Firm in global ATM heist speaks out
An Indian payment card processing company acknowledged on Monday that hackers breached its security to increase the limits on some pre-paid card accounts in a global ATM heist in December.
ElectraCard Services said no customer data was stolen from it and any tampering of ATM cards occurred elsewhere.
"To withdraw money from a pre-paid card, one needs an ATM card that has a magnetic strip, which has encoded data. You also need a PIN.
"The forensic report noted that this data and PIN was not compromised at the ElectraCard data centre," said Ramesh Mengawade, chief executive officer of ElectraCard Services.
"However, in three or four accounts, there was a breach, where the limit of cash that can be withdrawn from a pre-paid card was increased," he said in an interview at his office in Pune.
Withdrawal limits
US prosecutors said on Thursday that hackers broke into two unnamed card processing companies, raising the balances and withdrawal limits on accounts that were then exploited in coordinated ATM withdrawals around the world that stole a combined $45m from two Middle Eastern banks.
ElectraCard Services was the company that processed prepaid travel cards for National Bank of Ras Al Khaimah PSC (RAKBANK), according to a US official and a bank employee who both spoke on condition of anonymity. RAKBANK suffered a $5m coordinated heist at ATMs around the world on December 21 last year, the US indictment said.
"What happened in December was an industry-wide attack," Mengawade said in his first interview since the case came to light last week. "There were pranks in India; there were pranks in the US, in Europe and at processors as well."
The company said the attack was external and no one inside the company was involved, and that it became aware of it within an hour and immediately notified clients and the police.
Another processing company, EnStage, which is incorporated in Cupertino, California, but has operations based in Bangalore, handled card payments for Bank of Muscat of Oman, sources have said. Bank of Muscat lost $40m in a coordinated heist on February 19.
"Our customers were adversely affected by this sophisticated crime," EnStage CEO Govind Setlur said in a statement in the Times of India newspaper on Sunday.
ElectraCard was not associated with the February incident.
Outside investigator
ElectraCard hired US-based Verizon Communications to investigate what happened in the December heist.
Verizon is one of the largest companies that certify that companies are in compliance with payment card industry standards set by Visa and MasterCard. It is also one of the biggest providers of incident response services to companies that are victims of cyber attacks.
"They are saying, yes, the fraudsters entered the system but they have not found any data because we don't store the data," said Ravi Sundaram, ElectraCard's head of strategy and corporate services.
"While somebody might have accessed my data in an unauthorised way, it still doesn't mean you can do an ATM withdrawal," he added.
The company has about 100 customers globally, all of them in financial services, and said it had not lost any in the wake of the December incident.
"This incident in no way impacts or troubles us in terms of our financials," Sundaram said. "We are well protected for that."
Complaint lodged
The head of the Pune police cyber crimes cell could not immediately confirm late on Monday whether a complaint had been filed by ElectraCard in the matter.
"It's an international gang and the US is prosecuting them," Mengawade said.
After the incident, operations continued as usual, Mengawade said. "We put stop withdrawal instructions on only those cards which were showing such transactions," he said.
ElectraCard was delisted from a global industry standards body after the incident, but is still authorised to conduct transactions.
Mengawade said he expects to be re-certified by June.
MasterCard bought a 12.5% stake in ElectraCard in 2010. MasterCard, the network under which the cards used in the heist were issued, has said its security was not compromised.
ElectraCard Services is a subsidiary of Opus Software Solutions, which is also headed by Mengawade.
Iran unhappy with current oil prices
Iran is unhappy with the current oil prices, its oil minister said on Monday, hinting at a proposal for the Opec to lower its output to compensate for a drop in crude prices.
"Iran's suggestion has always been to reduce Opec production ceiling," Rostam Qasemi told reporters at a petrochemical conference in Tehran.
The Organisation of the Petroleum Exporting Countries last week boosted production to 30.21 million barrels a day in April from 29.93 million in March maintaining a flat forecast of global demand.
The move led to lower crude prices in Asian trade on Monday.
"Market is not in a very bad situation but (the oil price) does not correspond to our expectations," Qasemi said, adding that Iran sees "ideal oil prices" above $100 per barrel.
"Part of the fluctuations in oil prices is because of summer. We hope to find a solution at the next Opec meeting," he added, referring to the Opec meeting scheduled in Vienna on May 31.
New York's main contract, light sweet crude for delivery in June shed 78 cents to $95.26 a barrel and Brent North Sea crude for June delivery was down 71c to $103.20 in Monday afternoon trade.
According to secondary sources in Opec, Iran has dropped to the fifth biggest producer in the cartel, producing 2.70 million barrels per day in April. Its production was at 3.63 million bpd in 2011, ranking it second after Saudi Arabia.
Qasemi rejected those accounts, saying Iran's "current oil production has not decreased." He did not elaborate.
In April Qasemi confirmed a decline in production and export in 2012 without giving any figures.
Iran's oil industry has been slapped with international sanctions over its controversial nuclear programme.
The European Union in 2012 stopped buying Iranian crude, forcing Tehran to seek for new customers.
Top brands face protests over Bangladesh
Bangladesh offers the global garment industry
something unique: Millions of workers who quickly churn out huge amounts of
well-made underwear, jeans and T-shirts for the lowest wages in the world.
But since a building collapse in April 24 killed at least 1 100 garment workers in Bangladesh in one of the deadliest industrial tragedies in history, the country has gone from one of the industry's greatest assets to one of its biggest liabilities.
"The risk factors have jumped off the charts," said Julie Hughes, president of the US Association of Importers of Textiles and Apparel, a trade group that represents retailers who import garments. "This is worse than what anyone had imagined."
Working conditions in Bangladesh's garment industry long have been known to be grim, a result of government corruption, desperation for jobs, and industry indifference. But the scale of this tragedy has raised alarm among executives and customers.
The Facebook pages of Joe Fresh, Mango and Benetton, a few of the brands whose clothing or production documents were found in the rubble of the collapsed building, are peppered with angry comments from shoppers. Some warn they're going to shop elsewhere now.
Retailers are also facing street protests. In the US, university chapters of United Students Against Sweatshops are helping to stage demonstrations against Gap in more than a dozen cities, including Seattle, Los Angeles and New York. The group plans to target other retailers it believes are not committed to stricter standards for Bangladeshi factories.
