The European Union unveiled proposals for euro-area bank oversight that require unprecedented cooperation between the European Central Bank and national regulators.
The Frankfurt-based ECB should expand its role as financial-system guardian by becoming the top-level supervisor of every lender in the 17-nation currency bloc, EU officials said in interviews. At the same time, the central bank would depend on national regulators for day-to-day supervision and ensuring that banks comply with European rules, according to the proposals.
EU leaders called for a single bank supervisor in June as a condition of allowing euro-area banks direct access to the zone’s firewall funds. Germany’s top constitutional court yesterday cleared the way for the 500 billion-euro ($644 billion) European Stability Mechanism to become operational later this year.
German Finance Minister Wolfgang Schaeuble said the EU needs to be conservative on how quickly it can establish the new system. Schaeuble said the ECB won’t be able to monitor all euro-area banks overnight. EU Financial Services Commissioner Michel Barnier concurred, saying the ECB will work with national regulators rather than dictating all operations from its Frankfurt headquarters.
Barnier also said the plans don’t jeopardize London’s role as a leading financial services center. The banking union proposals are designed so that non-euro countries can join if they wish, he said, declining to say which nations may consider such a move. Yesterday’s proposals include safeguards for the U.K. and the other nine nations that don’t use the euro to protect them from being drowned out by their neighbors during rulemaking.
For more, click here, and click here and see Interviews, below.
ESRB Aims for EU Shadow Banking Rule Proposals in Early 2013
The European Systemic Risk Board, a group of central bankers and other regulators charged with monitoring market threats, aims to recommend shadow banking oversight changes in early 2013, European Union documents show.
The ESRB wants to mitigate systemic risk associated with shadow banking, according to the papers prepared in advance of a Sept. 14-15 meeting of officials in Cyprus. The panel intends to make policy recommendations on ways regulators can manage the overall health of the financial system and prevent firms from collapsing and triggering contagion.
“Enhanced transparency of certain shadow banking activities is needed to further monitor the sector, for example in the areas of securities lending and repos and other shadow banking entities,” the documents said, referring to repurchase agreements and other financial products. Non-bank financial companies also should not be able to circumvent supervision by switching regulators, according to the papers.
Finance ministers and central bankers will consider a range of regulatory issues when they meet in Cyprus in their first gathering since the European Central Bank announced its plan for working with the euro area’s firewall.
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U.S. Unbanked Households Rising as FDIC Pushes for Alternatives
U.S. families without bank accounts grew by 821,000 from 2009 to 2011, pushing the so-called unbanked population to 8.2 percent of the nation’s households, according to the Federal Deposit Insurance Corp.
About 17 million adults manage their finances without checking or savings accounts at insured institutions, many of them relying instead on non-bank services such as payday lenders and check-cashing firms, the FDIC said in the National Survey of Unbanked and Underbanked Households released yesterday. The agency released the report in conjunction with a conference to explore ways banks could profit by serving this population.
The FDIC and consumer advocates have sought to shed light on the unbanked -- those without bank accounts -- and underbanked -- those who rely on alternative services even though they have bank accounts -- as a first step toward promoting use of insured lenders instead of non-bank products, which can have high fees and interest rates.
Russian ‘Mega-Regulator’ May Appear by End-2013, Siluanov Says
A Russian mega-regulator may appear by the end of 2012, according to Russian Finance Minister Anton Siluanov, who spoke to reporters in Moscow yesterday.
Russia is expected to prepare the legal basis for the move by end of this year in order to submit a bill on a unified regulator in the spring legislative session, Siluanov said. A merged regulator may start work by the end of 2013 or early 2014, he said.
The government is still discussing how to merge functions of market regulation and oversight, Siluanov said. Russia is committed to moving toward a unified regulator as global experience has shown is it better to have oversight and regulation concentrated in one entity, he said.
Russian First Deputy Prime Minister Igor Shuvalov ordered the government to study the possibility of merging the Federal Financial Markets Service and the central bank into a mega-regulator, Kommersant reported Sept. 7.
EU Set to Publish Bank-Structure Overhaul Report on Oct. 2
The European Union’s high-level group examining possible rules on bank structure may deliver its report on Oct. 2, according to Stefaan De Rynck, a spokesman for Michel Barnier, the EU’s financial services chief.
The group, headed by Bank of Finland Governor Erkki Liikanen, is provisionally scheduled to report back that day, De Rynck said in an e-mail.
Cyprus Popular Bank Gets Temporary EU Approval for State Aid
Cyprus Popular Bank Pcl, the island’s second-biggest lender, received temporary European Union approval to receive a 1.8 billion-euro ($2.3 billion) recapitalization from the Cyprus government.
The European Commission said Cypriot authorities have promised to submit a restructuring plan within six months. The EU will then take a final decision on the aid. The Brussels-based regulator can require banks to sell assets or change behavior after they receive large amounts of state help.
Cyprus Popular Bank last month posted a first-half net loss of 1.3 billion euros. The government became the lender’s majority shareholder earlier this year.
NYSE Mulls Kill Switches With Brokers to Catch Errant Trades
NYSE Euronext held a meeting with broker-dealers last month to discuss ways to limit losses and disruption from accidental trading as the industry grapples with technology mishaps, a person familiar with the matter said.
The exchange company and member firms talked about the usefulness of kill switches, which would halt all trading by a firm based on specified parameters, among other potential initiatives, said the person, who declined to be named because the discussions are private.
Exchanges, brokers and regulators are considering ways to reduce risks of market turbulence and errant trades after Knight Capital Group Inc.’s $440 million loss on Aug. 1 because of a technology mistake.
Keara Everdell, a NYSE Euronext spokeswoman, declined to comment. Robert Madden, a spokesman for Nasdaq OMX Group Inc., declined to comment on whether the New York-based company has held similar meetings.
