Dubai IPO Exodus, Gold ‘Fix,’ Weatherford: Compliance

Dubai and Abu Dhabi are finding that outperforming stock markets aren’t enough to lure initial public offerings as restrictive regulations and a lack of trading volume persuade local companies to list in London.

Damac Real Estate Development Ltd. plans to raise $500 million when it sells depositary receipts in London this week in the first IPO by a Dubai-based developer since the sheikhdom’s property crash in 2008. That follows the London listing of Abu Dhabi-based health-care provider Al Noor Hospitals Group Plc in June and an IPO for the emirate’s NMC Health Plc last year.

Higher oil prices and government spending have led to a rally in Persian Gulf stocks and encouraged firms to sell shares. They’re opting to go abroad as rules such as the Dubai Financial Market’s requirement that at least 55 percent of a company must be offered have deterred IPOs in that emirate since

2009. Neighboring Abu Dhabi hasn’t had a new public offering in two years.

While Nasdaq Dubai only requires companies to offer a minimum of 25 percent, its trading volumes are much smaller.

For more, click here.

Separately, Abu Dhabi Islamic Bank PJSC said it’s seeking changes in local land ownership rules that could open ownership of shares of the emirate’s biggest Shariah-compliant bank to foreigners.

Land ownership is essential to Muslim banks as financing is based on hard assets, ADIB Chief Executive Officer Tirad Mahmoud said in an interview at an Islamic finance summit in Dubai Nov.

25. A company with foreign shareholding cannot now own land in Abu Dhabi, a rule ADIB is discussing with the emirate’s economic department, he said.

Dubai Islamic Bank PJSC, the U.A.E.’s biggest Islamic lender, said Nov. 20 it’s reviewing its foreign ownership limit.

Compliance Policy

FDIC’s Hoenig to Weigh Easing U.S. Bank Leverage Rule

Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp., said in an interview that he’ll consider allowing banks to exclude cash from their total assets when calculating how much equity they must hold to absorb potential losses under a new leverage rule.

Banks have sought the cash exemption, arguing that otherwise they would be encouraged to replace cash with riskier assets, undermining the rule’s purpose. Hoenig has been a champion of the leverage rule, which proposes a flat ratio of equity to assets and complements other capital regulations that factor in the risk of various asset classes.

The FDIC, the Federal Reserve and the Office of the Comptroller of the Currency proposed the new leverage standard in July. The U.S. went further than the 3 percent minimum approved by the global Basel Committee on Banking Supervision by asking the nation’s eight largest lenders to hold as much as 6 percent of equity capital in relation to their total assets.

Banks have said the proposed ratio contradicts other regulations.

Chamber Asks Volcker Rule Rewrite as U.S. Agencies Near Deadline

The U.S. Chamber of Commerce called for delaying approval of the Volcker rule ban on proprietary trading by banks as regulators approach a year-end deadline set by the White House to complete the proposal.

In a letter sent to regulators yesterday, the business group said the proposal should be rewritten because “many fundamental issues” have emerged since the comment period closed. Specifically, the chamber said there had been reports of changes to the proposal’s hedging provision after JPMorgan Chase & Co.’s $6.2 billion trading loss.

Regulators have pledged to finalize by the end of the year the Volcker rule’s hedging provision, which allows banks to conduct some proprietary trading to protect themselves against other losses, in a way that would prevent a repeat of JPMorgan’s derivative bets by a trader dubbed the London Whale. A rewrite of the rule would push the process well into 2014.

Federal Reserve Governor Daniel Tarullo said on Nov. 23 that a key mandate of regulators is to ensure that the London Whale couldn’t happen again.

Five regulators -- the Federal Reserve, Office of Comptroller of the Currency, Securities and Exchange Commission, Federal Deposit Insurance Corp., and Commodity Futures Trading Commission -- issued the proposed rule in 2011 and the comment period closed in February 2012. JPMorgan revealed its trading loss months later.

At issue is an exemption in the rule for broad portfolio hedging. Regulators are working to narrow that exemption.

Compliance Action

Monte Paschi Wins European Union Approval for Italian Bailout

Banca Monte dei Paschi di Siena SpA won European Union approval to get a 3.9 billion-euro ($5.3 billion) recapitalization and 13 billion euros in guarantees from the Italian government.

The European Commission said it was satisfied that the bank’s plans to raise at least 2.5 billion euros from the market and redeem the full share of state bonds within five years would help restore the bank to long-term viability.

Monte Paschi, Italy’s third-largest lender, has pledged to cut an extra 3,360 jobs and increase capital by 2.5 billion euros as it aims to return to profit this year, a necessary condition under a restructuring plan to avoid surrendering a stake to the government. The bank sought government help after racking up losses from bets on Italian sovereign debt between 2009 and 2011. Prosecutors are also probing how managers used derivatives to hide losses.

Gold Fix Scrutinized Amid Knowledge Tied to Daily Eruption

Every business day in London, five banks meet to set the price of gold in a ritual that dates back to 1919. Now, dealers and economists say knowledge gleaned on those calls could give some traders an unfair advantage when buying and selling the precious metal.

The U.K. Financial Conduct Authority is scrutinizing how prices are set in the $20 trillion gold market, according to a person with knowledge of the review who asked not to be identified because the matter isn’t public. The London fix, the benchmark rate used by mining companies, jewelers and central banks to buy, sell and value the metal, is published twice daily after a telephone call involving Barclays Plc, Deutsche Bank AG, Bank of Nova Scotia, HSBC Holdings Plc and Societe Generale SA.

The process, during which gold is bought and sold, can take from a few minutes to more than an hour. Just after the fixing begins, trading erupts in gold derivatives, according to research published in September. Four traders interviewed by Bloomberg News said that’s because dealers and their clients are using information from the talks to bet on the outcome.

Spokesmen for all but one bank declined to comment about the London fix or the regulatory probes, as did Chris Hamilton, a spokesman for the FCA, and Steve Adamske at the U.S. Commodity Futures Trading Commission.

Joe Konecny, a spokesman for Bank of Nova Scotia, wrote in an e-mail that the Toronto-based company has “a deeply rooted compliance culture and a drive to continually look toward ways to improve our existing processes and practices.”

Stewart Murray, chief executive officer of London Bullion Market Association, which represents the gold and silver markets and publishes the results of the fix on its website, declined to comment, saying the group has “no jurisdiction or responsibility” for the process or its administration.

For more, click here.


Weatherford International Settles U.S. Foreign Bribe Probes

Weatherford International Ltd., a Swiss-based oil services company, agreed to pay more than $252 million to settle U.S. allegations it bribed officials in Congo and Iraq and violated sanctions against countries including Iran, Syria and Cuba.

Weatherford will enter into deferred-prosecution agreements with the U.S. and agreed to hire a corporate compliance monitor, according to a federal court filing in Houston by the Securities and Exchange Commission. Penalties the company agreed to pay include an $87.2 million criminal fine for the alleged bribery and $100 million to resolve criminal and administrative probes into sanctions violations, according to a Justice Department statement.

The world’s fourth-largest oilfield-services provider took a $100 million charge in the second quarter last year in preparation for yesterday’s settlement involving improper sales to nations under U.S. trade sanctions.

The SEC case is U.S. Securities and Exchange Commission v. Weatherford International Ltd., 13-cv-03500, U.S. District Court, Southern District of Texas (Houston).

Before it's here, it's on the Bloomberg Terminal.