White Nominated, Barclays List, IOSCO, Davos: Compliance
Mary Jo White, who gained prominence prosecuting terrorists as U.S. attorney for Manhattan, was named by President Barack Obama to be chairman of the Securities and Exchange Commission.
White, a partner at law firm Debevoise & Plimpton LLP in New York, would succeed Elisse Walter, who took over as SEC chairman when Mary Schapiro stepped down last month. Obama also re-nominated Richard Cordray as director of the Consumer Financial Protection Bureau.
The nominations will ensure the laws and rules put in place after the financial crisis are used to protect investors and families, Obama said at the White House. He described White as someone “you don’t want to mess with.”
The appointment of White will be a departure for the SEC, which has typically been run by lawyers steeped in financial policy making and the securities industry. Her relative inexperience in those areas, along with her work defending corporate clients including Ken Lewis, the former chief executive officer of Bank of America Corp., could draw criticism from some lawmakers and advocates for investors.
White, 65, was U.S. attorney for the Southern District of New York from 1993 to 2002, and won the conviction of four followers of Osama bin Laden for the 1998 bombings of two U.S. embassies in Africa.
Under her direction, prosecutors won convictions for the 1993 World Trade Center bombing and a failed plot to blow up the United Nations headquarters and other New York landmarks.
Schapiro stepped down from the SEC’s top job last month and was succeeded by Walter, who can stay in the job through the end of this year.
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Special Section: Davos
EU to Embark on Strong Bank-Structure Overhaul, Barnier Says
Michel Barnier, the European Union’s financial services chief, said that he will present proposals this year for a “strong reform” of bank structure in a bid to prevent lenders from being too-big-to-fail.
The EU plans will “separate well the risks in the banking sector,” the European Commissioner said in an interview with Bloomberg Television’s Caroline Connan yesterday at the World Economic Forum in Davos, Switzerland. The proposals may be published by September, he said.
Barnier said that the “basis” of his work was a report presented last year by an EU mandated group led by Bank of Finland governor Erkki Liikanen. The group proposed that banks should be forced to shift some trading activities into separately capitalized units.
BNP Paribas SA and UniCredit SpA are among EU banks that signaled opposition to the Liikanen group’s proposals, saying that they would force them to cut back lending to businesses and households. Barnier said that his proposals would “respect the diversity of the banking sector” in the EU.
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U.K.’s EU Membership, Austerity Measures Are Focus at Davos
Leaders in finance and government convened in Davos, Switzerland this week and participated in speeches, panels and impromptu interviews on a range of economic and regulatory topics. Recurring themes have included whether the U.K. should remain in the European Union, and the need for austerity measures coupled with ongoing fiscal and administrative reforms in Europe.
U.K. Prime Minister David Cameron said the U.K. is not turning its back on Europe after his speech on renegotiating the relationship yesterday.
“This is not about turning our backs on Europe -- quite the opposite,” Cameron said in a speech in Davos yesterday. “It’s about how we make the case for a more competitive, open and flexible Europe and secure the U.K.’s place within it.”
Irish Prime Minister Enda Kenny, talking with Bloomberg Television’s Olivia Sterns, said he wants the U.K. to remain a strong EU member. Swedish Finance Minister Anders Borg discussed the implications of a U.K. exit from the EU with Francine Lacqua on Bloomberg Television’s “Countdown” in Davos. He also touched on banking regulation during the interview.
Earlier in the week, Swedish Prime Minister Fredrik Reinfeldt said the U.K. staying in the EU is of “vital interest” to Sweden.
Separately, former U.S. Treasury Secretary Lawrence Summers said yesterday “we really can’t look to austerity as a source of growth.”
“In a different era it was reasonable to think that bringing down budget deficits would bring down interest rates, would spur investment, and would itself constitute a growth strategy,” Summers said in a Bloomberg television interview with Bloomberg’s Tom Keene on the sidelines of the World Economic Forum’s annual meeting.
Government spending reductions in Europe are “really stifling growth” and threaten to undermine the region’s economic recovery, according to Joseph E. Stiglitz, the Nobel Prize-winning Columbia University economist, who spoke with Bloomberg Radio’s “Surveillance” with Tom Keene in Davos.
Angel Gurria, secretary general of the Organization for Economic Cooperation and Development, said policy makers in the euro area should push ahead with deficit cuts and avoid the “false dilemma” of the austerity debate.
“You need fiscal consolidation in many countries and at the same time you need to plant the seeds of future growth,” Gurria said yesterday in an interview in Davos. “Let’s go for the reforms, accelerate the reforms, so we can consolidate the recovery.”
