NEWS,20.08.2012

ECB: Greek exit viable but undesirable

A Greek exit from the eurozone would be manageable, European Central Bank (ECB) policymaker Joerg Asmussen was quoted on Monday as saying, although he would prefer it if the crisis-stricken country remained within the single currency bloc. He also said that the Bundesbank, whose chief ECB President Mario Draghi singled out earlier this month for expressing reservations over the bank's new bond-buying plans, was not isolated in Europe.The comments on Greece from the ECB executive board member, Germany's deputy finance minister until he took the post at the end of last year, sum up a growing debate in Berlin on the possibility of cutting Greece free. Most would prefer not to, but an increasing number of MPs and influential figures have come out of the woodwork saying the eurozone is strong enough to deal with the fallout. "Firstly, my clear preference is that Greece should remain in the currency union," Asmussen was quoted as saying in an advance copy of an interview due to appear in Germany's Frankfurter Rundschau on Monday. "Secondly, it is in Greece's hands to ensure that. Thirdly, a Greek exit would be manageable."But Asmussen also warned that a so-called Grexit would not be as orderly as some imagined: "It would be associated with a loss of growth and higher unemployment and it would be very expensive - in Greece, Europe as a whole and even in Germany."He also said it would be good if the eurozone's permanent bailout mechanism, the European Stability Mechanism (ESM), successor to the European Financial Stability Facility (EFSF), were up and running as soon as possible."The ESM is a better instrument for dealing with the crisis than the EFSF," he was quoted as saying.Germany's Constitutional Court has said it will deliver its ruling on whether the ESM and the fiscal pact are compatible with the German constitution on September 12. Germany cannot legally ratify the two treaties without the go-ahead from the court and the ESM cannot come into effect without German backing.On eurozone bonds, Asmussen said such common debt was only logical in a full fiscal union and added that they were not crisis management tools.Draghi indicated earlier this month that the euro zone's central bank may again start buying government bonds to reduce crippling Spanish and Italian borrowing costs but not before September and only if governments activated the euro zone's bailout funds to join the ECB in buying bonds.Whether the plan goes ahead at all, however, remains largely a question of whether leaders in Germany, whose own central bank opposes bond-buying, agrees over the course of a series of key meetings next month.Whereas Draghi said that Bundesbank chief Jens Weidmann had been the only ECB policymaker to register reservations against the bond-buying proposals at this month's meeting, Asmussen hinted that the division may not be as clear cut."No-one should try to give the impression that the Bundesbank or its president is isolated," said Asmussen, adding that he and Weidmann worked closely together and trusted each other.Noting that Draghi had not said the new bond-buying programme would be limited in terms of time and volume, the paper asked Asmussen if this meant it could be successful as it would be unlimited."You heard him correctly. But wait and see. We are working on further details of the new programme and we will discuss this at our next meeting," Asmussen replied.

