BOE Capital Buffer, Alibaba IPO Process, Cynk: Compliance

Bank of England officials signaled they’re ready to toughen their stance on banks, saying lenders may have to further boost their leverage ratios.

The central bank made the statements in a paper released July 11 in London. It didn’t give details on the size of the extra leverage buffer.

Global regulators have been seeking ways to make banks safer after the collapse of Lehman Brothers Holdings Inc. in 2008 sparked a financial crisis and bank bailouts. The so-called leverage ratio has since been part of the Basel Committee on Banking Supervision’s armory, requiring banks to hold at least 3 percent in equity capital as a percentage of all their assets to cut firms’ debt reliance.

Institutions have until Aug. 14 to respond to the BOE proposal, which follows a review of the use of the leverage ratio by the Financial Policy Committee, a central bank panel empowered to oversee and guard against risks to stability. Officials said that the additional requirement could be varied in a similar way to how capital levels are set in banks.

Compliance Action

Citigroup to Pay $7 Billion to Settle Mortgage-Bond Probe

Citigroup Inc., the third-largest U.S. bank by assets, agreed to pay $7 billion in fines and consumer relief to resolve government claims that it misled investors about the quality of mortgage-backed bonds sold before the 2008 financial crisis.

The bank took a $3.8 billion pretax charge in the second quarter ended June 30 to cover the cost of the settlement, the New York-based firm said today in a statement.

The accord covers securities issued, structured and underwritten between 2003 and 2008, according to Citigroup. The settlement includes a $4 billion civil penalty, the largest of its kind, according to the Justice Department. It also includes $500 million to state attorneys general and the Federal Deposit Insurance Corp. The rest will be various forms of consumer relief to be provided by the end of 2018, according to Citigroup’s statement.

Citigroup was among lenders including Bank of America Corp. investigated by the Justice Department for allegedly misrepresenting the quality of mortgage-backed bonds sold to investors before 2008’s credit crisis.

“We also have now resolved substantially all of our legacy RMBS and CDO litigation,” Citigroup Chief Executive Officer Michael Corbat said in today’s statement. “We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not the past.”

Citigroup ranked ninth among non-agency underwriters of mortgage-backed securities in 2008.

Alibaba Nears SEC Assent as Biggest IPO Causes Few U.S. Ripples

Alibaba Group Holding Ltd.’s proposal for what could be the largest initial stock offering in U.S. history is sailing through Washington with few bumps.

While a federal commission has warned that the offering by the world’s biggest Internet retailer poses “major risks” for investors, the reaction from securities regulators, Congress, cabinet secretaries and competitors has been uneventful.

The Hangzhou, China-based company over the past three years has hired a lobbying firm, plus communications and government relations experts with Washington experience.

The U.S. Securities and Exchange Commission’s anticipated approval of the offering documents will follow a staff review and won’t be voted on by the full five-member commission. The process isn’t designed to judge the offering, only to ensure investors are alerted to all risks.

Ashley Zandy, an Alibaba spokeswoman, said she couldn’t comment because the company is in a pre-IPO quiet period. As required, the company has listed risks to investors in its SEC filings, including warnings about the transparency of its audits and the chance that Chinese regulators could challenge the legality of its structure.

Cynk Stock Suspended as No-Member Network Rises From Pennies

Cynk Technology Corp., the supposed operator of a social network that caught the attention of the financial world with its skyrocketing stock price, was suspended from trading by the U.S. Securities and Exchange Commission.

The halt stems from “concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in CYNK’s common stock,” the SEC said July 11 on its website. Judith Burns, a spokeswoman for the agency, declined to comment further.

Cynk’s social network appears to have no members, no revenue, no assets and only one employee. The stock-price chart has been the talk of all manner of business blogs and Twitter pundits, from Business Insider to the Wall Street Journal and Zero Hedge.

A message left July 11 for Cynk wasn’t immediately returned.

Interviews/Commentary

Nowotny Sees Positive Results From Latest ECB Stimulus

European Central Bank Governing Council Member Ewald Nowotny talked about progress from the central bank’s latest monetary policies, as well as the benefits of the monetary union. He also reflected on past decisions during his service.

He spoke July 10 in London with Bloomberg Television’s Jonathan Ferro.

For the video, click here.

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