Indonesia Time Zone, Russian Tax Dodgers, EU Aid: Compliance

Indonesia plans to switch to a single time zone on Oct. 28, allowing Southeast Asia’s biggest economy to match clocks in Singapore, Malaysia and China with the aim of boosting economic development and synchronizing markets, the nation’s trade ministry said.

The change will put Indonesia, the world’s largest shipper of thermal coal and tin, eight hours ahead of Greenwich Mean Time, according to the ministry. The country that stretches about 5,300 kilometers (3,300 miles) and borders India in the west and Australia in the east, has three time zones.

The move will help accelerate economic development across the country, Trade Minister Gita Wirjawan said in the statement in Jakarta yesterday. After the change in clocks, the country’s stock market will open 30 minutes after bourses in Singapore and Malaysia, from 90 minutes at present.

Indonesia’s new time zone will follow that of countries such as China, Korea, Singapore and Malaysia, Wirjawan said.

Jakarta’s clocks are two hours behind cities in eastern Indonesia. A unified time zone will help improve communication and productivity of Indonesia’s bureaucracy and help the spread of information through medium such as television broadcasts, Wirjawan said.

Compliance Policy

Russia Will Fight Tax Dodgers at Offshore Havens, Siluanov Says

Russia is seeking to curtail corporate use of tax havens as the government considers changes to taxes on foreign profits by offshore-registered units, Finance Minister Anton Siluanov said.

The authorities plan to “reduce opportunities to evade taxes, which includes the use of low-tax jurisdictions and primarily offshores,” Siluanov told lawmakers in Moscow yesterday.

Russia may overhaul rules on controlled foreign companies, according to a three-year tax-policy outline published on the Finance Ministry’s website. The government may levy the 20 percent corporate income-tax rate on undistributed foreign earnings of companies controlled by Russian residents, the ministry said in the document. The measure would combat efforts to dodge taxes by Russian parents transferring profits to offshore destinations, according to the document.

President Vladimir Putin, who was inaugurated for his third term in the Kremlin this month after serving four years as prime minister, urged Russian entrepreneurs last December to repatriate assets held in offshore accounts and said the government may adjust legislation to facilitate the process. Putin ordered officials on March 5 to prepare rule changes requiring Russian residents to declare and pay taxes on income earned from foreign assets, the Vedomosti newspaper reported yesterday.

Fed Adopts Final Rule Listing Criteria for U.S. Broker Oversight

The Federal Reserve adopted a final rule stipulating the criteria under which a U.S. broker-dealer may choose the Fed Board of Governors as its supervisor if government oversight is required under laws outside the U.S.

The rule, required by section 618 of the Dodd-Frank Act, says a U.S. securities holding company that is required by a foreign regulator to be subject to comprehensive supervision may register with the U.S. central bank.

The Fed lists nine types of information a securities holding company must submit to receive consideration for supervision, including an organizational chart, biographical information on senior executives, and copies of the most recent quarterly and annual reports, the Fed said in a press release.

EU Weighs Direct Aid to Banks, Euro Bonds as Crisis Antidote

The European Commission called for direct euro-area aid for troubled banks, and touted a Europe-wide deposit-guarantee system and common bond issuance as antidotes to the debt crisis now threatening to overwhelm Spain.

The commission, the European Union’s central regulator, sided with Spain in proposing that the euro’s permanent bailout fund inject cash to banks instead of channeling the money via national governments. It also offered Spain extra time to squeeze the budget deficit.

The use of the rescue fund to recapitalize banks “might be envisaged” and would “sever the link between banks and the sovereigns,” the commission said yesterday in Brussels.

Proposals for more liberal use of European bailout money are likely to face resistance in creditor countries such as Germany, Finland and the Netherlands, the scenes of growing taxpayer opposition to more aid.

Current EU plans call for the 500 billion-euro European Stability Mechanism, set to start up in July, to funnel bank-aid money through national governments and, ultimately, require those governments to pay it back.

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German Savings Banks Welcome High-Frequency Trading Curb Plan

The DSGV association of German savings banks said it welcomes government plans to rein in high-frequency trading, saying the group would help lawmakers to tag the trades in a targeted fashion.

The German initiative may be worth considering for inclusion in a revision of the Markets in Financial Instruments Directive, DSGV said in an e-mailed statement yesterday.

DSGV President Georg Fahrenschon said in the statement the transactions carry the risk of “volatile price spikes that bear no relation to developments in the real economy.”

Separately, high-frequency trading may be responsible for some of the market volatility, Chairman of the Portuguese securities regulator CMVM, Carlos Tavares, said in Portugal’s parliament yesterday.

These trades carry some risks and demands and supervision isn’t prepared for them, Tavares said in Lisbon.

Direct Aid to Banks Would Endanger ESM Timeline, Austria Says

The European Commission’s call to provide direct aid to banks would endanger the 500 billion-euro European Stability Mechanism’s timeline, the Austrian Finance Ministry said yesterday in an e-mail response to questions.

The Commission’s proposal, made yesterday in Brussels, would require that policy makers change the rules for the ESM, which is set to start up in July, the Finance Ministry said yesterday.

China Securities Regulator to Tighten Standards for IPO Pricing

Companies planning an initial public offering may have to resubmit their prospectuses for review if shares are priced more than 25 percent of the industry’s earning ratio, Shanghai Securities News reported yesterday, citing a China Securities Regulatory Commission meeting.