The rising death toll may force Western brands to make a choice: Stay and work to improve conditions. Or leave and face higher costs, similar or worse worker conditions in other low-wage countries and criticism for abandoning a poor nation where per-capita income is just $1.940 per year.
Retailers vowed to stay put
Most retailers have vowed to stay and promised to work for change. Walmart and the Swedish retailer H&M, the top two producers of clothing in Bangladesh, have said they have no plans to leave. Other big chains such as The Children's Place, Mango, J.C. Penney, Gap, Benetton and Sears have said the same.
"Today's economy is global, and it is not a question of if a company like H&M should be present in developing countries," said Anna Eriksson, an H&M spokesperson. "It is a question of how we do it."
But for some, the risk of being in Bangladesh has become too great. Walt Disney announced this month that it is stopping production of its branded goods in Bangladesh.
Industry experts predict others will quietly reduce their dependence on the country.
"Almost everybody is going to cut back on what they are sourcing from Bangladesh," Hughes said. "Not today, but by a year from now our imports are going to fall. The question is how much."
But it's not easy for retailers who make their clothes in Bangladesh to simply leave.
There is no shortage of cheap labour or available garment factories around the world. But it takes months or even years to establish relationships with new factories that retailers can trust to turn out large volumes of garments to their specifications on time.
Even if retailers move their business to other low-cost countries, they still face threats to their reputations.
Of the major garment-manufacturing countries, Bangladesh's working conditions pose the highest risk to brands, according to Maplecroft, a risk analysis firm based in Bath, England. But Bangladesh ranks somewhat better than many low-cost countries on other labour issues, such as child labour and forced labour.
According to Maplecroft's Labour Rights and Protection Index, which measures the overall risk of association with violations of labour rights, Bangladesh is the 17th-riskiest country in the world and less risky than such garment-producing leaders as China, Pakistan, Indonesia and India.
Another reason it's hard for retailers to leave is that Bangladesh is one of the few places in the world that has enough workers, manufacturing capacity and experience to provide what retailers demand: High volume, low prices, good quality and predictable service.
The garment industry in Bangladesh is the third-biggest exporter of clothes in the world, after China and Italy. There are 5 000 factories in the country and 3.6 million garment workers. Manufacturers have easy access to cheap raw materials, and the country's political situation has been relatively stable.
Minimum wage
And its garment workers command the lowest wages by far in the world. The average worker in Bangladesh earns the equivalent of 24 cents an hour, compared with 45 cents in Cambodia, 52 cents in Pakistan, 53 cents in Vietnam and $1.26 in China, according to the Worker Rights Consortium, a worker advocacy group.
On Sunday a Bangladesh cabinet minister said the government plans to raise the minimum wage for garment workers, and a new minimum wage board will issue recommendations within three months.
Between 15% and 25% of the wholesale cost of a garment is for labour. Unlike raw material costs, which can vary, labour is the only major cost that retailers can control.
Bangladesh has long been a major garment producer, but in recent years its production has soared.
For decades, the global garment trade was controlled with a quota system called the Multi Fibre Arrangement that limited production from developing countries to protect higher-wage workers in developed countries.
When the system ended in 2005, retailers flocked to Bangladesh because of its low wages. Manufacturers scrambled to increase the size of their factories.
Land is scarce in Bangladesh, one of the world's most densely populated countries, with 163 million people. So the Bangladesh government, desperate to boost employment, looked the other way as companies converted unsuitable buildings into factories or crammed far too many workers and equipment into small spaces, creating fire hazards, labour activists say.
Since 2005, at least 1 800 workers have been killed in the Bangladeshi garment industry in factory fires and building collapses, according to research by the advocacy group International Labor Rights Forum.
In November, 112 workers were killed in a garment factory in Dhaka, the Bangladeshi capital.
The factory lacked emergency exits, and its owner said only three floors of the eight-story building were legally built.
Clothes destined for Disney, Walmart and Sears were found among the building's remains, though Disney has denied its suppliers used the factory.
But as horrific as that fire was, it wasn't as bad as the April 24 collapse, the garment industry's worst disaster. The eight-story Rana Plaza building housing five garment factories collapsed at the beginning of a workday.
Crushed by massive blocks of concrete
The building wasn't designed to hold factories, and three stories had been added illegally. Most of the victims were crushed by massive blocks of concrete and mortar falling on them.
Then as the death toll was climbing, a fire broke out at a sweater manufacturer on Wednesday in Dhaka, killing eight people including a senior police officer, a Bangladeshi politician and a top clothing industrial official.
Only a few companies, including Britain's Primark and Canada's Loblaw, which owns the Joe Fresh clothing line, have acknowledged that suppliers were making clothes for them at the Rana Plaza site and have promised to compensate workers and their families.
Loblaw's CEO said suppliers were making clothes for as many as 30 brands and retailers at the site.
Benetton labels were found at the site, and the Italian fashion brand acknowledged that one of its suppliers had used one of the factories.
The company said that before the collapse, the factory had been removed from its list of approved factories.
Mango, whose production documents were found in the ruins, has said it was planning to produce there but hadn't started.
Clothing retailers often depend on a web of contractors and sub-contractors to produce goods for them.
Fabric will be made at one factory, buttons at another, and the item will be sewn together somewhere else. Large orders are often placed with one contractor, who then farms out the work to several smaller factories.
Work conditions
Retailers said they have strict standards that they require their suppliers to follow, but they know little or nothing about conditions at individual factories that make their clothes because there are so many of them.
But retailers are very familiar with the general conditions in the countries where they do business, and their importance to local economies means they can push for improvements.
Labour groups and other activists have said last month's tragedy is just the most extreme evidence that brands haven't done nearly enough to protect workers.
The retail industry hasn't released estimates on how much it would cost to upgrade Bangladeshi factories to Western standards. But the Worker Rights Consortium puts the cost at $1.5bn to $3bn.
If the money was spent over five years, it would be 1.5% to 3% of the $95bn expected to be spent on clothes manufacturing over that time. Put another way, it's 10 cents added onto the cost of a T-shirt.
There are limits to what companies can do to improve conditions, though, said Matthew Amengual, a professor at the MIT Sloan School of Management who studies labour regulation and enforcement in developing countries.
The collapse of the factory in Bangladesh showed how safety issues in the country are in some ways too ingrained and complex for companies to monitor and change.
It is much easier for a company to push for more fire extinguishers or make sure fire exits aren't locked than to judge the structural integrity of thousands of factories.
