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.

NEWS,16.07.2012

IMF: Global growth forecasts cut

 

The International Monetary Fund (IMF) stepped up its warnings on Monday on risks to the global economy, especially coming from Europe, as it trimmed its growth forecast for the rest of the year.The IMF said the world economy appeared weaker since its assessment just three months ago, and while growth was only slightly off the expected pace, "downside risks continue to loom large," especially from inadequate or slow policy reactions in major economies."In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness," the fund said in its quarterly revision of economic forecasts."Financial market and sovereign stress in the euro-area periphery have ratcheted up," it said, while growth has fallen below expectations in a number of major emerging-market economies.It pointed to renewed deterioration in the markets for European sovereign debt as a sign that eurozone leaders need to move fast on pledged reforms.The IMF also singled out the overhanging risk from US political stasis that could send the country over a "fiscal cliff" due to laws that, if not changed, will force massive government spending cuts coupled with automatic tax hikes on January 1 that would severely crunch the world's largest economy."Avoiding the fiscal cliff, promptly raising the debt ceiling, and developing a medium-term fiscal plan are of the essence," the global crisis lender said in recommendations for the United States.After forecasting in April that the global economy would expand by 3.5% this year, the IMF said it had cut 0.1% off the forecast, but that the number remained at 3.5% because of rounding.For 2013, the forecast is 3.9%, down from 4.1%.The change in the worldwide outlook mainly came from sharp cuts to growth forecasts for the large emerging economies like China, India, Brazil and newly industrialized Asia.But in addition the IMF saw slower-than-expected growth in the United States, Britain and France, among the major industrialized nations. The US forecast dropped 0.1% to 2% ; France was down 0.1% to 0.3%; and Britain was projected to grow at just 0.2%, compared with 0.8% forecast three months ago.The bank also said Spain's recession would persist through 2013, after having forecast in April that the country's economy would return to growth next year.On the bright side, forecasts for this year for Germany and Japan were revised higher -- to 1% and 2.4%, respectively, though the 2013 prediction for each was also trimmed slightly.Also getting an upgrade was the Middle East and North Africa region, much of which has been struggling through deep political turmoil in the past two years. The IMF said the region would grow about 5.5% this year, much better than the 4.2% predicted in April. The IMF said that major economies were making progress on cutting their fiscal deficit burdens, but that doing so remained hampered by more volatility and risk aversion in debt markets, which have sent the borrowing costs of the troubled eurozone periphery countries skyrocketing.The global lender reiterated its prescriptions of recent months: short-term fiscal balance targets for troubled economies like Spain and Italy can be de-emphasized to allow for growth while more focus is placed on medium-term adjustments and reforms."A steady pace of adjustment focused on the measures to be implemented rather than on headline deficit targets is preferable, especially in light of heightened downside risks to the outlook."Moreover, the IMF suggested, the political stress of too much austerity, set to meet fiscal targets, could backfire in countries with IMF or IMF-linked bailout programs, like Ireland, Portugal and Spain."The recent deterioration in the political and economic climate in Greece serves as a warning about the potential onset of 'adjustment fatigue,' which remains a threat to continued program implementation."

U.S. Stocks Retreat as IMF, Retail Data Spur Concern on Economy

 

