Mizuho Resignation, Rusal-LME, DIB Limits: Compliance

Takashi Tsukamoto resigned as chairman of Mizuho Financial Group Inc. after Japan’s third-largest lender was penalized over loans to criminal groups for the second time in three months.

The Financial Services Agency ordered the Mizuho Bank Ltd. lending unit to suspend new transactions through its consumer credit affiliates for a month, the regulator said in a statement in Tokyo yesterday that also announced other measures. Tsukamoto will step down at the end of March, the bank said in a separate statement.

The new measures add to the regulator’s September order directing Mizuho to strengthen compliance after it failed to stop 200 million yen ($2 million) in credit extended to members of anti-social groups through an affiliate. Mizuho cut pay for executives including President Yasuhiro Sato and submitted a plan on Oct. 28 to the agency outlining measures to improve internal controls.

Mizuho President Yasuhiro Sato apologized at a news conference in Tokyo for the bank receiving the extra penalties. The lender is taking the regulator’s orders seriously, it said in a statement, adding that it may make changes to its corporate structure in response.

The watchdog yesterday also issued business improvement orders to the parent company and the lending unit after the bank wrongly reported to the FSA during an investigation that only lower-level officials were aware of the loans.

The FSA is calling on financial institutions for more efforts to break off relationships with criminal groups, it said in a separate statement yesterday.

The additional measures result from Mizuho’s incorrect report on the transactions during the previous probe, as well as a lack of awareness and governance regarding the issue, the FSA said in the statement. The parent company and the lending arm must submit improvement plans to the FSA by Jan. 17, according to the statement.

Mizuho has been penalized for lapses ranging from computer failures to trading errors since its creation in 2000 through a merger. The FSA ordered Mizuho to improve operations in 2011.

Sato, 61, said on Oct. 28 he would give up six months of pay, as did Tsukamoto. Sato’s unpaid period will be extended to one year, the bank said in yesterday’s statement.

Compliance Policy

Dubai Islamic Bank Decides to Raise Foreign Ownership to 25%

Dubai Islamic Bank will raise the limit on foreign ownership to 25 percent, the lender said in a statement made to the Dubai bourse Dec. 25.

The increase from the current limit of 15 percent is subject to necessary regulatory approvals, according to the statement.

The decision was made to address the demand for shares by large foreign institutional investors, the lender said in the statement.

China State Council May Issue Investor Rule, Daily Says

China’s State Council may issue a regulatory document to strengthen investor protection in capital markets, the Economic Information Daily reported, citing unidentified people.

The rules will provide policy support to protect investors’ information rights and the right to dividend payments, the Daily reported.

Compliance Action

Japanese Banking Group Sets Up New Body to Manage Tibor Rate

Japan’s biggest banking lobby group will form a separate body to manage benchmark interbank lending rates as the country’s financial watchdog seeks to tighten supervision.

The Japanese Bankers Association, which calculates the Tokyo interbank offered rate, will build the organization “as soon as possible,” the group said today in a statement. The organization said it also set a code of conduct for the banks that contribute rates. Those institutions include the lending unit of Mitsubishi UFJ Financial Group Inc., the nation’s biggest lender, the association said.

The measures come two days after an advisory panel to the Financial Services Agency recommended that the regulator get formal authority to supervise rate-setting organizations, as part of its effort to revamp the regulatory framework in line with international trends. Global fines on companies including Deutsche Bank AG and Royal Bank of Scotland Group Plc for manipulating benchmark rates reached $6 billion this month, and other firms are under investigation around the world.

Under the new administrative body, the JBA will set up an independent oversight panel mainly consisting of external experts, the group said in the statement. It will cut the number of Tibor rates to six from 13 in April 2015, according to the statement.

Australia Sets Higher Capital Buffer for Four Biggest Banks

Australia’s four largest banks will need to carry an extra 1 percent of core tier 1 capital from Jan. 1, 2016, due to their systemically important status, according to the country’s banking regulator.

Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia, National Australia Bank Ltd. and Westpac Banking Corp. need to have a greater capacity to absorb losses, the Australian Prudential Regulation Authority said in a statement this week.

The nomination of domestic systemically important banks, or D-SIBs, is part of Basel III rules to deal with any threat to domestic and regional financial stability. APRA expects the lenders will have sufficient capital to meet the new rules by 2016 and said the 1 percent higher loss absorbency rate is at the lower end of rates applied elsewhere in the world.

