Consumer Rules, Goldman Dark Pool, FSA: Compliance
The U.S. Federal Reserve proposed two rules that would raise consumer protection coverage limits for credit transactions and leases.
The rules would increase the limits to $50,000, according to a Fed statement yesterday. Amounts will be adjusted annually to reflect any increase in the consumer price index, the Fed said. Consumer loans of more than $25,000 are generally exempt from the protections of the Truth in Lending Act, and leases where the consumer’s total obligation exceeds $25,000 are also exempt from safeguards of the Consumer Leasing Act.
The Truth in Lending Act requires creditors to disclose important terms of consumer loans and prohibits lenders from engaging in certain practices. The Consumer Leasing Act requires lessors to provide consumers with disclosures regarding the cost and other terms of personal property leases, such as automobile leases. The $50,000 limit for leases would apply to everything consumers are required to pay under the lease excluding taxes, the Fed said.
The financial overhaul bill enacted July 21 included a provision to extend coverage to $50,000 effective July 21, 2011.
European Federation of Energy Traders ‘Welcomes’ EU Proposal
The European Federation of Energy Traders said yesterday it “welcomes” a draft proposal by the European Commission for regulation of the energy market, according to an e-mailed statement. The group called for European Union lawmakers to use care in designing the regulatory system “so as not to harm the market, nor hinder its development,” and urged them to clarify the powers and responsibilities of the agencies involved.
China Will Stop ‘Inappropriate’ Ties Between Banks, Non-Banks 9
China will seek to halt “inappropriate” ties between banks and non-bank financial institutions, the China Banking Regulatory Commission said in a statement posted on its website yesterday.
The watchdog also said it will control the pace of lending and modify loan structures, and will control the credit risk of local-government financing vehicles. The CBRC made the statement after the central government’s annual economic work meeting.
Mexico Adds Anti-Laundering Rules for Lenders, Universal Says
Mexico’s Finance Ministry will publish new regulations for specialized lenders known as Sofomes in a bid to prevent money laundering, El Universal reported.
The rules will require Mexico’s tax agency to create a registry of the lenders, which currently don’t receive approval to operate from any financial regulator, the newspaper said.
The Sofomes will have nine months to comply with the new rules, the newspaper reported. The regulations will be published in the federal gazette in the coming days, El Universal said.
EU Commission Seeks Views on Possible Changes to UCITS Rules
The consultation seeks comments on possible measures to further harmonize protection for UCITS investors in the wake of scandals and the financial crisis, the Brussels-based commission said today.
Jimi Accepts Proposal to Extend Japan Capital Gain Tax Break
Speaking to reporters in Tokyo after meeting Noda, Jimi said they haven’t decided how long the tax break will be extended. Jimi says he wanted a two year extension and Noda has called for it to be extended by one year.
Separately, Japan’s Prime Minister Naoto Kan ordered a 5 percentage point cut in the nation’s corporate tax rate starting in the next fiscal year to boost an economy that is showing signs of contraction.
The corporate tax rate in Tokyo, Japan’s financial and economic center, is 40.69 percent, compared with 28 percent in the U.K. and 25 percent in China, according to Ministry of Finance data.
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U.S. Financial Crisis Panel Rift Spurs Protest by Republicans
The internal split between Republicans and Democrats on the congressionally appointed commission investigating the 2008 financial crisis is about to break into the open.
Republican members of the Financial Crisis Inquiry Commission are planning to register a public protest against a decision by the FCIC’s Democratic majority to push back a deadline for reporting its findings.
The move is in part a reaction to a plan that would limit dissenting views to 36 pages in a 500-page book the panel is set to publish next year, three people with knowledge of the protest said.
Bill Thomas, vice chairman of the panel, told reporters in Washington yesterday that he is trying to schedule a news conference for tomorrow, the day the panel was required to issue its final report. While Thomas didn’t give details, the people said the FCIC’s four Republicans are likely to attend and may provide a preview of their own report.
The Republicans are angry that the commission’s six Democrats voted last month to push the delivery of the final report to January, said the people, who spoke on condition of anonymity because the plans aren’t public. The change was made to “accommodate the publication” of the book, they said.
Congress created the FCIC to investigate the causes of the financial crisis that toppled Lehman Brothers Holdings Inc. and prompted U.S. bailouts for private companies. The panel has been beset by internal disputes and staff departures.
