‘Housing Doomsday,’ SEC Objector, EU CRAs: Compliance

The Bank of England, in its first public set of stress tests, will assess the country’s eight biggest lenders on how they would cope with 4 percent interest rates coupled with a 35 percent decline in house prices.

Banks will also be examined on their resilience to shocks such as rising unemployment, the BOE’s Prudential Regulation Authority said in a statement yesterday. Lenders must maintain a core tier one capital buffer of 4.5 percent of risk-weighted assets.

The U.K. stress tests will take place during an unprecedented series of financial-stability exams in the European Union as the bloc prepares to hand supervisory powers over about 130 banks to the Frankfurt-based European Central Bank in November. The European Banking Authority announced separate scenarios for its stress tests yesterday.

Compliance Policy

SEC Official Objects to RBS Waiver of Sanction for Criminal Case

Royal Bank of Scotland Group Plc’s successful plea to lift a U.S. Securities and Exchange Commission sanction drew a dissent from Commissioner Kara Stein, who said the agency acts as if some firms are “too big to bar.”

Stein criticized the SEC for a 3-2 vote that lets RBS avoid automatically losing its ability to issue securities without prior review after a unit was convicted of a criminal offense last year. The action is part of a pattern of failing to hold large banks or brokerages to standards set by both the U.S. Congress and SEC to protect investors and markets, she wrote in a statement released April 28 by the SEC.

The SEC said last week that it voted to overturn RBS’s disqualification as a “well-known seasoned issuer.”

John Nester, an SEC spokesman, declined to comment on Stein’s statement. Spokesmen for RBS didn’t answer calls made after business hours.

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EU Endorses Credit Rating Rules From Mexico to Singapore

The European Commission said rules for credit rating companies, or CRAs, in Argentina, Brazil, Hong Kong, Mexico and Singapore are equivalent to the European Union’s own measures.

“The equivalence decisions allow smaller CRAs in these countries to apply for certification in the EU with the result that their ratings can be used by EU financial institutions for regulatory purposes,” the EU said in an e-mailed statement.

Compliance Action

NYSE Computer Error Prompts Cancellation of Almost 20,000 Trades

A computer malfunction at IntercontinentalExchange Group Inc.’s two U.S. options exchanges yesterday caused almost 20,000 erroneous trades that were later canceled.

On the NYSE Amex Options market, 12,830 orders involving 462,468 contracts were busted, while the tally at NYSE Arca was 6,932 trades and 34,484 contracts, according to notices sent by the exchanges. The erroneous trades happened from 9:30 a.m. to 9:43 a.m. New York time yesterday.

The error was one of the biggest since Goldman Sachs Group Inc. bombarded the options market with trades it didn’t mean to send on Aug. 20. That event, coupled with a three-hour freeze for trading of Nasdaq-listed stocks on Aug. 22, prompted U.S. Securities and Exchange Commission Chairman Mary Jo White to summon market chiefs to Washington and demand they improve their technology and procedures, including a review of how they decide whether to cancel bad transactions.

ICE spokesman Eric Ryan said yesterday’s error was caused by a computer malfunction at the exchange operator, and declined to comment further.

ICE plans to upgrade the exchanges’ technology. NYSE Arca cited rule 6.89 when voiding the trades, a regulation that permits cancellations resulting from a disruption or malfunction of trading facilities, according to the SEC website.

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Northern Trust Gets SEC Subpoena Over Securities-Lending Program

Northern Trust Corp. said it received a subpoena from the U.S. Securities and Exchange Commission in April related to the company’s securities lending.

“Northern Trust will fully cooperate with the SEC in this investigation,” the Chicago-based company said April 28 in a regulatory filing disclosing the subpoena.

Northern Trust, an independent custody bank, previously disclosed that it was sued by a number of customers of its securities-lending program alleging mismanagement of collateral causing losses for the lenders, according to the filing.

“We believe the securities-lending practices under review are appropriate,” Doug Holt, a spokesman for Northern Trust, said in an e-mail.

The lawsuits “assert various contractual, statutory and common-law claims, including claims for breach of fiduciary duty under common law and under the Employee Retirement Income Security Act,” the company said in the April 28 filing.


Almunia Says No EU Fine Imposed on Samsung, Motorola Mobility

European Union Competition Commissioner Joaquin Almunia spoke in Brussels about the EU’s settlement with Samsung Electronics Co. and Motorola Mobility over licensing terms and injunctions relating to standard essential patents.

Motorola Mobility and Samsung have both avoided EU antitrust fines.

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