NEWS,29.01.2013

RBS faces £500m fine over Libor scandal

Britain's Royal Bank of Scotland could face a £500m ($786m, €585m) fine from British and US authorities for its role in the Libor rate-rigging affair, media said Tuesday.The Wall Street Journal, citing people briefed on negotiations, added that US authorities were pushing for a settlement of allegations that would result also in an RBS division pleading guilty to criminal charges.The newspaper said that the deal could be completed within the next fortnight and added that RBS was resisting any guilty plea amid fears it would lose clients and spark costly litigation.A spokesperson for the state-rescued bank would not be drawn on the article, simply saying: "Discussions with various authorities in relation to Libor setting are ongoing."We continue to co-operate fully with their investigations," he added in a statement.Investors meanwhile took flight at Tuesday's development. RBS shares sank 5.98% to finish at 345.80 pence on London's FTSE 100 index of leading shares, which ended 0.71% higher at 6 339.19 points.The Edinburgh-based lender is 82% owned by the British government after a vast bailout during the global financial crisis.The Libor affair erupted in June 2012 when Barclays bank was fined 290m by British and US regulators for attempted manipulation of Libor and Euribor interbank rates between 2005 and 2009.In December, Swiss banking giant UBS was slapped with fines totalling $1.5bn after a major probe by Swiss, British and US regulators revealed evidence of massive misconduct."It cannot be said that this comes as a surprise given that it was well flagged that authorities will chase RBS following the successful takedowns of Barclays and UBS," said analyst Ishaq Siddiqi at trading group ETX Capital."However, it does serve to remind us just how careless and brazen traders at these banks were, taking excessive risk to manipulate rates."The response in markets may be somewhat muted in the sessions ahead as over the months we have learnt just how deep this corruption ran through the Libor market and instead, investors are likely to breathe a sigh of relief as these charges will remove an overhang in the stock price."The Libor rate is used as a benchmark for global financial contracts worth about $300 trillion. However, the system was found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure.The London Interbank Offered Rate, or Libor, is a flagship instrument used all over the world, affecting what banks, businesses and individuals pay to borrow money. Euribor is the eurozone equivalent.

Global tourism peaked in 2012 - UN

International tourist arrivals exceeded one billion for the first time last year, with the Asia-Pacific region posting the biggest increase in foreign visitors, and numbers will rise further in 2013, a UN body said on Tuesday. The number of international tourist arrivals grew by 4.0% to 1.035 billion in 2012, up from 996 million in 2011, the Madrid-based United Nations World Tourism Organisation said in an annual survey."2012 was a year of constant economic instability in the entire world, especially in the euro zone. Despite this international tourism managed to maintain its course," the body's Secretary General Taleb Rifai told a news conference.The organisation forecasts international tourist numbers will grow in 2013 although at a slightly lower rate of 3.0%  4.0%.Global tourism figures were hit hard by the 2008 global financial crisis, with the rise in international arrivals that year slowing to 2.1% after jumping 6.6% in the previous year.Arrivals plunged by 3.9% in 2009, its worst performance in 60 years, as the outbreak of the swine flu virus contributed to cash-strapped consumers' decision to stay home.But international tourism arrivals bounced back the following year, rising 6.6% in 2010 and by 5.0% in 2011 even though global economic crisis had not yet ended. The Asia-Pacific region posted the largest growth in visitor arrivals last year with the number of foreign tourists up by 14 million or 6.5% to 233 million.Growth in the number of foreign visitors was highest in Southeast Asia, with the number of arrivals up by 8.7% over 2011.Tourist numbers climbed 4.1% in emerging economies compared with a 3.6% rise in advanced economies.The only region to report a decline in tourist numbers compared with 2011 was the Middle East with 2.0% fewer arrivals because of political instability in popular tourist spots such as Egypt and Syria.But the drop in the number of visitors to the region was smaller than the decline of 7.0 posted in 2011, the UN body said.Asia and Africa are expected to post the greatest growth in tourist numbers this year.The agency predicts tourist arrivals will increase by 5.0%-6.0% in the Asia-Pacific region this year and by 4.0%-6.0% in Africa.The Middle East will see the number of foreign visitors to the region rise by 0 and 5.0% this year while Europe will post growth of 2.0%-3.0%.The forecast of continued growth in international tourist arrivals next year comes a week after the International Monetary Fund (IMF) predicted the global economy will grow slightly less in 2013 than expected.The IMF projects global gross domestic product annual growth of 3.5% this year, a dip of 0.1 point from its October forecast owing largely to weakness in the eurozone, and 4.1% in 2014.The UN World Tourism Organisation predicts international tourist arrivals will rise by an average of 3.8% each year between 2010 and 2020 and will reach 1.8 billion in 2030.