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Goldman Sachs Considers Second European Dark Pool Amid Scrutiny
Goldman Sachs Group Inc. (GS), the world’s most profitable investment bank, is considering opening a second dark pool with a different regulatory structure as European Union policy makers seek more transparency.
The New York-based bank is in talks with regulators to create a trading platform to be called Sigma X MTF in addition to its current internal system, a so-called broker crossing network known as Sigma, David Shrimpton, who will be chief operating officer of the new system, said yesterday by phone. The new dark pool’s regulatory status will more closely resemble a multilateral trading facility like Chi-X Europe Ltd. and will be accessible to external traders.
Last week the European Commission proposed placing transparency requirements on dark pools to provide more information to investors. Dark pools are being probed by regulators in both the EU and U.S. because of concerns that their lack of transparency makes prices potentially less reliable.
The European Commission may require “organized trading” to be subject to minimum requirements, including disclosure of the kinds of trades that can be executed, and who is allowed to participate. Waivers that allow investors not to disclose pre-trade information on regulated exchanges should be “subject to further clarification and in some cases restrictions,” according to the commission.
The commission is seeking views on its plans until February 2011. Any final proposals would have to be approved by national governments and the European Parliament to become law.
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FSA Unable to Publish RBS Report Without Permission
The U.K.’s Financial Services Authority wasn’t able to publish its supervisory report on Royal Bank of Scotland Group Plc without permission from the banks and individuals involved in the investigation.
The FSA is prohibited under U.K. and European Union law “to publish information collected through a supervisory investigation” without permission, said Hector Sants, chief executive officer of the agency. Lawmakers should review whether the Prudential Regulatory Authority, which will replace the FSA in 2012, should have more power to release data, he said.
The FSA cleared RBS and former executives including ex-Chief Executive Officer Fred Goodwin in the Dec. 2 report, which faulted the bank for “a series of bad decisions” before the financial crisis. Edinburgh-based RBS posted the biggest loss in corporate history in 2008 and required a bailout of 45.5 billion pounds ($72 billion) following its acquisition of ABN Amro Holding NV.
The FSA was probing the 2007 ABN Amro takeover, conduct by RBS executives and a 2008 rights offering. RBS spokeswoman Linda Harper declined to comment yesterday.
Liberal Democrat Business Secretary Vince Cable, in a letter to Adair Turner, chairman of the FSA, urged the FSA to publish any report into whether the lender’s former executives broke regulatory rules in the run-up to the 2008 bailout. In the letter, Cable said he was “disappointed” the findings weren’t public. U.K. Treasury minister Mark Hoban said the report’s publication is a matter for the regulator.
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WTO Rules U.S. Tariffs on Chinese Tire Imports Legal
World Trade Organization judges rejected China’s complaint that U.S. tariffs on Chinese car and light-truck tires violate global trade rules, saying the Obama administration “did not fail to comply with its obligations.”
President Barack Obama announced the three-year duties on $1.8 billion of tires from China in September 2009, acting on a complaint by the United Steelworkers union, which represents 15,000 employees at 13 tire plants in the U.S. The union said Chinese tire exports to the U.S. tripled from 2001 to 2004 to 41 million and called for a cap on annual imports of 21 million.
The case was the largest so-called safeguard petition filed to protect U.S. producers from growing imports from China. Union leaders and Democratic lawmakers said at the time the decision was proof of Obama’s commitment to safeguarding domestic workers and jobs.
The Chinese government said the tariffs broke WTO rules and were a “serious case of trade protectionism, which China resolutely opposes.” It lodged a complaint at the Geneva-based WTO against the duties just three days after Obama announced them.
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Credit Suisse May Sell CoCo Bonds Next Year, CEO Dougan Says
Credit Suisse Group AG (CSGN), Switzerland’s second-biggest bank, may start selling contingent convertible bonds as early as next year as regulators push firms to use the securities as a cushion against losses,
Dougan told Bloomberg Television in an interview in October that the bank has already received indications of investor interest in such securities and sees some benefits in starting to sell them “sooner rather than later.” He also said that the bank may consider using contingent convertibles, or CoCos, which automatically become equity when certain capital levels are breached, as part of future bonus payments for bankers.
