‘Swift’ Iran Cutoff, Indonesian Mining, BTA Bank: Compliance

The leading worldwide financial messaging service for international money transfers announced yesterday that it will stop providing services to Iranian banks subject to European Union sanctions -- a category that includes Iran’s central bank.

The Society for Worldwide Interbank Financial Telecommunication, known as Swift, said it is taking the action in response to EU regulations issued yesterday. The halt to Swift services for sanctioned Iranian banks will take effect March 17 at 4 p.m. GMT, Swift said in a statement.

Lázaro Campos, Swift’s chief executive officer, said in a statement that the EU decision, “forces Swift to take action.”

Swift said the EU-sanctioned Iranian financial institutions have been notified of the disconnection. Swift said it complies with all applicable sanctions regulations of the multiple jurisdictions in which it operates.

In January, U.S. lawmakers proposed legislation targeting Swift and its board, whose chairman is Yawar Shah of Citigroup Inc. and deputy chairman is Stephan Zimmermann of UBS AG, if it continued to provide services to sanctioned Iranian banks.

Compliance Policy

FSB Seeks Improvements to Audit Rules for International Banks

The Financial Stability Board said it’s seeking better rules for audits of banks, including global lenders deemed to be too big to fail.

The FSB said it is targeting improvements in “the information that external audits provide to prudential supervisors and regulators of financial institutions, including systemically important financial institutions (SIFIs),” according to an e-mailed statement.

Goldman Employee Reinforces Need for Volcker Rule, Democrats Say

The Goldman Sachs Group Inc. employee who criticized the company’s culture in a newspaper column bolsters the case for Wall Street restrictions like the Volcker rule, congressional Democrats said.

While Greg Smith’s New York Times opinion column published March 14 drew no requests for hearings or deeper investigations, lawmakers including Senators Carl Levin of Michigan and Jeff Merkley of Oregon, the Democrats who authored the Volcker rule’s ban on proprietary trading and conflicts of interest in the Dodd-Frank Act, said the piece strengthened the case for restrictions on Wall Street trading.

Congress can’t “legislate the culture but I think the heart of this goes to why we needed the Merkley-Levin amendment,” Merkley, a member of the Senate Banking Committee, said in an interview.

Lawmakers on Capitol Hill yesterday said the piece, which has ricocheted through Wall Street firms, has had less of an impact in Washington, where Goldman Sachs’s business practices and Chief Executive Officer Lloyd C. Blankfein were the targets of congressional hearings in 2010.

“Doing a little research before you call for hearings is important to understand the totality of the story,” Senator Robert Menendez, a New Jersey Democrat on the Banking Committee, said yesterday in an interview on Bloomberg Television.

Senator Jack Reed, a Rhode Island Democrat who sits on the Banking Committee, said Smith’s comments deserve greater scrutiny. He was skeptical there was much Congress could do.

David Wells, a spokesman for Goldman Sachs in New York, declined to comment.

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SEC Issues CDS Market Analysis to Aid Evaluation of Definitions

The U.S. Securities and Exchange Commission released a staff analysis of data on credit-default swap transactions, designed to help evaluate final Dodd-Frank Act rules for the $708 trillion global swaps market.

The analysis by the agency’s Division of Risk, Strategy and Financial Innovation was made available yesterday as part of the comment file for rules proposed with the Commodity Futures Trading Commission, the SEC said in a statement. The rules, proposed in December 2010, will define the terms “swap dealer,” “security-based swap dealer,” “major swap participant,” “major security-based swap participant” and “eligible contract participant,” the agency said.

The SEC staff expects that commissioners will consider the adoption of rules defining the terms within the next several weeks, according to the statement.

Senators Urge $350 Million Revenue Limit for Lower IPO Threshold

U.S. legislation designed to cut barriers to initial public offerings should be limited to firms with no more than $350 million in annual revenue, according to three Senate Democrats pushing to revise the House measure.

Senator Jack Reed of Rhode Island is working with Senators Carl Levin of Michigan and Mary Landrieu of Louisiana on amendments to the bill passed last week in the 390-23 vote in the Republican-led House.

President Barack Obama’s backing and bipartisan support in Congress have given momentum to the legislation, which would exempt newly public companies from some reporting requirements of the Dodd-Frank and Sarbanes-Oxley laws. Reed criticized the House bill, saying the “on ramp” for IPOs “just goes too far” in applying to firms with as much as $1 billion in revenue.

The House package includes provisions that would undo a ban on closely held firms soliciting investments and increase the number of investors such firms can have. The amendment sought by Reed, Landrieu and Levin would revise another provision to increase oversight of firms engaging in so-called crowdfunding, which would allow online solicitation and pooling of investments.