Japan to approve $1.02 trillion budget

Japan's cabinet was Tuesday set to approve a $1.02 trillion annual budget with boosts in defence and public works spending amid a festering territorial row with China and a renewed assault on deflation.The cabinet is expected to approve a ¥92.61 trillion budget for fiscal 2013, with revenue estimated at ¥43.10 trillion and new bond issuance at ¥42.85 trillion - the first time in four years revenue will have been greater than new bond issuance, local reports have said.The budget is down from the ¥92.9 trillion allocated in the fiscal 2012 initial budget, the first decrease in seven years, they said.But the defence budget is up by ¥40bn or about 0.8% from the previous year to ¥4.75 trillion, the first rise in 11 years, at a time Japan is embroiled in a row with China over a chain of islands in the East China Sea.Beijing has repeatedly sent vessels to the disputed waters, prompting calls in Japan for more measures to defend the Tokyo-controlled islands, called the Senkakus in Japan but known as the Diaoyus in China.Defence Minister Itsunori Onodera has said the military will add nearly 300 personnel to help defend the disputed islands.Meanwhile, public works spending rises for the first time in four years, growing by ¥710bn to ¥5.29 trillion, reports said.Prime Minister Shinzo Abe, who took office in December, has pledged to pull Japan out of years of deflation by active government spending coupled with aggressive monetary easing by the Bank of Japan.Abe's government announced a $226.5bn stimulus package earlier this month.In the fiscal 2013 budget, the issuance of new government bonds decreases by ¥1.4 trillion from the preceding year to ¥42.85 trillion, Jiji Press said.The government is planning an $86bn bond sale to pay for the stimulus, stoking fears about spending by Tokyo, which already owes creditors cash equal to twice the size of its economy.

 

Japan, China set to boost economic ties

Japanese Prime Minister Shinzo Abe said on Tuesday he was open to a meeting with Chinese leaders to rebuild ties damaged by a territorial dispute but said there was no room for negotiations on their row over a group of small islands.The remarks came after China's Communist Party chief, Xi Jinping, told a Japanese envoy sent to Beijing last week that he was committed to developing bilateral ties and would consider holding a summit meeting.Relations between the world's second- and third-largest economies plunged after the Japanese government bought three disputed islands from a private owner last September, sparking anti-Japan protests across China.Some Japanese businesses were looted and Japanese citizens attacked."It is precisely because we have a problem that we should hold the summit between leaders and have high-level talks," Abe said on a television programme, "I would like to consider a top-level summit if circumstances allow."The conservative prime minister has just increased the defence budget for the first time in 11 years and swept back to power in a December election calling for the protection of Japan's "beautiful seas".He reiterated Japan's stance on the islands, which it controls. Japan calls them the Senkaku while China calls them the Diaoyu."The Senkaku Islands are our land and China has taken provocative steps against them ... we have been clear that there is no room for negotiation on this matter," he said."But on top of that, there's an economic relationship. Japan invests in China and reaps benefits from exporting its goods there while China creates job places thanks to Japanese investment," said Abe, adding that maintaining strong economic ties were vital for both countries."If top-level meeting was necessary to achieve that, we should do it and from that point on rebuild our relationship."

