Danes’ Debt Deadline, Swiss-Asia Tax Trail: Compliance

Denmark’s regional banks face a repayment deadline on subordinated debt sold before the financial crisis that now threatens to leave them insolvent unless they deleverage or divest.

Banks need to refinance about 400 billion kroner ($66 billion), with maturities concentrated in 2012 and 2013, the nation’s financial regulator estimates. About 12 percent of that is subordinated debt. Refinancing is unlikely to be an option for a number of banks as capital markets roll over only the safest credit, said Kristian Vie Madsen, deputy director general at the Copenhagen-based Financial Supervisory Authority.

Denmark’s regional banks are still struggling to emerge from a funding crisis spawned by Europe’s toughest resolution laws, which require senior creditors to share losses in the event of insolvency. The industry is also fighting to recover from a burst housing bubble and a recession that caused two thirds of the country’s medium-sized banks to lose money last year, central bank data show.

The repayment cliff won’t hurt the country’s largest lenders including Danske Bank A/S, the FSA estimates. The refinancing pressure that banks face doesn’t include such state-held debt, which is classed as hybrid tier 1, Vie Madsen said, explaining that the state-held debt does not expire, “as it is perpetual.”

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Compliance Policy

Consumer Bureau Proposes New Rules on Mortgage Servicing

The U.S. Consumer Financial Protection Bureau Aug. 10 proposed new regulations that would revamp how American homeowners interact with mortgage servicers.

One set of rules aims to provide homeowners with clearer, more timely information about changes to interest rates and options for avoiding foreclosure. A second set of rules requires servicers to credit payments promptly, correct errors, stay accessible and limit foreclosures if homeowners are working on loan modifications.

The bureau is seeking public comment on the proposals by Oct. 9, and will finalize them by January 2013.

The proposal would cover major bank servicers, such as Bank of America Corp., as well as smaller non-bank players like Ocwen Financial Corp.

The new regulations go beyond the standards for mortgage servicing that state attorneys general wrote into a court settlement reached with major banks on March 12, according to a senior CFPB official who briefed reporters on condition of anonymity. For example, the CFPB proposal requires servicers to acknowledge receipt of complaints or information requests within five days, and respond to the borrower about the inquiry within 30 to 45 days.

Argentine Economy Ministry Officials to Unveil Fuel Regulations

Argentina’s Economy Minister Hernan Lorenzino and Deputy Minister Axel Kicillof were expected Aug. 10 to announce a 50 percent increase in soybean biodiesel export taxes.

Argentina created a registry for soybean operators that will be managed by the country’s tax agency to control temporary imports of soybeans, Argentina’s official gazette said Aug. 10.

The government, which seeks to boost biodiesel production, will increase export taxes for biodiesel soybeans to 32 percent from 20 percent, according to the gazette.

The bioedesel regulations follow announcements Aug. 9 by Argentine President Cristina Fernandez de Kirchner. Argentina will raise by 300 percent gas wellhead prices seeking to attract investors in shale gas developments in southern Argentina’s Vaca Muerta, Fernandez said.

HK Bank Group Sets Up Hibor Review Committee, Fung Says

The Hong Kong Association of Banks set up a committee to review the Hong Kong inter-bank offered rate, or Hibor, Anita Fung, chairwoman of the association and Hong Kong chief executive officer of HSBC Holdings Plc, told reporters in the city Aug. 10.

The committee is expected to hold its first meeting this week and hopes for material progress by the end of the year, Fung said.

Earlier this month, the Hong Kong Monetary Authority said that quotes from contributing banks to the Hibor system don’t necessarily reflect the banks’ own borrowing costs and are less likely to be under-reported. The HKMA made the statement in an article posted to its website Aug. 3.

Trading of Hong Kong dollar interest rate derivatives isn’t as active as that for the U.S. dollar, so there is less incentive to collude to manipulate the Hibor rate, the agency said in the statement.

The HKMA also said in the statement earlier this month that it hasn’t observed any anomalies in the HIBOR mechanism or financial instruments linked to Hong Kong dollar interest rates.

Italy Moves to Define Premier’s Powers to Block Takeovers

Italian Prime Minister Mario Monti proposed a measure defining the premier’s special powers to block takeovers of defense contractors and other companies partly owned by the state and considered strategic.

The decree will allow the prime minister to impose “specific conditions on the purchases of stakes” and to oppose the acquisition of shares if it would “reach a level that would compromise the protected interests,” Monti’s office said Aug. 10 in an e-mailed statement after his Cabinet met in Rome.

The decree will be submitted to the Council of State and the competent commissions for opinions before being adopted, according to the statement.

