EU Bank Test, Pan-African Risks, State Street: Compliance

The largest banks in Europe will have to show their capital won’t dip below 5.5 percent of their assets in an economic crisis, the European Union’s top banking regulator said.

The exercise, which will examine a sample of 124 banks that cover more than half of each EU member state’s banking industry, is scheduled to begin around the end of May, the European Banking Authority said in a statement Jan. 31. Results will be published at the end of October.

The EBA’s so-called core-equity Tier 1 requirement is less than the 6 percent proposed by the European Central Bank, according to two euro-area officials with knowledge of the discussions last month. The lenders will be tested on resilience to credit, market and sovereign risk, securitization and cost of funding. Both trading and banking book assets will be tested, according to the authority.

The EBA methodology also forms the basis for the ECB’s own stress test, part of the effort to take over supervision duties from domestic regulators in the euro area in November.

For more, click here.

Compliance Policy

Ecobank Probe Shows Pan-African Regulatory Risks, Fitch Says

The Nigerian Securities and Exchange Commission’s investigation last month into Ecobank Transnational Inc. highlights the regulatory risks facing pan-African companies, Fitch Ratings said.

“Insufficient cross-border supervision and lower regulatory standards in some frontier markets are constraints on the ratings of pan-African banking groups,” Fitch said in a report Jan. 31.

Nigeria’s SEC investigated Ecobank concerning a plan to sell assets below market value and asked Ecobank to develop a one-year plan to address the governance issues. Ecobank has commissioned the Lausanne, Switzerland-based International Institute for Management Development to review its corporate governance and expected a report by the end of last month, the lender said Jan. 13.

Pan-African banks are growing rapidly, but diversification may not benefit their credit ratings, constrained by the lack of collaboration among national regulators, Fitch said.

Compliance Action

U.K. Banks to Start Card-Insurance Compensation Plan, FCA Says

Britain’s biggest banks and credit-card providers will start compensating customers as much as 1.3 billion pounds ($2.1 billion) over wrongly-sold insurance to cover credit-card and identity theft, the U.K. markets regulator said.

As many as 7 million people may be owed money over card and identity-protection products that were bought as early as January 2005, the U.K. Financial Conduct Authority said in a statement. Customers can start claiming compensation in mid-February and payments may be made starting in late March, the regulator said. The compensation plan will close Aug. 30.

State Street Fined $37.7 Million by FCA Over Hidden Client Fees

State Street Corp.’s U.K. unit was fined 22.9 million pounds ($37.7 million) by the Financial Conduct Authority for charging clients “substantial” mark-ups without their consent.

State Street “developed and executed a deliberate strategy” to charge fees on top of agreed management or commission payments in a restructuring group at the asset manager, the FCA said in an e-mailed statement.

The firm received a 30 percent discount for settling early with the FCA, avoiding a larger fine of 32.7 million pounds.

“Over the past several years, we have worked hard to enhance our controls to address this unacceptable situation,” State Street said in an e-mailed statement.


Martoma Ends SAC Insider-Trading Defense Saying Data Not Secret

Former SAC Capital Advisors LP fund manager Mathew Martoma wrapped up his defense Jan. 30 after seeking to convince jurors that the inside information he’s accused of trading on wasn’t actually secret.

Martoma, 39, is on trial for allegedly using illegal tips from two doctors who were supervising parts of a clinical drug trial. Prosecutors claim he learned detailed test results for an Alzheimer’s disease treatment under development by Elan Corp. and Wyeth LLC, and made $275 million for the firm in illegal profits and losses avoided.

Jurors will begin considering the case this week after lawyers make their closing arguments. Martoma, who is charged with conspiracy and securities fraud, faces as long as 20 years in prison if convicted of the securities-fraud charges.

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

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