NEWS,18.08.2012

Barclays 'Deeply Flawed,' Bank of England's Involvement 'Difficult To Justify': Parliamentary Report

 

Company culture at Barclays was "deeply flawed" and the Bank of England's hand in removing its chief executive Bob Diamond was hard to justify, a UK parliamentary report into the "disgraceful" rigging of Libor interest rates said on Saturday.Few emerge unscathed from the Treasury Select Committee's 300-page report and annexes, based on a string of high-profile hearings after Barclays was fined a record $453 million on June 27 for manipulating the London Interbank Offered Rate or Libor."Such behaviour would only be possible if the management of the bank turned a blind eye to the culture of the trading floor," the report said."The standards and culture of Barclays, and banking more widely, are in a poor state," it said, adding it was unlikely the bank acted alone. Barclays is the first of several banks expected to be fined for rigging a rate which forms a reference point for home loans, credit cards and other financial transactions worth over $350 trillion globally.The report slammed the UK's Financial Services Authority (FSA) watchdog for being behind the curve, giving ammunition to London's critics by starting its own formal probe into Libor setting two years after U.S. authorities had kicked off theirs.It said the delay contributed to the perceived weakness of London in regulating financial markets and recommended many reforms, several of which are already being looked at elsewhere, such as criminal penalties and direct oversight.The FSA responded that its managing director Martin Wheatley will consider the report's findings in his government-commissioned review of Libor due to be published in September.The government also welcomed the report and would consider any necessary legislative changes called for by Wheatley.Barclays said it does not expect to agree with all the report but "we recognise that change is required, not least to restore stakeholder trust".The FSA and U.S. authorities are still probing HSBC , Royal Bank of Scotland, Lloyds and several non-UK banks in connection with possible manipulation. Diamond, Barclays' Chairman Marcus Agius and Chief Operating Officer Jerry del Missier all quit in July.Bank of England Governor Mervyn King and FSA Chairman Adair Turner told lawmakers they did not demand that Diamond step down, but the report concluded that their intervention meant it was a "fait accompli".King and Turner stepped in following public outrage over Barclays after the rigging was disclosed in June.” The Governor's involvement is difficult to justify," the report said, dismissing King's defence the Bank would be regulating lenders anyway from 2013 when the FSA is scrapped The central bank must be made accountable to avoid such potential abuses of power, the report said.The Bank of England said in a statement it did not have any regulatory responsibility for Libor at the time and that King's meeting with Agius on the day he resigned was "fully justified"The report criticised Barclays' board for several failings and Diamond himself, saying his testimony to parliament was unforthcoming and selective in parts, and fell well short of the candour and frankness expected.Diamond said in a statement he had responded to questions from lawmakers "truthfully, candidly and based on information available to me. I categorically refute any suggestion to the contrary."A focus of the hearings was a conversation between Diamond and Bank of England Deputy Governor Paul Tucker in Oct. 2008 when markets were in meltdown after the collapse of U.S. bank Lehman Brother the previous month.They agreed that the conversation did not amount to directing Barclays to "low ball" its Libor rate submission in a bid to show it had no problem borrowing from other banks.The heavy public emphasis by Barclays on this conversation may have been a "smokescreen" to distract from more serious failings at the lender and made no fundamental difference to the bank's behaviour, the report said."Barclays did not need a nod, a wink or any signal from the Bank of England to lower artificially their Libor submissions. The bank was already well practised in doing this," it said.Tucker told the lawmakers that possible clues to dishonesty did not ring alarm bells at the time, suggesting "naivety" on the part of the BoE, the report added.Tucker has long been seen as a leading candidate to replace BoE Governor Mervyn King, who stands down next year, and while his grilling in the hearings was seen as setting back his chances, he escapes the trenchant criticism levied at other players.Turner, another candidate for the deputy governorship, also escapes uniformly bad criticism, the report saying the FSA was on the case in questioning Barclays' culture of risk taking.But the FSA's probe left unanswered whether senior figures from Whitehall, a reference to government, instructed Tucker to ask Barclays to low ball its Libor submissions.Evidence received by lawmakers suggested Whitehall simply wanted to know if government efforts to prop up the financial system were working and Barclays was safe, the report said."This was understandable given the fragility of the UK and international financial system in October 2008," it added.Libor is overseen by the British Bankers' Association (BBA), whose review in 2008 appears to have been "an opportunity missed to stop the attempted manipulation that was occurring" and the report questions whether the BBA should keep its role.

