Anti-Bribery Guide, Danish Banks, EU Firewall: Compliance

Officials who work for companies that are more than half-owned or controlled by a foreign government are probably covered by U.S. foreign bribery laws, the Justice Department and the Securities and Exchange Commission said yesterday.

The status of employees of state-owned companies is part of a 120-page document providing the most detailed guidelines to date for a law that has cost companies billions of dollars in fines and penalties.

The Foreign Corrupt Practices Act bars companies or individuals regulated or based in the U.S. from paying bribes to foreign officials to win business. Foreign companies and nationals also can be prosecuted if their corrupt acts were committed in the U.S.

The SEC and Justice Department have stepped up their enforcement of the 1977 law in recent years. The guidance, which also addresses what level of gifts, travel and entertainment constitute a violation, has been long sought after by law firms, which are called in to investigate and negotiate alleged wrongdoing.

Foreign bribery investigations have touched companies with foreign subsidiaries.

Compliance Policy

Danish FSA Burned Once Closes Backdoor to Capital Dilution

Denmark’s financial regulator is warning the country’s banks (SX7P) that an understatement of lending risks won’t be tolerated as it embarks on a hunt to catch what it’s dubbed “backdoor” capital dilution.

The Financial Supervisory Authority will review internal rating models that determine how much capital a lender sets aside to ensure banks don’t find a way around stricter standards. While banks may fulfill capital requirements on paper, recent failures suggest risk weights don’t always reflect reality, leaving buffers too small to absorb losses.

When Denmark’s housing bubble burst more than four years ago, it revealed widespread capital shortfalls that have since led to the demise of more than a dozen regional lenders. Toender Bank A/S, the most recent insolvency, followed a reported three- fold increase in profit in the first half and a solvency ratio - - a measure of financial strength -- of 17.3 percent at the end of June. Yet an inspection last month by the FSA revealed bad loans almost 10 times as big as those reported by the bank, wiping out its equity.

The government has urged the industry to consolidate rather than risk more failures, extending state guarantees and granting access to depositor guarantee funds to help finance takeovers.

Banks operating in Denmark have lashed out at the FSA, arguing its insistence on more rigorous standards in the middle of a crisis is exacerbating the nation’s economic decline as lenders compensate by raising fees and withholding credit.

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EU Bank Firewall Plan May Push Up Lenders’ Costs, AFME Says

Banks may face increased funding costs and have to cut back lending if the European Union presses ahead with plans to impose structural changes, according to an industry lobbying group.

Proposals from an EU advisory group to force banks to put much of their trading activities into separately capitalized units may have a “significant detrimental impact on European growth,” the Association for Financial Markets in Europe said in an e-mailed statement. The plans “could also weaken the structure of the European banking sector” and reduce competition, the group said.

Michel Barnier, the EU’s financial services chief, has said that he’s weighing proposals made by the advisory group. The measures, which would force lenders to set up legally separate trading entities, are a “good basis” for future EU policy making, Barnier has said.

Afme represents international lenders including Deutsche Bank AG (DBK), BNP Paribas SA (BNP) and Goldman Sachs Group Inc. (GS) The statement was co-signed by the International Swaps and Derivatives Association.

Systemic Banks May Be First for Basel Debt-Disclosure in EU Plan

Systemically important banks may have to disclose how well they measure up to an internationally agreed-upon debt limit before other lenders, under draft European Union plans.

European Parliament lawmakers and officials from Cyprus, which holds the EU’s rotating presidency, agreed on the step during negotiations in Brussels this week. The so-called leverage ratio is part of a draft law to apply Basel rules in the 27-nation bloc.

Philippe Lamberts, who leads work on the draft rules for the Green group, said in a telephone interview that while the principle for earlier disclosure was adopted, negotiators are split over other issues, including on lawmakers’ demands for banks to disclose country-by-country information on their activities, such as taxes paid and state-aid received.

Nations are struggling to meet a Jan 1 deadline for starting to apply the revised Basel rules. The EU’s draft law to implement the measures must be agreed on by the parliament and by governments before it can take effect.

Compliance Action

SEC Exempts Companies From Some Requirements Because of Sandy

The Securities Exchange and Commission issued an order yesterday that provides exemptions from certain provisions of the securities laws because of the disruptions caused by Hurricane Sandy.

Among the provisions subject to exemptions is the Exchange Act filing requirements from Oct. 29 to Nov. 20, proxy and information statement delivery requirements, and Investment Company Act requirements.

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Indonesia Takes On Energy Oversight After Regulator Wound Up

The Indonesian government will assume responsibility for overseeing the nation’s oil and gas activities, President Susilo Bambang Yudhoyono said, a day after the industry regulator was dissolved by a court.