Netherlands Prime Minister Mark Rutte said austerity measures remain necessary and discussed the progress of growth policies.
Record Foreign Takeovers Mean New Scrutiny for Davos Dealmakers
Cross-border merger and acquisitions increased to a record portion of all takeovers last year. That’s good news for dealmakers, except at the same time those foreign transactions have spurred tougher scrutiny from regulators and politicians.
For bankers, the colliding trends mean devoting more time to weighing a deal’s political and antitrust considerations, with many using meetings at the World Economic Forum in Davos, Switzerland to network with politicians and such A-list antitrust watchdogs as Europe’s Joaquin Almunia, Jon Leibowitz of the U.S. and China’s Chen Deming.
Citing domestic competitive concerns, regulators have in recent months blocked several big proposed cross-border deals.
United Parcel Service Inc. (UPS), the world’s biggest package- delivery company, this month scrapped its 5.16 billion-euro ($6.9 billion) bid for TNT Express NV (TNTE), after the European Union said it would oppose the deal. Last October, German Chancellor Angela Merkel, concerned about the loss of jobs and influence, scuttled the planned merger of European Aeronautic, Defence & Space Co. (EAD) and BAE Systems Plc (BA/) to create the world’s largest aerospace and defense company.
“It’s important to understand how politicians and regulators think,” said Henrik Naujoks, a partner and head of European financial services at consulting firm Bain & Co., who said he packed in three meetings with politicians in a day-and- a-half in Davos. “Government and regulators have become more critical in affecting corporate strategies.”
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Enria Says EU Should ‘Stay Together’ on Capital Rules
Andrea Enria, chairman of the European Banking Authority, discussed banking regulation and capital rules.
He talked with Olivia Sterns on the sidelines of the World Economic Forum’s annual meeting in Davos, Switzerland.
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Bank of Italy’s Role Isn’t to ‘Police’ Paschi, Visco Says
The Bank of Italy’s role isn’t to “police” lender Banca Monte dei Paschi di Siena SpA and the central bank wasn’t informed of newly emerged transactions producing losses, said Governor Ignazio Visco.
The central bank “is a supervisor, not the police of the banks,” Visco said today in an interview with Bloomberg Television’s Francine Lacqua in Davos, Switzerland.
The central bank will review Paschi’s books after the company disclosed this week it may face more than 700 million euros ($941 million) of losses related to structured finance transactions hidden from regulators.
The Siena, Italy-based bank’s difficult liquidity situation, which is also due to “risky” deals, has been known for a long time, Visco said. New derivatives transactions linked to earlier deals have emerged and the central bank wasn’t informed of losses connected to them, Visco said.
Monte Paschi shareholders are today voting on a capital increase to pave the way for emergency government loans needed to boost capital. The stability of the bank is not in question and Monte Paschi “needs money because it has to meet certain standards of capital,” Visco said.
The Bank of Italy may approve the aid as soon as tomorrow, financial newspaper MF reported today, without citing anyone.
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U.S SEC Commissioners Protest IOSCO Complex Security Report
Two members of the U.S. Securities and Exchange Commission objected to a report on suitability requirements for complex financial products put out by an international group.
The document, issued by the International Organization of Securities Commissions on Jan. 21, sets out nine “principles” that include distinguishing between individual and institutional investors, adequately disclosing risks and making sure a customer understands an investment’s structure. The guidelines are intended for distributors of securities, such as brokers. The SEC, which currently lacks one of its five commissioners, didn’t approve the report.
SEC commissioners Troy Paredes and Daniel Gallagher said in a statement that the final report “does not accurately reflect the relevant law in the U.S.”
IOSCO, whose members include regulators in more than 100 countries, is a policy forum that tries to develop and implement international oversight and enforcement standards. The board is made up of representatives from 32 securities regulators, including the SEC.
Messages left with representatives for Paredes and Gallagher weren’t returned.
Focus Media Says SEC Probing Possible Securities Violations
Focus Media Holding Ltd. (FMCN) said the U.S. Securities and Exchange Commission is probing potential “violations” of securities law, with special attention to purchases and resales of companies including Allyes Online Media Holding.
The Shanghai-based advertising company is cooperating with the SEC, it said in a regulatory filing on Jan. 18 about its going-private transaction with Carlyle Group LP (CG) and other firms.
Focus Media agreed in December to be bought by a group of investors led by Carlyle Group.
SEC Delays Ruling on Nasdaq’s Payout Proposal for Facebook IPO
The U.S. Securities and Exchange Commission delayed a ruling on Nasdaq Stock Market’s proposal to compensate brokers that lost money in the initial public offering of Facebook Inc. (FB) in May.
