Bl***y Banks Again

Libor Probe

---

Global regulators are probing whether banks colluded to rig the London interbank offered rate, the benchmark interest rate for more than $360 trillion of securities worldwide -- from mortgages to student loans. Barclays last week was fined a record £290 million by U.S. and U.K. regulators for systematically attempting to rig the rate for profit. At least a dozen banks are still being probed, while British prosecutors are weighing whether to open a criminal investigation. ============================ Of course there should be a criminal investigation !!! The Americans are putting us to shame with this invesstigation and the guilty have done so much damage they should pay .

Barclays Says Ricci, Kalaris to Step Down Following Diamond Exit


By Gavin Finch & Ambereen Choudhury - Apr 18, 2013 1:22 PM GMT+

Barclays Plc (BARC)’s investment-banking chief Rich Ricci and wealth-management head Tom Kalaris, two of the last remaining members of former Chief Executive Officer Robert Diamond’s management team, will step down.
Ricci, 49, will be replaced by Eric Bommensath and Tom King, 52, as co-CEOs of corporate and investment banking in May, the London-based bank said in a statement today. Peter Horrell, who joined the bank in 1990, will become interim head of the wealth unit.





Enlarge image
Barclays Head of Investment Banking Rich Ricci



Adeel Halim/Bloomberg
Barclays Head of Investment Banking Rich Ricci will retire at the end of June.
Barclays Head of Investment Banking Rich Ricci will retire at the end of June. Photographer: Adeel Halim/Bloomberg




5:29 Feb. 12 (Bloomberg) -- Antony Jenkins, chief executive officer of Barclays Plc, discusses revenue expectations, business focus and the company's "progressive" dividend policy. He speaks with Francine Lacqua in London on Bloomberg Television's "On the Move." (Source: Bloomberg)
Chairman David Walker and CEO Antony Jenkins, who took over after the lender was fined an unprecedented 290 million pounds ($442 million) in June for rigging the London interbank offered rate, are trying to cut costs by stripping out layers of management and boost regulators’ confidence in the company. An internal report this month criticized pay at the investment bank and urged the company to boost transparency.
“Jenkins has been trying to distance the bank from some of the excesses of the previous regime,” said Chris Wheeler, a financials analyst at Mediobanca SpA in London. “Ricci was closely associated with the previous management team, having worked very closely with Diamond.”
The stock fell 0.3 percent to 289.45 pence as of 1:10 p.m. in London, for a market value of about 37 billion pounds.
‘Strengthening Control’

“A major area of focus for me has been to streamline and improve how the bank is managed, while strengthening control,”Jenkins said in today’s statement. “I want to de-layer the organization, creating a closer day-to-day relationship and clearer line of sight for myself into the business.”
Ricci, a 19-year veteran of the bank, won’t receive a severance payment, and will instead get as much as a year’s salary of 700,000 pounds. He received 5.7 million shares valued at 17.6 million pounds when they vested in March. He didn’t reply to an e-mailed request for comment. Diamond, Chairman Marcus Agius and Chief Operating Officer Jerry Del Missier all stepped down in the wake of the Libor fine.
“This as an inevitable and appropriate piece of transitioning,” said Ian Gordon, a banking analyst at Investec Plc (INVP) in London. “Few tears will be shed and the reshuffle will be broadly welcomed.”
Barclays said in the statement that it plans to refocus the securities unit on the U.S., the firm’s largest source of income after Britain. Skip McGee, who joined Barclays when it acquired Lehman Brother Holdings Inc.’s U.S. operation out of bankruptcy in 2008, will become head of Barclays’s Americas business, the bank said today.
“There is a clear need for even more effective execution of Barclays’s operations in the region,” the bank said. “We want to have the strongest possible relationships with our U.S. regulators.”
Better Conditions

The firm is seeking to take advantage of better investment banking conditions in the U.S. compared with Europe. Fees for arranging mergers, equity, bond and syndicated loan sales climbed 16 percent in the U.S. to $8.9 billion in the year to March 18, according to data compiled by New York-based research firm Freeman & Co. By contrast, fees dropped 15 percent to $3.4 billion in Western Europe in the same period, the data show.
Barclays hired King, a U.S. national, from Citigroup Inc. in 2009. After serving as global co-head of corporate finance in London, he was appointed deputy head of the investment-banking division in October 2012 and relocated to New York. He has an MBA in Finance from the Wharton School of the University of Pennsylvania.
Bommensath, who joined in 1997 from Bankers Trust as head of derivatives in Europe, will continue as global head of markets, Barclays said. He is a former head of the investment bank’s fixed-income, currencies and commodities business
==============================
Rich Ricci is obviously being asked to leave because of the scandal and loss of income incurred over the Libor Crisis and Fines.
He is to receive 1 years Salary as a golden Handshake but Barclays would not reveal how much that will be.

Compliance Policy


Banker Bonus Curbs Sealed as EU Clinches Deal on Basel Law


Bankers may feel the pinch from European Union bonus curbs starting in 2015,
after Britain failed to water down a tentative agreement from last month aimed
at reining in excessive risk- taking.

European Parliament lawmakers and Ireland, which holds the rotating
presidency of the EU, kept bonus restrictions unchanged, as they sealed a deal
yesterday overhauling bank capital and liquidity rules for the 27-nation EU.


The bid to ban bonuses more than twice fixed pay is part of EU legislation to
apply international bank capital and liquidity rules, known as Basel III, drawn
up following the collapse of Lehman Brothers Holdings Inc. While yesterday’s
accord paves the way for the EU to start phasing in the Basel law by next
January, it comes too late to limit 2014 bonus awards.

Talks on the rules had dragged on for a year and a half before the Irish
presidency and lawmakers negotiated the bonus agreement. The parliament had
insisted that the legislation include restraints on pay to curb excessive awards
and irresponsible behavior.

The bonus rules would apply to EU banks, including overseas units. They would
also apply to EU-based units of banks from beyond the bloc’s borders.

The European Banking Authority will work out the details of the discounting
method, said an EU official who asked not to be identified citing government
policy.

EU lawmakers on the economic and monetary affairs committee today backed
legislation that would extend similar bonus caps to fund managers.

For more, click here.

Wall Street Wins in Swap-Rule Revisions Moving in U.S. House


U.S. House lawmakers advanced legislation that would ease Dodd-Frank Act
derivatives rules and give banks greater ability to trade swaps overseas.

The House
Agriculture Committee voted yesterday to move seven measures, including one
to allow trading of almost all types of derivatives by units of banks that hold
government- insured deposits -- such as JPMorgan Chase & Co. and Citigroup Inc. (C) A
separate bill would restrict U.S. regulators’ ability to apply rules to overseas
transactions.

The measures, which would need
approval from the House and Senate before heading to President Barack
Obama, are part of an effort to amend or limit the regulatory overhaul the
president signed into law less than three years ago. Dodd-Frank requires the
Commodity Futures Trading Commission and Securities and Exchange Commission to
create swap-market rules after largely unregulated trades helped fuel the 2008
credit crisis.

The lawmakers are working to undo Dodd-Frank provisions even as the CFTC and
other regulators are trying to complete the overhaul.

For more, click here.

ECB Said Likely to Delay Vote on Emergency Cyprus Bank Lending


The European Central Bank is likely to delay a decision on whether to
continue to supply Cypriot banks with emergency funds as it awaits clarity on
the nation’s bailout, two people familiar with the deliberations said.

The ECB assumes that a bank holiday in Cyprus will be extended to the end of
the week, and there is a public holiday on the Mediterranean island on March 25,
the people said on condition of anonymity.

That means policy makers don’t need to vote on whether to extend or halt
Emergency Liquidity Assistance to Cypriot banks at their mid-month meeting in
Frankfurt, which started yesterday and ends today, the people said.

Europe Plays I-Didn’t-Do-It Blame Game on Cypriot Deposit Levy


To listen to the German and
French governments, the European Central Bank and European
Commission, no one was responsible for the Cypriot deposit tax that was
unanimously endorsed in the early hours of March 16 and fell apart March 19.


German Finance Minister Wolfgang
Schaeuble opened the blame game on Sunday, telling ARD television that the
commission, ECB and Cypriot government engineered the swoop on ordinary bank
accounts and “now they have to explain it to the Cypriot people.”

Indignation in Nicosia led other finance ministers from France to Finland to
disown what they had decided.

France’s Pierre Moscovici said he had wanted an exemption for accounts worth
less than 100,000 euros ($129,500). Austria’s Maria Fekter said ECB demands made
that impossible. Joerg Asmussen, the ECB Executive Board member who took part in
the finance chiefs’ all-night Brussels meeting, pleaded not guilty, saying the
central bank didn’t insist on “this specific structure of the levy.”

