DNB Lending, MarketAxess Exemption, Currency: Compliance

DNB ASA (DNB), Norway’s largest bank, will increase prices on loans to pass on stricter rules the government imposed to cool the housing market to clients.

Lending rates will be increased by as much as 30 basis points on floating rate loans, parts of DNB’s loan portfolio for small and medium-sized companies, and “a significant part” of DNB Finans’ loan portfolio, Oslo-based DNB said in a statement March 8. The new prices will be effective immediately for new loans and for existing credit by the end of April, it said.

Norway is introducing stricter rules for its banks to cool down the housing market and prevent a repeat of the 1990s crisis that sent the country’s real estate prices plunging 40 percent. The Finance Ministry in December proposed tripling the risk- weights banks need to hold on mortgage assets to 35 percent after house prices and private debt burdens soared. It also proposed introducing a curb on covered bond issuance.

Compliance Policy

China, Singapore Double Currency Swap Agreement to $48 Billion

China and Singapore doubled a currency swap agreement to 300 billion yuan ($48.3 billion) after the city-state became the third offshore center for the Chinese currency last month.

Under the new arrangement, the funds will be available to eligible financial institutions in Singapore and those operating in China for a period of three years, the central banks said in a statement March 7. China was the republic’s third-largest trading partner after Malaysia and Europe in 2012.

The People’s Bank of China gave Industrial & Commercial Bank of China Ltd. the right to clear yuan transactions in Singapore last month, joining Hong Kong and Taiwan. London is also in the process of arranging a currency swap with China as it seeks to become an offshore yuan center in Europe.

Chinese Premier Wen Jiabao pledged to expand cross-border use of the yuan and encourage foreign investment, as the government plans to allow the budget deficit to widen by 50 percent in 2013 to spur economic growth. The new agreement was signed on March 7 and will replace the previous arrangement dated July 23, 2010, the central banks said in the statement.

The increased swap makes the Southeast Asian nation the third-largest counterparty after Hong Kong’s 400 billion yuan and South Korea’s 350 billion yuan out of the 18 countries with which China has such lines, Kowalczyk wrote.

Singapore is the largest currency trading center in Asia after Tokyo, according to the most recent triennial survey by the Bank for International Settlements issued in September 2010.

Separately, China is studying rules on allowing futures companies to list and introduce foreign shareholders, Shanghai Securities News reported March 8, citing Jiang Yang, a vice chairman of the China Securities Regulatory Commission.

EU Seeks Final Talks for Bank Capital, Bonus Rules on March 20

Irish diplomats and European Union lawmakers will meet on March 20 to complete negotiations on legislation to toughen capital and bonus rules for the banks.

Ireland, which holds the rotating presidency of the EU, said last week that it will hold talks with the parliament to flesh out details of the legislation, following a draft deal on the measures that it struck with the assembly on Feb. 28. Officials are seeking to wrap up talks this month, so that the law can be formally adopted, according to an EU official.

Parliament lawmakers have insisted that the law, which would apply capital and liquidity rules to the bloc’s 8,000 banks, include binding limits on bonuses. Under the draft deal struck with Ireland last month, bankers would be banned from receiving discretionary pay worth more than twice their base salary, with a special accounting treatment applied to parts of the bonus that are deferred for at least five years.

Asia-Pacific Policy Measures Curb Inflows, Adjust Exchange

Asia-Pacific policy makers from March 2012 have taken a variety of policy measures to cool property prices, curb capital inflows, and adjust foreign-exchange rules.

Examples include measures taken concerning Philippine outflow capital rules, South Korea currency-forward rules, and Thailand capital controls.

For a timeline of the measures as compiled by Bloomberg News, click here.

Parliament Repeats Demands That Osborne Toughen Banking Bill

The parliamentary commission scrutinizing a bill designed to make Britain’s banks safer demanded for a second time that Chancellor of the Exchequer George Osborne toughen the legislation.

Osborne should threaten to break up the entire banking industry if it doesn’t comply with rules to protect retail operations, the Parliamentary Commission on Banking Standards said in today’s report in London. The cross-party panel demanded 19 changes to the bill, including one that regulators get immediate powers to set higher leverage ratios.

The report is the second attempt to toughen the proposed laws after Osborne rejected previous recommendations. It sets up the government for criticism during a second reading of the bill in Parliament later today.