"Companies have a very important role to play, but they can't do it just by auditing their supply chain," Amengual said.
But since a building collapse in April 24 killed at least 1 100 garment workers in Bangladesh in one of the deadliest industrial tragedies in history, the country has gone from one of the industry's greatest assets to one of its biggest liabilities.
"The risk factors have jumped off the charts," said Julie Hughes, president of the US Association of Importers of Textiles and Apparel, a trade group that represents retailers who import garments. "This is worse than what anyone had imagined."
Working conditions in Bangladesh's garment industry long have been known to be grim, a result of government corruption, desperation for jobs, and industry indifference. But the scale of this tragedy has raised alarm among executives and customers.
The Facebook pages of Joe Fresh, Mango and Benetton, a few of the brands whose clothing or production documents were found in the rubble of the collapsed building, are peppered with angry comments from shoppers. Some warn they're going to shop elsewhere now.
Retailers are also facing street protests. In the US, university chapters of United Students Against Sweatshops are helping to stage demonstrations against Gap in more than a dozen cities, including Seattle, Los Angeles and New York. The group plans to target other retailers it believes are not committed to stricter standards for Bangladeshi factories.
The rising death toll may force Western brands to make a choice: Stay and work to improve conditions. Or leave and face higher costs, similar or worse worker conditions in other low-wage countries and criticism for abandoning a poor nation where per-capita income is just $1.940 per year.
Retailers vowed to stay put
Most retailers have vowed to stay and promised to work for change. Walmart and the Swedish retailer H&M, the top two producers of clothing in Bangladesh, have said they have no plans to leave. Other big chains such as The Children's Place, Mango, J.C. Penney, Gap, Benetton and Sears have said the same.
"Today's economy is global, and it is not a question of if a company like H&M should be present in developing countries," said Anna Eriksson, an H&M spokesperson. "It is a question of how we do it."
But for some, the risk of being in Bangladesh has become too great. Walt Disney announced this month that it is stopping production of its branded goods in Bangladesh.
Industry experts predict others will quietly reduce their dependence on the country.
"Almost everybody is going to cut back on what they are sourcing from Bangladesh," Hughes said. "Not today, but by a year from now our imports are going to fall. The question is how much."
But it's not easy for retailers who make their clothes in Bangladesh to simply leave.
There is no shortage of cheap labour or available garment factories around the world. But it takes months or even years to establish relationships with new factories that retailers can trust to turn out large volumes of garments to their specifications on time.
Even if retailers move their business to other low-cost countries, they still face threats to their reputations.
Of the major garment-manufacturing countries, Bangladesh's working conditions pose the highest risk to brands, according to Maplecroft, a risk analysis firm based in Bath, England. But Bangladesh ranks somewhat better than many low-cost countries on other labour issues, such as child labour and forced labour.
According to Maplecroft's Labour Rights and Protection Index, which measures the overall risk of association with violations of labour rights, Bangladesh is the 17th-riskiest country in the world and less risky than such garment-producing leaders as China, Pakistan, Indonesia and India.
Another reason it's hard for retailers to leave is that Bangladesh is one of the few places in the world that has enough workers, manufacturing capacity and experience to provide what retailers demand: High volume, low prices, good quality and predictable service.
The garment industry in Bangladesh is the third-biggest exporter of clothes in the world, after China and Italy. There are 5 000 factories in the country and 3.6 million garment workers. Manufacturers have easy access to cheap raw materials, and the country's political situation has been relatively stable.
Minimum wage
And its garment workers command the lowest wages by far in the world. The average worker in Bangladesh earns the equivalent of 24 cents an hour, compared with 45 cents in Cambodia, 52 cents in Pakistan, 53 cents in Vietnam and $1.26 in China, according to the Worker Rights Consortium, a worker advocacy group.
On Sunday a Bangladesh cabinet minister said the government plans to raise the minimum wage for garment workers, and a new minimum wage board will issue recommendations within three months.
Between 15% and 25% of the wholesale cost of a garment is for labour. Unlike raw material costs, which can vary, labour is the only major cost that retailers can control.
Bangladesh has long been a major garment producer, but in recent years its production has soared.
For decades, the global garment trade was controlled with a quota system called the Multi Fibre Arrangement that limited production from developing countries to protect higher-wage workers in developed countries.
When the system ended in 2005, retailers flocked to Bangladesh because of its low wages. Manufacturers scrambled to increase the size of their factories.
Land is scarce in Bangladesh, one of the world's most densely populated countries, with 163 million people. So the Bangladesh government, desperate to boost employment, looked the other way as companies converted unsuitable buildings into factories or crammed far too many workers and equipment into small spaces, creating fire hazards, labour activists say.
Since 2005, at least 1 800 workers have been killed in the Bangladeshi garment industry in factory fires and building collapses, according to research by the advocacy group International Labor Rights Forum.
In November, 112 workers were killed in a garment factory in Dhaka, the Bangladeshi capital.
The factory lacked emergency exits, and its owner said only three floors of the eight-story building were legally built.
Clothes destined for Disney, Walmart and Sears were found among the building's remains, though Disney has denied its suppliers used the factory.
But as horrific as that fire was, it wasn't as bad as the April 24 collapse, the garment industry's worst disaster. The eight-story Rana Plaza building housing five garment factories collapsed at the beginning of a workday.
Crushed by massive blocks of concrete
The building wasn't designed to hold factories, and three stories had been added illegally. Most of the victims were crushed by massive blocks of concrete and mortar falling on them.
Then as the death toll was climbing, a fire broke out at a sweater manufacturer on Wednesday in Dhaka, killing eight people including a senior police officer, a Bangladeshi politician and a top clothing industrial official.
Only a few companies, including Britain's Primark and Canada's Loblaw, which owns the Joe Fresh clothing line, have acknowledged that suppliers were making clothes for them at the Rana Plaza site and have promised to compensate workers and their families.
Loblaw's CEO said suppliers were making clothes for as many as 30 brands and retailers at the site.
Benetton labels were found at the site, and the Italian fashion brand acknowledged that one of its suppliers had used one of the factories.
The company said that before the collapse, the factory had been removed from its list of approved factories.
Mango, whose production documents were found in the ruins, has said it was planning to produce there but hadn't started.
Clothing retailers often depend on a web of contractors and sub-contractors to produce goods for them.