Other non-authors of the tax on sub-100,000-euro accounts included Spanish
Economy Minister Luis de Guindos, Finnish Finance Minister Jutta Urpilainen and
the Brussels-based commission, which said yesterday that it wasn’t comfortable
with the package in “all its elements” and added that “decisions are taken by
the member states.”

For more, click here.

Iceland Unveils Bill Restricting Foreigners’ Property Purchases


Iceland’s Interior Minister
Ogmundur Jonasson introduced a bill curbing foreigners’ ability to buy property
in the country, according to a statement on the parliament’s website.

The bill, which is being discussed in the Reykjavik-based legislature, seeks
to prevent people who aren’t citizens of Iceland from purchasing properties that
include water rights or fishing rights. The interior minister would be
authorized to grant exemptions to people or companies operating in Iceland.

The legislation follows Iceland’s repeated rejections of Chinese billionaire
Huang Nubo’s plan to invest $200 million in 300 square kilometers (116 square
miles) of land in the north part of the island to develop a resort and mountain
park.

Compliance Action

Former FSA chief John Tiner steps down from RBS bid consortium


John Tiner, the former head of the Financial Services Authority, has stepped
down from a consortium that is bidding for 316 bank branches owned by Royal Bank
of Scotland.








RBS was forced to put the
branches up for sale - in a process dubbed 'Project Rainbow' - by European
regulators Photo: Getty
Images






By Garry White

8:39PM BST 18 Apr 2013


2 Comments




His departure comes ahead of expected criticism from the Parliamentary
Commission on Banking Standards over the regulator’s conduct in the lead up to
the financial crisis.


Mr Tiner was the authority’s chief executive from 2003 until 2007, and had
been fronting a bid from investors including Lord Rothschild’s investment
vehicle RIT Capital and private-equity groups Corsair and Centerbridge.



Sources close to Mr Tiner said that he stepped down because he did not want
his presence to be a “distraction” from the process.


RBS was forced to put the branches up for sale - in a process dubbed “Project
Rainbow” - by European regulators as a condition of the £45.5bn bail-out it
received in 2008 to save it from collapse.


Last week, Sir James Crosby, the former chief executive of HBOS, gave up his
knighthood and almost a third of his £580,000-a-year pension after his role in
the downfall of HBOS was criticised. It followed a report from the Parliamentary
Commission on Banking Standards that described Sir James as the “architect of
the strategy that set the course for disaster”.

I ASKED A BANK TELLER AT RBS AND SHE SAID THAT RBS COULD BECOME WILLIAN AND GLYN'S AGAIN,FIRST THEY WOULD HAVE TO GET AGREEDMENT FROM SHAREHOLDERS FIRST,THEN STAFF WILL BE TOLD.

Badboy wrote:I ASKED A BANK TELLER AT RBS AND SHE SAID THAT RBS COULD BECOME WILLIAN AND GLYN'S AGAIN,FIRST THEY WOULD HAVE TO GET AGREEDMENT FROM SHAREHOLDERS FIRST,THEN STAFF WILL BE TOLD.

They are selling 316 Branches Badboy ....that was the worst thing Gordon Brown did was to bail out RBS, the Government has lost billions and will never recoup its losses.

Banks reluctant to pay out on PPI


Banks are stalling on customers' PPI claims, creating unnecessary backlogs
and delays, critics said yesterday.















By Rosie Murray-West

11:56AM BST 22 Apr 2013


22 Comments




A claims management company, Emcas, has said that banks are rejecting around
a third of claims from customers.


However, the Financial Ombudsman Service (FOS), which deals with complaints
rejected by the banks, is upholding the majority of PPI claims, suggesting that
the banks are rejecting legitimate claims in the hope that customers will not
take the process further.


"If claims were being resolved in the first instance, it would be better for
everyone concerned," a spokesman for FOS said yesterday.


The development comes after it emerged last week that PPI (payment protection
insurance) is turning out to be the biggest mis-selling scandal in British
history. Millions of people were pushed policies when they bought credit cards,
loans and other forms of credit. They hoped this would protect them if they lost
their jobs or were unable to work through illness.


However, the policies were often sold without proper explanation and were not
fit for purpose, meaning that many people are eligible for a refund of all of
the premiums that they paid. The average payout is more than £2,700.



Related Articles

• 
  Banks push for PPI deadline: how to make your
  claim
  19 Jan 2013
  
• 
  Reclaimed PPI? Here's three more to try
  
  02 Mar 2013
  
• 
  PPI mis-selling: complaints to Financial
  Ombudsman double
  05 Mar 2013
  

The banks have set aside billions of pounds to meet the cost of claims, but
other brands have been hit by the scandal. Tesco last week said it had set aside
£115m for PPI mis-selling alone, taking its total compensation fund to £222m.


Many people have to wait up to two years for the FOS to deal with their claim
at present, because so many people are complaining about PPI. However, figures
show that the adjudicators find in the customer's favour in large numbers of
cases. A FOS spokesman said 86pc of Lloyds TSB PPI cases were settled in favour
of the consumer, while other banks have lower uphold rates.

A spokesman for the British Bankers' Association denied that banks were
deliberately turning down legitimate claims in the hope that they would avoid
having to pay up.

"We continue to work with the ombudsman to try to improve the system for the
benefit of customers," he said. "All of the UK's high street banks have
committed publicly to ensuring a decisive end to any bad practices which
resulted in mis-selling.

"Banks are overhauling their incentive structures for front-line staff,
rewarding staff for high levels of customer service and not sales volumes."

The delays were due to "unscrupulous claims management companies who refer
huge numbers of claims to the ombudsman whether there are grounds or not", the
spokesman said, adding: "The system is being clogged up and people with genuine
complaints don't always get the service they deserve."

Banks have to pay a fee of £900 every time the FOS handles a claim for PPI.
However, the customer has to pay nothing.

Craig Bernhardt, the chief executive of Emcas, said his company's high
rejection rates and subsequent uphold rates from the FOS should encourage PPI
claimants who were rejected by their banks to go to the ombudsman.

However, if you use a claims management company it will take a hefty
percentage – often a quarter – of your payout. There is no reason why you cannot
claim back PPI yourself. If you break it down into steps, it is not that
difficult. Because of the long delays it makes sense to get in quickly.

First, see if you have any paperwork that suggests you have ever taken out a
policy. Failing that, write to your bank and ask it to list the products it has
sold you and whether PPI policies were included. Banks are obliged to supply
this information, which they should keep for at least six years after the end of
any loan agreement. But there is no time limit for making a claim.

Then make a complaint with the company that sold you
the insurance. You can use template letters or questionnaires from the FOS (financial-ombudsman.org.uk). Send copies of
the loan agreements or statements to support your case. If it is rejected, make
the same complaint to the FOS.

If the ombudsman finds in your favour, it will inform both you and the bank
by letter. It will also give the bank a formula that it should use to calculate
how much compensation you should be paid.



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Co-op pulls out of deal to buy 632 Lloyds bank branches


The Co-operative Group has pulled out of its £750m deal to buy 632 'Project
Verde' branches from Lloyds Banking Group.








The news, announced by the Co-op
and confirmed by Lloyds, will be a blow for both institutions which agreed the
terms of the deal in July last
year.





By James Quinn, and Rebecca
Clancy

7:00AM BST 24 Apr 2013

9 Comments




The Co-op had hoped to bolt the branches on to its existing 342-strong branch
to create a new high street bank.


The news will be a blow for both
institutions which agreed the terms of the deal in July last
year.


For the Co-op, it will end outgoing chief executive Peter Marks' dream of
building a challenger bank to the Big Four high street players.


For Lloyds, it will mean a delay to
extricating the business, known internally as Project Verde, from its balance
sheet.


Under the terms of a European competition ruling, Lloyds must sell or dispose
of the branches by the end of November 2013 as part of a package linked to the
state aid provided at the time of Lloyds' takeover of HBOS.



Related Articles

• 
  Why Co-op pulling out is not necessarily bad news
  for Lloyds
  24 Apr 2013
  
• 
  Co-op's £1bn hole could derail Lloyds deal
  
  27 Feb 2013
  
• 
  Co-op puts insurance arm up for sale
  21 Mar 2013
  
• 
  Co-op bank finance chief quits
  15 Feb 2013
  
• 
  Lloyds' Horta-Osorio can't bet on the Co-op
  
  14 Apr 2012
  

It is understood regulators have questioned the amount of capital in the
group's banking business, and whether it was sufficient once taking into account
its soon-to-be enlarged banking book.

The decision to pull out was made by a meeting of the Co-op board, thought to
have been held at the end of last week.

However Lloyds is believed to have only been informed of the decision late on
Tuesday.

