EBA Authority, China Lending, Hacker Targets: Compliance

The European Banking Authority “lacks the authority to make or enforce decisions on supervisory convergence and to resolve disputes” among national financial regulators, the European Union Court of Auditors said in a report released yesterday.

The Court of Auditors was established to audit the European Union’s finances, including giving reports and opinions on EU policies.

EU auditors called on the EBA, European Central Bank and national regulators to formally clarify who does what because the “banking union requires a clear division of roles and responsibilities,” according to the report.

There is “an ambiguity regarding who has overall responsibility” for stress tests of EU banks, the Court of Auditors said in the report.

EU financial-services chief Michel Barnier said the report doesn’t call into question the EBA’s mission after European Central Bank takes over euro-area bank supervision, adding that the EBA’s “role in the overall supervisory architecture is crucial.”

Compliance Policy

China Boosts Banks’ Lending Capacity by Changing Loan Ratio

Chinese regulators increased banks’ capacity to lend money and bolster the slowing economy by changing the way loan-to-deposit ratios are devised.

Banks beginning yesterday can include in the calculation negotiable certificates of deposit sold to companies or individuals, the China Banking Regulatory Commission said in a statement. They can also exclude loans advanced to small enterprises and the rural sector that are backed by bonds, the CBRC said. Bank lending is capped at 75 percent of deposits to prevent an overextension of credit.

Premier Li Keqiang is seeking to cut funding costs and feed credit into the world’s second-largest economy, which is forecast to expand in 2014 at the weakest pace in 24 years.

Compliance Action

Hacked Companies Face SEC Scrutiny Over Disclosure, Controls

The U.S. Securities and Exchange Commission opened investigations in recent months examining whether multiple companies properly handled and disclosed cyberattacks.

The investigations are focused on whether the companies adequately guarded data and informed investors about the impact of breaches, according to two people familiar with the matter who asked not to be named because the probes aren’t public.

The prospect of enforcement actions against the targets of cyberattacks marks a new effort to combat the rising threat hackers pose to public companies, brokerages and financial markets. The SEC previously focused on guiding public companies on how to disclose risks and making sure financial companies have adequate defenses against hackers.

Public companies are required to disclose to investors events that are material to the share prices.

The SEC is also investigating companies’ internal controls in cases where the value of assets might have been affected by a breach, one of the people said.

Ex-Goldman Banker Korenberg Is Told SEC Galleon Probe Closed

Ex-Goldman Sachs Group Inc. banker Matthew Korenberg, the subject of a years-long insider-trading probe tied to Galleon Group LLC, was told he won’t be sued by regulators.

John Hueston, a lawyer for Korenberg, said in a phone interview that the U.S. Securities and Exchange Commission, which was ready to file a civil complaint 18 months ago, officially “de-authorized” his client as a lawsuit target. Hueston said it’s “extraordinary” for the SEC to be persuaded to drop a case it was ready to proceed with.

More than 20 people have been convicted of insider trading tied to the investigation of Galleon Group and the fund’s co-founder, Raj Rajaratnam. He was convicted in 2011 and is serving an 11-year prison sentence for masterminding one of the most sprawling insider-trading schemes in a generation. His brother Rengan is on trial for insider trading.

The SEC and U.S. prosecutors were investigating Korenberg for insider trading involving Abbott Laboratories Inc.’s acquisition of Advanced Medical Optics Inc. in 2009.

A parallel criminal investigation of Korenberg was previously closed, according to the lawyer.

Korenberg left Goldman Sachs at the end of 2012 and has been focused on defending against the allegations, Hueston said.

John Nester, a spokesman for the SEC, declined to comment on Korenberg’s case.


ICE, Citadel, BATS Global CEOs to Appear Before Senate July 8

Intercontinental Exchange Inc. Chief Executive Officer Jeffrey Sprecher, Citadel LLC CEO Kenneth Griffin and BATS Global Markets Inc. CEO Joe Ratterman are scheduled to appear before a Senate Banking Committee hearing July 8 on the role of regulation in market structure and electronic trading.

Other witnesses include Thomas Wittman, Nasdaq OMX Group Inc.’s global head of equities, the committee said in e-mailed statement.

Senator Tim Johnson, a Democrat from South Dakota, is chairman of the Committee.

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