Osborne last month made a partial concession to the panel’s demands for a reserve power to break up the banking industry along retail and investment banking lines if it fails to adhere to laws aimed at protecting taxpayers from future bailouts. He said individual banks, rather than the industry, could be broken up under that scenario after earlier voicing opposition in November during a clash with members of the 10-member committee.

Osborne himself appointed the panel last year to look at conduct in the financial-services industry following the Libor scandal and subsequently asked to lead the pre-legislative scrutiny of the banking bill.

Successive witnesses at the panel’s hearings have expressed concern that the government’s proposals will be diluted by the banks before they are properly implemented.

For more, click here.

Compliance Action

MarketAxess Seeks CFTC Exemption Easing Shift to Dodd-Frank Rule

MarketAxess Holdings Inc. (MKTX), the electronic trading platform for bonds that is expanding into swaps, is asking the top U.S. derivatives regulator for an exemption to ease its transition to Dodd-Frank Act rules.

The New York-based company, which facilitates trading of credit swaps tied to indexes of securities, said a limited exemption should be granted by the Commodity Futures Trading Commission because it is already regulated by the Securities and Exchange Commission and Financial Industry Regulatory Authority. Proposed CFTC rules would mean high compliance and surveillance costs for so-called swap execution facilities, MarketAxess Chief Executive Officer Richard M. McVey said March 7. An exemption would increase competition between trading platforms because it would lower costs, McVey said.

The CFTC and SEC are writing Dodd-Frank rules for swap execution facilities that compete with exchanges, including those operated by CME Group (CME) Inc. and Intercontinental Exchange Inc. (ICE), for trading of interest rate, credit and other swaps. The rules are meant to reduce risk and boost transparency after largely unregulated swaps helped fuel the 2008 credit crisis.

The five-member CFTC has been negotiating since late last year on final regulations for trading platforms. The agency has yet to schedule a vote on the rules to govern trades by firms such as JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS)

MarketAxess said in a Feb. 21 letter to the CFTC that it intends to formally request a conditional exemption under Dodd- Frank.

Bloomberg LP, the parent company of Bloomberg News, has said it intends to register with the CFTC as a swap-execution facility.

EU Libor Cases May Last Longer Than Those in U.S., Almunia Says

European Union antitrust probes into whether banks and brokers manipulated benchmark lending rates such as Libor “may last longer” than those in the U.S., EU Competition Commissioner Joaquin Almunia said.

While U.S. authorities can strike plea bargains with individual companies, the EU must deal with all companies at once, he said in a speech in Brussels March 8.

While U.S., British and Swiss authorities have already closed their cases with three large European banks in the so- called Libor scandal, the results of EU probes into a suspected cartel involving a large number of banks and brokers “will be announced in due time,” Almunia said.

Settlement cases take an average of three years after a company first reports a cartel to regulators, Almunia said, while standard cartel cases take around five years.

Financial regulators in the U.K. and the U.S. have already imposed more than $2.5 billion in fines on Barclays Plc (BARC), UBS AG and Royal Bank of Scotland Group Plc, and are investigating other companies.

The EU can levy fines of as much of 10 percent of a company’s yearly global revenue for each cartel in which they participate.

Turkey Competition Board Fines 12 Banks 1.12 Billion Liras

Banks in Turkey received collective fines of 1.12 billion liras after the Competition Board in Ankara found them guilty in a probe into alleged collaboration in setting interest rates, deposit rates and credit card fees, according to a board decision published March 8.

Included among the banks were Garanti (GARAN), Garanti Odeme Sistemleri and Garanti Konut Finansmani, fined 213.4 million liras; Akbank (AKBNK), fined 72.2 million liras; Yapi Kredi (YKBNK), fined 150 million liras; Ziraat, fined 148.2 million liras; and Isbank fined 146.7m liras.

The probe related to activities that took place between 2007 and 2011.

Intrade Halts Service on Possible Financial Irregularities Probe

Intrade, an online service that lets people bet on events including elections and the weather, ceased trading activity, saying it is investigating possible financial irregularities.

The service provider has settled open positions, and stopped banking transactions for company accounts, Intrade said in a statement on its website. It didn’t give details of any irregularities and said it took the actions in accordance with Irish law. The company’s parent, Trade Exchange Network Ltd., is based in Dublin.