Lloyds' chief executive Antonio Horta-Osario said
in a statement this morning the bank
was "disappointed" the Co-op was unable to complete the deal, but added that it
was "well advanced" in its plans to bring the Verde business to the high street
under the TSB brand.

In a separate statement this morning, the Co-op said its decision to pull-out
reflected "the impact of the current economic environment, the worsened outlook
for economic growth and the increasing regulatory requirements on the financial
services sector in general".

Peter Marks, group chief executive of the mutual, added that the transaction
would not deliver "a suitable return for its members within a reasonable
timeframe and with an acceptable level of risk".

It follows months of speculation surrounding the
Co-op's capital position, and comes four weeks after the mutual posted a £599m loss for the
year to January 5.

Lloyds confirmed it will now pursue an initial public offering of the
business under the TSB brand, which was being sold to the Co-op as part of the
deal.

The stand-alone bank will have 7.5pc of the UK branch network and 5pc of UK
current accounts. Lloyds said the bank would be extricated from its own business
this summer, at which time the TSB brand will become visible on the high street.


Lloyds was providing the management for the tie-up with the Co-op, as well as
the technology platform and the financing.

The Co-op was due to pay an initial £350m, with a further £400m based on
performance factors.

It is thought a number of the parties currently vying to buy the 300-odd
branch business being sold by Royal Bank of Scotland could also be interested in
the Verde assets.

Barclays profits fall 25pc in first quarter


Barclays has reported first-quarter profits fell by a quarter from a year
ago, hit by the costs of restructuring and increasing losses in Europe.








Barclays' chief executive Antony
Jenkins said profits had been dented by a £514m charge to cover costs associated
with "Project Transform". Photo:
EPA






By Rebecca Clancy

8:01AM BST 24 Apr 2013


1 Comment




Adjusted pre-tax profit for the three months to
March 31 were down 25pc to £1.78bn, down from £2.4bn in the same quarter a year
ago, according to an interim statement this
morning.


But, statutory results have improved from a loss of £525m last year to a
profit of £1.535bn, underscoring the distorting impact accounting rules have on
bank balance sheets.


Barclays' chief executive Antony Jenkins said
profits had been dented by a £514m charge to cover costs associated with
"Project Transform", the strategic review announced in February which
detailed plans to axe 37,000 jobs and make £1.7bn in cost cuts in a radical bid
to restore the bank's tattered reputation.


Mr Jenkins said the charge covered the "immediate priorities" of the review,
which were to reduce its European retail branch network so it could focus on the
mass-affluent segment and on re-positioning its equities and investment banking
operations in Asia and Europe


The chief executive said its expected a further £500m of costs in order to
execute the 'Project Transform' in 2013.



Related Articles

• 
  Barclays chief explains decision to cut 3,700
  jobs
  12 Feb 2013
  
• 
  Fall in Barclays staff paid more than £1m
  
  08 Mar 2013
  
• 
  Barclays could cut up to 40,000 jobs
  
  07 Mar 2013
  
• 
  Barclays in crackdown on high pay
  23 Dec 2012
  

The changes are an attempt to make a clean break with the past for Britain's
third largest bank.

Mr Jenkins said the cuts showed his plans for change at the bank were not
mere “window dressing or PR” as he pointed to the financial cost of exiting
controversial businesses.

The bank has already confirmed it would shut its controversial structured
capital markets (SCM) unit, responsible for giving tax advice to the bank’s
wealthy clients, while all speculative trading in agricultural commodities would
be ended.

WASN'T ONE OF THE BANKS GOING TO SACK LOTS OF STAFF(HSBC?)

Regulator’s Capital Silence
By Gavin Finch & Ben Moshinsky - Apr 26, 2013

• 
  
  
  Q
  

Britain’s new banking regulator has rattled lenders by holding off disclosing how much capital each firm will have to raise after ordering the industry to plug a 25 billion-pound ($38 billion) shortfall by the end of the year, three people with knowledge of the discussions said.
The Prudential Regulation Authority, the unit of the Bank of England that took over supervision of the industry from the Financial Services Authority this month, isn’t expected to detail the steps all banks need to take to bolster their balance sheets until mid-May at the earliest, said two of the people who asked not to be identified because the talks are private. Banks had expected to be told in March, one of the people said.





Enlarge image
U.K. Banks Said to Be Rattled by Regulator’s Silence on Capital



Simon Dawson/Bloomberg
A pedestrian shelters from the rain beneath an umbrella as he passes the closed main doors of the Bank of England in London. Britain’s lenders have been selling units and detailing plans to bolster their businesses since the central bank initially said in November it was concerned that banks weren’t holding enough capital.
A pedestrian shelters from the rain beneath an umbrella as he passes the closed main doors of the Bank of England in London. Britain’s lenders have been selling units and detailing plans to bolster their businesses since the central bank initially said in November it was concerned that banks weren’t holding enough capital. Photographer: Simon Dawson/Bloomberg




9:09 April 25 (Bloomberg) -- Jonathan Portes, director of the National Institute for Economic and Social Research, and Arnab Das, managing director of market research and strategy at Roubini Global Economics LLC, discuss U.K. gross domestic product figures reported today, fiscal policy and the business outlook. They speak with Francine Lacqua and Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)
That delay could leave banks less than seven months to plug the gap identified by the Bank of England. The regulator is recommending the firms raise capital to cover bigger potential losses, possible fines for mis-selling and stricter risk models. Chancellor of the Exchequer George Osborne in February ruled out injecting any more public money into state-owned Royal Bank of Scotland Group Plc.
“It’s surprising that they haven’t been told yet,” said Cormac Leech, a banking analyst at Liberum Capital Ltd. in London. “The PRA is getting off to a bad start, potentially destabilizing the financial system rather than stabilizing it.”
The banks will hold within the next three weeks their first formal meetings with the PRA since the central bank published its report on March 27, the people said. They will discuss the assessment by the Bank of England’s Financial Policy Committee and the capital plans the banks have already outlined, the people said.
Capital Ratios

Barclays Plc (BARC) fell 1.7 percent to 288.7 pence by 10:15 a.m. in London, the biggest faller in the FTSE 350 Banks Index. RBS slipped 1.5 percent to 296.3 pence, Lloyds Banking Group Plc (LLOY)dropped 1 percent to 52.63 pence, while HSBC Holdings Plc (HSBA) was little-changed at 691.5 pence. Standard Chartered Plc’s shares were unchanged at 1,616 pence.
Officials at RBS, Lloyds, HSBC and the PRA declined to comment on the discussions. Barclays Finance Director Chris Lucas told reporters this week that talks with the regulator are continuing.
HSBC and Standard Chartered, the two British banks that get most of their profit from Asia, have the strongest core Tier 1 capital ratios under the latest rules set by the Basel Committee on Banking Supervision of 9.8 percent and 10.7 percent. Barclays has a ratio of 8.4 percent, Lloyds 8.1 percent and RBS 7.7 percent, according to company filings.
Selling Assets

Britain’s lenders have been selling units and detailing plans to bolster their businesses since the central bank initially said in November it was concerned that banks weren’t holding enough capital.
Since then, Lloyds has sold a 20 percent stake in wealth-manager St. James’s Place Plc and is considering a sale of its Scottish Widows Investment Partnership division. Edinburgh-based RBS said in February it would sell a 25 percent stake in Citizens Financial Group Inc., the U.S. consumer and commercial lender acquired in 1988, and would further shrink its investment bank. Barclays, Lloyds and RBS also plan to sell contingent convertible notes to boost their financial strength.

By Donal Griffin - Apr 24, 2013 9:16 PM GMT+0100


Q

Citigroup Inc. (C) shareholders, who rejected the bank’s 2011 compensation plan, voted in favor of the latest round of payouts after the lender said it overhauled rewards for top executives.
The 2012 plan, which includes an $11.5 million package for new Chief Executive Officer Michael Corbat, received more than 90 percent of votes cast in the non-binding tally, Secretary Rohan Weerasinghe said at the annual meeting in New York.





