Basel Reprieve, Accounting Standards, UBS Win: Compliance

(Corrects UBS details to show firing came after internal probe in story originally published July 25. To be sent this column daily, click SALT COMPRPT.)

European Union banks are set to win a nine-month delay before they have to begin complying with an international liquidity rule intended to ensure they can survive when money markets seize up.

The EU plans an Oct. 1, 2015, start date for implementing global rules set by the Basel Committee on Banking Supervision for banks to hold a minimum amount of assets that would be easy to sell in a crisis, according to a European Commission document obtained by Bloomberg News. That’s nine months after the date set by Basel. The rule will be phased in over several years.

Concerns such as the technical complexity of the issues and the need for stakeholder consultation with experts prevented earlier finalization, according to the document.

Europe’s banks at mid-2013 had a collective shortfall of 262 billion euros ($353 billion) in the liquidity buffers needed to fully meet the rule, according to data from the European Banking Authority.

Compliance Policy

Banks Face Accounting-Rule Overhaul to Prevent Crisis Fire Sales

Banks face an overhaul of international rules for measuring losses on loans, derivatives and other assets as regulators seek to prevent a recurrence of the fire sales seen in the last financial crisis.

The International Accounting Standards Board published revised standards for lenders and other companies yesterday with a January 2018 deadline for implementation. IASB rules are mandatory for publicly traded companies in more than 100 countries, though not the U.S., which applies its own.

The revised standards will force businesses to make a more realistic, continuous assessment of losses they have suffered on financial products, curbing the potential for so-called cliff effects, whereby they suddenly have to make large writedowns, the IASB said.

Still, the IASB acknowledged defeat in a bid to bring the U.S. within the scope of the updated standard.

Courts/Tribunals

UBS Wins Case Over Firing of Drug Analyst After Probe

A London judge said UBS AG (UBSN) had the right to fire a senior analyst who discussed rumors about a Sanofi (SAN) drug with a friend at a hedge fund who may have bet against the company before publishing a report causing its shares to drop.

Gbola Amusa was dismissed as head of European pharmaceuticals research in March 2013 when UBS found he’d exposed the bank to the risk of front-running, according to a ruling by a London employment tribunal released this week. Amusa was also investigated by U.K. and French market regulators who decided not to take action, the judge said.

Hana Dunn, a UBS spokeswoman, and Jack Cox, a Sanofi spokesman, declined to comment. Amusa declined to comment when contacted by phone July 23 and yesterday.

The tribunal rejected Amusa’s case that he was being punished for blowing the whistle on harassment, improper requests for information by a saleswoman, and exaggerated research by a member of his team.

Madoff Five Face Sentencing as U.S. Seeks Harsher Terms

Five ex-aides to Bernard Madoff who prosecutors say have shown a “galling” lack of remorse since being convicted of fraud in March are set to be sentenced in hearings beginning July 28 for propelling the biggest Ponzi scheme in U.S. history.

The three men and two women, who worked for Madoff for decades, deserve “significantly harsher” terms than the eight to 20 years recommended by the U.S. Probation Office, the government said in court filings this month. The defendants seek leniency, arguing jurors were misled by overzealous prosecutors.

U.S. District Judge Laura Taylor Swain, who oversaw the five-month trial in Manhattan, yesterday rejected requests by the five to set aside their verdicts.

Their defenses lawyers say they will seek to overturn the convictions on appeal.

A federal jury on March 24 found the five guilty of securities fraud and related counts, handing the government a total victory in the first criminal trial over Madoff’s $17.5 billion fraud.

Madoff, 76, pleaded guilty in 2009 and is serving a 150-year sentence in a federal prison in North Carolina.

The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).

Interviews/Hearings

‘Bring It On,’ Barney Frank Tells Dodd-Frank Critics at Hearing

Barney Frank, former chairman of the U.S. House Financial Services Committee, sat before the panel July 23 and told members to “bring it on,” in a feisty defense of the regulatory overhaul law that bears his name.

The hearing on the Dodd-Frank Act, which marked its fourth anniversary this week, was split along partisan lines.

The retired congressman, a Democrat, sat at a witness table with two representatives from banking and business who were called by Republicans to provide testimony about the act’s harm to their respective enterprises.

Frank largely defended the law while endorsing some changes, including limiting the Volcker Rule, which restricts risky trading, to larger institutions.

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

To contact the editors responsible for this story: Andrew J. Barden at barden@bloomberg.net

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