NEWS,24.07.2012

Germany's credit rating downgraded

Germany's Aaa credit rating outlook has been lowered to negative by Moody's.The rating agency cited "rising uncertainty" about Europe's debt crisis.Risks that Greece may leave the euro and the "increasing likelihood" of help for Spain and Italy also caused the downgrade."Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form," Moody's said. Germany's vulnerable banking system, which Moody's deems exposed to the most stressed euro countries, could leave them open to further deepening of the crisis.However, it will retain its Aaa rating because of the country's "advanced and diversified economy" with high productivity and strong demand for German products.Finland held on to its top ranking, getting a stable outlook from Moody's.

 

Deutsche Bank's Internal Libor Investigation Finds Deutsche Bank Mostly Innocent

 

Great news, you guys. We can go ahead and scratch at least one bank off the list of egregious interest-rate manipulators. That's because this bank has heroically determined that it is totally innocent. Almost totally, anyway.Deutsche Bank, the biggest German bank, has carefully investigated its own role in the habitual, fraudulent, global rigging of Libor, the most important interest rate in the world. And you might want to sit down for this, but Deutsche Bank has determined, to what we can only imagine is its own profound relief, that Deutsche Bank was only barely involved in the scandal. Hardly any involvement, really. If you blur your eyes a bit, it even kind of looks like Deutsche Bank wasn't involved at all. Certainly not in its top executive ranks. That's the way Deutsche Bank would like you to see it, anyway.Hmm, one small problem, though: Handelsblatt is reporting that Deutsche Bank is bracing for "a huge fine" in the Libor scandal, setting aside between $300 million and $1 billion -- the middle point of which would be higher than the $450 million Barclays paid. Does that sound like a bank that really expects to get out of this without any mud getting splashed on the C-suite?Anyway, we can only imagine that if Deutsche Bank is indeed planning on paying such a huge fine, then it is only doing so out of the goodness of its heart, a sense of civic duty really. Because it turns out, according to Deutsche Bank's investigation, that every bit of Deutsche Bank's involvement in the constant, gleeful rigging of Libor for years came down to just two very bad Deutsche Apples, who were fired last year. Both of those, let's call them, slimeballs apparently were part of the global Libor-rigging cartel that involved nearly every large bank in the world. But they're gone now, and we can only imagine that their desks have been taken out back and chopped into dust, that their pictures have been photoshopped out of all the company's birthday-party photos, and that their names are no longer spoken around Deutsche Bank's offices in any tones other than scorn or maybe shame.A Deutsche Bank internal probe has found that two of its former traders may have been involved in colluding to manipulate global benchmark interest rates but there was no indication of failure at the top of the organization, three people close to the investigation said.No indication of failure at the top of the organization! This will be a tremendous relief to spanking-new Deutsche Bank chief Anshu Jain, who is already on thin ice with the Germans because he came up from the bank's investment-banking arm. Germans don't much like investment bankers. To make matters worse, it was Jain's investment-banking arm that happened to be in charge of these bad-apple traders that were fiendishly rigging Libor. A major scandal that originated in Mr. Jain's area of the bank could damage his chances to continue on as sole CEO of the bank after co-head Jürgen Fitschen's contract expires in three years.Thank goodness for Jain that such a risk is apparently all gone now, according to Deutsche Bank's unflinching review of its own leadership. In fact, Reuters seems to imply that Deutsche Bank will likely avoid the sort of unpleasantness that beset Barclays, where the chairman, CEO and chief operating officer all walked the plank as a result of that bank's admitted Libor manipulation. And we can only imagine that the ongoing investigations by "regulators and governmental entities" in the U.S. and Europe, including German markets regulator BaFin, are now a mere formality. All that's needed now is to bring those two pesky scapegoats to justice, and Deutsche Bank can get back to doing the Lord's work.

Italy pushes for Sicilian recovery plan

Italian Prime Minister Mario Monti imposed a compulsory plan to restore financial stability to the cash-strapped Sicily region and overhaul its bloated public administration, a government statement said today.The statement, issued after a meeting between Monti and regional governor Raffaele Lombardo, said the leaders had agreed "a plan for financial recovery and reorganisation of the region's public administration, with a binding timeframe and objectives".The statement stopped short of saying that Sicily would be placed under special administration but made it clear that the programme would be monitored from Rome and that it would insist on cuts to the region's notoriously swollen payroll."The programme is to be finalised in the coming weeks and will be formally signed by the regional and national governments," the statement said.Sicily, which accounts for about 5.5% of Italy's gross domestic product, has been at the centre of growing concerns over the financial stability of Italy's regional and city governments after Monti said last week there were serious concerns about the possibility that it could default.The autonomous island region has some 5.3 billion euros in debt, a long history of waste and mismanagement and an outsized public sector payroll that critics say has been used by successive governments to buy votes.Officials have since played down fears of an immediate crisis with Interior Minister Annamario Cancellieri saying on Monday that there was no risk either of default or of a special government administrator being appointed.Worries about Sicily come as Italy itself moves to the forefront of concerns in the euro zone crisis, with the cost of servicing huge debts jumping on contagion fears for the bloc's third biggest economy linked to the worsening plight of Spain.Following the meeting, Lombardo repeated his own insistence that Sicily had sound and sustainable finances and dismissed talk of default as "rubbish" but confirmed he would resign by the end of the month as previously agreed.He also said the government had released 240 million euros to help cover funding gaps in the health system, one of the regional administration's key responsibilities.While the plight of Italy's regional and municipal authorities has not reached the levels seen in Spain, where several regions have been reported to be close to asking for state aid, there have been growing signs of strain from successive cuts to government transfers.On Tuesday, mayors from around Italy held a demonstration outside the Senate to protest against the cuts which they say will force them to curtail vital local services.The Corte dei Conti, Italy's top public finance watchdog, has made a damning series of criticisms of the regional administration in Sicily, which has overseen a steady deterioration in the island's finances over the past decade.With an unemployment rate of 19.5%, almost twice the national average, Sicily is among the regions hardest hit by the recession but its public sector payroll has been constantly increased, particularly in the health sector.