NEWS,24.07.2012

Germany's credit rating downgraded

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

 

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

 

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

Italy pushes for Sicilian recovery plan

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

NEWS,14.07.2012

JPMorgan Traders May Have Hidden Losses, Could Face Criminal Charges

 

JPMorgan Chase & Co said its traders may have deliberately hidden losses that have since climbed to $5.8 billion for the year, in a development that may result in criminal charges against traders at the bank.The losses came from bets on corporate debt now known as the "London Whale" trades made at JPMorgan's Chief Investment Office. Chief Executive Jamie Dimon said that in the worst-case scenario the derivatives trades would lose another $1.7 billion, and that the bank has fixed the CIO problems.Investors cheered the bank for capping losses and taking steps to ensure it avoids similar bad bets in the future. JPMorgan's shares rose nearly 6 percent on Friday.Even with the trading losses, JPMorgan earned nearly $5 billion overall in the second quarter, thanks to its strong performance in areas such as mortgage lending.The trading losses may be mostly over, but with the disclosure that traders may have lied about their losses, regulatory and legal consequences will linger for some time. Blame for the problems at the CIO office may go further up the management chain to some of the most senior executives at the firm, lawyers said.A source said that federal criminal investigators are looking at people at JPMorgan in London, where the CIO's risky bets were placed. The criminal investigation began in earnest in the past few weeks after JP Morgan's internal investigation uncovered that CIO traders may have intentionally masked losses, the source said."I see little doubt that someone is going to get charged with fraud," said Bill Singer, a lawyer at Herskovits in New York who provides legal counsel to securities industry firms, and publishes the BrokeandBroker website.Authorities ranging from the FBI to the U.S. Securities and Exchange Commission are probing the bank. The SEC could charge JPMorgan with weaknesses in oversight and internal controls, said James Cox, a securities law expert at Duke University."I think the SEC will continue to look at 'What exactly did Jamie Dimon know and when did he know it?'" Cox said.An internal review found that some of the CIO traders appear to have deliberately ignored the massive size of their trades - and the difficulty in liquidating them - when valuing their positions. The result was not reporting the full declines in the value of positions, which is forcing JPMorgan to restate its first-quarter results. The bank is cooperating with authorities.The trading losses and possible deception from traders are a black eye for Dimon, who was respected for keeping his bank consistently profitable during the financial crisis. Dimon, who has criticized regulators for meddling too much with banks, has lost credibility because of difficulties in his own house."How do we know there are not more roaches in the kitchen?" said Paul Miller, an analyst at FBR Capital Markets, referring to the maxim that seeing a single roach typically means there are far more hiding in the woodwork.The Chief Investment Office became infamous in May when JPMorgan said bad derivatives bets had triggered about $2 billion of paper losses, a figure that turned into $4.4 billion of actual losses in the second quarter.One trader in the CIO, Bruno Iksil, took big enough positions in the credit derivatives markets to earn the nickname "The London Whale." He made at least some of the big bets that caused trouble for the bank, and has since left JPMorgan, a source said on Friday.Ina Drew, who headed the CIO, has also left, and offered to give back as much of her pay as the bank was contractually entitled take back, said Dimon, whose pay could be taken back as well. A spokesman for the bank said JPMorgan had accepted Drew's offer.The bank said it had moved the bad trades from the CIO, which invests some of the company's excess funds, to its investment bank. JPMorgan was one of the inventors of credit derivatives, and its investment bank is one of the biggest traders of the product on Wall Street.The CIO will now focus on conservative investments, JPMorgan said. The bank has taken a number of other steps to prevent these types of losses from repeating, including changing the way it limits risk taking in the CIO's office."People feel good that the loss is largely contained at this point," said Nancy Bush, a banking analyst at independent research firm NAB Research.JPMorgan said later on Friday that its former CIO risk officer, Irvin Goldman, had resigned. Goldman "behaved with integrity and we wish him well," JPMorgan said.JPMorgan's shares rose $2.03 to close at $36.07 on the New York Stock Exchange.THE TEMPEST LEAVES THE TEAPOT The bank posted second-quarter net income of $4.96 billion, or $1.21 a share, compared with $5.43 billion, or $1.27 a share, a year earlier.The derivative loss after taxes reduced earnings per share by 69 cents, the company said.JPMorgan said it expected to file new, restated first-quarter results in the coming weeks, reflecting a $459 million reduction of income because of bad valuations on some of its trading positions. The bank found material problems with its financial controls during the period.The bank said its internal investigation combed through over a million emails, tens of thousands of taped conversations, and other evidence. It learned that some traders may have intended not to value their trading positions at the proper levels.In particular, the traders recorded the value of their trades at current market prices, rather than prices they would get if they liquidated their large positions, in an effort to avoid reporting their full paper losses.The bank made trades that were intended to protect it against the credit markets tanking, but allowed those positions to morph into bets on credit markets getting better.Friday's financial report came three months to the day after Dimon, 56, told stock analysts that news reports about Iksil and looming losses in London were a "tempest in a teapot."That remark, which Dimon told Congress last month was "dead wrong," added to the damage the loss has done to his reputation and his argument that his bank is not too big to be managed safely.A host of international regulators and agencies are probing the trading mishap. Besides the FBI and the SEC, they the UK's Financial Services Authority, the U.S. Federal Deposit Insurance Corp, the U.S. Commodity Futures Trading Commission, the U.S. Treasury's Office for the Comptroller of the Currency, and the Federal Reserve Bank of New York.