Enlarge image
Citigroup Inc. CEO Michael Corbat



Simon Dawson/Bloomberg
Citigroup Inc. Chief Executive Officer Michael Corbat, pictured, and Chairman Michael O’Neill presided over their first annual meeting together since taking the bank’s most senior positions last year.
Citigroup Inc. Chief Executive Officer Michael Corbat, pictured, and Chairman Michael O’Neill presided over their first annual meeting together since taking the bank’s most senior positions last year. Photographer: Simon Dawson/Bloomberg




10:56 April 23 (Bloomberg) -- Michael Mayo, a bank analyst at CLSA Ltd., talks about Citigroup Inc.'s earnings and financials. He speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
The approval is a success for Corbat and Chairman Michael O’Neill, who said in February that the bank had changed how it paid top executives so that rewards would be tied to performance. Shareholders rejected the previous plan last April amid criticism that it allowed former CEO Vikram Pandit to collect millions of dollars too easily. The board ousted Pandit six months later and replaced him with Corbat.
“The company has taken significant, positive strides” to remedy concerns about the gap between pay and performance, shareholder advisory firm Glass Lewis & Co. said in a report prepared for the meeting. “What a difference a year makes.”
Corbat, 52, and O’Neill, 66, presided over their first annual meeting together since taking the New York-based bank’s most senior positions last year. O’Neill, a director since 2009, replaced Richard Parsons as chairman after the 2012 annual meeting.
The CEO and chairman have embarked on an overhaul of Citigroup’s operations, announcing plans to cut 11,000 jobs, shut branches, pull back from certain markets and exit more if results don’t improve.
Venting Anger

The meeting was attended by about 150 shareholders. Investors have used the gathering in previous years as an opportunity to vent anger as Citigroup shares tumbled amid bailouts and multibillion-dollar losses tied to subprime mortgages. While the stock has outpaced other U.S. lenders since last year, it’s still down 84 percent since the end of 2007.
“We are by no means satisfied,” O’Neill said in response to a question from Vincent Russo, a shareholder who said the stock hadn’t performed well enough since a reverse split in May 2011. The split converted every 10 common shares into one new common share.
Citigroup has advanced about 6.7 percent since the reverse split, and are up 19 percent this year, after a 50 percent increase in 2012. They dropped 44 percent in 2011.
Boosting Value

The shares advanced 1.4 percent to $47.12 at 4:15 p.m. in New York trading. Russell Forenza, who said he lost $1.5 million on Citigroup shares, said he needed the stock to reach $600 to break even. He offered to join the board to help boost the stock price.
“You’ll see some decisions on that board that will get that stock price back up,” Forenza said.
The vote on compensation was encouraged by Glass Lewis and ISS Proxy Advisory Services, a unit of MSCI Inc. (MSCI) The bank said in February that awards will be based on “pre-defined” goals - - including financial metrics --established at the beginning of the year, replacing the previous system of rewarding executives at the discretion of the compensation committee.
Glass Lewis said that there’s still a “disconnect”between executives’ pay and performance. The firm said it’s concerned that executives got large cash bonuses for 2012 not tied to any disclosed financial metrics.
Cash Bonus

Corbat’s 2012 package included a $4.2 million cash bonus. Manuel Medina-Mora, the head of consumer banking who received $11 million, including $4.2 million in cash.
Corbat is “decisive and he gets results,” O’Neill said.“I work closely with Mike, he briefs me on what’s going on, but I have a clear understanding of who’s running the bank and I’m not intrusive but I’m interested.”
Corbat told shareholders that he and fellow executives have turned the bank into a “simpler, smaller, sounder institution.” The lender manages its risks in a way that would avert the multibillion-dollar losses that JPMorgan Chase & Co. suffered in its chief investment office, Corbat said.
“The way we run our institution is different from JPMorgan in terms of managing risk in this particular instance,” Corbat said. “That’s not what that money is set aside to do.”
Directors Re-Elected

Shareholders elected 11 of the 12 directors, Weerasinghe said. Lawrence Ricciardi retired from the board after reaching the panel’s retirement age of 72, according to a March proxy filing.
Ricciardi’s retirement brought the number of directors on the Citigroup board to 11, fewer than the range of 13 to 19 in the bank’s corporate-governance guidelines.
“The range is intended to be a guideline, not a requirement,” Shannon Bell, a spokeswoman for the bank, said in an e-mailed statement. “The board’s intention is to add qualified directors to the board and will announce these appointments when they are made.”
The board hasn’t announced a replacement for Ricciardi, who joined in July 2008, months before Citigroup took a $45 billion U.S. bailout to avoid collapse. He headed the audit committeeand also was a member of the executive committee. He previously held executive roles at International Business Machines Corp. (IBM), RJR Nabisco Inc. and American Express Co. (AXP), according to a biography in a 2012 Citigroup proxy filing.
Joss, Rodin

Glass Lewis recommended that investors vote to remove directors Robert Joss and Judith Rodin. Joss, 71, has a consulting contract with the bank that pays him $350,000 a year in addition to fees and awards in return for advising on projects from “time to time,” Citigroup said in a filing.
“We view such relationships as potentially creating conflicts for directors as they may be forced to weigh their own interests in relation to shareholder interests when making board decisions,” Glass Lewis wrote in its report.
Joss, a former Wells Fargo & Co. (WFC) executive, received $662,500 in total 2012 compensation, according to the bank’s most recent proxy filing. The next highest-paid directors were O’Neill and Anthony Santomero, who each received $375,000, the filing shows.
Shareholders also should remove Rodin, 68, from the board because she “failed to adequately oversee the company’s risk controls” during the three years through 2009 when Citigroup’s share price tumbled, Glass Lewis said.

Rift Between Bank of America and Fannie Mae Grows













Late last week, Bank of America – one of the largest originators of home loans in the country – revealed that it would cease selling new home mortgage loans to Fannie Mae in the wake of a controversy over previously-written loans that were deemed deficient after most resulted in foreclosures.
The case gained attention last year when Bank of America agreed to buy back approximately $2.5 billion in toxic mortgages from Fannie Mae and Freddie Mac. As a part of this deal, Bank of America was left open to additional claims from Fannie Mae, who is now fighting with BoA in court over the exact amount of loans that were not written according to underwriting standards.
As a result, Fannie Mae will no longer be able to purchase home loans from BoA and repackage them into mortgage-backed securities and sell them to investors. This in theory cuts down on the amount of liquidity in the housing market and could potentially crimp attempts to jumpstart the home-buying process in the U.S. – something BoA says will not happen for its customers.
In the meantime, Fannie Mae has stated that it is dedicated to working out a mutually-beneficial solution with BoA about the buy-back case and arrive at an acceptable dollar amount for repurchases. It still sticks by its original contention that a mass of mortgages sold to Fannie Mae by BoA were improperly originated and shouldn’t have been written in the first place. When they defaulted in mass and resulted in home foreclosures, Fannie Mae’s balance sheet took a major blow.
Bank of America still has other options to replace Fannie Mae in its list of sources for liquidity. Freddie Mac and Ginnie Mae are two other government-sponsored enterprises that could sponsor BoA mortgages, and other private investors could also step in and fill the gap.
This case comes as the federal government is seriously considering the role of Fannie Mae and Freddie Mac in the overall mortgage market. Previously, the two were relied on to provide much-needed liquidity in the market by purchasing home loans and freeing up capital to be then used by home loan originators to make new mortgage loans. That role may seriously change over the next few years.
As for BoA, its situation continues to worsen. BoA is now the second-largest bank in the country by assets and is the second-largest originator of home loans, taking a backseat to JPMorgan Ch


Read more: Rift Between Bank of America and Fannie Mae Grows | Foreclosure News http://www.eforeclosuremagazine.com/foreclosure/rift-between-bank-of-america-and-fannie-mae-grows#ixzz2RrhljLor
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There are several lawsuits against the Banks over the Libor Crisis, including Investment Companioes, Town Councils, Mortgage Lenders and this will go on for months.

Slovenia Bank Rescue Costing 20% of GDP Means No Escaping EU Aid


By Yalman Onaran - Apr 30, 2013 2:00 AM GMT+0100


Q

Slovenia, the first former Communist nation in the euro zone, is facing a typically capitalist dilemma: whether to protect creditors of big banks.
Rising loan losses resulting from a housing bust and a second recession in two years have left a hole of about 7.5 billion euros ($9.8 billion) at Slovenia-based lenders, investment bank Keefe Bruyette & Woods estimates. That’s a lot for a 35 billion-euro economy: A bank bailout would push government debt above 70 percent of economic output.