Separately, China’s securities regulator plans to give priority in reviewing initial public offering of companies in the nation’s western region to boost development there, according to Shanghai Securities News, which cited an unidentified person at the regulator.

China Seeks Feedback on Proposed Drug Blacklist, Xinhua Reports

China is inviting responses from the public to a proposal to create a blacklist of illegal drug producers and sellers, Xinhua News Agency said, citing the State Food and Drug Administration.

The regulation will allow for the names and “pertinent details” of offenders to be distributed to government departments and be published online and through the media, the official news service reported.

Compliance Action

CLS Bank Said to Receive Systemic Label From U.S. Regulators

CLS Bank International, which settles about $4.5 trillion in foreign-exchange transactions daily, received a letter from U.S. regulators including it among entities proposed for designation as systemically important, according to a person familiar with the matter.

The London-based bank, which settles transactions in 17 currencies, joins clearinghouses owned by CME Group Inc.; Intercontinental Exchange Inc.; OCC, formerly the Options Clearing Corp.; and the Depository Trust and Clearing Corp. in receiving the designation from the Financial Stability Oversight Council. CLS’s inclusion was confirmed by the person, who requested anonymity because the decisions haven’t been publicly disclosed.

Being labeled systemically important moves the so-called financial market utilities closer to heightened supervision under the Dodd-Frank Act. The designations are subject to appeal and may be completed “as early as this summer,” said Anthony Coley, a U.S. Treasury Department spokesman.

The Clearing House Payments Co. LLC, which operates a cross-border and domestic wire-transfer system, also received a letter of designation.

Further Arrest in FSA Unauthorized Business Investigation

The Financial Services Authority said a 54-year-old man was arrested March 29 in connection with a probe into a suspected unauthorized foreign exchange trading scheme.

No one was charged at this stage of the investigation, the FSA said in a statement.

Obama Signs Bill Reauthorizing Export-Import Bank

President Barack Obama signed a bill in Washington reauthorizing the Export-Import Bank. The bill raises its lending authority 40 percent to $140 billion by 2014 to boost U.S. export sales and increase jobs. Renewing the charter ends a months-long battle for survival for the 78-year-old-bank, the official export credit agency of the U.S.

Obama also spoke about U.S. trade policy and the bank before signing the bill.

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EU Ministers Fail to Agree on Location of Patent Court

Danish Business Minister Ole Sohn said European Union ministers couldn’t decide in talks yesterday on the location of a European Union patent court, the last obstacle toward agreeing on an EU-wide patent system.

EU leaders will try to strike a deal at talks next month, he told reporters yesterday.


Marsal Expects Europe to Accept ‘Community of Pain’

Bryan Marsal, co-founder of Alvarez & Marsal Inc., talked about the outlook for the U.S. banking industry and implementation of the Dodd-Frank Act.

Marsal, who spoke with Erik Schatzker and Stephanie Ruhle on Bloomberg Television’s “InsideTrack,” also discussed his tenure as Chief Executive Officer of Lehman Brothers Holdings Inc. and the European debt crisis.

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Barroso Says European Banking Union Is a Possibility

European Commission President Jose Barroso spoke about the need for closer financial integration among member states. Economic and Monetary Affairs Commissioner Olli Rehn discussed Spain’s deficit-cutting timetable.

They spoke at a news conference in Brussels.

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RBS Chairman Sees ‘Constant Vigilance’ on Regulation Balance

Royal Bank of Scotland Group Plc Chairman Philip Hampton said “constant vigilance” by his bank is needed to ensure the correct balance between regulation, customer needs and profits.

“Elements of increased regulation are to be welcomed and RBS’s shareholders need little reminding that their own interests are ill-served by ineffective regulatory and capital regimes,” Hampton, 58, said at an annual shareholder meeting in Edinburgh yesterday. “But constant vigilance is required to make sure that we get the balance right between regulation, customer needs and the sustainability of the industry, including required market-based returns for shareholders.”

Regulators are requiring banks to hold more capital as the latest round of rules set by the Basel Committee on Banking Supervision are implemented. A panel of U.K. lawmakers will examine the financial stability tools to be given to the Bank of England as the central bank takes on powers to regulate the financial system, the Treasury select committee said yesterday. The Financial Policy Committee recommended in March that Parliament give it powers of direction over counter-cyclical capital buffers, capital requirements and leverage ratios.

Spajic Says ECB Only Option to Help Europe Debt Crisis

Luke Spajic, head of European credit portfolio management at Pacific Investment Management Co., talked about the role of the European Central Bank in stemming the sovereign debt crisis, Greece’s euro prospects and his investment strategy.

He spoke with Caroline Hyde on Bloomberg Television’s “The Pulse.”

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Comings and Goings

U.K. Treasury Appoints Former Bankers Fried, Frost to BOE Court

The U.K. Treasury appointed two former bankers to the court of the Bank of England as it strengthens the oversight body before the central bank takes on new powers.

Bradley Fried, former chief executive officer of Investec, and Tim Frost, who worked at JPMorgan Chase & Co. before founding Cairn Capital, will join the court on June 1, the Bank of England said in a statement yesterday. Dave Prentis, general secretary of labor union UNISON, has also been appointed to the court. The three replace Brendan Barber, Mark Tucker and Harrison Young.

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