The Unrepentant and Unreformed Bankers

These days, the business sections of newspapers read like rap sheets. GE Capital, JPMorgan Chase, UBS, Wells Fargo and Bank of America tied to a bid-rigging scheme to bilk cities and towns out of interest earnings. ING Direct, HSBC and Standard Chartered Bank facing charges of money laundering. Barclays caught manipulating a key interest rate, costing savers and investors dearly, with a raft of other big banks also under investigation. Not to speak of the unprecedented wrongdoing that precipitated the financial crisis of 2008.Evidence gathered by the Financial Crisis Inquiry Commission clearly demonstrated that the financial crisis was avoidable and due, in no small part, to recklessness and ethical breaches on Wall Street. Yet, it's clear that the unrepentant and the unreformed are still all too present within our banking system.A June survey of 500 senior financial services executives in the United States and Britain turned up stunning results. Some 24 percent said that they believed that financial services professionals may need to engage in illegal or unethical conduct to succeed, 26 percent said that they had observed or had firsthand knowledge of wrongdoing in the workplace, and 16 percent said they would engage in insider trading if they could get away with it.That too much of Wall Street remains unchanged is not surprising. Simply stated, the banks and their leaders have paid no real economic, legal or political price for their wrongdoing and thus have not felt compelled to change.On the economic front, the financial sector has rebounded nicely from its brush with death, thanks to an enormous taxpayer bailout. By 2010, compensation at publicly traded Wall Street firms had hit a record $135 billion.Last year, the profits of the nation's five biggest banks exceeded $51 billion, with their chief executives all enjoying pay increases. By 2011, the 10 biggest U.S. banks held 77 percent of the nation's banking assets.On the legal front, enforcement has been woefully inadequate. Federal criminal financial fraud prosecutions have fallen to a two-decade low. Violations are settled for pennies on the dollar  the mere cost of doing business, with no admission of wrongdoing and with the bill invariably picked up by insurers or shareholders. (When it's shareholders, that's not someone else far away, that's your 401(k), pension fund or mutual fund.) When Goldman Sachs was charged with failing to set policies to prevent insider trading, it was fined $22 million, an amount the bank collects in about seven hours of trading. Goldman's record $550 million penalty for securities fraud in 2010 amounted to less than 2 percent of that year's revenue.On the political front, after a brief stint in the penalty box, the big banks have resumed the political muscling that got them two decades of deregulation.To block reform, the financial industry has spent more than $317 million on lobbying in Washington over the past two years and more than $230 million in federal political contributions in the 2010 and 2012 election cycles.It's been to good effect. Two-thirds of the regulations called for in the financial reform law passed two years ago are still not in place. And the House Republicans, the banks' sturdiest allies, have slashed at the budgets of the Securities and Exchange Commission and the Commodities Futures Trading Commission to impede their ability to investigate wrongdoing.Clearly, the present order is unsustainable. We need to demand fundamental changes now, breaking up the big banks to snap their stranglehold on our markets and our democracy, ensuring that the newly minted financial reform laws are implemented, and wringing out rampant speculation.But true reform can only occur if we root out the corruption that has distorted our banking system and undermined the productive work of the many good people in the financial sector.The system of financial law enforcement is clearly broken. Think of it this way: If someone robbed a 7-Eleven of $1,000 but could settle a few days later for $25 and no admission of guilt, would they do it again?Only enforcement with real consequences will work. That means vigorous pursuit of criminal cases against individuals involved in wrongdoing, the surest method to deter malfeasance.It means enforcement agencies eschewing weak settlements in civil cases and seeking remedies with teeth such as civil penalties, restitution and executives forfeiting their jobs. And, it means tougher financial fraud laws. In that regard, the bipartisan proposal by Sens. Jack Reed, D-R.I., and Charles Grassley, R-Iowa, to increase fines for securities fraud is a place to start.To make any of this a reality, the U.S. Department of Justice and the federal regulators must have the will and the resources to do the job. President Obama has asked for additional funds for the Department of Justice, the SEC and the Commodities Futures Trading Commission. Giving these agencies the tools to detect and prosecute wrongdoing will more than pay for itself  the Commodities Futures Trading Commission's fine against Barclays for interest rate manipulation alone will pay for almost an entire year of that agency's budget.None of these changes will come easily, but this much is clear: We cannot allow Wall Street to continually flout our sense of right and wrong, to erode faith in our legal and political systems, and to put our financial system and economy in jeopardy.

NEWS,15.08.2012

U.K. Recession Drives More Than 1,000 To Suicide: Study

 