Enlarge image
Slovenia Bank Rescue Costing 20% of GDP Means No Escaping EU Aid



Joze Suhadolnik/Bloomberg
The three biggest banks - Nova Ljubljanska Banka d.d., Nova Kreditna Banka Maribor d.d. and Abanka Vipa d.d. - are government-owned or controlled and make up almost half the financial system.
The three biggest banks - Nova Ljubljanska Banka d.d., Nova Kreditna Banka Maribor d.d. and Abanka Vipa d.d. - are government-owned or controlled and make up almost half the financial system. Photographer: Joze Suhadolnik/Bloomberg
Even after a successful domestic debt sale two weeks ago, the country may need assistance from the European Union, and holders of bank bonds, including the most senior creditors, could be forced to take losses, according to Raoul Ruparel, head of research at London-based Open Europe. Such a bail-in, which would be the second in the euro zone, after Cyprus, risks deepening divergence in the monetary union by keeping borrowing costs higher in economically weak nations.
“It’s not impossible, but it’s very unlikely that Slovenia can manage to pull off the bank restructuring without any EU money,” said Ruparel, who tracks economic and political developments in the region. “And when it turns to official funds, the conditions will most likely include a bail-in of creditors, especially because banks are the main problem.”
Cyprus Bailout

Slovenia is trying to avoid following Cyprus as the sixth country using the euro to require a bailout. The sale of 1.1 billion euros of 18-month bills gave the government some breathing room. The yield on its dollar bonds due October 2022 has fallen 58 basis points to 5.67 percent since the April 17 sale. Still, the cost of cleaning up its banks may force Slovenia to join Ireland, Spain and Greece in seeking aid and Cyprus in having to impose losses on creditors.
The government has injected about 1 billion euros into Slovenia’s three largest banks since 2008, according to data compiled by Andraz Grahek, a managing partner at Capital Genetics, a financial-advisory firm in Ljubljana, Slovenia. The country’s lenders will need an additional 900 million euros by the end of July, the government said in a document last week.
The three biggest banks -- Nova Ljubljanska Banka d.d.,Nova Kreditna Banka Maribor d.d. and Abanka Vipa d.d. -- are government-owned or controlled and make up almost half the financial system. They have been buying sovereign debt as foreign investors stay away. About 79 percent of bills sold this year prior to the most recent sale were purchased locally, according to the Finance Ministry. The proportion for the latest sale was 71 percent, the nation’s securities-clearing firm said.
Doubling Debt

Meanwhile, government debt has more than doubled since 2008, partly because of the cash injections to keep banks alive. Those reciprocal money flows have reinforced the link between sovereign indebtedness and bank solvency that euro-zone leaders vowed last year to break.
The government, in power for less than two months, has pledged to carry out the previous administration’s bank-restructuring plans, including the creation of a so-called bad bank to move as much as 4 billion euros of nonperforming debt out of the lenders and recapitalize them.
Delinquencies account for 20 percent of total loans, and that could rise to 27 percent, KBW estimates. As much as 90 percent of the soured debt is held by locally owned banks whose bad-loan ratio could surge to 34 percent, according to the firm.
That would amount to 5 billion euros for the three biggest lenders, some of which would be absorbed by provisions already set aside by the banks. The government might have to inject 3 billion euros of capital to cover the shortfall and finance the bad bank that will take over the nonperforming assets, KBW said.
Aid Package

The EU aid package might have to be about 8 billion euros because the government needs to finance a widening budget deficit as well as bank restructuring, estimates Mai Doan, a London-based economist at Bank of America Merrill Lynch. The Organisation for Economic Co-operation and Development has criticized the government’s 900 million-euro figure as too low and urged some costs to be borne by owners of bank debt.
The government plans to give banks bonds in exchange for the nonperforming assets they transfer to the bad bank. In an interview yesterday with Delo newspaper, Finance Minister Uros Cufer said the asset-management company to take over the bad loans would have to be established in less than a year.
Prime Minister Alenka Bratusek said she will sell state assets, including government stakes in banks as high as 90 percent of the largest lender, to help pay for recapitalization. That has been met with skepticism by some because of Slovenia’s historical resistance to government divestiture and a lack of investor interest in its banks. Bratusek has promised more-detailed plans.
‘Unsustainable Levels’

“The government continues to emphasize it won’t request a bailout, but the pipeline of potential debt issuance in the coming year is quite large,” Doan said. “Investors would like to have a backstop from the EU to comfortably invest in Slovenia’s bank restructuring. The government will resist an EU package until it’s pushed to do it by markets, when yields rise to unsustainable levels.”
The yield on 10-year dollar bonds already exceeds that of Romania, Chile or Mexico. Slovenia had to resort to dollar funding in October to tap emerging-markets investors, an unusual move for a euro-zone country. The yield on Slovenia’s 2018 euro-denominated bond is 4.57 percent, compared with 4.37 percent for junk-rated Portugal, which is rated five levels below Slovenia’s Baa2 investment grade from Moody’s Investors Service.
Monetary Club

Slovenia, a nation of 2 million people that accounts for 4 percent of the euro-zone’s economic output, joined the monetary union in 2007. Now its membership may require it to impose losses on senior bank creditors, as Germany leads a chorus advocating such burden-sharing in restructuring costs.
The new bail-in strategy risks widening the gap between lending rates in weaker countries such as Slovenia and stronger ones including Germany, according to Alberto Gallo, head of European credit research at Royal Bank of Scotland Group Plc. That could push struggling economies further into recession and make it more difficult to end the region’s crisis.
Banks in weaker euro-zone countries already pay more interest for deposits, ranging from 2.5 percent to 4.5 percent, while German or Finnish counterparts pay as little as 0.5 percent. That translates to higher lending rates for companies in countries from Slovenia to Spain, hurting efforts to improve their competitiveness with German counterparts.
Nonfinancial corporations in Spain, Ireland, Greece, Italy, Portugal, Slovenia and Cyprus pay an average of 5.4 percent for new loans maturing in one-to-five years, according to European Central Bank data. Companies in Austria, Belgium, Germany,Finland, France and the Netherlands pay 3.3 percent.
“Financial fragmentation isn’t getting any better and causes economic fragmentation within the region,” Gallo said.
Leaving, Shrinking

Meanwhile, foreign banks operating in Slovenia are leaving or shrinking, which worsens the prospects of an economic recovery any time soon, said Ronny Rehn, a KBW analyst.
“Loans are shrinking in the country, so the economy which is built on local demand is collapsing,” said Rehn, who’s based in London. “We might end up being too bullish on asset-quality assumptions for the banks in the next two years if the economy gets much worse.”
Slovenia joins a growing list of euro-zone countries whose banks have pushed them to the brink of collapse.
Ireland was shut out of bond markets in 2010, when it tried to prop up its domestic banks, whose assets had peaked at four times the nation’s gross domestic product. It agreed to a 68 billion-euro aid package that year.
Spanish Borrowing

Spain’s borrowing costs surged to as high as 7.5 percent last year as the government delayed recapitalizing savings banks. The country reached an accord for 100 billion euros of assistance and has so far tapped about half of that credit line.
Cyprus, whose banking system is also eight times the size of its economy, received a 10 billion-euro aid package last month after agreeing to shut its largest bank.
In Ireland, junior bondholders were forced to take losses. Irish leaders, who wanted to penalize senior creditors as well, were rebuked by ECB and EU officials at the time. Two years later those officials demanded that Spain force some losses on subordinated debt of failed banks.
When it was Cyprus’s turn, German and Dutch politicians demanded that a bigger portion of bank-restructuring costs be borne by creditors. Because Cypriot lenders had little debt, depositors with more than 100,000 euros at the two largest lenders face losing as much as 60 percent of their savings.
New Template

Slovenia’s banks aren’t as big, with total assets about 140 percent of GDP. They also have enough debt to cover the bail-in amount that European leaders will probably require. The three largest banks have 8.7 billion euros of debt, KBW estimates. OECD and KBW data show that less than 10 percent of that is junior bonds, so senior creditors may have to take losses.
Dutch Finance Minister Jeroen Dijsselbloem initially said the Cypriot rescue would become the new template for the euro zone. While he later recanted, European officials have since moved to speed up implementation of new rules that would institutionalize bail-in of bank creditors. ECB President Mario Draghi said on April 4 that the rules need to go into effect as early as 2015, not be delayed until 2018 as originally planned.
Rehn and Doan said they can’t rule out depositors being included in a bail-in. The European Commission bail-in plan lumps uninsured depositors with other senior creditors, Rehn said. If that model is used in Slovenia, depositors could be forced to share the costs. Draghi has said he favors modifying the proposal to elevate all depositors above other creditors.
Borrowing Costs

The shift from blanket protection of almost all bank creditors to demanding they share restructuring costs has contributed to higher borrowing costs for the financial institutions in the weaker countries, RBS’s Gallo said. Banco Santander SA, Spain’s largest lender, pays 4.875 percent for 10-year senior bonds, compared with 2.375 percent for Deutsche Bank AG, Germany’s largest, data compiled by Bloomberg show.
The impact also can be seen in the cost of insuring subordinated debt at the weakest banks in the weakest economies. Credit default swaps to protect against losses cost about 10 percent for Italy’s Monte dei Paschi di Siena SpA and 7 percent for Spain’s Banco Popular Espanol SA (POP), according to Bloomberg data. That translates to 1 million euros to insure 10 million euros of Monte Paschi junior bonds against default annually and 700,000 euros to insure the same amount of Banco Popular debt.
CDS on Monte Paschi’s senior debt costs about 6 percent and Banco Popular’s is about 5 percent. Comparable credit-insurance for UniCredit SpA, Italy’s largest bank, is about 3 percent for senior debt and 5 percent for subordinated.
Debt Divergence