The SEC needs more time to review Nasdaq’s payment plan and comment letters, the regulator said in a notice yesterday on its website. The new deadline is March 29, it said. The SEC has received six additional letters and a second response letter from Nasdaq since it last extended the deadline on Oct. 26, according to the filing.
The operator of the second-largest U.S. equity exchange increased a plan to pay brokers for losses incurred because the exchange’s so-called opening cross, which sets the first traded price for Facebook, failed to operate properly on May 18, according to a July proposal.
U.K. Competition Agency Won’t Probe Bank Checking Accounts
A British competition regulator won’t seek a full investigation into the country’s 9 billion-pound ($14.2 billion) market for personal checking accounts after a review of difficulties faced by customers.
Upcoming changes in the market for so-called current accounts, including automated account switching and the sale of branches by Lloyds Banking Group Plc (LLOY) and Royal Bank of Scotland Group Plc, will make it easier for customers to compare services, the Office of Fair Trading said today.
The industry still needs “significant” changes to tackle long-standing competition concerns, the regulator said. The OFT said there have been improvements to the accounts, including a decrease in unauthorized overdraft charges between 2007 and 2011 that have saved customers as much as 928 million pounds a year. The structure for such charges is still too complex, it said, and the market is hampered by low innovation and “customer apathy in the face of unclear costs.”
The British Bankers’ Association, a trade group, said the system for allowing customers to switch banks would start in September, and that it would work with the OFT to implement new changes to improve services for customers.
Barclays Libor Suit List Shows Probe Spanned Diamond to Dearlove
Barclays Plc (BARC) senior executives, dozens of traders and the bank’s chief economist were all identified by regulators in a probe into interest-rate rigging that spanned continents, according to documents released in the U.K.’s first Libor- manipulation lawsuit.
Barclays is being sued by affiliates of Guardian Care Homes Ltd. claiming an interest-rate swap should be annulled because it is linked to Libor, which Barclays tried to rig. Judge Julian Flaux in London rejected a bid by a group of employees identified in the Libor documents to prevent their names from being published ahead of a trial later this year.
Among those identified in connection with the case were former Chief Executive Officers Robert Diamond and John Varley, and Jerry Del Missier, the bank’s former chief operating officer. The list of names, which Flaux said had to be turned over to Guardian, was compiled from evidence Barclays provided in the regulatory probes that led a 290 million-pound fine ($457.5 million) in June.
Jon Laycock, a spokesman for London-based Barclays, said people named in the hundreds of thousands of documents used in the investigation weren’t necessarily suspected of wrongdoing. Only 24 of the 104 employees on the list had any involvement in setting Libor, Flaux said on Jan. 22.
Tom Gough, a spokesman for one of the law firms representing the Barclays employees, declined to comment. A spokesman for Diamond declined to comment.
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Comings and Goings
Geithner Exits Treasury as Lew Prepares for Senate Scrutiny
U.S. Treasury Secretary Timothy F. Geithner, the most senior Obama administration official remaining from the team that grappled with the worst financial crisis since the Great Depression, leaves office today as his likely successor seeks Senate approval.
Geithner, 51, hands a more stable economy to Jack Lew, President Barack Obama’s nominee, as the administration bounces from one confrontation to another with Republican lawmakers on issues including the budget and the debt ceiling. Geithner hasn’t said publicly what his next career move will be.
Deputy Treasury Secretary Neal Wolin will be acting secretary after Geithner leaves today. Wolin, 51, was a key negotiator with Congress on the Dodd-Frank financial overhaul law.
Lew, 57, who ran a surplus for three consecutive years as U.S. budget chief under Clinton, has been meeting this week with senators who will vote whether to confirm him. The Senate Finance Committee, which has jurisdiction over Lew’s nomination, hasn’t set a date for a confirmation hearing.
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HSBC Said Close to Hiring Former Nomura Banker William Barter
William Barter, 46, the former head of U.K. investment banking at Nomura Holdings Inc. (8604), is poised to join HSBC Holdings Plc (HSBA) as head of global banking for the U.K., according to two people familiar with the situation.
The role would be a newly created position and a final decision has yet to be made, one of the people said, declining to be identified because the plans are private. An HSBC spokesman was not immediately available for comment.
Barter, who worked on 2012’s biggest takeover, left Nomura late last year, according to the Financial Services Authority register. His departure followed a reorganization of the Japanese firm’s investment bank.
Nomura is scaling back its overseas ambitions after buying Lehman Brothers Holdings Inc.’s European and Asian operations in 2008 -- a purchase intended to underpin a global investment bank.
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