U.K. Basel Speed-Up, Spain DTAs, Swiss Bank: Compliance

The largest U.K. banks will have to comply with tougher capital rules five years ahead of an international timetable as the Bank of England seeks to bolster lenders’ resilience to crises.

U.K. banks and building societies including Barclays Plc, HSBC Holdings Plc and Royal Bank of Scotland Group Plc will have to meet capital requirements of the Basel Committee on Banking Supervision by Jan. 1, 2014, the Prudential Regulation Authority said in a statement Nov. 29. The requirements include a debt limit, known as a leverage ratio, that forces lenders to have equity equal to 3 percent of their assets.

Lenders that will have to comply with the faster timetable also include Banco Santander SA’s U.K. unit, Lloyds Banking Group Plc, Co-operative Bank Plc, Nationwide Building Society and Standard Chartered Plc, the PRA said.

The measures, known as CRD IV, are being implemented in the European Union through legislation adopted this year and applied in the U.K. based on CRD IV rulebook standards.

Under CRD IV, national regulators can force their banks to implement the capital rules ahead of the international timetable.

Compliance Policy

China’s Move to End IPO Halt Sparks Rally in Finance Stocks

China’s move to end a 14-month ban on initial public offerings and allow the sale of preferred shares led to a rally in financial stocks as investors bet the measures will boost fees for brokerages and ease banks’ funding.

The IPO freeze will be lifted following new rules that pave the way for a switch to a U.S.-style registration system and letting investor demand determine pricing, underscoring Communist Party leaders’ pledge to allow markets to play a “decisive” role in allocating resources. China, the world’s largest IPO market in 2010, hasn’t had a new listing since October 2012 amid a crackdown on fraud and misconduct.

It will take about a year to review more than 760 companies that are seeking first-time share sales, the China Securities Regulatory Commission said in a statement on its website on Nov. 30. A total of 83 companies’ IPO applications have been cleared and are pending final approval, the regulator’s website shows.

Foreign investment banks including Goldman Sachs Group Inc. are allowed to manage IPOs in China only through their joint ventures with local firms.

The CSRC also proposed drafting rules for a trial program to allow companies to sell preferred stock, based on guidance issued Nov. 30 by the State Council. That class of equity, which doesn’t carry any voting rights, grants holders a greater claim on a company’s assets or earnings than common stock.

Banks will be able to include preference shares in calculations of Tier-1 capital, giving them a new financing avenue to meet requirements for risk buffers, while helping reduce corporate debt levels, CSRC spokesman Deng Ge said in a separate statement.

Spain Ruling Helps Banks Pad Capital Buffers Before ECB Review

Spain passed rules that will allow the country’s banks to keep counting 30 billion euros ($40.8 billion) of deferred tax assets as capital, easing the burden on lenders as they face tougher rules.

About 60 percent of the 50 billion euros of DTAs that banks have amassed are included, Economy Minister Luis de Guindos told reporters in Madrid after a weekly cabinet meeting Nov. 29. The change won’t affect the government’s debt or deficit in the short or medium term, he said.

Spanish banks have been pushing the government to shield them from new financial regulations known as Basel III that will force banks to deduct these assets from capital over time.

The International Monetary Fund said last month that it supported steps to convert some DTAs into claims backed by the government as long as Spain also makes banks take further steps to bolster capital by selling shares or skipping cash dividends.

Bank Rossii to Split Up Financial Markets Regulator in March

Bank Rossii’s board approved a plan to split up the financial markets regulator nine subdivisions responsible for the development and functioning of financial markets beginning March 3, according to a statement on its website.

Separately, Russian banks must increase provisions on their investments in shares of closed-end funds starting July 1, Vasily Pozdyshev, the head of Bank Rossii’s banking regulation department, said in an e-mailed statement.

The delay from a previous Jan. 1 start date is intended as a compromise for banks, to give them time to form reserves, Pozdyshev said in the statement.