The new capital impost will take the big four Australian banks’ minimum common equity tier 1 capital requirement to 8 percent, in line with current capital levels at the lenders, according to their annual reports.

Basel III rules are aimed at bolstering banks’ liquidity and capital to prevent a repeat of the crisis that deepened with the collapse of Lehman Brothers Holdings Inc. in 2008.

While Australian lenders stayed profitable and didn’t require bailouts during the financial crisis, APRA has followed a tighter timetable without phase-ins to impose the new rules. It again said Dec. 23 it didn’t see a need to spread the introduction of the new capital requirement over a few years.

National Australia Bank said in response to APRA’s announcement that it “has a strong capital position and expects to be able to meet the revised capital requirements through organic capital generation.” It may opt to lean on its dividend reinvestment plan if needed, the lender said in a statement.

Westpac was well placed to meet the new requirements and will review its preferred capital levels in 2014, the lender said in a statement. CBA’s current capital position is already in excess of APRA’s requirements, the lender said in a statement.

ANZ’s current capital position is already in excess of APRA’s requirements, the bank said in a statement.

“Over time and through organic capital generation, ANZ may modestly increase its capital buffers from current levels,” it said.


SAC’s Martoma Says U.S. Must Disclose Evidence in His Favor

Former SAC Capital Advisors LP portfolio manager Mathew Martoma asked a judge to force the government to turn over evidence that he says can help him beat insider-trading charges when his case goes to trial next month.

Martoma said yesterday in a request filed in federal court in Manhattan that prosecutors have failed to provide him with communications between the government and lawyers for the two scientists who allegedly gave him nonpublic information about drug trials and who will be key government witnesses.

Martoma, 39, is to go on trial Jan. 6, about three weeks after a federal jury found another former SAC manager, Michael Steinberg, guilty of using illegal tips to trade stocks of technology companies. SAC last month agreed to plead guilty and pay a record $1.8 billion for perpetrating an insider-trading scheme stretching back to 1999.

Prosecutors in the case against Martoma claim SAC liquidated its $700 million stake in Wyeth and Elan Corp. in July 2008 and then shorted the stocks within a week of Martoma’s obtaining confidential information about negative test results from a clinical trial on bapineuzumab, a drug intended to treat Alzheimer’s disease.

U.S. Attorney Preet Bharara in Manhattan said after SAC’s plea that his investigation of the Stamford, Connecticut-based hedge fund’s employees continues and that the firm’s plea agreement doesn’t provide any individual immunity from prosecution.

SAC’s billionaire founder, Steven Cohen, 57, hasn’t been charged with criminal wrongdoing.

The Martoma case is U.S. v. Martoma, 12-cr-00973, and the Steinberg case is U.S. v. Steinberg, 12-cr-00121, U.S. District Court, Southern District of New York (Manhattan).

Rusal Says LME Warehouse Rules ‘Irrational,’ HK Exchange Says

The London Metal Exchange, the world’s biggest market for industrial metals, made “irrational and disproportionate” changes to its warehousing policy after unfair consultation, United Co. Rusal said in a lawsuit, according to Hong Kong Exchanges & Clearing Ltd.

Rusal filed the suit in the English High Court Dec. 23, seeking a judicial review, HKEx said in a statement. The company’s press office in Moscow confirmed in an e-mail it had filed a lawsuit. A copy of the filing wasn’t immediately available.

The bourse said the complaint was without merit and it will defend the proceedings. Rusal is the world’s largest producer of aluminum.

The exchange, founded in 1877, changed the rules in a notice on Nov. 7 in a bid to speed up withdrawals from warehoused stockpiles of metal amid consumer complaints that prompted scrutiny from U.S. regulators. Rusal also alleged the consultation conducted by the LME before the changes was “unfair and procedurally flawed,” HKEx said Dec. 24.

“Implementation of the proposed changes to the warehousing policy will proceed as announced,” the exchange said.

The amendments affect depots where waiting times to withdraw stockpiled metals exceed 50 calendar days, according to the LME notice. The bourse also said then it would review its warehouse system every six months and was studying its powers to regulate warehousing companies’ charges.

Consumers of metals complained that lengthy waits for stockpiled supplies inflated costs. The changes are scheduled to take effect April 1. Rusal urged the exchange to postpone the changes in a Sept. 25 statement, saying the new rules would reduce transparency and further distort the aluminum market.

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