Earlier yesterday, the Wall Street Journal reported that NYSE Euronext and Nasdaq OMX held meetings with customers to discuss steps to limit trading errors including through kill switches.
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Singapore’s Resorts World Casino Fined for Reimbursing Fees
Resorts World at Sentosa Pte.’s casino was fined S$600,000 ($488,599) by the Singapore regulator for breaching laws against reimbursing patrons’ entry fees, the Casino Regulatory Authority of Singapore said.
Staff at Resorts World, operated by a subsidiary of Kuala Lumpur-based Genting Bhd., provided hotel accommodations, concert tickets and free admission to its Universal Studios theme park to about 3,400 people when they purchased or renewed the S$2,000 annual entry levies, the regulator said in a press release Sept. 12.
Resorts World said it set up an independent investigation when it became aware of the breaches. Singapore citizens and permanent residents are required to pay a daily S$100 levy or yearly fees to enter the city-state’s two casinos.
“Measures put forth by the board of inquiry have since been implemented, including staff training on compliance policies, and the setting up of a compliance committee,” Resorts World said in a statement Sept. 12. “The company is fully committed to uphold Singapore’s social safeguards to protect locals from problem gambling.”
This is the second fine on casinos in Singapore announced within a month.
Ex-HBOS Banker Cummings Fined $805,000 by U.K. Finance Watchdog
The U.K.’s financial watchdog fined Peter Cummings, a former banker at HBOS Plc, 500,000 pounds ($805,000) over the aggressive expansion of corporate lending.
The Financial Services Authority fined and banned Cummings for failing to adequately manage the risks his division faced as financial market conditions deteriorated in 2007 and 2008, the agency said in an e-mailed statement.
Cummings ran the corporate-banking unit before the Edinburgh-based lender was acquired by Lloyds Banking Group Plc. Cummings’ unit had “lent too much,” ex-HBOS chairman Dennis Stevenson said at a Parliamentary committee hearing in 2009. HBOS’s assets more than doubled to 681 billion pounds between 2001 and 2008, as it expanded lending to entrepreneurs and real estate developers.
About 40 percent of the bank’s 117 billion-pound corporate loan book was allocated to real estate and commercial property. Lloyds’s acquisition of HBOS, Britain’s biggest mortgage lender at the time, led it to seek a 20 billion-pound bailout. The U.K. government acquired a 43.4 percent stake in Lloyds.
Cummings, 57, rejected the FSA’s claims, calling the investigation process “Orwellian” and said in an e-mailed statement that there should be “collective responsibility” for what happened at HBOS. So far, he’s the only HBOS director to face action from the FSA over the near-collapse of the lender.
Cummings said he won’t appeal the FSA’s decision, citing the potential costs. The FSA said it will now begin work on a detailed report into the causes of the failure of HBOS in 2008.
Glencore Trader Fired for Drinking Sues for Shares, Salary
An oil trader fired by Glencore International Plc’s London unit for “alcohol-related issues” sued the company for shares worth at least $1.2 million.
Andrew Kearns was fired in October 2010 after missing meetings following an evening out with clients on a Singapore business trip, his lawyers said in an August court filing released this week. Kearns, who made $225,000 a year plus a bonus of about $300,000, said he doesn’t have an alcohol problem and was singled out because he disagreed with managers and was owed a bonus in shares.
Glencore sold $10 billion in stock in an initial public offering in May of last year, making at least five of its executives billionaires, including Chief Executive Officer Ivan Glasenberg.
Kearns said in court documents that the culture of the firm includes frequent entertaining of clients, which involves the consumption of alcohol.
The case is Andrew Stephen Kearns v. Glencore UK Ltd., High Court of Justice, Queen’s Bench Division, HQ12X03294.
Mayer Says Treaty Change Needed for ESM Bank License
Franz Mayer, a professor at the University of Bielefeld, discussed yesterday’s ruling by Germany’s top constitutional court to reject bids to block ratification of the 500 billion-euro ($644 billion) European Stability Mechanism.
Germany’s top constitutional court rejected efforts to block a permanent euro-area rescue fund. The ruling yesterday handed a victory to Chancellor Angela Merkel, who championed the 500 billion-euro ($645 billion) bailout facility.
Mayer spoke about the decision with David Tweed in Berlin on Bloomberg Television’s “The Pulse” with Guy Johnson.
For the video, click here.
Oudea Says Banks Need to Be Realistic on Return Outlook
Frederic Oudea, chief executive officer at Societe Generale SA, talked about the impact of regulation on Europe’s financial-services industry and the growth outlook for his bank.
He spoke with Erik Schatzker on Bloomberg Television’s “Market Makers.”
For the video, click here.
Barnier Says EU Bank Plans Are Not a Threat to London
European Union Financial Services Commissioner Michel Barnier spoke at a news conference in Strasbourg, France, about proposals for a single banking supervision mechanism.
For the video, click here.
For more, see top section, above.
Barclays’s Walker Says Banks Should Cut Sales Bonuses
Incoming Barclays Plc Chairman David Walker talked about transparency in banking, remuneration and supervision.
He testified before the U.K. parliament’s Commission on Banking Standards in the House of Commons in London.
For the video, click here.
Comings and Goings
Andrew Bowden Named Deputy Director, SEC Office of Compliance
Andrew Bowden has been named Deputy Director of the Office of Compliance at the U.S. Securities and Exchange Commission, according to a statement by the agency.
Bowden is to assume the new position immediately while continuing in his current role as associate director for the SEC’s Office of Compliance Inspections and Examinations until a successor is in place, the SEC said in the statement.
Bowden succeeds Norm Champ, who was named in July to head the SEC Division of Investment Management.