The divergence between junior and senior debt rates, as well as between weaker and stronger banks, is healthy for the long-term functioning of the banking industry, RBS’s Gallo said.
“This is how it’s supposed to be -- higher risk of failure being reflected in the cost of borrowing by the institution,”Gallo said. “So smaller, second-tier banks are paying more to borrow, but partly because the biggest banks are too big to fail and investors still believe governments will rescue them.”
In the short run, the divergence in borrowing costs between weaker and stronger countries hurts economic recovery efforts. Banks paying more to borrow have to lend at higher rates.
That’s partly because French, German and U.K. banks have been reducing their lending to banks and companies in southern European countries. In 2010, when Ireland had to bail out its banks and was prevented from imposing losses on creditors, lenders based in those three countries had $112 billion of exposure to the Irish banking system. By the end of September 2012, that was down to $31 billion, according to the Bank for International Settlements.
‘Run Away’

While a country breakdown showing who owns Slovenia’s bank debt isn’t available, total foreign exposure to lenders in the Adriatic nation fell by 50 percent in a year to $3 billion at the end September, BIS data show.
“Now that the bankers have run away from the periphery, German and French politicians no longer care about bank creditors,” said Paul De Grauwe, an economics professor at the London School of Economics. “Germany now says taxpayers shouldn’t bear the costs of bank restructuring, but what it really means is German taxpayers shouldn’t. Slovenian or Cypriot people are stuck with the costs since German bankers are gone.”
Slovenian taxpayers may wind up better off than their Cypriot counterparts because their banking industry is smaller, according to Timothy Ash, chief emerging-markets economist at Johannesburg-based Standard Bank Group Ltd. The government needs to move fast to detail its restructuring plans and seal a deal with the EU to keep those costs under control, he said.
“It’s all manageable unless there’s a run on the bank,”said Ash, who’s based in London. “The longer you mess around, the higher possibility for such a run to happen. They need to get serious soon. If they wait too long, they’ll be toast.”

Exclusive: Metro Bank Losses Pass £100m Mark


A circular to shareholders seen by Sky News reveals
spiralling losses but rapid customer growth at the new high street lender.


7:10pm UK,
Wednesday 01 May 2013

Metro Bank is Britain's first new high street lender in
more than a century

• 
  
  
  
  
  By Mark Kleinman, City Editor
  
  Losses at Metro Bank, the first new high street lender in Britain
  in more than a century, have reached more than £100m nearly three years since
  its launch.
  
  According to information circulated to shareholders in recent days, Metro
  Bank lost £45.7m before tax in 2012, and a further £8.8m in the first quarter of
  this year. After tax, the respective figures were £34.5m and £7.1m.
  
  The losses underline the costs associated with breaking into the UK's retail
  banking sector at a time when Government ministers are attempting to foment new
  competition through a string of policy measures.
  
  The numbers handed to Metro Bank's investors, which are broadly in line with
  the bank's expectations, follow losses of £23.4m in the 16 months to the end of
  2010 and a further £33.1m the following year.
  
  Metro Bank's first branch opened in Central London in July 2010, and it now
  has more than 15 open, with aggressive expansion plans over the next five
  years.
  
  On Friday it will open a branch in Slough, Berkshire, which has drive-through
  banking facilities, reflecting its determination to revolutionise the consumer
  banking experience.
  
  According to the circular to shareholders, who include the American hedge
  fund tycoon Steve Cohen and the billionaire Reuben brothers, loans and advances
  to customers grew at an annual rate of 297% in the year to March 31.
  Chairman Vernon Hill launched a similar bank
  venture in the US
  Customer deposits grew at an annual rate of 210% to almost £700m over the
  same period.
  
  The UK banking regulator, the Financial Conduct Authority, has reduced the
  level of capital required to be held by Metro Bank by a quarter, "reflecting the
  increasing maturity of the bank and the quality of risk management", it told
  shareholders.
  
  Metro Bank is chaired by Vernon Hill, who enjoyed huge commercial success
  with the launch of similar banking ventures in the US.
  
  Its board members include Luke Johnson, the restaurants entrepreneur, and
  Lord Flight, former chief secretary to the Treasury.
  
  The lender has raised hundreds of millions of pounds from shareholders to
  fund its launch and subsequent expansion, and is targeting a stock exchange
  listing as soon as next year.
  
  A Metro Bank spokeswoman declined to comment.
  

RBS Returns To Profit In Latest Quarter


The 82% taxpayer-owned bank sees shoots of recovery as it
overcomes bad debt woes and compensation for mis-selling of products.


9:02am UK,
Friday 03 May 2013

It is the first quarterly profit report from RBS for 18
months

• 
  
• 
  
• 
  
  
  
  
  
  
  The Royal Bank of Scotland has returned to profit with its latest
  quarterly results, reporting a group operating gain of £826m.
  
  RBS said its profit after tax for the January-March period compared with a
  net loss of £1.545bn in the first quarter of 2012.
  
  It is the first profit report from the bank, which received Britain's biggest
  ever bailout following the financial crash, for 18 months.
  
  The profit was above forecasts. The bank is currently 82% owned by the
  British taxpayer.
  
  Sky News City Editor Mark Kleinman revealed last night that the
  bank's chairman would announce later today the start of privatisation.
  
  Kleinman said: "Sir Philip Hampton will say that George Osborne, the
  Chancellor, will be able to press the button on a multi-billion pound share sale
  by the middle of next year."
  
  The bank's balance sheet was helped by not needing to make a further
  provision for payment protection insurance (PPI) mis-selling.
  RBS CEO Stephen Hester has focused the bank on
  core priorities
  RBS chief executive Stephen Hester has overseen the shedding of billions in
  assets and is focusing on core lending to British households and small
  businesses.
  
  "We expect to substantially complete the bank's restructuring phase during
  2014. We are seeing the start of a pick-up in loan demand and have a strong
  surplus of funds ready and available to support economic recovery," he said.
  
  However, Mr Hester still has major hurdles to overcome.
  
  Britain's financial regulator said in March that UK banks must raise £25bn of
  extra capital by the end of the year to absorb any future losses on loans.
  
  Although the regulator has not yet given specific guidance to individual
  banks, analysts expect the biggest shortfall to be at RBS.
  
  RBS said its capital position had improved during the period and its core
  tier one ratio - a bank's main benchmark of health - had risen by 50 basis
  points to 10.8%.
  
  It expects to have a core capital ratio of 9% at the end of 2013 on the basis
  of full implementation of tougher Basel III capital rules.
  
  The City regulator wants major lenders to achieve a core-tier one ratio of at
  least 7%.
  
• Related Stories
  

I GOT TOLD BY A BANK TELLER THAT RBS MADE £516MILLION PROFIT,SO MIGHT BE SOLD OFF.

Badboy wrote:I GOT TOLD BY A BBadboy?ANK TELLER THAT RBS MADE £516MILLION PROFIT,SO MIGHT BE SOLD OFF.

Didn't they sell Branches a while ago ? I think they still are paying off fines for the Libor crisis and PPI mis-selling.

Libor Lies Revealed in Rigging of $300 Trillion Benchmark


By Liam Vaughan & Gavin Finch - Jan 28, 2013 9:54 PM GM






The benchmark rate for more than $300 trillion of contracts was based on honesty. New evidence in banking's biggest scandal shows traders took it as a license to cheat. Graphic: Bloomberg MarketsEvery morning, from his desk by the bathroom at the far end of Royal Bank of Scotland Group Plc’s trading floor overlooking London’s Liverpool Street station, Paul White punched a series of numbers into his computer.