A painful British economic recession, rising unemployment and biting austerity measures may have driven more than 1,000 people in England to commit suicide, according to a scientific study published on Wednesday.The study, a so-called time-trend analysis which compared the actual number of suicides with those expected if pre-recession trends had continued, reflects findings elsewhere in Europe where suicides are also on the rise."This is a grim reminder after the euphoria of the Olympics of the challenges we face and those that lie ahead," said David Stuckler, a sociologist at Cambridge University who co-led the study, published in the British Medical Journal (BMJ).The analysis found that between 2008 and 2010 there were 846 more suicides among men in England than would have been expected if previous trends continued, and 155 more among women.Between 2000 and 2010 each annual 10 percent increase in the number of unemployed people was associated with a 1.4 percent increase in the number of male suicides, the study found.The analysis used data from the National Clinical and Health Outcomes Database and the Office of National Statistics.Keith Hawton, a professor at the Centre for Suicide Research at Oxford University who was not involved in the study, said its findings were "of considerable interest and certainly raise concerns", but that they must be interpreted carefully."It is also important that they are not over-dramatised in a way that might increase thoughts of suicide in those affected by the recession," he said in an emailed comment.Stuckler, who worked with researchers from Liverpool University and the London School of Hygiene and Tropical Medicine, stressed while this kind of statistical study could not establish a causal link, the power of the associations was strong. Its conclusions were strengthened by other indicators of rising mental health problems, stress and anxiety, he added.He also pointed out the study showed a small reduction in the number of suicides in 2010 which coincided with a slight recovery in male employment.A survey of 300 family doctors published by the Insight Research Group on Tuesday found that 76 percent of those questioned about the effects of the economic crisis said they thought it was making people unhealthier, leading to more anxiety, abortions and alcohol abuse.Data this month from the government's Health and Social Care Information Centre showed the number of prescriptions dispensed in England for antidepressants rose 9.1 percent in 2010.A study published last July, also by Stuckler, found that across Europe, suicide rates rose sharply from 2007 to 2009 as the financial crisis drove unemployment up and squeezed incomes.The countries worst hit by severe economic downturns, such as Greece and Ireland, saw the most dramatic increases in suicides.In Britain, there's little doubt times have been getting harder. The economy has shrunk for the last nine months and now produces 4.5 percent less than before the economic crisis.Many Britons have had the worst squeeze in living standards for 40 years and the crisis has hit young people hard, with youth unemployment soaring above 20 percent.Stuckler's BMJ study found that the number of unemployed men rose on average across Britain by 25.6 percent each year from 2008 to 2010, a rise associated with a yearly increase in male suicides of 3.6 percent."Much of men's identity and sense of purpose is tied up with having a job. It brings income, status, importance..." Stuckler said in a telephone interview."And there's also a pattern in the UK where men are three times more likely to commit suicide than women, while women are much more likely to report being depressed and seek help."Hawton noted that increases in suicides at times of economic recession had been reported before - for example in the Great Depression of the 1930s and in the economic downturn in South-east Asia during the 1990s.The World Health Organisation estimates that every year, almost a million people die from suicide - a rate of 16 per 100,000, or one every 40 seconds. It also estimates that for every suicide, there are up to 20 attempted ones.

HSBC gives US staff details for tax probe

Global bank HSBC has handed over details of current and former employees to the US authorities, it confirmed today, as part of a tax probe that almost sank rival bank UBS in 2009.As a result the bank could now face legal action from individuals whose details have been revealed, lawyers representing them said.In a letter to them seen by Reuters, the bank said it had passed on documents, in which their names appear, on the request of US authorities looking to hunt down US citizens with untaxed money held in Swiss accounts.After passing on a first set of documents earlier this year, HSBC has sent the new batch to the US Department of Justice and the Securities and Exchange Commission in an effort to reach a settlement over the investigation.HSBC lawyer Lenz & Staehelin has told lawyers acting for these employees that the documents included the minutes of executive, board and audit committee meetings, client visit reports, emails and other correspondence "We have submitted further information to the US authorities but it concerns the initial enquiry from December 2011. Client information has clearly not been submitted," HSBC Private Bank spokesman Medard Schoenmaeckers said by telephone.Banks including HSBC, Credit Suisse and Julius Baer have already passed on about 10,000 employee names in an attempt to avoid the fate of private bank Wegelin, which broke up in January under threat of indictment, bank employees and lawyers said.Credit Suisse said its cooperation with the US authorities was also in the interests of the bank and its employees. Baer declined to comment.Lawyer Douglas Hornung, who has filed a complaint against HSBC on behalf of its former chief legal counsel, said banks who handed employee names to US authorities infringed the criminal code and Swiss privacy laws.HSBC has avoided breaching strict Swiss banking secrecy laws by redacting from the documents any information that could lead to the identification of clients, said Lenz & Staehelin in a letter to lawyers acting for current and former employees of the bank.In 2009 the Swiss authorities reached a deal for UBS to pay a fine of $780 million to avert criminal charges, and ultimately agreed to allow the bank to reveal details of around 4,450 clients.Hornung said banks that hand over employee data to US officials are hoping to reduce the potentially huge fines they might face if they are found to have helped US clients avoid tax."HSBC could face a much higher fine than UBS, $1.3 to 1.4 billion would be logical. In cooperating HSBC can expect the fine to be lowered significantly," said Hornung.The benefit of such a reduction for cooperating would far outweigh anything the banks would have to pay for breaching obligations to employees in Switzerland, where the maximum fine is 5 million Swiss francs ($5.15 mln) and there are no punitive damages, Hornung said.A spokeswoman for the Swiss Attorney General confirmed that a legal complaint against HSBC had been received and said it was considering whether to open an investigation.A former HSBC employee, who asked not to be named, told Reuters he had never dealt with US clients and only realised US officials had his name during a background check when he was shortlisted for a new banking job.He was not offered the job."It can be difficult to inform former employees because as a company we don't keep records of their whereabouts. If they contact us, then we do inform them," Schoenmaeckers said.But Hornung, a partner at Geneva-based Hornung Avocats, said allegations of professional damage might be hard to prove."I have spoken to five or six people in the same situation, which means there is some chance of demonstrating a direct link between being on the list and difficulties in finding further employment," said Hornung.Bruno Seeman, a lawyer from small but locally renowned Zurich law firm Anwaltsbuero Landmann who is representing another former HSBC employee, said those wishing to sue the bank were unlikely to get any help from the largest law firms."The big five in Switzerland are all employed by the large banks, all the big commercial law firms with the capacity and know-how to act against big Swiss organisations cannot do so because it would be a conflict of interest," Seemann said."The effect is to prevent employees from approaching them because these law firms can't act against existing clients."