Fabric will be made at one factory, buttons at another, and the item will be sewn together somewhere else. Large orders are often placed with one contractor, who then farms out the work to several smaller factories.
Work conditions
Retailers said they have strict standards that they require their suppliers to follow, but they know little or nothing about conditions at individual factories that make their clothes because there are so many of them.
But retailers are very familiar with the general conditions in the countries where they do business, and their importance to local economies means they can push for improvements.
Labour groups and other activists have said last month's tragedy is just the most extreme evidence that brands haven't done nearly enough to protect workers.
The retail industry hasn't released estimates on how much it would cost to upgrade Bangladeshi factories to Western standards. But the Worker Rights Consortium puts the cost at $1.5bn to $3bn.
If the money was spent over five years, it would be 1.5% to 3% of the $95bn expected to be spent on clothes manufacturing over that time. Put another way, it's 10 cents added onto the cost of a T-shirt.
There are limits to what companies can do to improve conditions, though, said Matthew Amengual, a professor at the MIT Sloan School of Management who studies labour regulation and enforcement in developing countries.
The collapse of the factory in Bangladesh showed how safety issues in the country are in some ways too ingrained and complex for companies to monitor and change.
It is much easier for a company to push for more fire extinguishers or make sure fire exits aren't locked than to judge the structural integrity of thousands of factories.
"Companies have a very important role to play, but they can't do it just by auditing their supply chain," Amengual said.
Retailers back safety in Bangladesh
Some of the world's largest retailers have
agreed to a first-of-its-kind pact to improve safety at some of Bangladesh's garment factories. The move comes nearly three weeks after a building
collapse in the country killed more than 1 100 workers.
H&M, a trendy Swedish chain that's the
largest clothing buyer in Bangladesh, on Monday said it would sign a five-year,
legally binding contract that calls for retailers to take on a greater role in
ensuring the garment factories in Bangladesh are safe.
Within hours, C&A of the Netherlands, British retailers Tesco and Primark, and Spain's Inditex, owner of
the Zara chain, followed with their own announcements.
The companies join two other retailers that
signed the agreement last year: PVH, which makes clothes under the Calvin
Klein, Tommy Hilfiger and Izod labels, and German retailer Tchibo. The
agreement has since been expanded to five years from two.
The pact requires that the companies conduct
independent safety inspections, make their reports on factory conditions public
and cover the costs for needed repairs. It also calls for them to pay up to
$500 000 annually toward the effort, to stop doing business with any factory
that refuses to make safety upgrades and to allow workers and their unions to
have a voice in factory safety.
The safety agreement was applauded by labour
groups who say it goes a long way toward improving working conditions in
Bangladesh's garment industry, which long have been known to be potentially
dangerous.
Based on the seven companies that plan to
participate in the pact, between 500 and 1 000 of the 5 000 factories operated
in Bangladesh will be covered, according to Scott Nova, executive director of
the Worker Rights Consortium, a workers' rights group that had been one of the
organizations pushing for the agreement.
"This agreement is exactly what is needed
to finally bring an end to the epidemic of fire and building disasters that
have taken so many lives in the garment industry in Bangladesh," he said.
The pact comes as the working conditions of Bangladesh's garment industry have come under increased scrutiny. Since 2005, at
least 1 800 workers have been killed in the Bangladeshi garment industry in
factory fires and building collapses, according to research by the advocacy
group International Labour Rights Forum.
The two latest tragedies in the country's
garment industry have raised the alarm. The building collapse on April 24 was
the industry's worst disaster in history. And it came months after a fire in
another garment factory in Bangladesh in November killed 112 workers.
Following the latest tragedy, Walt Disney Co.
announced this month that it is stopping production of its branded goods in Bangladesh. But most retailers have vowed to stay and promised to work for
change.
H&M and Wal-Mart, the second largest buyer
of clothing Bangladesh, have said they have no plans to leave. Other big chains
such as The Children's Place, Mango, J.C. Penney, Gap, Benetton and Sears have
said the same.
The pressure has increased for those who stay
to make changes.
Since April's building collapse, Avaaz, a human
rights group with 21 million members worldwide, has gotten more than 900 000
signatures on a petition pushing Gap and H&M to commit to the
proposal.
And in the US, university chapters
of United Students Against Sweatshops are helping to stage demonstrations
against Gap in more than a dozen cities including Seattle, Los Angeles and New York.
The safety agreement comes about a year and a
half after a fire and safety proposal drawn up by labour unions was first
rejected by many clothing companies as too costly and legally binding. The latest
agreement is a revised version of that proposed pact.
Forty companies, including Wal-Mart, H&M,
and J.C. Penney, met with labor rights groups days after the building collapse.
They met in Germany to discuss how the industry could improve safety conditions in Bangladesh, with labour groups setting Wednesday as the deadline for companies to
commit to the plan.
Among the holdouts: Gap Inc. was close to
signing last fall but then backed out and announced its own plan that included
hiring an independent fire safety expert to inspect factories. Gap didn't
immediate respond to queries from The Associated Press on Monday.
And Kevin Gardner, a spokesperson for Wal-Mart
Stores, which is the second-largest producer of clothing in Bangladesh behind H&M, said on Monday that the retailer had nothing to
announce at this time.
H&M said Monday that the agreement is a
"pragmatic step," and urged more brands to reach a pact that covers
the entire industry of 5 000 factories in Bangladesh.
"Our strong presence in Bangladesh gives us the opportunity to contribute to the improvement of the lives
of hundreds of thousands of people and contribute to the community's
development," H&M spokesperson Helena Hermersson said in a statement. "We
can slowly but surely contribute to lasting changes."
Only a few companies, including Britain's
Primark and Canada's Loblaw which owns the Joe Fresh clothing line, have
acknowledged that suppliers were making clothes for them at the site of the
April building collapse, and have promised to compensate workers and their
families.
In a statement emailed to The Associated Press
on Monday, Primark said the agreement was the most likely way to "bring
effective and sustainable change for the better to the Bangladeshi garment industry."
EU eyes creditors to rescue banks
European Union governments want to shift the cost of rescuing troubled banks from taxpayers to the banks' creditors, including the holders of large deposits as a last resort.
The finance ministers from the 27-nation bloc met in Brussels on Tuesday to hammer out the new rules on how to fund bank rescues as part of their wider project to set up a banking union.