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Diamond Testifies in Libor Probe



Paul Thomas/Bloomberg
Former Barclays CEO Robert Diamond gave evidence to the Treasury Select Committee in London on July 10, 2012. Diamond stepped down from his position after regulators fined the bank 290 million pounds for attempting to rig the benchmark interest rate.
Former Barclays CEO Robert Diamond gave evidence to the Treasury Select Committee in London on July 10, 2012. Diamond stepped down from his position after regulators fined the bank 290 million pounds for attempting to rig the benchmark interest rate. Photographer: Paul Thomas/Bloomberg



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How Libor Was Rigged









Enlarge image
Gensler Began CFTC Investigation of Libor Manipulation



Peter Foley/Bloomberg
Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, started an investigation after listening to a tape of a conversation between traders and rate setters at Barclays.
Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, started an investigation after listening to a tape of a conversation between traders and rate setters at Barclays. Photographer: Peter Foley/Bloomberg



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London Lawyer Takes on Libor Banks



Harry Borden/ Bloomberg Markets
Stephen Rosen, an attorney at Collyer Bristow in London, represents a real estate company, three nursing homes and more than a dozen other firms that bought Libor-linked interest-rate swaps from banks.
Stephen Rosen, an attorney at Collyer Bristow in London, represents a real estate company, three nursing homes and more than a dozen other firms that bought Libor-linked interest-rate swaps from banks. Photographer: Harry Borden/ Bloomberg Markets



Enlarge image
Libor Score Card






White, who had joined RBS in 1984, was one of the employees responsible for the firm’s submissions for the London interbank offered rate, or Libor, the global benchmark for more than $300 trillion of contracts from mortgages and student loans to interest-rate swaps. Behind him sat Neil Danziger, a derivatives trader who had worked at the bank since 2002.
On the morning of March 27, 2008, Tan Chi Min, Danziger’s boss in Tokyo, told him to make sure the next day’s submission in yen would increase, Bloomberg Markets magazine will report in its March issue. “We need to bump it way up high, highest among all if possible,” Tan, who was known by colleagues as Jimmy, wrote in an instant message to Danziger, according to a transcript made public by a Singapore court and reported on by Bloomberg before being sealed by a judge at RBS’s request.

• More from the March 2013 issue of Bloomberg Markets
  
• How Libor Works
  
• Jeanne Gang vs. Frank Lloyd Wright | Slideshow
  
• Shaking Up Korea Inc.
  
• The Perils of Doing Business in Russia
  
• Slideshow: The Top 20 Emerging Markets
  
• The Master of Shangri-La
  

Danziger typically would have swiveled in his chair, tapped White on the shoulder and relayed the request to him, people who worked on the trading floor say. Instead, as White was away that day, Danziger input the rate himself. There were no rules at RBS and other banks prohibiting derivatives traders, who stood to benefit from where Libor was set, from submitting the rate -- a flaw exploited by some traders to boost their bonuses.

