Money Transfers, EU Credit Reports, SEC Post: Compliance

The U.S. Consumer Financial Protection Bureau said it will revise rules for international money transfers after banks complained that the agency’s current plan could push some of them out of the business.

The bureau, which had said final regulations governing so-called remittances would take effect on Feb. 7, now plans to issue a revision in December for a comment period, according to a statement released yesterday. The changes will address what should happen if a consumer provides an incorrect account number for a transfer and how remittance providers must disclose third-party fees and foreign taxes, the bureau said.

Bureau Director Richard Cordray had rebuffed bank lobbyists’ request for a delay in the effective date during an Aug. 10 meeting to discuss the rule. Industry groups then outlined what they saw as problems with the rule in an Oct. 17 letter.

The change announced yesterday may have been prompted by the Federal Home Loan Bank of New York saying it would stop processing international wire transfers for members as a result of the rule, according to Robert Rowe, vice president and chief counsel of the Washington-based American Bankers Association.

The question is whether the changes come in time to keep other banks from exiting the business, Rowe said.

The remittance rule, required under the Dodd-Frank Act, is designed to improve consumer understanding of costs. The bureau issued a revision on Aug. 7, to exempt companies that handle 100 or fewer remittances per year.

The new effective date will be some time in the spring of 2013, according to the bureau’s statement.

Compliance Policy

U.K. Government Starts Public Consultation on Libor Rules

The U.K. government began a public consultation on its plans to overhaul Libor, the benchmark used to set rates for more than $300 trillion of securities, the Treasury said.

The exercise seeks the views of industry and the public on legislation to implement Financial Services Authority Managing Director Martin Wheatley’s recommendations, the Treasury said in a statement in London today.

Under the proposals, which are expected to become law early next year, the Treasury will give legal force to the way the London interbank offered rate is set, create a criminal offense for those who misreport it and give regulators the power to oversee the setting of the rate and other financial-industry benchmarks. The British Bankers’ Association, the industry lobby group that compiles Libor, will give way to a new rate-setting panel.

Wheatley began the review after Barclays Plc paid a record 290 million-pound ($464 million) fine in June for manipulating Libor. At least a dozen banks are being probed worldwide over allegations they colluded to manipulate the benchmark to profit from bets on derivatives.

The public consultation ends on Dec. 24, the Treasury said.

Credit-Rating Companies in EU to Face Sovereign-Debt Curbs

Credit ratings companies face curbs on when they can assess government debt and restrictions on their ownership under draft plans agreed on by European Union officials and legislators.

Lawmakers from the European Parliament and Cyprus, which holds the rotating presidency of the EU, also agreed yesterday to allow investors to sue ratings companies if they lose money because of malpractice or gross negligence.

Michel Barnier proposed the tougher ratings rules after warnings from nations including France and Germany that downgrades of sovereign debt had deepened the bloc’s fiscal crisis. He said last year that ratings companies were guilty of “serious mistakes” and shouldn’t be allowed to “increase market volatility” through ill-timed or unjustified downgrades.

The European Commission has said that tougher regulation is needed to boost competition for the so-called big three ratings companies of Fitch Ratings Ltd., Moody’s Investors Service Inc. and Standard & Poor’s. The draft deal brokered yesterday must be formally approved by governments and by the full parliament before they can be implemented.

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Compliance Action

First Foreign Bank Junior Islamic Bonds Sold in Malaysia

National Bank of Abu Dhabi PJSC completed Malaysia’s first sale of sukuk by a foreign lender that rank below other securities in terms of claims on assets, taking advantage of the Asian nation’s more-advanced rules.

The government-owned entity sold 500 million ringgit ($164 million) of 15-year subordinated Islamic bonds at 4.75 percent last week, according to a Nov. 23 statement. That’s less than the 4.9 percent it paid Malaysian investors in December 2010 for sukuk due in 2020 that has a higher priority in the event of liquidation, and 183 basis points more than average rates on global Shariah-compliant debt in the Gulf Cooperation Council.

The Southeast Asian nation has the regulatory framework in place and legal recourse in the event of a default that may encourage more of these types of products, according to CIMB Islamic Bank Bhd. in Kuala Lumpur. Sales of bonds that comply with religious tenets by Gulf Investment Corp. GSC and Abu Dhabi National Energy Co. helped propel issuance to a record 90 billion ringgit this year.

