U.K. Bonuses, Swedish Banks, Bitcoin Tax Case: Compliance

Senior bankers could be forced to pay back bonuses as long as seven years after they’re awarded under new Bank of England rules to curb short-term risk-taking.

Banks operating in the U.K. should amend employee contracts so they can recoup bonus payments from workers who exceed their risk limits or break financial-conduct rules, the central bank said in a statement on its website yesterday.

The rules, which come into force on Jan. 1, are part of a move by global regulators to hit bankers’ wallets if their risk-taking leads to large losses.

The U.K. measures go beyond minimum European Union standards, which require at least 40 percent of awards to be deferred for at least three years, and hand banks some clawback powers. U.S. rules on banker pay have mainly targeted bailed-out banks.

Compliance Policy

Bank Risks Hidden From Investors to Be Disclosed in Sweden

Sweden will start publishing banks’ individual capital requirements in a step designed to reveal risks investors have so far been unable to measure based on reported buffers.

The Swedish Financial Supervisory Authority is planning to follow its Danish counterpart and disclose so-called Pillar 2 requirements as Scandinavia leads Europe in stepping up efforts to improve transparency. In Denmark, which like Sweden has a bank industry whose assets are four times gross domestic product, lenders can be shut down by the regulator if reserves drop below individual requirements.

Disclosing bank-specific capital needs, which are set by national regulators, isn’t required under Basel III or European capital rules. Pillar 2 requirements can in some cases more than double the minimum amount of equity and debt a bank must hold to absorb losses.

The Basel Committee on Banking Supervision sets out three Pillars for a sound financial system. The first imposes industrywide capital requirements, and the third draws on market discipline by forcing banks to show how they meet those requirements.

Sweden already requires its biggest banks to meet some of the world’s most rigorous capital standards, ranging from 14 percent for Nordea Bank AB (NDA) to 19 percent for Swedbank AB. (SWEDA) In May the FSA said banks should hold a 1 percent counter-cyclical buffer after household debt burdens swelled to a record.

Compliance Action

BofA on Brink of Burying Countrywide Woes as Lender Nears Accord

Bank of America Corp. is about to learn how much it really paid for its 2008 acquisition of Countrywide Financial Corp.: about $70 billion.

The original $2.5 billion price tag swelled as the Charlotte, North Carolina-based company resolved more than a dozen legal disputes with the U.S. government, investors and bond insurers over loans that fueled the financial crisis. Bank of America and the U.S. Justice Department are nearing a settlement as soon as this week after the company increased its offer from $13 billion, according to people familiar with the matter. The Justice Department had sought $17 billion, the people said. A deal would come on top of about $55 billion in mortgage settlements, mostly tied to Countrywide.

Lawrence Grayson, a Bank of America spokesman, declined to comment on talks with the Justice Department.

Courts

Bitcoin Tax-Free Transactions Face Test at EU’s Highest Court

Tax-free trading of bitcoin faces a legal test at the European Union’s top court after Swedish authorities sought to extend existing levies to virtual currencies.

The EU Court of Justice must decide whether transactions between virtual and traditional currencies can be classed as a service under EU value-added tax rules, and if so, whether such trades are tax-exempt, according to a court filing.

The case may help clarify powers of tax authorities over bitcoins as central bankers who regulate supplies of traditional currencies from the euro to the pound grapple with their emergence as an alternative means of payment.

Banks shouldn’t buy, hold or sell virtual currencies until regulators develop safeguards to protect their integrity, the European Banking Authority said earlier this month, citing risks including identity theft and the possibility that hackers could target a trading platform.

The Luxembourg-based tribunal is examining a dispute between Sweden’s tax agency and David Hedqvist, who wanted to start selling bitcoins on his website.

The case is C-264/14 Skatteverket v David Hedqvist.

Interviews/Commentary

EU, U.S. Level Toughest Russia Sanctions; No Putin Reaction

Bloomberg’s Peter Cook reported on the latest round of sanctions against Russia by the U.S. and European Union and looked at possible sanctions Russia can levy in retaliation.

He spoke on “Bloomberg Surveillance.”

For the video, click here.

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

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Andrew Dunn, Joe Schneider

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