A Swiss government-appointed panel recommended in October that Zurich-based Credit Suisse and UBS AG (UBSN) hold as much as 9 percent of their risk-weighted capital in CoCos by 2019. UBS said previously that it doesn’t plan to sell CoCos until the bank “significantly” boosts capital under the Basel Committee on Banking Supervision’s Basel III rules, which apply a stricter definition of capital.
FDIC Plans to Sell $1 Billion of Bonds Tied to Real Estate
The Federal Deposit Insurance Corp. plans to sell almost $1 billion of securities tied to residential and commercial real-estate debt once held by failed banks, according to a person familiar with the transaction.
The agency is selling guaranteed notes backed by the debt, said the person, who declined to be identified because the transactions are private.
The FDIC is offering bonds from three securitizations through Barclays Capital, the person said. Two are tied to residential debt, and total $160.2 million and $135.7 million, the person said. An additional $679 million of bonds are tied to commercial-property debt, the person said.
David Barr, a spokesman for the FDIC, declined to comment, saying any possible bond sales would be considered private placements.
Informa Global Markets reported on the deals yesterday.
ECB Said to Consider Asking for Capital Increase
The European Central Bank may ask members for a capital increase to protect itself from any losses stemming from its government bond purchases, said a euro-area central bank official with knowledge of the talks.
Any new money would come from the 16 national central banks which use the euro and contribute most of the ECB’s 5.8 billion euro ($7.8 billion) capital base, the ECB’s statutes show. The matter may be discussed at the next Governing Council meeting on Dec. 16 and no decision has yet been made, said the official, who spoke on condition of anonymity. Germany would view any ECB request positively, a government official said.
The debate suggests the ECB is concerned its program to buy the bonds of strained governments such as Portugal (GDBR10) and Ireland, which now totals 72 billion euros, may end up saddling its balance sheet with losses.
An ECB spokeswoman declined to comment. The ECB’s potential capital request was reported by Reuters late yesterday.
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Banker Pay Shouldn’t Be Tied to Risk-Taking, EU’s Barnier Says
Bankers’ pay shouldn’t be linked to the amount of risk they take on behalf of lenders, Michel Barnier, the European Union’s financial services commissioner, said yesterday.
Barnier made the remarks in response to questions from British lawmakers about rising banker salaries in London yesterday.
Bankers will face limits on cash payouts and the size of their bonus relative to salary from the start of next year, after European Union regulators approved laws to curb incentives for excessive risk-taking on Dec. 10. The rules limit bankers to receiving about 25 percent of their bonuses in immediate cash payouts, the rest either deferred or held in shares for a minimum of three years.
Barclays’s Callow says Eurozone Banks Need an FDIC
Julian Callow, chief European economist at Barclays Capital, said the Eurozone banks need a common insurance fund similar to the Federal Deposit Insurance Corporation.
Callow talked with Bloomberg’s Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.”
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Levitt Says Muni Bond Market Lacks Serious Oversight
Arthur Levitt, former U.S. Securities and Exchange Commission chairman, said even with the regulatory reform of Dodd-Frank, “nobody dare touch” reform of the municipal bond market.
Levitt talked with Bloomberg’s Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.”
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Banker Threats to Quit Region Are Blackmail, EU’s Barnier Says
Bankers won’t follow up on “blackmail” threats to flee the European Union’s tough new regulations, said Michel Barnier, the region’s financial-services chief.
Barnier, who earlier said he wants to limit the link between bonuses and risk-taking, told British lawmakers at the Treasury Select Committee yesterday that he doubted there would be “a flight of talent” out of Europe to financial centers in the U.S. or Asia as proposed curbs on short-selling, over-the-counter derivatives and bonuses take effect from next year in the 27-nation EU. He said he wasn’t “overly impressed” by such “blackmail.”
Bankers will face limits on cash payouts and the size of their bonus relative to salary from the start of next year, after EU regulators approved laws to curb incentives for excessive risk-taking.
Comings and Goings
Former Bank of America Executive Named to Lead OCC Examinations
Brosnan, who returned to the OCC in 2008 after spending four years at Bank of America and a predecessor company, will replace Doug Roeder when Roeder retires at the end of the year, the Washington-based agency said in a statement on its Web site yesterday. Previously, Brosnan had spent 21 years at the OCC, the agency said.
The large-bank unit oversees examinations and supervision for 15 lenders with a combined $7.5 trillion in assets, the OCC said.
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