NEWS,17.07.2012

Olympic security group in tatters, admits CEO

 

The chief executive of G4S admitted that his management of the London Olympics staffing scandal had embarrassed the British government and left the world's biggest security group's reputation in tatters as he fought to save his job on Tuesday.G4S has been at the centre of a political firestorm that has wiped $US1.1 billion ($NZ1.37 billion) off its market value since it announced that it could not provide the promised 10,400 security guards only two weeks before the Games.Shares in the group closed down 5.7% after Chief Executive Nick Buckles appeared before a parliamentary committee, struggling to answer several questions and saying he wished he had never taken on the Olympics contract.At one point, when asked whether his staff would be able to speak fluent English, he responded that he did not know what fluent English was.After being assured that he was speaking English himself, Buckles went on to say that the group still expected to take its 57 million pound ($NZ111.7 million) management fee from the Games.G4S has said that it could lose up to 50 million pounds on the Olympics security contract, worth 284 million pounds.The embarrassing staffing admission has ignited a wider row over the British government's decision to outsource key work to the private sector and left ministers from the Prime Minister down trying to explain how the failure was allowed to develop."Many would take the view that the reputation of the company is in tatters," Buckles was told by one member of the Home Affairs Select Committee after being summoned at short notice to explain the debacle."I think, at the moment, I would have to agree with you," Buckles said, looking uncomfortable and sitting ramrod straight before lawmakers in the ornate wood-panelled room."We have had a fantastic track record of service delivery over many years in many countries, but clearly this is not a good position to be in," he added.The debacle has overshadowed the build-up to the Games only 10 days before the world's biggest sporting event begins, reviving memories of previous embarrassments for the company, such as a string of prisoner escapes and riots.Last year the group left inmates locked up for almost 24 hours at a British jail after losing the keys to cells. In another incident, guards tagged a man's false leg, allowing him to remove it and break a court-imposed curfew."Certainly my view, and the view of the board, is I'm the best person at the moment to take this through," Buckles insisted.To fill the gap left by G4S, the government has called up an additional 3500 soldiers, many of whom had just returned from lengthy deployments in Afghanistan.On Monday it emerged that, as well as extra troops, police officers were being deployed earlier than planned to cover for some G4S staff who had failed to show up for work.The row is a blow for Buckles, who worked his way up through G4S over 27 years with a no-nonsense management style.” Clearly we regret signing the contract, but now we have to get on and deliver it," he said after being asked to answer questions more directly.Only 11 days ago, the managing director of G4S Global Events, Ian Horseman Sewell, told Reuters that the company was so confident about the Olympics that it believed it could stage another similar-sized event at the same time if needed - a line that was repeated numerous times at the committee hearing.In a blow to the group's future earnings, Buckles indicated that the group would now not bid for work at either the soccer World Cup or the next Olympic Games, both to be held in Brazil, a key emerging market for G4S.Buckles said that the company would seek to compensate the police and consider a bonus for police and troops, prompting the chairman of the committee to ask if he was making up plans on the spot. A further 500 troops are on standby in case needed, Buckles said.Espirito Santo analyst David Brockton believes that G4S will come out relatively unscathed in the longer term, though Buckles could pay the price for the company's failures."If G4S can deliver the minimum 7000 (venue guards) that they expect to deliver, then today is the eye of the storm and the vitriol will subside over time and (we) will perhaps see the departure of Nick Buckles after the Olympics."The company's second largest shareholder Invesco, however, said that it thought the market had overreacted and told that Buckles should not be forced to stand down for failures made by local staff.