In November, Intrade asked U.S. clients to close their accounts after the Commodity Futures Trading Commission sued the website for allegedly offering improper options trading. Trade Exchange in 2005 agreed to pay $150,000 to settle allegations it illegally offered contracts in the U.S., including some based on the price of gold, crude oil, the euro and the yen.

Intrade held members’ funds of $5.7 million at Dec. 31, 2011, and had net assets of $1.9 million, according to accounts filed with Ireland’s corporate regulator.

Courts

Absolute Capital’s Homm Said He Had Cash in Underwear, Fled

The German fugitive hedge fund manager who more than five years ago fled the Spanish island of Mallorca with $500,000 hidden in his underwear and luggage faces U.S. charges after his arrest at the Uffizi Gallery in Florence.

Florian Homm, 53, was taken into custody by Italian police at 12:30 p.m. on March 8 at the world-famous museum.

The arrest, by Homm’s own account as well as that of U.S. prosecutors, followed his 2007 decision to leave behind a life of wealth and castles. During his escape, he held a Liberian diplomatic passport as well as German and Irish passports, according to the Federal Bureau of Investigation.

Homm is accused in a criminal complaint filed March 6 in federal court in Los Angeles of defrauding investors in hedge funds he controlled, causing $200 million in losses. He is charged with four counts of conspiracy, wire fraud and securities fraud. He faces as long as 75 years in prison if convicted on all counts.

The founder and former chief investment officer of Absolute Capital Management Holdings Ltd. is accused of “cross trading” billions of shares of penny stocks between the company’s funds to boost the value of the otherwise illiquid securities.

The trades, through a Los Angeles-based broker-dealer that Homm co-owned, generated fees for Homm and Absolute Capital and also inflated the price of Absolute Capital’s shares, U.S. prosecutors said. Homm “dumped” his shares and resigned from Absolute Capital on Sept. 18, 2007, “in the middle of the night,” according to the U.S.

Homm and his co-conspirators made more than $53 million from the scheme, prosecutors said. Thom Mrozek, a spokesman for the U.S. Attorney’s Office in Los Angeles, didn’t immediately return phone and e-mail messages yesterday seeking comment on the case.

Adam Kravitz, a Miami lawyer who represents Homm in a lawsuit brought by the U.S. Securities and Exchange Commission, declined to comment on the criminal charges.

Homm recently published a book in German called “Rogue Financier: The Adventures of an Estranged Capitalist,” according to the affidavit.

The case is U.S. v. Homm, U.S. District Court, Central District of California (Los Angeles). The SEC case is Securities and Exchange Commission v. Ficeto, 11-cv-01637, U.S. District Court, Central District of California (Los Angeles).

For more, click here.

Interviews

Senator Brown, Pawlenty Discuss Bank Regulation

U.S. Senator Sherrod Brown, an Ohio Democrat, talked with Bloomberg’s Peter Cook about regulation of U.S. banks and his and Senator David Vitter’s bipartisan bill to force banks to set aside even more capital than currently required.

Tim Pawlenty, chief executive officer of the Financial Services Roundtable and former Minnesota governor, discussed bank regulation. Rajiv Shah, administrator of the U.S. Agency for International Development, talked about U.S. foreign aid. They spoke on Bloomberg Government’s “Capitol Gains.”

For the video, click here.

Comings and Goings

Senator to Play Offense for NFL Saints Against SEC Nominee White

Senator David Vitter, a Louisiana Republican, plans to cross-examine Mary Jo White this week about her assessment of wrongdoing by New Orleans Saints players and coaches in the National Football League team’s “Bountygate” scandal. White, nominated by President Barack Obama to lead the Securities and Exchange Commission, was retained by the NFL in 2011 to review evidence that team paid players to injure opponents.

The probe resulted in the suspension of several key defensive players and coaches, including Saints head coach Sean Payton. The players’ suspensions were overturned last year on appeal. The Saints didn’t recover from the suspensions, finishing with a 7-9 win-loss record in 2012, one year after going 13-3. The team won Super Bowl XLIV in 2010.

Vitter, in a statement, described White’s work for the NFL as “botched.”

The three-member arbitration panel that overturned the players’ suspensions faulted NFL Commissioner Roger Goodell for his handling of the discipline. It didn’t address White’s review of the facts or the quality of the investigation.

Vitter’s staff says he plans to ask White how many of the NFL’s cooperating witnesses actually mentioned a “pay for injury” program, and if any of them had an interest in verifying the league’s claims.

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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