Libor Scandal May Hit U.S. Banks Harder Than Their British Counterparts

 

Barclays Plc and other UK banks may escape lighter than their U.S. rivals if shareholders seek damages in the wake of an interest rate-rigging scandal, because such cases are costlier and harder to win in Britain.Cases pursued in America by investors alleging they suffered a loss because of the wrongdoing of a financial institution, will often be deemed ineligible to be heard in U.S. courts when the bank in question is foreign, legal experts said.But if investors opt to take their cases to UK courts, they will find Britain's legal structures make such claims harder to win, costlier and riskier."Would we like to sue Barclays in the New York courts weknow well and we're very good at prosecuting in? Sure. But we're not going to because this is a UK situation," said Dominic Auld, a litigation expert at U.S. law firm Labaton Sucharow.Since Barclays admitted its role in manipulating the London interbank offered rate (Libor), lawyers on both sides of the Atlantic are taking calls from investors."I did take a call this morning from an institutional investor who is interested in looking at litigation both from a UK perspective and the U.S ... I expect there will be a good deal of similar interest," said Owen Watkins, a barrister in the corporate department of London law firm Lewis Silkin.More than a dozen banks are being investigated for their roles in setting Libor, including Citigroup, JPMorgan Chase & Co, Deutsche Bank, HSBC Holdings Plc , UBS and Royal Bank of Scotland..Morgan Stanley analysts have calculated the litigation risk to each of the 16 banks involved in setting Libor, an estimate of the rate at which banks could lend to each other and a benchmark for setting many other types of loans, at between $60 million to $1.1 billion. But lawyers say that while it was once commonplace for European investors to issue proceedings in the States, this transatlantic "legal tourism" was brought to an effective end in 2010 by a Supreme Court ruling in the United States.In a case brought against National Australia Bank, the court ruled U.S. securities laws do not have jurisdiction over so-called "F cubed" cases involving foreign investors and a foreign company traded on a non-U.S. market In the case of Barclays, only about 4 percent of its market capitalisation is traded in the U.S. in the form of American Depository Receipts. Any pursuit of meaningful damages from investment losses related to falls in Barclays' share price caused by the scandal will have to be carried out in Britain."Bringing proceedings here is not easy because there are various questions about causation. But most importantly Barclays would fight hard and you take a substantial risk in relation to costs that you would have to pay if you lost," said David Greene, senior partner at London-based law firm Edwin Coe.Furthermore, proceedings by institutional investors are rare and run against the traditions of the City of London financial district which had in part prompted disgruntled investors to make claims in the United States until it was halted by the F-cubed ruling."I don't think that sort of thing would be held in a UK court. I think they would just say the nature of the capital markets is shares go down as well as up. It's the guiding principle here," said one institutional investor who declined to be named because he is a major Barclays shareholder.