HSBC linked to Mexican drug trafficking

 

HSBC Holdings Plc told a US Senate panel today that it has dealt head-on with allegations of pervasive money-laundering through bank accounts, saying it has overhauled how it polices transactions, exited lucrative businesses and shaken up executive leadership.HSBC offered up the changes after the Senate's Permanent Subcommittee on Investigations released a report accusing the British bank of a "pervasively polluted" culture, underscoring money-laundering problems have been flagged by regulators for nearly a decade.The report said the bank routinely acted as a financier to clients routing funds from the world's most dangerous corners, including Mexico, Iran and Syria.During a hearing on the Senate report, David Bagley, a top compliance executive at HSBC since 2002, said he would step down.The resignation was part of HSBC's effort to apologize and show that it has cleaned up its act, even as the bank faces fresh questions about whether it has really fixed major flaws in catching and stopping money laundering.A  investigation has found persistent lapses in the bank's anti-money laundering compliance since 2010.Senator Carl Levin, who chairs the Senate's Permanent Subcommittee on Investigations, kicked off the hearing by detailing how HSBC's lapses have systematically allowed suspicious actors to access the US banking system."Accountability for past conduct is essential. That's what's been missing here," Levin said, adding that the bank's charter could be at risk if it did not do better.The bank is still facing a Justice Department investigation could soon yield a fine that dwarfs the record $619 million that Dutch bank ING agreed in June to pay to settle similar accusations.Bagley told the hearing that while reforms had been made at HSBC, it was time for him to go."I recommended to the group that now is the appropriate time for me and for the bank, for someone new to serve as the head of group compliance," he said.Bagley also told the Senate panel that the bank would close thousands of Cayman Islands accounts as part of its renewed compliance efforts."That's good news," Levin said.The Senate report said HSBC had little oversight of client accounts housed in a shell operation in the Cayman Islands, well known for offering secret accounts and a limited tax regime. By 2008, the Cayman accounts held $2.1 billion.Bagley was on a panel with other high-level HSBC executives, but the harshest spotlight is expected later when Stuart Levey, who joined the bank in January as chief legal officer, is due to testify.He had been the Treasury Department's top official on terrorism finance from 2004 to 2011 - during which time he was involved in cracking down on HSBC for Iran-related transgressions.In prepared testimony released at the start of the hearing, Levey placed much of the blame on HSBC's rapid expansion, which left in place a decentralized management structure that did not implement consistent standards across the bank and viewed compliance only as an advisory job.Levey said the bank has reorganized its businesses to make the firm better connected to manage risk.The changes Bagley and Levey talked about are coming at a great cost to the bank, as spending on anti-money laundering systems and staff have increased substantially.HSBC Bank USA CEO Irene Dorner, in prepared remarks, said the bank now has 892 full-time anti-money laundering compliance professionals.HSBC shares closed 1.7% lower in London trade. Analysts warned that the bank faced huge financial penalties -- but perhaps worse, was now in the crosshairs of politicians."(The) most important consequence is that the bank is now under the microscope ... at a very bad time where banks are used as scapegoats by politicians globally," analysts at Italian bank Mediobanca said in a research note, adding that they expect HSBC to face a $1 billion fine as well.In a statement to British regulators today, the bank began its mea culpa."We will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect," it said.The Senate report detailed how between 2007 and 2008, HSBC's Mexican operations moved $7 billion into the bank's US operations.Both Mexican and US authorities warned HSBC that the amount of money could only have reached such a level if it was tied to illegal narcotics proceeds, the report said.It also examined banking HSBC did in Saudi Arabia with Al Rajhi Bank, which the report said has links to financing terrorism.HSBC will have company in the Senate's harsh spotlight - the report was also highly critical of the Office of the Comptroller of the Currency, a major US bank regulator.In prepared testimony, the OCC acknowledged the need for changes in its oversight of anti-money laundering operations, as called for in the Senate report.The OCC will also testify on the extent of the failings it found in HSBC's money laundering controls, and the orders it issued to the bank to correct them.The exhibits for the hearing also provide new clues about how the Justice Department and regulators developed their probes of HSBC and Mexican drug trafficking.A July 2009 email from an OCC official to the bank relates a call received from the US Attorney's office in Brooklyn.The OCC official said that an assistant US attorney "said that his office is in the early stages of investigating possible money laundering through the repatriation of US currency through accounts at the banknotes division of HSBC-N.Y."The author of the email, Daniel Stipano, is an OCC lawyer scheduled to testify today.Later that day, Stipano told his peers at the OCC, "From what I can tell, this has the makings of potentially being a major criminal case- we need to be all over it."According to the Senate report, the OCC didn't take strong action against the bank until the fall of 2010, after the agency had learned of US law enforcement probes.