Separately, Maurice “Hank” Greenberg, the former chairman of American International Group Inc., Wilbur Ross, the billionaire chairman of private-equity firm WL Ross & Co., and Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission, offer their views on an opinion piece written by a departing Goldman Sachs Group Inc. employee criticizing the firm.

For the video, click here.

Compliance Action

EU Markets Regulator Endorses U.S. Credit-Rating Companies

Regulation of credit-rating companies in the U.S., Canada, Hong Kong and Singapore is in line with European Union rules, the region’s top markets regulator said in an e-mailed statement.

The European Securities and Markets Authority said it signed cooperation agreements with financial regulators from the countries, allowing European financial firms to continue to use credit ratings from providers in these jurisdictions beyond April this year.

Lloyds Bank Has Been Named in Private U.S. Libor Lawsuits

Lloyds Banking Group Plc has been named in private lawsuits in the U.S. relating to how various banks set the London interbank offered rate, the London-based lender said in its annual report yesterday.

“The Group has received requests from some government agencies for information and is co-operating with their investigations,” Lloyds said in the report.

Vale, Newmont Retain Appetite for Indonesia Mines Amid Stake Cut

Global companies led by Vale SA and Newmont Mining Corp. plan to invest in Indonesia’s mines, undeterred by a new rule cutting foreign ownership, as they hunt for resources in the world’s biggest exporter of tin and thermal coal.

PT Vale Indonesia, a unit of the world’s second-biggest nickel producer, the Adani Group, controlled by Indian billionaire Gautam Adani, Hong Kong-based G-Resources Group Ltd. and Canadian explorer East Asia Minerals Corp. said this week they will boost output at their Indonesian operations even as they need to cut their holdings in local ventures.

The companies are awaiting rules on how to reduce their stakes to 49 percent after President Susilo Bambang Yudhoyono’s decree last month, aimed at increasing the participation of local investors in mining. South Africa and Mongolia are also weighing additional measures to gain a greater share of mining profits.

The Indonesian regulation, signed in February and announced this month, requires overseas companies to reduce their stakes in local ventures to 49 percent within 10 years of starting production. It extends a 2009 law mandating local ownership of at least 20 percent in joint ventures by the sixth year of production.

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Groupon Broke Consumer-Protection Rules, U.K. Regulator Says

Groupon Inc.’s U.K. unit breached consumer-protection rules and must change its pricing, product claims and advertising practices, according to the U.K.’s consumer watchdog.

Groupon must ensure its discounts are “honest and transparent,” that the merchant providing the goods is able to meet demand and that “health or beauty product claims are supported by adequate substantiation,” the Office of Fair Trading said in a statement on its website.

“As a young and innovative business, Groupon acknowledges that our processes and procedures have not always kept pace with our rapid growth,” Roy Blanga, the company’s U.K. managing director, said in an e-mailed statement. “We take their concerns very seriously and will be willingly implementing the recommended changes.”

The company pulled a 2011 advertisement that aired during the Super Bowl following public criticism that it made light of repression in Tibet. Chief Executive Officer Andrew Mason later apologized for the ad.


Citigroup-SEC Trial Is Delayed by Federal Appeals Court

Citigroup Inc. and the U.S. Securities and Exchange Commission won a delay in the trial of a lawsuit the agency brought against the bank while an appeals court considers a judge’s refusal to approve their $285 million settlement.

In November, U.S. District Judge Jed Rakoff declined to approve the accord resolving claims that New York-based Citigroup, the third-biggest U.S. bank, misled investors in a $1 billion financial product linked to risky mortgages. He ordered them to go to trial, which was scheduled for July 16.

“The SEC and Citigroup have made a strong showing of likelihood of success in setting aside the district court’s rejection of their settlement,” the court wrote.

In his decision, Rakoff criticized the agency’s practice of settling without requiring the subject of the allegations to admit wrongdoing, and said the proposed pact was “neither fair, nor reasonable, nor adequate, nor in the public interest.” The agreement didn’t provide him with “any proven or admitted facts” to inform his judgment, he said.

Rakoff didn’t immediately return a call seeking comment on the appeals-court ruling. Danielle Romero-Apsilos, a Citigroup spokeswoman, said the company was pleased with the appeals court’s ruling.

The case is U.S. Securities and Exchange Commission v. Citigroup Global Markets Inc., 11-05227, U.S. Court of Appeals for the Second Circuit (New York). The district court case is 11-cv-7387, U.S. District Court, Southern District of New York (Manhattan).