U.S. stocks fell, following the best one-day gain in two weeks for the Standard & Poor’s 500 Index, as the International Monetary Fund cut its global economic forecast and retail sales unexpectedly dropped.General Electric Co. lost 1.3 percent after Morgan Stanley reduced its recommendation on the stock. Alpha Natural Resources Inc. declined 12 percent as Bank of Montreal cut its rating on the coal producer, citing potential financing issues. Visa Inc. and MasterCard Inc., the world’s biggest payment networks, rose at least 1.8 percent after agreeing to a settlement of at least $6.05 billion in a price-fixing case.The S&P 500 declined 0.3 percent to 1,353.2 at 1:43 p.m. in New York, trimming a drop of as much as 0.6 percent. The Dow Jones Industrial Average slipped 49.76 points, or 0.4 percent, to 12,727.33 today.“The retail sales gives you another indicator that uncertainty has showed up in the consumer side,” James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “We’re in a bit of the summer doldrums.”The S&P 500 is down almost 5 percent from a four-year high in April as economic data trails forecasts and investors brace for what is projected to be the first decrease in quarterly earnings since 2009. The Citigroup Economic Surprise Index for the U.S., which measures how much data from the past three months is beating or missing the median estimates in Bloomberg surveys, is at minus 64, near the almost 11-month low of minus 64.9 reached last week.Retail SalesU.S. retail sales dropped 0.5 percent in June, following a 0.2 percent decrease in May, Commerce Department figures showed today. The decline was worse than the most-pessimistic forecast in a Bloomberg News survey in which the median projection called for 0.2 percent rise.The IMF cut its 2013 global growth forecast as Europe’s debt crisis prolongs Spain’s recession and slows expansions in emerging markets. Growth worldwide will be 3.9 percent next year, less than the 4.1 percent estimate in April, the fund predicted in an update of its World Economic Outlook.Manufacturing in the New York region expanded in July at a faster pace than anticipated, signaling factories will keep contributing to growth. The Federal Reserve Bank of New York’s general economic index rose to 7.4 from 2.3 in June. The median forecast of 51 economists surveyed by Bloomberg News called for an increase to 4.0. Readings greater than zero signal expansion in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.Earnings SeasonEarnings beat estimates at 21 of the 32 companies in the S&P 500 that have reported quarterly results so far, data compiled by Bloomberg show. Profits probably decreased 2.1 percent in the second quarter, the first drop in almost three years, according to a Bloomberg survey of analysts.GE, the world’s biggest maker of jet engines, power generation equipment and locomotives, declined 1.3 percent to $19.52. The Fairfield, Connecticut-based company was cut to equalweight from overweight by Morgan Stanley, citing the stock’s higher valuation relative to peers with or without GE Capital Corp.Caterpillar Inc., the world’s largest maker of construction equipment, declined 1 percent to $81.28, while Boeing Co. fell 0.8 percent to $72.96 as industrial stocks led declines out of 10 groups in the S&P 500. Energy stocks were added 0.3 percent after earlier falling as much as 0.8 percent as the price of crude oil reversed a 0.8 percent decline to rise 0.5 percent to $87.57 a barrel.Coal StocksAlpha Natural Resources Inc. declined 12 percent to $6.74 as Bank of Montreal cut its rating to underperform from outperform, citing potential financing issues. Arch Coal Inc., the fourth-largest U.S. producer of the fuel, sank 3.9 percent to $5.90 after BMO cut the stock to underperform from market perform.MasterCard advanced 1.9 percent to $437.79 and Visa rose 1.8 percent to $126.32 after they agreed to settle a price- fixing case brought by retailers over credit-card swipe fees.Citigroup Inc., the third-biggest U.S. bank, advanced 0.7 percent to $26.83 after reporting second-quarter profit that beat analysts’ estimates on revenue from advising on mergers and underwriting stocks and bonds.Net income declined to $2.95 billion, or 95 cents a share, from $3.34 billion, or $1.09, a year earlier. Excluding accounting adjustments and a loss from the sale of a stake in a Turkish bank, earnings were $1 a share, compared with the average estimate of 89 cents in a Bloomberg survey of 18 analysts.Gannett Co., the owner of 82 daily newspapers including USA Today, rallied 2.5 percent to $14.66. The company reported second-quarter profit that topped analysts’ estimates, bolstered by growing Internet revenue. Excluding some items, profit was 56 cents a share in the period, beating the 53-cent average estimate by analysts, according to data compiled by Bloomberg.