The union is key to their plans to strengthen the financial sector and to avoid a repeat of the crisis.
"This is at the moment the biggest project for Europe," said Dutch Finance Minister Jeroen Dijsselbloem.
"It's absolutely important to get it right."
The bloc should move swiftly and get all elements of the banking union running by 2015, well before the initial deadline of 2018, added Dijsselbloem, who also chairs the meetings of the 17-country eurozone's finance ministers.
Tuesday's meeting focused on establishing a hierarchy of which bank creditors have to take losses - to be involved in a so-called "bail-in" - in case the bank needs rescuing.
The ministers mostly agreed that banks' shareholders and capital must take the first hit and after that, the pecking order becomes less clear, with junior and senior bond holders and, ultimately, all the banks' clients on the line.
The ministers said holders of deposits of over €100 000 - the EU's deposit insurance ceiling - could be asked to suffer losses.
They said, however, that depositors would only be asked to take losses as a last resort and that there could be exceptions.
Deposits
All deposits below €100 000 must and will be sacrosanct," insisted EU Commissioner Michel Barnier, who is in charge of financial market reform.
The issue has become important since the bailout for Cyprus, agreed on in March, inflicted losses on deposits over €100 000 at the country's two biggest banks.
An initial proposal was to have all deposits, even those covered by the €100 000 insurance limit, suffer losses.
The proposal was quickly rejected, but raised concerns and confusion across Europe on how bank creditors would be treated in future bank rescues.
The European Central Bank and EU officials have since called for the establishment of clear rules on the matter so that investors can gauge their risk beforehand.
"That's the lesson from Cyprus: it must be clear what will happen," said German Finance Minister Wolfgang Schaeuble.
National authorities could in some cases decide to spare some creditors, but such exceptions should be kept to a minimum to keep the playing field level, he argued.
The ministers were not expected to make a final decision on the new rules on Tuesday, but they sought to provide political guidance for the technical work of establishing the rules.
Dijsselbloem, Britain's George Osborne and others argued that - in addition to existing
capital requirements - bigger banks should be forced to hold a certain amount
of investments that can be bailed-in to pay for potential rescue operations.
The ECB, for one, left no doubt that it will push hard for a swift agreement on all elements of the bloc's banking union - that includes a central authority with the power to rescue or unwind ailing banks that would accompany the ECB's new role as an overseer of the bloc's banks.
"We want to make progress on all elements of the banking union in parallel," said ECB executive board member Joerg Asmussen, adding this should be achieved "hopefully by the summer of next year".
GrowthThe ECB, for one, left no doubt that it will push hard for a swift agreement on all elements of the bloc's banking union - that includes a central authority with the power to rescue or unwind ailing banks that would accompany the ECB's new role as an overseer of the bloc's banks.
"We want to make progress on all elements of the banking union in parallel," said ECB executive board member Joerg Asmussen, adding this should be achieved "hopefully by the summer of next year".
The establishment of the banking union will get credit flowing again to some of the eurozone's troubled nations, helping to "kick-start growth and employment," he said.
Asmussen's comments were backed by most ministers, but were at odds with the stance of Germany, Europe's biggest economy.
It argues that the creation of some parts of the banking union will require changes to the EU's treaties first - which is a cumbersome and time-consuming process.
The finance ministers were also seeking ways to cut down on tax evasion.
"I think that at an economic time like this, it is right that everyone makes their fair contribution," Britain's Osborne said on his way into the meeting.
"This is our opportunity to do that."
Part of the effort will involve reviving a program to set up an automatic exchange of banking information between countries so that interest income on various types of savings accounts can be properly taxed.
The programme requires unanimous approval from all 27 EU members.
Austria and Luxembourg, two states renowned for their cultures of banking secrecy, have long held up the regulation, but increasing international pressure from the US and their European peers has swayed them into reconsidering their stance.
Britain could also face pressure, as many EU officials say it is not doing enough to crack down on tax evasion in its offshore territories.
Retail's global top 10
There's expensive and then there's Hong Kong.
The Asian shopping haven in the first quarter kept its crown as having the world's highest rent for prime retail properties, at nearly 50% more than for similar districts such as upper Fifth Avenue in Manhattan.
Rents were more than four times the rate in similar areas in London and Paris, according to a report by global property adviser CBRE Group.
The 10 most expensive cities for retailers benefit from strong demand and modest new supply, a recipe for stable record-high prime rental rates, the report released on Sunday showed.
In some markets, such as Hong Kong and London, the sky-high rents have prompted some newcomers to look nearby. For example, in London, Mayfair has benefited from those priced out of Bond Street.
Annual retail rent in high-end shopping areas in Hong Kong averaged €36 351 per square metre.
"Given that space is so expensive in Hong Kong's prime shopping streets largely driven by continued demand from international luxury brands, many traditional retailers have moved into more niche secondary retail locations as they still want to be in and access the market, but have been priced out of the prime space," Joe Lin, CBRE's executive director of retail, said in a statement.
New York ranked second among the most expensive global retail markets, with prime rents averaging €24 944 per square metre.
Europe's prime retail markets followed, with London at €8 843 per square metre, and Paris at €8 820 per square metre.
The supply of prime space was tight elsewhere in the Asia Pacific region. An inflow of US retailers helped Sydney maintain its prime rent at an average of €8,549 per square metre.
Tokyo was sixth at €7 519 per square metre, followed by Melbourne at €7 148 per square metre.
Zurich came in eighth at €6 905 per square metre. Brisbane's mining and natural resource sectors, and growing population helped push that into the top 10 with its prime retail rents up 15% to €6 209 per square metre.
Moscow rounded out the top 10 with rents at €6 203 per square metre.
The Asian shopping haven in the first quarter kept its crown as having the world's highest rent for prime retail properties, at nearly 50% more than for similar districts such as upper Fifth Avenue in Manhattan.
Rents were more than four times the rate in similar areas in London and Paris, according to a report by global property adviser CBRE Group.
The 10 most expensive cities for retailers benefit from strong demand and modest new supply, a recipe for stable record-high prime rental rates, the report released on Sunday showed.
In some markets, such as Hong Kong and London, the sky-high rents have prompted some newcomers to look nearby. For example, in London, Mayfair has benefited from those priced out of Bond Street.
Annual retail rent in high-end shopping areas in Hong Kong averaged €36 351 per square metre.