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Vale Says Court Suspends Collateral Payment in Tax Dispute

Vale SA said a Brazilian court freed it from making collateral payments as part of a dispute over 30.7 billion reais ($17.1 billion) worth of taxes claimed by the government.

The ruling from the Superior Justice Tribunal, which overturned claims including a 1.6 billion-real guarantee payment, suspends all collateral requests until a final ruling on the case, the Rio de Janeiro-based company said late in the day on March 14 in an e-mailed statement.

Vale, the world’s largest iron-ore producer and Brazil’s biggest exporter, has been challenging taxes levied on its foreign subsidiaries’ profits since 2003. The ruling means it won’t need to make guarantee payments on four claims from the Finance Ministry’s revenue service, allaying investors’ concern the dispute will cause losses, Barclays Plc analysts led by Leonardo Correa said.

A Vale official in Rio, who declined to be named according to corporate policy, said the company won’t comment further than the March 14 statement.


Goldman’s ‘Change in Culture’ Hurts Clients, Greenberg Says

Maurice “Hank” Greenberg, the former chairman of American International Group Inc., said Goldman Sachs Group Inc. had a “change in culture” that made the securities firm less responsive to clients.

“You didn’t have investment bankers running the firm, you had traders running the firm” after Goldman Sachs went public, Greenberg told Bloomberg Television’s Betty Liu yesterday in an interview on the “In the Loop” program. “And a trader has a short-term memory, and a short-term look at things, and that change really has changed the culture of Goldman Sachs. It is not the Goldman Sachs that represented companies as an investment banker.”

Greg Smith March 14 blamed Goldman Sachs Chief Executive Officer Lloyd Blankfein and President Gary Cohn for a “decline in the firm’s moral fiber” in a New York Times op-ed piece in which Smith announced his resignation from a post in London selling derivatives. Executives at Goldman Sachs are mistreating clients even after the firm paid $550 million to settle a fraud suit with the Securities and Exchange Commission, Smith wrote.

Greenberg said he counted on Goldman Sachs for investment banking when he ran the New York-based insurer. AIG later took billions of dollars of losses on collateralized debt obligations it backed for Goldman Sachs and ran short of cash. The insurer averted bankruptcy only because of a U.S. bailout that swelled to $182.3 billion.

Greenberg’s former firm had a “contentious relationship” with Goldman Sachs, then-Federal Crisis Inquiry Commission Chairman Phil Angelides said in 2010.

Levitt Says Goldman Is ‘Very Conscious’ of Criticism

Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission and a Bloomberg LP board member, talked about a New York Times opinion piece written by a departing Goldman Sachs Group Inc. employee attacking the firm.

Levitt spoke with Erik Schatzker on Bloomberg Television’s “InsideTrack.”

For the video, click here.

Orenbuch Says Citigroup Buyback Plan May Drop to Zero

Moshe Orenbuch, an equity research analyst at Credit Suisse Group AG, talked about results of the Federal Reserve stress tests on banks and the outlook for banks to return capital to shareholders.

Orenbuch spoke with Erik Schatzker on Bloomberg Television’s “InsideTrack.”

For the video, click here.

Comings and Goings

Kazakhstan’s BTA Bank Said to Consider Balapanov as New CEO

BTA Bank, the Kazakh lender that’s seeking to restructure its debts for a second time in as many years, may name former Kazkommertsbank Managing Director Yerik Balapanov as its new chief executive officer, said two people with knowledge of the matter.

Balapanov, 43, who resigned from Kazkommertsbank, Kazakhstan’s largest lender by assets, on Feb. 24, has already begun work at BTA, the two people said, declining to be identified because the appointment must be approved by the bank’s board of directors.

Balapanov’s secretary at BTA said he wasn’t available for comment when contacted by Bloomberg News. A secretary for Askhat Beisenbayev, BTA’s acting CEO, referred questions to the bank’s press service, which declined to comment immediately when contacted outside of normal business hours. The National Wellbeing Fund Samruk-Kazyna, which holds an 81.5 percent stake in BTA, didn’t respond to e-mailed questions sent after business hours.

BTA is negotiating its second debt restructuring since 2010 after failing to make an interest payment on its July 2018 dollar bonds in January.

Hector Sants to Step Down as FSA Chief Later This Year

Hector Sants, the chief executive of the U.K. Financial Services Authority, will step down at the end of June.

Sants won’t lead the Prudential Regulation Authority, a unit of the Bank of England which will be responsible for banking supervision starting next year, according to an e-mailed statement.

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