines and disbarment -- for auditors who fail to comply. The new standards would apply to broker-dealers because the Dodd-Frank Wall Street Reform and Consumer Protection Act, the most significant financial regulatory reform law since the Great Depression, gave the PCAOB oversight of broker-dealer auditors.
The new standards would be part of the audits that registered financial institutions are required to file each year with the U.S. Securities and Exchange Commission.
“Related parties” are the chief focus of the proposal, and can include subsidiaries, executives, shareholders or relatives tied to the company. The goal of the plan, which the PCAOB opened to public comment last week, is to strengthen audit standards so they can better expose transactions designed to hide fraud.
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Greece Pushes Through Debt Swap as Euro Chiefs Ready Rescue
Greece pushed through the biggest sovereign restructuring in history after getting private investors to forgive more than 100 billion euros ($132 billion) of debt, opening the way for a second bailout.
Euro-region finance ministers agreed on a conference call that with the swap Greece had met the terms for a 130 billion- euro rescue package designed to prevent a collapse of the economy. Ministers freed up 35.5 billion euros in payments and interest for bondholders, with a decision on the balance of the bailout funds to be made at a March 12 meeting in Brussels.
Officials from the International Swaps and Derivatives Association called a meeting March 9 to consider a “potential credit event” relating to Greece, while Fitch Ratings cut the nation’s long-term foreign and local currency issuer default ratings to “Restricted Default.”
The goal of the exchange was to reduce the 206 billion euros of privately-held Greek debt by 53.5 percent. Even with the restructuring almost completed, Greece faces hurdles. Europe’s most indebted nation will be saddled with borrowings equivalent to 120.5 percent of gross domestic product by 2020 under current targets.
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Bank of Scotland Censured for Failings, Won’t Get FSA Fine
Bank of Scotland Plc was censured by the U.K.’s finance regulator for “very serious misconduct” at its corporate division that led to it getting a government bailout during the financial crisis.
The bank, which was part of HBOS Plc until the parent company was bought by Lloyds Banking Group Plc (LLOY) in 2009, won’t be fined by the U.K. Financial Services Authority because it received taxpayer money, the regulator said in an e-mailed statement March 9. Individuals may still face enforcement action, the agency said.
Bank of Scotland took on too much risk over a three-year period with “highly concentrated exposures to property and to significant large borrowers,” the FSA said. The bank’s strategy focused too highly on revenue and it didn’t have appropriate systems and controls for its level of risk, the regulator found.
Lloyds cooperated fully with the FSA’s investigation, the London-based bank said in a statement March 9.
The former corporate banking unit provided loans and equity in management buyouts. HBOS Plc’s assets more than doubled to 681 billion pounds from 2001 to 2008. About 40 percent of the bank’s 117 billion-pound corporate loan book was allocated to real estate and commercial property. Lloyds’s acquisition of HBOS, Britain’s biggest mortgage lender at the time, led to the bank needing a bailout valued at more than 20 billion pounds.
Managers at Royal Bank of Scotland Group Plc were heavily criticized by the FSA in its December report into the bank’s near collapse in 2008 following its takeover of ABN Amro Holding NV.
EU’s Almunia Close to Changing Bailout Terms for Commerzbank
Almunia told reporters in Brussels that he was discussing what other conditions can compensate for the EU’s request for the bank to sell its Eurohypo unit.
Almunia also said there is a high probability that the regulator will appeal an EU court ruling concerning aid for ING Groep NV. (INGA)
U.S. SEC Probes Whether Exchanges Favor Bigger Firms, FT Reports
The U.S. Securities and Exchange Commission has started a probe into whether exchanges give advantage to large trading companies over smaller companies, the Financial Times reported, citing unidentified people familiar with the inquiry.
The investigation followed a study into how exchange operators manage conflicts of interest with hedge funds, high frequency trading groups, banks and asset managers, the FT said, citing the people.
ASIC Declines to Probe Directors in Bribery Case at RBA Units
Australia’s main stock market regulator said it won’t conduct a formal investigation of company directors involved in a federal bribery probe at note-printing units of the central bank.
The Australian Securities & Investments Commission confirmed it received material from the Australian Federal Police relating to bribery allegations at Securency International Pty and Note Printing Australia Ltd.
“ASIC considers a range of factors when deciding to investigate and possibly take enforcement action,” the regulator said in a statement on its website. “ASIC has reviewed this material from the AFP” and “has decided not to proceed to a formal investigation.”