Malaysia, which pioneered Islamic finance 30 years ago, is also seeing interest from international names to sell debt in the world’s biggest sukuk market. Ireland’s Electricity Supply Board and National Australia Bank Ltd. are planning to tap the market, while Singapore’s Noble Group Ltd. and Bahrain’s Mumtalakat Holdings Co. have already issued ringgit-denominated notes this year.

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Libor Lending Rates Were Probably Fixed, German Regulator Says

Banks probably fixed the London Interbank Offered Rate, or Libor, said Raimund Roeseler, chief of banking supervision at German financial regulator BaFin.

Probes are continuing into the alleged manipulation, Roeseler said before a parliamentary hearing in Berlin today.

Regulators from Canada to Switzerland are investigating whether more than a dozen banks including Deutsche Bank AG, Barclays Plc, UBS AG and Royal Bank of Scotland Plc were colluding to rig Libor, the benchmark for more than $300 trillion of securities, or hiding their true cost of borrowing. Barclays Chief Executive Officer Bob Diamond resigned in July after the bank admitted to manipulating the rate.

Separately, Deutsche Bank co-Chief Executive Officer Anshu Jain is facing criticism from politicians and his own predecessor for a decision not to attend the German hearing on rate rigging. Josef Ackermann, Jain’s predecessor as CEO, criticized him, saying two days ago that he should have accepted parliament’s invitation.

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Big Banks More Apt to Impose Arbitration on Checking Accounts

Large banks are more likely to force checking-account customers to forgo their right to sue over a dispute, according to a new study by the Pew Charitable Trusts released yesterday.

More than half -- 56 percent -- of the 50 largest banks by domestic deposits, including JPMorgan Chase & Co. and Wells Fargo & Co., require checking account holders to submit disagreements to arbitration. Of the next group of 50 banks, 30 percent do so.

The study found that the top five U.S. banks -- JPMorgan, Wells Fargo, Bank of America Corp., Citigroup Inc. and U.S. Bancorp -- all include arbitration clauses in their checking account agreements, according to Cora Hume, one of the researchers. Bank of America uses a process known as “judicial reference,” which functions in a similar manner, Hume said.

Consumer advocates argue that mandatory arbitration limits redress of customer grievances. The U.S. Consumer Financial Protection Bureau is conducting a study on the use of arbitration.


Barofsky Says Party Split May Slow SEC’s ‘Glacial Pace’

Neil Barofsky, former special inspector for the U.S. Treasury’s Troubled Asset Relief Program and Bloomberg Television contributing editor, talked about the selection of Elisse Walter to head the Securities and Exchange Commission.

Barofsky, speaking with Tom Keene and Sara Eisen on Bloomberg Television’s “Surveillance,” also discussed U.S. banking regulations. Stephen Roach, a professor at Yale University, also spoke.

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Pitt Says U.S. SEC Still ‘Absolutely Essential’

Harvey Pitt, former Securities and Exchange Commission chairman, said there is a real need for the SEC to find new ways to “achieve its ever-increasing workload. It is absolutely essential for American investors and for our economy.” Pitt spoke with Bloomberg’s Carol Massar on “Bloomberg On the Economy.”

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Block Giving Up on China Shorts, Says State Protects Frauds

Carson Block, founder of Muddy Waters LLC, said he’s lost interest in betting against Chinese stocks and speculates the government is protecting fraudulent companies.

“China has gotten harder in the sense that the government has really taken the side of the fraud,” Block said in an interview on Bloomberg Television’s “Market Makers” program yesterday. “The government is working with a number of these companies to try to conceal records that are public. When you are up against that sort of strength of the ability to revise history, it becomes difficult. That is one of the reasons we’re not that interested in China anymore.”

A phone call to the State Administration for Industrial and Commerce, which compiles corporate records in China, wasn’t answered after business hours in Beijing. An official at China’s consulate in New York, who asked not to be identified because it’s against their policy, said that she’s not in a position to respond to Block’s comments.