Compliance Action

Standard Chartered Said to Agree on New York Monitor Demand

Standard Chartered Plc has agreed to a New York Department of Financial Services demand that the bank hire an outside monitor to ensure compliance with U.S. anti-money laundering laws, according to a person familiar with the matter.

The agreement on the monitor, mandated by the regulator in an Aug. 6 order, stems from negotiations between the bank and state officials ahead of an Aug. 15 hearing at which Standard Chartered will be asked to explain why its license to do business in New York shouldn’t be revoked.

New York banking Superintendent Benjamin Lawsky alleged London-based Standard Chartered flouted U.S. banking laws by helping launder about $250 billion in Iranian funds in contravention of U.S. statutes and without proper disclosure. Lawsky is said to seek as much as $700 million to settle the investigation, another person familiar with the case said.

The regulator’s threat panicked the bank’s investors, sent its share price down about 16 percent the day after and provoked a defiant response from Standard Chartered Chief Executive Officer Peter Sands, who said the vast majority of wire transfers identified by Lawsky complied with federal law. The bank’s stock was down about 10 percent last week.

Lawsky and Julie Gibson, a spokeswoman for Standard Chartered, didn’t immediately respond to calls or e-mails seeking comment on the monitor agreement after regular business hours.

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Herbalife Resolves SEC Correspondence After Einhorn Questions

Herbalife Ltd., the maker of namesake nutritional supplements, was questioned by the U.S. Securities and Exchange Commission about its disclosures, following similar questions from hedge-fund manager David Einhorn in May.

The SEC asked Herbalife why it viewed certain disclosures related to its distributors as immaterial to investors, according to a letter dated June 5 that was released Aug.8 in a filing. On July 11, the SEC said it had completed its review following an explanation from Herbalife, an additional correspondence shows.

“The documents speak for themselves, the matter’s closed and there’s no SEC investigation,” Barbara Henderson, a Herbalife spokeswoman, said Aug. 10 in a telephone interview.

Herbalife sells vitamins, shake mixes and skin gels through a marketing network of independent distributors in 81 countries who earn revenue through their sales and by recruiting new distributors.

Germany Opens Swiss Tax-Evasion Probe Amid Paper Trail Report

Prosecutors in the German city of Bochum opened a probe into tax-evasion by nationals with Swiss bank accounts, as German authorities were reported to have found evidence lenders in Switzerland helped clients to conceal their money in Asia.

Prosecutors received “tip-offs” that plans have been developed “on a large scale” on how to hide money parked in Switzerland until a planned tax accord between Switzerland and Germany is in place, Norbert Walter-Borjans, finance minister of the German state of North Rhine-Westphalia, said in an interview on ZDF television Aug. 10.

While North Rhine-Westphalia has regularly been the subject of reports it bought CDs with Swiss account information on German clients, the latest allegations mark an escalation that may further undermine efforts to seal a bilateral agreement to halt tax-dodging.

Prosecutors in Bochum, in North Rhine-Westphalia, have received data and are looking into it, spokesman Bernd Bieniossek said by phone Aug. 10. He declined to provide any more details of the investigation.

Authorities have for the first time found a “paper trail” leading from Switzerland to Singapore, the Financial Times Deutschland reported, citing an unnamed official close to the North Rhine-Westphalia Finance Ministry. Daniel Moritz, a ministry spokesman, didn’t confirm the report.

Mario Tuor, a spokesman for Switzerland’s State Secretariat for International Financial Matters in Bern, declined to comment on the speculation over new CD purchases.

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Japan FSA to Issue Improvement Order to SMBC Nikko, Nikkei Says

Japan’s Financial Services Agency will issue a business improvement order to SMBC Nikko Securities Inc. today over the involvement of its former executive in insider trading cases, Nikkei reported.

The company said earlier this month that it plans to cut its president’s pay following the June arrest of a former executive on suspicion of aiding insider trading.


MF Global Agreement With CME Group Wins Court Approval

The trustee liquidating MF Global Inc. won court approval to receive $130 million from CME Group Inc. to pay back the bankrupt brokerage’s customers and other creditors.

U.S. Bankruptcy Judge Martin Glenn said in court papers filed in Manhattan bankruptcy court Aug. 10 that the agreement can go forward, overruling an objection from one customer. Glenn had heard arguments in court on Aug. 8, including those from the Commodities Future Trading Commission and Securities Investor Protection Corp. in support of the pact.

Commodity customers who traded on U.S. exchanges will get $65 million, with the same amount going to customers who traded on foreign exchanges, while non-customer creditors will get $16.5 million, trustee James Giddens has said. In total, CME Group will return $175 million to the failed brokerage, settling all disputes about how much of MF Global’s property and customer property rested with the exchange.