Securency, which is half-owned by the Reserve Bank of Australia, and Note Printing Australia, which is fully owned by the central bank, and seven people who worked at the companies, face federal bribery charges over payments allegedly made in Malaysia, Indonesia and Vietnam to secure banknote printing contracts. It’s the first time anyone’s been prosecuted under anti-bribery laws enacted in Australia in 2000.
The RBA declined to immediately comment on the ASIC statement.
ASIC said it wouldn’t provide any additional comments beyond its statement.
Man Who Ran Britain’s Biggest Ponzi Scheme Jailed for 14 Years
A man who admitted running the largest Ponzi scheme in British history, defrauding investors of more than 115 million pounds ($182 million), was sentenced to 14 years and six months in prison, prosecutors said.
Kautilya Nandan Pruthi pleaded guilty to defrauding around 800 investors over a three-year period until November 2008.
His associates, John Anderson and Kenneth Peacock, were found guilty March 8 for their part in the fraud and each jailed for 18 months, the Press Association reported.
The trio defrauded investors by offering monthly returns of as much as 13 percent. The scheme was marketed as a fund investing in high-interest loans to distressed trading companies involved in importing and exporting goods.
Pruthi spent the proceeds on London property and luxury cars, according to the City of London Police, which investigated the case after it was referred to them by the Financial Services Authority in 2009.
The prosecution service had no information on the men’s lawyers to contact for comment on the verdict.
EU Sees ‘Limited’ Effects of Court Ruling on ING’s Bailout Terms
ING Groep NV’s victory in a court case on the European Union’s terms of its state bailout will have “limited” consequences for reviews of other bank rescues, European Union antitrust chief Joaquin Almunia told reporters today.
There is a “high probability” that regulators would appeal the ruling, Almunia said.
The EU’s General Court said the European Commission wrongly considered a revision of repayment terms as 2 billion euros ($2.6 billion) of additional aid to ING on top of 10 billion euros it received in 2008. The court struck down part of the EU’s decision, which forces regulators to re-open their assessment of part of the Dutch government’s bailout to the bank.
EU governments spent 1.6 trillion euros to shore up banks from 2008 to 2010 amid the financial crisis that followed the collapse of Lehman Brothers Holdings Inc., according to the commission, most of that in loan guarantees and fresh capital. The EU must approve large state subsidies and can impose conditions on the aid.
ING is still studying the judgment and its consequences, Raymond Vermeulen, spokesman of the Amsterdam-based bank, said in an interview today. He declined to comment on Almunia’s statement.
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Allan Meltzer Discusses His Book ‘Why Capitalism?’
Allan Meltzer, a professor at Carnegie Mellon University, talked about the impact of regulations on fairness and growth, as well other topics including central banks, the Greek debt crisis and his book “Why Capitalism?”
He spoke with Tom Keene on Bloomberg Television’s “Surveillance Midday.”
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German Banks Slowly Getting Healthy, Bafin’s Koenig Tells FAS
Germany’s banks are slowly regaining their health, Elke Koenig, president of German financial regulator Bafin, said in an interview with the Frankfurter Allgemeine Sonntagszeitung.
“They’re slowly becoming healthy, but the risk of contagion remains high,” Koenig told the newspaper. Asked what would happen if a foreign bank collapsed, she said her agency is “optimistic that the German banks are prepared for nearly all imaginable scenarios.”
Comings and Goings
Fannie Mae and Freddie Mac Executives Will See Pay Cuts in 2012
The 2012 pay program for the government-owned companies eliminates bonuses and establishes a target for chief executive officer pay at $500,000, the Federal Housing Finance Agency announced March 9. With the changes, total compensation for top executives has been reduced by almost 75 percent since the companies were taken under government control in 2008.
The number of senior executives has been reduced from 91 in 2008 to 70, the FHFA reported.
Last month, the U.S. Senate moved to ban executive bonuses at Fannie Mae and Freddie Mac, voting 96-3 to approve a measure introduced after the FHFA approved nearly $13 million in bonuses to 10 executives.
Ranjit Ajit Singh to Head Malaysia Securities Commission
Ranjit Ajit Singh was appointed chairman of the Securities Commission of Malaysia, replacing Zarinah Anwar.
Ranjit’s appointment will take effect April 1, the day after Zarinah’s term ends, according to a statement posted on the commission’s website. Ranjit has served the regulatory body since 1994, according to the statement. He is now the commission’s managing director and executive director, market oversight, according to its website.
Nik Ramlah Mahmood, the current managing director and executive director, enforcement, will be appointed deputy chief executive, according to the statement.
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