"Given that space is so expensive in Hong Kong's prime shopping streets largely driven by continued demand from international luxury brands, many traditional retailers have moved into more niche secondary retail locations as they still want to be in and access the market, but have been priced out of the prime space," Joe Lin, CBRE's executive director of retail, said in a statement.
New York ranked second among the most expensive global retail markets, with prime rents averaging €24 944 per square metre.
Europe's prime retail markets followed, with London at €8 843 per square metre, and Paris at €8 820 per square metre.
The supply of prime space was tight elsewhere in the Asia Pacific region. An inflow of US retailers helped Sydney maintain its prime rent at an average of €8,549 per square metre.
Tokyo was sixth at €7 519 per square metre, followed by Melbourne at €7 148 per square metre.
Zurich came in eighth at €6 905 per square metre. Brisbane's mining and natural resource sectors, and growing population helped push that into the top 10 with its prime retail rents up 15% to €6 209 per square metre.
Moscow rounded out the top 10 with rents at €6 203 per square metre.
Germany narrowly scrapes by recession
The German economy, Europe's biggest, got off to an unexpectedly weak start to the year, as it battled freezing winter weather, sagging exports and weak investment, official data showed on Wednesday.
And with growth of just 0.1%, the economy only narrowly escaped a recession, which is technically defined as two consecutive quarters of economic contraction.
Gross domestic product (GDP) grew by an anaemic 0.1% in the period from January to March, following a brief and sharp contraction of 0.7% in the fourth quarter of 2012, the federal statistics office Destatis calculated in a preliminary estimate.
The number fell short of analysts' expectations for slightly stronger growth of 0.3% in the first quarter of this year.
Destatis data showed that the Germany economy had expanded by a seasonally - and calendar-adjusted 3.1% in 2011 but by just 0.9% for 2012 as a whole.
While Destatis did not provide a breakdown of the latest different GDP components - to be published later this month - it said that the "extreme winter weather conditions played a role in this weak growth."
"According to our calculations, the only positive impulses came from private households which increased their spending at the start of the year," the statisticians said.
"In investments, the negative trend we saw in 2012 continued and investment was down quarter-on-quarter," they said.
And foreign trade had little effect on growth, with both imports and exports falling.
Germany, unlike most of its eurozone neighbours, has been spared the worst of Europe's long and debilitating sovereign debt crisis, even if growth shuddered to a standstill at the end of last year.
But the government, the Bundesbank and leading economic think-tanks are all projecting a rebound this year.
Just last month, Economy Minister Philipp Roesler said Germany could "look to the future with optimism", despite recent disappointing economic data and falling confidence.
"2013 will be a good year," Roesler had said, upgrading Berlin's growth forecast for the current year to 0.5% from a previous prognosis of 0.4%.
At a regular news briefing in Berlin on Wednesday, a spokesman for the economy ministry said "the decisive thing is that we've passed through the economic trough."
In the face of such optimism, buoyed by recent better-than-expected industrial data, analysts were disappointed by the first-quarter GDP figures.
Growth was "anaemic", said Newedge Strategy analyst Annalisa Piazza.
"The outcome is softer than anticipated. In a nutshell, the German economy seems to have struggled to gain momentum in the first quarter despite signs of resilience in its industrial activity data," she said.
Berenberg Bank economist Christian Schulz said Germany "will have to rely on domestic demand for growth this year."
"For exports, Germany's traditional growth engine, the outlook remains more clouded this year," the expert warned.
"Still, based on strong fundamentals, German growth should accelerate over the course of 2013 and reach trend rates in the second half. A strong Germany also boosts export chances for the eurozone periphery," Schulz said.
UniCredit analyst Andreas Rees believed that the GDP data "should be taken with a pinch of salt, or maybe even two."
They were "distorted to the downside by unusually harsh weather conditions ... which cannot be taken into account by standard seasonal adjustment methods," he said.
In the construction sector in particular, there was a "whopping gap" in orders and output.
"This is very good news for overall economic activity in the second quarter, since a catching-up effect will kick in very soon," Rees said.
Goldman Sachs economist Dirk Schumacher was similarly confident that "the fundamental picture remains sound, and we forecast an acceleration in the second half of the year."
Russia's favourite haven - Cyprus?
Documents seen by Reuters show that as the Mediterranean island headed towards financial meltdown in March, most notable among companies transferring money from the country's two main banks were Russians and East Europeans.
At least €3.6bn ($4.67bn) was removed in two weeks by big depositors, according to the documents. Though many companies listed initially appear obscure, a Reuters analysis shows a significant proportion are vehicles for foreign investors more at home in Moscow or Kiev than Nicosia.
The lists give an insight into the March crisis and how the tax haven, with a population of just 1.1 million, had amassed bank deposits that peaked at €72bn - more than four times the island's GDP.
Prepared in April by private sector lenders Bank of Cyprus and Laiki Bank, and passed to lawmakers by the island's central bank, the documents list 5 323 transactions, most previously undisclosed.
They detail transfers of €100 000 or more from Bank of Cyprus and Laiki Bank in the two weeks before Cyprus closed its banks on March 16 as it desperately negotiated an international rescue.
Reuters analysed 129 companies that each transferred €5m or more over the two-week period, collectively accounting for €1.9bn. Of those companies, 95 could be traced.
Out of that group, 34 have links to Russia, five have links to Ukraine and two to Kazakhstan.
The remainder comprise companies from Cyprus and other countries including tax havens such as the Cayman Islands, the British Virgin Islands and the Dutch Antilles. By value, more than half the transactions were made in dollars.
"This list verifies as well-founded Cyprus' reputation as an offshore economy used as a conduit for people, particularly Russians, to hold large sums of money, often to avoid paying tax and without too much scrutiny," said Michael McIntyre, professor of law and a tax expert at Wayne State University in the United States.
While the transfers appear mostly related to moving money out of Cyprus, Reuters could not establish where the funds went. It is possible some transfers were between banks within Cyprus.
Deposits that did flow out of the country had to be funded by emergency liquidity assistance from the European Central Bank, according to analysts. In effect, the ECB was paying for depositors, many of them Russian, to remove money from Cyprus before those depositors could be compelled to contribute to the international rescue of the island.
Biggest transfer
As debts threatened to overwhelm Cyprus early this year, money began to flow out of the country in fluctuating amounts. In January €1.7bn left the island and a further €900m in February, according to Central Bank of Cyprus figures.