A new unit within the Energy and Mineral Resources Ministry will handle BPMigas’s role for a transition period, Yudhoyono said yesterday at a press conference, confirming earlier remarks by Deputy Energy Minister Rudi Rubiandini.

Yudhoyono said in Jakarta that the presidential decree aims at preventing a regulatory vacuum and providing certainty for in the industry. All oil and gas contracts remain valid and all operational activities will go on, he said.

BPMigas was dissolved Nov. 13 by the nation’s Constitutional Court, raising concern that shipments of liquefied natural gas would be reduced. Indonesia is the world’s third-largest exporter of the fuel, according to BP Plc (BP/)’s Statistical Review of World Energy. BPMigas had been created under a 2001 law that violated the nation’s constitution, according to the court.

The new unit will assume responsibility for approving the development of new fields, work programs and budgets, and approving exports of oil and gas, Rubiandini said in a text message. The office will continue to operate until the 2001 legislation is amended, he said.

The government will start drafting a new law to ensure certainty and improve the country’s oil and gas business, Yudhoyono said.

Philippine State Agencies Monitoring Property Sector for Bubble

Bangko Sentral ng Pilipinas is working with the Philippine Securities and Exchange Commission and the Philippine Deposit Insurance and Insurance Commission in monitoring the property sector to ensure banks are managing risks well.

The monitoring is an effort by the government to prevent an asset bubble, Managing Director Johnny Noe Ravalo told reporters in Manila. There is no asset bubble now, he said.

BSP will impose prudential measures to prevent bubbles, Ravalo said. It ordered banks in August to provide more details on their real-estate exposure by year end.


Barclays Must Disclose Libor Traders, Submitters in Swap Lawsuit

Barclays Plc (BARC) must disclose the identities of Libor traders and employees that made submissions to set interest rates, after a ruling yesterday in the first U.K. lawsuit related to manipulation of the London interbank offered rate.

Judge Julian Flaux in London said the bank must give the information on the workers to Guardian Care Homes Ltd., which sued the bank over a loss-making interest-rate swap tied to Libor. London-based Barclays must also provide Guardian the e- mail communications of 42 employees, transcripts of phone conversations that refer to Libor, board minutes and documents from the bank’s treasury committee, Flaux ruled.

Flaux hasn’t yet ruled whether the bank must disclose the information only to Guardian or if it should be made public.

Guardian sued over the swap that cost it about 12 million pounds ($19 million), saying Libor -- the baseline for about $300 trillion of contracts worldwide -- can’t be trusted. In June, the lender was fined a record 290 million pounds after regulators found its investment bankers tried to manipulate the interest rate.

Barclays failed to have the Libor-fixing part of the suit thrown out on Oct. 29 when a judge ruled it would have to answer accusations it profited from rigging Libor submissions.

Barclays spokesman Jon Laycock wasn’t immediately available to comment.


Ceccatelli Says Euro-Area Bank Union Is ‘Gigantic Task’

Jacopo Ceccatelli, a partner at JC & Associati SIM, discussed Italian banks, loan provisions and a euro-area banking union.

He spoke from Milan with Francine Lacqua on Bloomberg Television’s “On the Move.”

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Norway Central Banker Reviles Bernanke Cash in John Law Quip

Ben Bernanke risks being remembered for the same monetary folly that was perpetrated by John Law, the banker who fled 18th century France after creating an asset bubble, the deputy governor of Norway’s central bank said.

“If printing money is not followed up by action -- in euro area countries, in the U.K. and in the U.S. -- Mario Draghi, Mervyn King and Ben Bernanke run the risk of being recorded in history in the same chapter as the Scotsman John Law,” Norges Bank Deputy Governor Jan F. Qvigstad said in the text of a speech set to be delivered Nov. 13 in Oslo.

European Central Bank President Draghi, Federal Reserve Chairman Bernanke and Bank of England Governor King are pursuing unprecedented stimulus programs in an effort to pull their economies out of the worst crisis since the Great Depression.

The ECB’s main interest rate is 0.75 percent, the Fed’s rate hovers near zero and the Bank of England’s is 0.5 percent. Draghi in September pledged unlimited debt purchases to support euro markets. Bernanke a week later vowed to buy bonds until the U.S. labor market recovers.

John Law, born in 1671, was a Scottish economist who moved to France and helped revive the French economy in a scheme that later backfired, forcing him to flee.

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To contact the reporter on this story: Carla Main in New York at

To contact the editor responsible for this story: Michael Hytha at

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