 

The Ignominy of Being Poor in an Emerging Asia

 

Everybody's talking about Asia's meteoric rise, set against the apocalyptic backdrop of a crumbling Eurozone and the rhetoric of a done-for-good American economy, but why is it so hard to look behind the number-crunching banners of Asian economies that hide a worrisome reality. One that speaks of a glaring socio-economic intolerance that stems from growing income disparities and which rocks the cradle of social inequities that Asia has become synonymous with. Pepsi drinkers in India, today, easily outnumber those with access to clean, drinking water. Finding a working polyclinic in rural Indonesia, Thailand or Cambodia would be far tougher than procuring aphrodisiacs made out of crushed exotic animals. Paved streets are light years away in many parts of Asia. And those that exist have people pissing on them in the absence of access to proper sanitation. Travelers who have walked through the stinky lanes of New Delhi, Mumbai, Calcutta, Kathmandu, Karachi and Islamabad, know exactly what I am talking about. Everyday, thousands do it nonchalantly. No sweat at all. But who cares? Asian politicians? Not at all. In fact Asian GDP junkies have learnt by now, how to manoeuvre their luxurious sedans through the stench of piling trash and human waste. While it's true that emerging Asian economies have seen many cross the poverty line, a cursory glance still finds millions living a pitiable life. And as if living an undignified life was not punishment enough, poverty itself has been made an excuse by the 'haves' in Asia to disregard the 'have-nots'. To be poor in an emerging Asia is now an unspeakable misdemeanour, worse than it ever was. For countless Asians, poverty's curse is homicidal and far more embarrassing than any known Asian taboo. There is an appalling tolerance among the noveau rich for social anomalies such as bribery, dowry, arranged and forced marriages, female infanticide, honour killings and child labour, but no place for the poor and destitute. Poverty's scorn in metropolitan Mumbai or Manila is boorish and the indignity, piercing.For an impecunious person living under the shadow of absurd amount of foreign direct investments and scores of decked-up Asian headquarters of multinational companies, poverty puts a debilitating price on one's mere existence. One that enslaves the desperately poor either as domestic servants, dishwashers, rag-pickers or even as bonded child laborers. Born and brought up in Asia, I have either lived in or visited Asian cities that have unfailingly displayed disdain and contempt for the indigent. Hiring a haplessly poor woman at ruthlessly low wages, to work as a domestic maid and clean toilets, is taken for granted in many parts of South and East Asia. No shame, no remorse at all. And this intolerance for the deprived has only increased with every striking headline of the rising GDPs. On top of it, this economic intolerance of the poor has cemented all prevalent racial, religious, political, social and gender based prejudices and discrimination that plague Asian societies.While I do see more Mercedes and BMWs on the streets of India as many news reports indicate, I also see countless sleeping inside sewer pipes and sniffing industrial glue to beat hunger. For the downtrodden, the story remains the same; whether it is Philippines, Vietnam, Cambodia, Indonesia, China or Thailand. Poverty brings with it a disclaimer that robs the underprivileged of their basic dignity, respect and human rights. With a dismal human rights record, there isn't much hope for the victims of economic discrimination in Asia.So we see mansions built by construction workers who retire at night to their huts made out of disposed plastic bags and packaging material, super-fast highways laid down by men and women who toil relentlessly, all for one meal a day, and state-of-the-art luxury hospitals erected by those who have no access to health care and are guaranteed to be shooed away from these deluxe hospitals the moment they become operational. Wealth is being churned at a pace that shocks business journalists and titillates private fund managers; yet, it remains concentrated within a few iron hands. No wonder, despite amassing huge fortunes not many Asian multi-millionaires have come forth to share their bounty or create growth opportunities for their fellow citizens. The Li Ka Shings, Azim Premjis and Narayana Murthys are between few and far. Where have the rich and proud Indian and Chinese CEOs CFO's and venture capitalists gone into hiding? It is estimated that over 100 million Indians, mostly urban middle-class families, piggybacked on India's rising fortunes and leapfrogged to a better standard of living. However, the remainder of over a billion are yet to experience electricity, drinking water, health care and sanitation. In interior mainland China, millions are yet to be a part of its remarkable growth story, despite their city cousins toting around with Armani and Gucci handbags.The Indian rickshaw-puller, Chinese sweat-shop worker, Vietnamese paddy field farmer and the Indonesian mason are not at all concerned, whatsoever, with the disintegration of the Eurozone or the toxic debts of American banks. Not even with President Barack Obama's re-election bid. If only they could somehow escape the indignity of being caught in the wealth gap just for one day, they could live that day of their life honourably.