China began limiting access to corporate filings this year after short sellers used them to highlight accounting discrepancies in companies listed abroad.

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HSBC Compliance Would Now Catch Improper Sales, U.K. Head Says

HSBC Holdings Plc’s updated compliance procedures would weed out products such as wrongly sold loan insurance because they would be identified as too profitable, said Antonio Simoes, head of the bank’s U.K. unit.

A reputational risk committee scrutinizes very profitable trades and products, Simoes said. He made the remarks before a panel of the Parliamentary Commission on Banking Standards yesterday.

Payment protection insurance “would have been picked up currently through our product approval procedures,” Simoes said. “One of the key issues we looked at was the profitability of the product and a product which is disproportionately profitable in our current processes would not have been approved.”

HSBC has set aside $2.1 billion after regulators ordered banks to compensate clients who were forced to buy, or didn’t know they had bought insurance to cover their repayments on mortgages, credit cards and other loans. British banks have made provisions of about 11 billion pounds ($17.6 billion) to redress consumers.

Bonuses in London to Trail New York Amid Tougher Rules

Bankers in London, the hub for securities firms in Europe, are bracing for lower bonuses compared with New York counterparts as earnings from the region plummet and pressure to tighten compensation rises. Bloomberg’s Ben Priechenfried reports.

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Comings and Goings

Elisse Walter Steps Out of Schapiro Shadow Into SEC Chairmanship

Elisse Walter, who has spent the past four years as Securities and Exchange Commission Chairman Mary Schapiro’s closest confidant and behind-the-scenes adviser, will soon step into the spotlight that she has mostly shunned in trying to help her close friend succeed.

Designated to become SEC chief by President Barack Obama when Schapiro leaves in December, Walter, 62, is little known outside of Washington. She was already confirmed by the Senate as a commissioner, which allows her to become chairman without going through a second confirmation. Walters can stay in the job as long as the end of next year.

Still, by not immediately naming a replacement for Schapiro’s commission seat, the administration will leave the panel evenly split with two Democrats and two Republicans -- making it harder to enact controversial policies, including the Volcker proprietary trading ban from the 2010 Dodd-Frank law and new strictures for money-market funds.

An administration official said Nov. 26 that Obama will nominate a new commissioner in the near future. The official, who spoke on condition of anonymity because the deliberations were private, didn’t say how soon a nomination might come, and whether the nominee would also be designated for the chairman position.

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Deutsche Boerse’s Rainer Riess to Leave Exchange After 24 Years

Rainer Riess, managing director of Deutsche Boerse AG and deputy chairman of the Frankfurt Stock Exchange, will leave after 24 years at the company.

Riess, 46, will hand over responsibility for the firm’s equity-markets business on Dec. 31, the Frankfurt-based company said in an e-mailed statement yesterday. Andreas Preuss, deputy chief executive officer of Deutsche Boerse, will oversee the unit in addition to derivatives.

The executive, who ran the equities business on a day-to-day basis, represented Deutsche Boerse at international conferences and at the Federation of European Securities Exchanges, the industry’s trade group. Riess’s departure follows the announced retirement of Frank Gerstenschlaeger, an executive board member who will leave on March 31.

Riess will formally depart on June 30 next year, the exchange said, adding he “leaves the company in best mutual consent in order to devote more time to pursue his personal interests.”

Libor Scuppers Tucker BOE Bid as Carney Takes Governor Job

Paul Tucker, whose three-decade career at the Bank of England marked him out as the leading candidate to become the next governor, failed to secure the top post after the Libor scandal undermined his bid.

His chances were tainted after he was forced to deny accusations from lawmakers that he pressed Barclays Plc to lower Libor submissions, and defend himself against criticism he ignored warnings from other regulators on flaws in the rate. Tucker, the BOE deputy governor for financial stability, said he “warmly” congratulated Bank of Canada Governor Mark Carney, who was chosen by Chancellor of the Exchequer George Osborne yesterday. Osborne said he hopes Tucker will continue at the central bank.

Barclays Plc lost its three most senior executives and incurred a record 290 million-pound fine in June for manipulating the London interbank offered rate, the benchmark for more than $300 trillion of securities. The probe into Libor practices has spread among more than a dozen banks worldwide.

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