Juncker: Greece won't leave eurozone

Greece won't leave the 17-nation eurozone, Luxembourg's prime minister said, arguing in an interview published Saturday that an exit wouldn't be politically feasible and would carry unforeseeable risks.Greece has been kept afloat by international loans, but has fallen behind on implementing reforms and austerity measures demanded in exchange, fueling impatience in Germany and other prosperous nations and speculation about a possible euro exit.But Luxembourg Prime Minister Jean-Claude Juncker, who also chairs eurozone finance ministers' meetings, was quoted as saying in an interview with Austrian newspaper Tiroler Tageszeitung: "It will not happen unless Greece violates all the conditions and keeps to no agreements.""In the case of a total refusal by Greece regarding budget consolidation and structural reforms, one would have to deal with the question," he said, according to the report. "But because I assume that Greece will try to redouble its efforts and achieve the targets that have been set, there is no reason to assume that this exit scenario can become relevant."Juncker said an exit would be "technically," but not "politically" feasible and insisted: "We are not working on it."There's little enthusiasm among creditors such as Germany for granting Greece more time to fulfill the terms of its international aid packages or other concessions. Juncker said it wasn't possible to say whether Athens might be granted more time before a report next month from its debt inspectors, but he doesn't currently consider an extension "absolutely necessary."Germany's vice chancellor, Economy Minister Philipp Roesler, said recently that the idea of Greece leaving the euro has "lost its horror." A regional official with one of the country's governing parties, Bavarian state finance minister Markus Soeder, has called for Greece to leave the currency this year and argued that "an example must be made of Athens."There has been no such talk from Chancellor Angela Merkel or Finance Minister Wolfgang Schaeuble, though they also have shown little appetite for concessions."I have always said that we can help the Greeks, but we cannot responsibly throw money into a bottomless pit," Schaeuble said during an appearance Saturday at his ministry's annual open day.He conceded that "it is immensely difficult for the Greeks," and said that Germans shouldn't speak "disrespectfully" of other nations.

Heineken raises bid for Tiger brewer

Heineken NV has raised its offer of more than $6 billion for Fraser and Neave's (F&N) stake in the maker of Tiger beer as it tries to fend off a Thai rival, a source close to the situation said today.The Dutch brewer's revised offer for Asia Pacific Breweries (APB) of 53 Singapore dollars per share compares to its earlier bid of S$50 and a partial offer by the Thai billionaire's group of S$55 per APB share.Heineken, the world's third biggest brewer, is seeking control of Asia Pacific Breweries to gain a larger slice of one of the last beer markets that is still growing rapidly.But Heineken's efforts have been complicated by Charoen Sirivadhanabhakdi, Thailand's second-richest man, as he tries to expand his Thai Beverage empire in the Southeast Asian market.The source said Heineken had raised its offer for the 58% of APB which it does not already own. That includes the 40% of APB held by its long-time partner Fraser and Neave, a drinks and property conglomerate.But it was not clear the new offer would seal the deal, the source said. Both Heineken and F&N declined to comment.Sources had earlier said a sweetened offer could depend on F&N not accepting the partial Thai bid. It was not clear whether the new offer was conditional.ThaiBev recently became F&N's largest shareholder with 26.4%. Charoen's son-in-law, through his group Kindest Place, separately offered to buy F&N's direct 7.3% stake in APB at S$55 per share."Heineken's resolve to win APB seems to be very strong," said Andrew Chow, head of research at UOB Kay Hian in Singapore."APB has an extensive distribution network and breweries. Its Tiger brand is also strong in Asia."The Thais have said they want to work with Heineken, but sources close to the situation say it would not be keen to cooperate with a competitor.APB has had nearly 20% annual earnings growth over the last decade.The biggest brand APB brews is Heineken itself, accounting for 30 % of its volume, but it also makes Tiger, Bintang and Anchor and runs 30 breweries in countries including Singapore, Malaysia, Indonesia, Vietnam, Thailand and Cambodia."Heineken just can't afford to lose," said one analyst who did not want to be quoted by name, although he said that even a higher offer could bring another bid from its rival - perhaps even as high as S$60."Still, it sounds like we are reaching the end-game," he said.Among Southeast Asian brewers, APB is the sixth-largest in terms of sales across the Asia Pacific region, behind San Miguel Corp of the Philippines in number one spot and ThaiBev in fourth, according to Euromonitor's latest data for 2011.Trading of APB and F&N shares in Singapore was suspended on Friday pending an announcement.Heineken had said its earlier offer of S$50 a share was a 45% premium to the price of APB shares before it made its bid and the F&N board had agreed to recommend the bid to its shareholders."Heineken wants full control of Asia Pacific Breweries, while Charoen wants a piece of that growth and is positioning himself to gain handsomely if Heineken wants to buy him out in the future," said an investment banking source in London.ABP shares have jumped from under S$35 in mid-July before stake building began to S$50.57 at Thursday's close. F&N shares, meanwhile, have risen from S$7.40 since mid-July to end at S$8.40 on Thursday. Both have hit record highs in recent weeks.The Heineken deal could prompt a breakup of F&N with Coca-Cola keeping an eye on its popular soft-drink 100PLUS, fruit juices, mineral water and dairy products unit, which could be hived off from the Singapore group's property assets.Goldman Sachs is advising F&N, while Citigroup and Credit Suisse are advisers to Heineken. Morgan Stanley and HSBC are advising the Thais.