Compliance Action

Fund Managers Press FCA for More Disclosure on Currency-Rigging

The U.K.’s Investment Management Association, whose members oversee about 4.5 trillion pounds ($7.4 trillion) of assets, is pressing regulators to provide more information about the alleged manipulation of the foreign-exchange market, said two people with knowledge of the matter.

The trade group wrote to the Financial Conduct Authority in recent weeks, asking how it should respond to clients’ inquiries about whether currency markets are being rigged, said the people, who asked not to be identified because the correspondence is private. The FCA replied that it couldn’t comment on a current investigation, one of the people said.

Fund managers are among the biggest clients of banks’ foreign-exchange desks and are at risk of being the biggest losers from any rigging of the $5.3 trillion-a-day market. The FCA opened a formal probe on Oct. 16, four months after Bloomberg News reported that some traders had pooled information about their positions with counterparts at other firms and tried to manipulate the benchmark WM/Reuters rates.

Annette Spencer, a spokeswoman for the IMA, said the industry group had contacted the FCA about the probe, but declined to comment further. David Cross, a spokesman for the regulator, declined to comment.

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RBS Lending Allegations Probed as FCA Asks Banks to Review Loans

Allegations that Royal Bank of Scotland Group Plc pushed small businesses into default will be investigated as the U.K. markets regulator called on other banks to review their lending practices.

The Financial Conduct Authority will consider whether to take action against the bank after a review by independent analysts, the watchdog said in a statement Nov. 29. The FCA will also write to other banks asking them to confirm that they do not engage in any of the “poor practices alleged” against RBS in a report last month.

Britain’s largest state-owned bank would charge companies advisory fees and buy their assets at reduced prices once they were in default, Lawrence Tomlinson, a government consultant, said in a report published on Nov. 25. Business Secretary Vince Cable referred the matter to the FCA.

The probe adds to the list of regulatory issues RBS is dealing with, including an internal probe related to currency manipulation and a fine for benchmark rigging.

RBS hasn’t found any evidence of “systemic fraud,” the lender said in an e-mailed statement about Tomlinson’s report.

The U.K. Serious Fraud Office is considering a criminal probe over the allegations. RBS has also appointed London-based law firm Clifford Chance LLP to investigate the allegations.


Shanghai Court Takes Case Against Everbright, Xinhua Says

A court in Shanghai accepted a lawsuit filed by an individual investor against Everbright Securities Co. alleging claims based on insider trading, the official Xinhua News Agency reported on a microblog, without saying where it got the information.

China Daily reported earlier that an Everbright investor lawsuit was rejected by a Guangdong court Sept. 9, citing lack of jurisdiction over the case.


Arthur Levitt Says SEC Is Failing on Money Market Funds

Arthur Levitt, a former Securities and Exchange Commission chairman, said an SEC proposal on money market funds “would only make matters worse.” Levitt talked with Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.”

For the audio, click here.

Comings and Goings

Basler Kantonalbank Chairman Steps Down After Finma Reprimand

Basler Kantonalbank, a state-owned Swiss regional lender, said Chairman Andreas Albrecht resigned after the bank was reprimanded last month for manipulating the market price of its own securities.

Albrecht will relinquish all duties by the end of the year at the latest, the Basel-based bank said in a statement Nov. 29. Andreas Sturm will take over his responsibilities until a new chairman is elected. The bank said Albrecht stepped down to protect the lender from loss of confidence in the company.

The Swiss financial watchdog Finma told Basler Kantonalbank to disgorge 2.64 million francs ($2.9 million) in improperly generated profits after finding that the lender “inadmissibly propped up the market price of its own participation certificates” from January 2009 to September 2012. The bank said last month that it has started measures to prevent a repeat of such misconduct.

“Basler Kantonalbank tried to halt or at least soften the decline in prices caused by the U.S. tax dispute from the fall of 2011” by buying its own certificates on the stock exchange, the lender said. “These supportive purchases were deemed inadmissible by Finma.”

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