Banks Downgraded, Holder on S&P, Graves on COSO: Compliance

Six European banks, including Credit Suisse Group AG and HSBC Holdings Plc, had their ratings cut by Standard & Poor’s on the prospect that their governments are less likely to provide aid in a crisis.

Barclays Plc and Lloyds Banking Group Plc also had the long-term ratings on their holding companies reduced. Standard Chartered Plc and Royal Bank of Scotland Group Plc had their short-term ratings lowered as well, S&P said in a statement Tuesday. Deutsche Bank AG was among other banks in Germany and Austria that may have their credit ratings cut, S&P said.

The lenders in the U.K., Austria and Germany were singled out for downgrades because those countries implemented rules requiring creditors to take losses before taxpayers at the start of this year, 12 months earlier than the rest of their peers in the 28-member European Union. S&P said in November it would review the banks’ ratings because of the move.

The EU enacted the bank-resolution law last year in a bid to end taxpayer bailouts that prevailed in the financial crisis.

Under the new rules, authorities will generally require 8 percent of a struggling bank’s liabilities to be wiped out before recourse can be made to industry funds or taxpayer support.

RBS said in a statement that S&P’s move wasn’t specific to the bank and welcomed the ratings company’s decision to upgrade its long-term outlook on the lender to stable from negative.

Officials at Barclays, Lloyds and HSBC in London, Frankfurt-based Deutsche Bank and Zurich-based Credit Suisse declined to comment. A spokesman for Standard Chartered in London didn’t immediately respond to a request for comment.

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Compliance Action

ICAP Fined $17 Million by EU for Aiding Banks’ Yen Libor Cartels

ICAP Plc, the world’s largest broker of transactions between banks, was fined 15 million euros ($17.2 million) by the European Union’s antitrust arm for helping traders to manipulate yen Libor derivatives.

ICAP spread misleading information to lenders on a panel that set the interbank rate for yen Libor and aided contacts between traders, the European Commission said Wednesday in an e-mailed statement from Brussels. ICAP in 2013 refused to join financial institutions in paying fines to settle the EU case.

UBS Group AG, Royal Bank of Scotland Group Plc, Deutsche Bank AG, JPMorgan Chase & Co., Citigroup Inc. and brokerage RP Martin Holdings Ltd. previously agreed to a combined penalty of 669.7 million euros. ICAP has paid fines of $88 million in a deal with U.S. and U.K. regulators to settle charges over contacts with UBS traders.

ICAP said it would appeal the fine to the EU courts because the decision was “wrong both in fact and in law,” according to an e-mailed statement.

Interviews/Commentary

U.S. Announces $1.5 Billion Settlement With Standard & Poor’s

U.S. Attorney General Eric Holder spoke Tuesday at a news conference in Washington about the Justice Department’s $1.5 billion settlement with Standard & Poor’s.

S&P, a unit of McGraw Hill Financial Inc., will pay more than a year’s profit to settle claims that it inflated ratings on subprime-mortgage bonds at the center of the 2008 financial crisis.

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KPMG Survey Finds Companies Differ in Adopting COSO 2013

Twenty percent of 450 financial reporting executives surveyed last month by KPMG LLP said implementing the financial reporting framework known as COSO 2013 was “chief among their worries for year-end reporting,” according to a statement by the firm.

The Committee of Sponsoring Organizations of the Treadway Commission’s updated framework, agreed upon by five private organizations including the American Institute of Certified Public Accountants and Financial Executives International, was published in May 2013, with a December 2014 effective date.

Some public companies continue to use the original version that came out some 20 years ago in Securities and Exchange Commission filings.

“The SEC has indicated it will accept the original version, for a period of time, so long as it is disclosed in the filing,” said George Graves, a partner in KPMG’s internal audit, risk and compliance services group.

“The reason why most publicly traded companies are focused on COSO 2013 is due to its importance to their compliance with Sarbanes-Oxley Section 404,” said Graves, referring to the landmark federal law aimed at improving corporate governance law and financial disclosure.

About 40 percent polled said they would adopt COSO 2013 for 2014 reporting, and 30 percent said they would do so in 2015. More than a quarter said they do not plan to implement it immediately and were uncertain as to when they would start using it, according to a statement by KPMG.

“While the transition will impact most companies to varying degrees, it’s going to be present more of a challenge for middle market companies, due to their fewer available resources,” Graves said.

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