The run accelerated in March as Cyprus found it had few friends among international institutions suffering bail-out fatigue. Many of the biggest transfers were by firms linked to Russia.
One of the largest was listed under the name of UCP Industrial Holdings, which is recorded as moving €80.2m out of the Bank of Cyprus on March 7. UCP Industrial Holdings is part of United Capital Partners, a $3.5bn Russian investment firm led by Ilya Sherbovich, a former head of investment at Deutsche Bank Russia and now a board director of the oil giant Rosneft.
Sherbovich, whose UCP fund recently acquired a stake in VKontakte, a fast-growing social network known as the "Russian Facebook", told Reuters: "Our group has several dozen legal entities, and some of them have accounts at Bank of Cyprus, but we don't use those as primary accounts.
"Anybody serious who works on financial markets wouldn't have left any significant amounts in the Cyprus banks. Very simple reason: Look at the share price chart of the Bank of Cyprus. It went to zero many months before the freeze happened."
He could not confirm the transaction listed in the Cypriot documents and said his companies did not keep big deposits in Cyprus. A spokesperson for UCP said the transaction "must be a mistake or incorrect information".
On March 16, the Cyprus government shut banks amid discussions over imposing losses on depositors as the price for an international rescue. On the day before, a company called Trellas Enterprises moved $63.85m out of Bank of Cyprus.
Trellas Enterprises is majority-owned by Maxim Nogotkov, an entrepreneur who controls Svyaznoy, one of the biggest retailers of cell phones in Russia. Nogotkov, 36, is listed by Forbes as having a net worth of $1.3bn.
Nogotkov confirmed that he controlled his mobile phone and banking interests in Russia through Trellas, but declined to comment on the transfer recorded in the bank list.
"We never comment on financial transfers or mergers and acquisitions activity," Nogotkov said by telephone.
Asked whether he was considering restructuring his business interests in light of Cyprus' financial meltdown, Nogotkov said: "Not actively. We don't have any urgent decisions to restructure (the business)."
Another company illustrating the Russia connection is O1 Properties Limited, which moved €10.1m out of Bank of Cyprus. The company is controlled by Boris Mints, a Russian politician turned businessman, and this year bought the White Square business centre in Moscow for $1bn.
In the 1990s Mints was a state official handling issues relating to property and local authorities. From 2004 until 2012 he was chairman of the board of Otkritie Financial Corporation, which describes itself as Russia's largest independent financial group by assets. He is now president of the firm.
Mints was not available for comment. A spokesperson for O1 Properties said: "O1 Properties keeps an account at the Bank of Cyprus to use it for regular business activities. We didn't know that Cyprus banks (would) shut. O1 Properties suffered losses. We do not comment (on the) total loss."
Expensive words
The troika of the European Commission, the European Central Bank and the International Monetary Fund insisted on tough terms for providing billions to stop Cyprus going bust.
As talks progressed, speculation began to spread that any package for Cyprus would include levying money from bank depositors an unprecedented move that came to be known as a bail in, rather than a bail out.
The impact of what politicians and officials said and did not say is reflected in the pattern of fund outflows.
On March 4, depositors withdrew €261m from the two banks, according to the transfer lists. Late that day, Jeroen Dijsselbloem, president of the Eurogroup of finance ministers in the euro zone, was asked whether the rescue of Cyprus would affect bank depositors. He did not give a clear answer.
The next day depositors yanked €315m out of the banks.
Account holders were further unnerved on March 5 when Panicos Demetriades, the island's central bank governor, publicly acknowledged for the first time that depositors might lose some of their money.
Over the next two days transfers leapt to €342m and €491m; the latter figure including the €80.2m withdrawn by UCP Industrial Holdings.
Non-Russians
As fears of losses mounted, Russians were not the only depositors who transferred large sums of money from the tax haven's banks. There were also Cypriot companies, individuals both Cypriot and foreign, and the occasional well-known international firm.
These included Apax Partners, a private equity group based in London. A subsidiary, Apax Mauritius Holdco, moved €68.8m from the Bank of Cyprus on March 8. A spokesperson for Apax Partners confirmed that it controlled Apax Mauritius Holdco but declined to comment further.
Previous news reports have noted how the Electricity Authority of Cyprus transferred €19m out of Laiki Bank just days before it was closed. The documents seen by Reuters show the authority also transferred €22m out of Bank of Cyprus between March 1 and 15.
The Electricity Authority said there was nothing unusual in the transfers. "This represented payments for heavy fuel oil ... our annual fuel costs are 650 million," said Costas Gavrielides, a spokesperson for the authority.
Mystery companies
While some readily identifiable companies appear on the lists of transfers, what is striking is the complex nature of many entries.
Glenidge Trading, which transferred €22.5m out of the Bank of Cyprus, is registered in the British Virgin Islands, a tax haven often favoured because of its British-based legal system and lack of transparency.
Glenidge was the vehicle through which a Cypriot company called DCH Investment UA Limited acquired an interest this year in the Karavan group of shopping malls in Ukraine, according to local reports and Cypriot and Ukrainian corporate filings.
In turn DCH Investment UA Limited is controlled by one of Ukraine's richest men, Oleksander Yaroslavsky, according to corporate filings. A representative for Yaroslavsky did not respond to requests for comment about Glenidge and the Cypriot bank transfer.
Some companies that made several of the largest transfers could not be traced. They include Jarlath Limited, which moved €76m, and Accent Delight International, which moved €27m.
Also on the list is Rangeley Services Limited, which transferred €9.3m from Bank of Cyprus on March 15. A company of that name is registered at an address near Leeds in Britain and owned by Jason Rangeley, who is described in company records as an agricultural contractor.
But when asked if the transfer of €9.3m was anything to do with him, Jason Rangeley said: "No ... I wish it was."
Rangeley, a self-employed farmer, said he had set up his company because he had hoped to buy a few sheep. "It just never came off." He said his company is dormant. It remains unclear who owns the company involved in the Cypriot transfer.
German economy shows modest growth
The German economy eked out a return to minimal
growth in an unusually cold first quarter - a performance that was enough to
keep Europe's biggest economy out of recession.
The economy grew by 0.1% in the January-March quarter compared with the
previous three-month period, Germany's Federal Statistical Office said Wednesday. That followed a 0.7
decline in last year's fourth quarter, a figure that was revised downward from
the initial reading of 0.6%.Extremely cold weather that dragged on until the end of March was one factor in the feeble growth figure, the statistical office said. Winter conditions typically hurt industries such as construction and, between January and March, "growth was based almost only on demand by households," the office said.