Under the agreement, more than $30 million of CME’s claims against MF Global will also have a lower priority when it comes to getting paid than brokerage customers.

Giddens has set in motion distributions that will repay commodity customers about 80 percent of what they’re owed for funds missing from their segregated accounts. He said he still sees lawsuits against former MF Global executives as a way to recover more money for creditors.

The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). Ex-Fannie Mae CEO Mudd Must Defend SEC Suit, Judge Rules

Former Fannie Mae Chief Executive Officer Daniel Mudd must face a lawsuit in which the U.S. Securities and Exchange Commission accuses him of misleading investors about the company’s exposure to risky loans.

U.S. District Judge Paul Crotty in New York today rejected a request to dismiss the case by Mudd and two other ex-Fannie Mae executives.

The SEC alleged in its lawsuit that Fannie Mae, the biggest backer of U.S. home loans, underrepresented its exposure to subprime and so-called Alt-A mortgages, which require little or no documentation from borrowers. James Wareham, a lawyer for Mudd, said in an e-mail that “nearly all” of the SEC’s allegations in the case are false, and the evidence will demonstrate that Fannie Mae’s executives acted in good faith and its disclosures were adequate.

The case is SEC v. Mudd, 11-cv-09202, U.S. District Court, Southern District of New York (Manhattan).

Ex-Carlyle Consultant Gets Probation for Insider Trading

Former A.T. Kearney Inc. partner Sherif Mityas was sentenced to three years of probation for trading on inside tips he learned while serving as a consultant to private-equity firm the Carlyle Group, according to a spokesman for federal prosecutors.

Mityas was sentenced Aug. 10 at a hearing in Brooklyn, New York, federal court, according to Robert Nardoza, a spokesman for U.S. Attorney Loretta Lynch. He wasn’t ordered to pay any financial penalties, Nardoza said in an e-mail.

The former consultant pleaded guilty in March to one count of securities fraud for making trades in the stock of vitamin maker NBTY Inc. based on nonpublic information he learned about the vitamin company through his work as a partner at Chicago-based A.T. Kearney.

Mityas made $25,871 in trading profits, prosecutors alleged.

In a memorandum filed with the court, Mityas’s lawyer, Eric Chase, asked that his client be sentenced to no prison time. Chase described Mityas as a family man whose financial stressors led him to “make this one foray into criminal conduct.”

Mityas also faced a civil suit by the U.S. Securities and Exchange Commission over the NBTY trades in which he consented to a $78,237 judgment, according to court filings.

The criminal case is U.S. v. Mityas, 1:12-cr-00133, U.S. District Court, Eastern District of New York (Brooklyn).

The civil case is Securities and Exchange Commission v. Mityas, 1:12-cv-01281, U.S. District Court, Eastern District of New York (Brooklyn).


Libor Review May Impact Oil, Mortgages U.K’s FSA Says

A review of the London interbank offered rate, or Libor, will probably have ramifications for the way oil and other commodities are priced, according to the U.K.’s Financial Services Authority.

“The Libor consultation may have implications for other financial benchmarks, including those for oil, gold and other commodity prices, which may eventually be reviewed at a global level,” Martin Wheatley, the managing director of the FSA, said Aug. 10 in a speech at Bloomberg LP’s office in London.

Wheatley, 53, also said that material changes to the way Libor is calculated risks invalidating millions of financial contracts, covering products ranging from mortgages to derivatives.

There needs to be certainty on what would happen to banks and investors if another benchmark is adopted, he said.

Wheatley said the FSA is conducting the review after Barclays Plc, the U.K.’s second-largest bank, was fined 290 million pounds ($453 million) by U.S. and U.K. authorities in June for rigging interest rates.

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Borg Seeks Higher Risk Weights on Swedish Banks’ Mortgages

Swedish Finance Minister Anders Borg called for risk weights on banks’ mortgage loans to be raised in response to rising household indebtedness as the government also pushes ahead with stricter capital rules than elsewhere.

“One can of course continue to discuss what needs to be done but I would then rather prefer that we perhaps should look at risk-weights and which liquidity requirements we have on the banks in their financing,” Borg told reporters at a press conference in Stockholm.

He is pushing through tougher capital rules than the Basel Committee on Banking Supervision and the European Banking Authority, requiring Swedish lenders to target 10 percent core Tier 1 buffers of their risk-weighted assets from January and 12 percent from 2015. At the same time, risk weights on mortgages in Sweden are among the lowest in Europe, according to a June 1 report from the central bank.

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