The German economy is in better shape than many others in the 17-nation euro area. Recent economic indicators have shown a mixed picture but industrial orders and production data have been robust.
Germany had been expected to avoid a recession, technically defined as two straight quarters of negative growth. Gross domestic product figures for the full eurozone were due later on Wednesday.
Looking ahead, prospects for Germany are improving now that the hard winter is over, said Carsten Brezski, an economist at ING in Brussels.
"Industry is gaining pace as order books have started to fill again and companies are cautiously stepping up their investment plans," he said. "Moreover, domestic demand with the solid labour market and wage increases have become a reliable growth driver."
Germany's unemployment rate of 7.1% in April compares with figures well into the double digits elsewhere in the eurozone. And the economy's relative health has fueled demands for substantial pay increases in several sectors.
Early Wednesday, the IG Metall union secured a solid raise for some 3.7 million workers in the key industrial sector, a deal that heads off the threat of strikes.
Under the deal reached by negotiators in Bavaria, which is expected to be extended to the rest of the country, workers will get a 3.4% raise in July followed by another 2.2% next May. The agreement runs until the end of next year.
IG Metall initially sought a raise of 5.5% this year alone, arguing that companies in Germany could afford it and that it would bolster private spending. But union chairman Berthold Huber said that employees "will get a fair and appropriate share of economic developments" under the deal now reached.
Rights sale boosts Brazil's oil industry
For the first time in nearly five years, Brazil's flagging oil
industry has received a jolt of serious interest from private investors.
Brazil's oil agency, the ANP, sold 142
exploration areas to 39 companies from 12 countries on Tuesday, wrapping up the
scheduled two-day auction in just one day. It was the first auction since a
decade of annual sales ended in 2008.
Winners agreed to pay a record 2.82 billion
reais ($1.4bn) in cash for the rights and committed to invest about 7bn reais
over about five years in exploration, the ANP said. Most of the areas are in
high-risk frontier regions with little or no oil output.
Brazil has failed to lived up to its promise as a major new producer as
increased government intervention and a new regulatory model discouraged
foreign and domestic private investors. Oil production has stagnated in recent
years and imports have risen.
But analysts said the results of the auction
showed Brazil was simply too big an opportunity to ignore.
"Sure, Brazil messed up, but the
auction puts things in perspective," said Cleveland Jones, an oil
geologist and mathematician with the Brazilian Petroleum Institute at Rio de Janeiro-State University.
"Brazil has huge potential and is a much less risky place than Nigeria, Venezuela or Russia."
"Brazil has huge potential and is a much less risky place than Nigeria, Venezuela or Russia."
Brazil's undiscovered oil reserves in the
Campos and Santos basins, an extension of the area where giant reserves were
found in 2007, may contain as much as 100 billion barrels, he said, enough for
about three years of world needs.
The ANP estimated the amount of oil on sale at
Tuesday's auction at about 35 billion barrels in place.
Among the biggest winners were Britain's BG
Group, which offered to pay 416m reais for stakes in 10 blocks, Brazil's OGX
Petroleo e Gas SA, which will pay 376m reais for stakes in 13 blocks, and
France's Total SA, which agreed to pay 372m reais for a share in 10, according
to Reuters and preliminary ANP data.
Companies from Australia, Norway, Colombia and Spain also won.
Companies from Australia, Norway, Colombia and Spain also won.
Harsh
environment
Since the last auction, Brazil has had trouble fulfilling
its potential as an oil power.
In 2008, state-controlled Petroleo Brasileiro
SA, or Petrobras said it would spend $112bn over five years to boost output 50%
to almost 3.5 million barrels a day in 2012, an amount that would have seen it
pass Mexico and Venezuela as Latin America's top producer.
However, production rose only 13% in five years
to about 2.68 million barrels, while Petrobras' shares are worth less than
before the giant 2007 discoveries.
Petrobras agreed to pay 540m reais for stakes
in 35 blocks, the largest of all winning bidders on Tuesday, but proportionally
less than in previous auctions.
Non-state companies have also had it hard. Chevron
Corp. and its drilling contractor Transocean Ltd. face about $20bn in civil
lawsuits for a 3 500 barrel oil spill in 2011, even though the ANP said no
discernible environmental damage was done and that Chevron cleaned up
quickly.
Despite these difficulties, Chevron jumped in
on Tuesday to pay 31.4m reais for a stake in a block.
The auction, though, may help Brazil break from
a cycle of negative news and provide companies with the future reserves needed
to keep investment flowing, João Carlos de Luca, head of the IBP, Brazil's
petroleum industry association said.
"I think we can put a lot of the
difficulties of the last few years behind us," he said. "Demand was
very strong at the auction about 40% above my own estimates."
Pent-up
demand
In the end, the world's growing demand for oil
and Brazil's relative appeal as an oil frontier drew investors back.
After an anxious lead-up to the auction, Brazil's government
expressed joy over the soaring bids. "We never saw anything like
this," Marco Antonio Martins Almeida, the oil secretary at Brazil's energy ministry
said on Tuesday.
Brazil's OGX Petroleo e Gas SA, hurt by
unfulfilled promises, came out of the auction looking stronger. Controlled by
Brazilian billionaire Eike Batista, OGX saw its shares soar on optimism over
Brazil's oil potential only to see them slump to nearly penny stock levels as
output failed to meet targets.
OGX won 13 blocks at auction, 10 alone and
three in partnership, and was the main partner in the auction for Exxon Mobil
the number one US oil company.
Exxon picked up 50%stakes in two blocks with
OGX for 63.9m reais, according to Reuters and the ANP.
OGX rose 5.4%in Sao Paulo on Tuesday.
Oil companies from fast-growing Asian nations,
though stayed away. Only Malaysia's Petronas, which recently bought a stake in an OGX field was very
active, but it won no blocks.
"I think the Chinese and Asian oil
companies want reserves with more promise of fast development," the
petroleum association's De Luca said. "These frontier areas will take time
to develop."
He expected Asian companies to show up for a
planned November auction, under stricter rules, greater state control and
Petrobras control. The areas will be near the giant discoveries of 2007 that
started Brazil's five-year oil debate.
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