The next morning, RBS said it would have to pay 0.97 percent to borrow in yen for three months, up from 0.94 percent the previous day. The Edinburgh-based bank was the only one of 16 surveyed to raise its submission that day, inflating that day’s rate by one-fifth of a basis point, or 0.002 percent. On a $50 billion portfolio of interest-rate swaps, RBS could have gained as much as $250,000.
Events like those that took place on RBS’s trading floor, across the road from Bishopsgate police station and Dirty Dicks, a 267-year-old pub, are at the heart of what is emerging as the biggest and longest-running scandal in banking history. Even in an era of financial deception -- of firms peddling bad mortgages, hedge-fund managers trading on inside information and banks laundering money for drug cartels and terrorists -- the manipulation of Libor stands out for its breadth and audacity.
Details are only now revealing just how far-reaching the scam was.
“Pretty much anything you could do to increase the revenue of your organization appeared legitimate,” says Martin Taylor, chief executive officer of London-based Barclays Plc from 1994 to 1998. “Here was the market doing something blatantly dishonest. I never imagined that people in the financial markets were saints, but you expect some moral standards.”
Where Libor is set each day affects what families pay on their mortgages, the interest on savings accounts and returns on corporate bonds. Now, banks are facing a reckoning, as prosecutors make arrests, regulators impose fines and lawyers around the world file lawsuits claiming the manipulation pushed homeowners into poverty and deprived brokerage firms of profits.
For years, traders at Deutsche Bank AG, UBS AG, Barclays, RBS and other banks colluded with colleagues responsible for setting the benchmark and their counterparts at other firms to rig the price of money, according to documents obtained by Bloomberg and interviews with two dozen current and former traders, lawyers and regulators. UBS traders went as far as offering bribes to brokers to persuade others to make favorable submissions on their behalf, regulatory filings show.
Members of the close-knit group of traders knew each other from working at the same firms or going on trips organized by interdealer brokers, which line up buyers and sellers of securities, to French ski resort Chamonix and the Monaco Grand Prix. The manipulation flourished for years, even after bank supervisors were made aware of the system’s flaws.
“We will never know the amounts of money involved, but it has to be the biggest financial fraud of all time,” says Adrian Blundell-Wignall, a special adviser to the secretary-general of the Organization for Economic Cooperation and Development in Paris. “Libor is the basis for calculating practically every derivative known to man.”
More than five years after alarms first sounded, regulators and prosecutors are closing in. UBS was fined a record $1.5 billion by U.S., U.K. and Swiss regulators in December for rigging global interest rates. Tom Hayes, 33, a former yen trader at the Zurich-based bank, was charged by the U.S. Justice Department on Dec. 20 with wire fraud and price fixing for colluding with brokers, contacts at other firms and his colleagues to manipulate Libor. Hayes hadn’t entered a plea as of mid-January, and his lawyers at Fulcrum Chambers in London declined to comment.
Barclays paid a 290 million pound ($464 million) fine in June to settle with regulators, and three top executives, including CEO Robert Diamond, departed. Other banks, including RBS, were negotiating settlements in early 2013, according to people with knowledge of the talks. RBS may pay as much as £500 million to settle allegations that traders tried to rig interest rates, two people with knowledge of the matter say. UBS and Barclays admitted wrongdoing as part of their settlement agreements. Spokesmen for the two banks, and for RBS, declined to comment.
The industry faces regulatory penalties of at least $8.7 billion, according to Morgan Stanley analysts. The European Union is leading a probe that could see banks fined as much as 10 percent of their annual revenue. Meanwhile, Libor is being overhauled after the U.K. government ordered a review in September into the way the benchmark is set.
The scandal demonstrates the failure of London’s two-decade experiment with light-touch supervision, which helped make the British capital the biggest securities-trading hub in the world. In his 10 years as chancellor of the Exchequer, from 1997 to 2007, Gordon Brown championed this approach, hailing a “golden age” for the City of London in a June 2007 speech. Brown, who later served as prime minister for three years, declined to comment.
Regulators have known since at least August 2007 that some banks were using artificially low Libor submissions to appear healthier than they were. That month, a Barclays employee in London e-mailed the Federal Reserve Bank of New York, questioning the numbers that other banks were inputting, according to transcripts published by the New York Fed. Nine months later, Tim Bond, then head of asset allocation at Barclays’s investment bank, publicly described Libor as “divorced from reality,” saying in a Bloomberg Television interview that firms were routinely misstating their borrowing costs to avoid the perception they were facing stress.
The New York Fed and the Bank of England say they didn’t act because they had no responsibility for oversight of Libor. That fell to the British Bankers’ Association, the industry lobbying group that created the rate in 1986 and largely ignored recommendations from central bankers after 2008 to change the way it was computed. Regulators also were preoccupied with the biggest financial crisis since the Great Depression, and forcing banks to be honest about their Libor submissions might have revealed they were paying penalty rates to borrow, which in turn would have further damaged public confidence.
Libor is calculated daily through a survey of banks asking how much it costs them to borrow in 10 currencies for periods ranging from overnight to one year. The top and bottom quartiles of quotes are excluded, and those left are averaged and made public before noon in London.
Because it’s based on estimates rather than actual trade data, the process relies on the honesty of participants. Instead of being truthful, derivatives traders sought to influence their own and other firms’ Libor submissions, with their managers sometimes condoning the practice, according to documents and transcripts of instant messages obtained by Bloomberg.
Occasionally, that meant offering financial inducements. “I need you to keep it as low as possible,” a UBS banker identified as Trader A wrote to an interdealer broker on Sept. 18, 2008, referring to six-month yen Libor, according to transcripts released on Dec. 19 by the U.K.’s Financial Services Authority.
“If you do that … I’ll pay you, you know, $50,000, $100,000 … whatever you want … I’m a man of my word.”
Some former regulators say they were surprised to learn about the scale of the cheating. “Through all of my experience, what I never contemplated was that there were bankers who would purposely misrepresent facts to banking authorities,” says Alan Greenspan, chairman of the U.S. Federal Reserve from 1987 to 2006. “You were honorbound to report accurately, and it never entered my mind that, aside from a fringe element, it would be otherwise. I was wrong.”
Sheila Bair, who served as acting chairman of the U.S. Commodity Futures Trading Commission in the 1990s and as chairman of the Federal Deposit Insurance Corp. from 2006 to 2011, says the scope of the scandal points to the flaws of light-touch regulation on both sides of the Atlantic. “When a bank can benefit financially from doing the wrong thing, it generally will,” Bair says. “The extent of the Libor manipulation was eye-popping.”
Libor debuted the same year that British Prime Minister Margaret Thatcher’s so-called Big Bang program of financial deregulation fueled a boom in London’s bond and syndicated-loan markets. The rate was designed as a simple benchmark that banks and borrowers could use to price loans.
In 1997, the Chicago Mercantile Exchange adopted the rate for pricing Eurodollar futures contracts, solidifying Libor’s position in the swaps market, which by June 2012 had a notional value of $639 trillion, according to the Bank for International Settlements. Swaps are contracts that allow borrowers to exchange a variable interest cost for a fixed one, protecting them against fluctuations in interest rates.
The CME decision created a temptation for swaps traders to game Libor, particularly in the days before international money market dates, when three-month Eurodollar futures settle. The value of positions was affected by where dollar Libor was set on the third Wednesdays of March, June, September and December. The manipulation of Libor was discussed openly at banks.
“We have an unbelievably large set on Monday,” one Barclays swaps trader in New York e-mailed the firm’s rate setter in London on March 10, 2006. “We need a really low three-month fix. It could potentially cost a fortune.” The rate setter complied with the request, according to the FSA, which published the e-mail following its investigation of the bank’s role in manipulating Libor.
The 2007 credit crunch increased the opportunity to cheat. With banks hoarding cash and not lending to one another, there was little trading in money markets, making it difficult for rate setters to assess borrowing costs accurately. Instead, traders say they resorted to seeking input from brokers, colleagues and acquaintances at other firms, many of whom stood to benefit from helping to push the rate in a particular direction.
On Aug. 20, 2007 -- days after BNP Paribas SA halted withdrawals from three of its funds, which marked the start of the credit crisis -- Paul Walker, RBS’s London-based head of money-markets trading, telephoned Scott Nygaard in Tokyo, where he was head of short-term markets for Asia. Walker, the person responsible for U.S.-dollar Libor submissions, wanted to talk about how banks were using the benchmark to benefit their trading positions.
“People are setting to where it suits their book,” Walker said, according to a transcript of the call obtained by Bloomberg. “Libor is what you say it is.”
"Yeah, yeah,” replied Nygaard, an American who had joined RBS in 2006 after six years at Deutsche Bank in Japan.
Walker and Nygaard, who’s now global head of treasury markets based in London and a member of the Bank of England’s money-markets liaison group, both declined to comment. It didn’t take a conspiracy involving large numbers of traders at different firms to move the rate. By nudging their submissions up or down, traders at a single bank could influence where Libor was fixed. Even inputting a rate too high to be included could push up the final figure by sending a previously excluded entry back into the pack.
“If you have a system like Libor, where highly subjective quotes are built into the process, you have a lot of opportunity for manipulation,” says Andrew Verstein, a lecturer at Yale Law School in New Haven, Connecticut, and co-author of a paper on Libor rigging published in the Winter 2013 issue of the Yale Journal on Regulation. “You don’t need a cartel to make Libor manipulation work for you.”
Rate setters at JPMorgan Chase & Co., Rabobank Groep, Barclays, Deutsche Bank, RBS and UBS were given no training or guidelines for making submissions, according to former employees who asked not to be identified because investigations are continuing. At RBS and Frankfurt-based Deutsche Bank, derivatives traders on occasion made their firm’s submissions, they say. Spokesmen for all of the banks declined to comment. Anshu Jain, co-CEO of Deutsche Bank and head of its investment bank at the time, told investors at a panel discussion in Germany on Jan. 21 that rigging Libor “sickens me the most of all the scandals.”
As the credit crisis intensified in the fourth quarter of 2007, Libor was a closely scrutinized gauge of the health of financial firms. After years of relative stability, the benchmark became more volatile. The average spread between the highest and lowest submissions to the three-month dollar rate widened to about 8 basis points in the three months ended on Oct. 30, 2007, from about 1 basis point in the previous three months, data compiled by Bloomberg show.
The volatility drew the attention of some bankers. On Aug. 28, 2007, Fabiola Ravazzolo, an economist on the financial-stability team at the New York Fed, received an e-mail from a member of Barclays’s money-markets desk in London accusing the firm’s competitors of making artificially low Libor submissions, according to transcripts published by the regulator that didn’t identify the sender. Barclays that day had submitted the highest rate to three-month dollar Libor, while the lowest was posted by London-based Lloyds TSB Group Plc, suggesting Barclays was having more difficulty obtaining funding than Lloyds, a bank later bailed out by the U.K. government and now known as Lloyds Banking Group Plc.
“Today’s U.S.-dollar Libors have come out, and they look too low to me,” the e-mail from the Barclays employee said. “Draw your own conclusions about why people are going for unrealistically low Libors.”
Lloyds, in an e-mailed statement, declined to comment on what it called “speculation by traders at other banks.” It wasn’t until the following year, prompted by a March 2008 report by the Bank for International Settlements and an April article in the Wall Street Journal suggesting banks were low-balling their submissions, that the New York Fed and the Bank of England asked the BBA to review the rate-setting process.
In June 2008, New York Fed President Timothy F. Geithner sent a memo to Bank of England Governor Mervyn King and his deputy, Paul Tucker, putting forward a list of recommendations for improving Libor, including increasing the number of banks that submit rates, basing the rate on an average of randomly selected submissions and cutting maturities in which little or no trading took place.
Aside from creating a committee to review questionable submissions and promising to increase the number of contributors to dollar Libor, the BBA didn’t implement Geithner’s suggestions. Angela Knight, then the group’s CEO, said in a December 2008 statement that Libor could be trusted as “a reliable benchmark.”
Privately, regulators were skeptical. As the BBA was drafting its proposals, King wrote to colleagues including Tucker on May 31, 2008, describing the group’s response as “wholly inadequate,” according to documents released by the Bank of England in July. Rather than press the BBA to change the way Libor was set, the Bank of England, the FSA and the New York Fed demanded that any references to their institutions be removed from the BBA review, the e-mails show.
A spokesman for the Bank of England says Britain’s central bank “had no supervisory responsibilities” for Libor at the time. The New York Fed also “lacked direct authority over Libor” and didn’t want to be seen endorsing a private association’s plan, according to Jack Gutt, a spokesman. The New York Fed continued to press for reform through 2008, he says.
Liam Parker, an FSA spokesman, referred to earlier comments Adair Turner, chairman of that agency, made to British lawmakers in July that the regulator was in contact with the CFTC in Washington at a “very early stage” in an investigation the U.S. agency began in 2008. The BBA said in an e-mail that it’s working with regulators “to ensure the provision of a reliable benchmark which has the confidence and support of all users.”
By failing to act, regulators allowed rate rigging to continue over the next two years. At RBS, the abuse was most pronounced from 2008 until late 2010, according to people close to the bank’s internal probe. At Barclays, manipulation continued until the second half of 2009. Japan’s Financial Services Agency banned Citigroup Inc. from trading derivatives linked to Libor and Tibor, the Tokyo interbank offered rate, for two weeks in January as punishment for wrongdoing that started in December 2009.
Former Barclays Chief Operating Officer Jerry Del Missier went further, saying that the Bank of England encouraged the lender to suppress Libor submissions. In October 2008, days before RBS and Lloyds sought bailouts, the central bank asked Barclays to lower its quotes because they were stoking concern about the bank’s stability, Del Missier told a panel of British lawmakers on July 16. Tucker, the Bank of England deputy director, told the panel he never gave such instructions.
“It’s not adequate for the authorities to say, ‘We didn’t have responsibility,’” says Paul Myners, a Labour Party member in Parliament’s House of Lords and a U.K. Treasury minister from 2008 to 2010. “It was a huge oversight by the regulators not to realize that Libor and other benchmarks were of such critical importance that they should fall within the regulatory ambit.”
In the end, it was a U.S. regulator without any banking oversight that took action. Vincent McGonagle, a top enforcement official at the CFTC in Washington, initiated a probe into Libor after reading the April 2008 Wall Street Journal story. The agency sent letters to several banks that year requesting information, according to a person with knowledge of the investigation. The commission decided it had the authority to act because Libor affects the price of futures contracts that trade on the CME.
Banks opened their own investigations after the CFTC inquiries. Barclays appointed Rich Ricci, then co-head of its investment bank, to oversee an inquiry. As his team sifted through thousands of pages of e-mails and transcripts of instant messages and phone conversations, it uncovered evidence that traders were manipulating the rate both up and down for profit, according to two people with knowledge of the probe.
The CFTC came to the same conclusion in late 2009 or early 2010, according to the person with knowledge of the commission’s inquiry. It happened when Gary Gensler, chairman for less than a year, stood in the foyer of his ninth-floor Washington office as Stephen Obie, acting head of enforcement at the time, played a Barclays tape of a conversation between traders and rate setters, the person said. “We had to vigorously pursue this,” Gensler says. “Sometimes practice in a market gets confused and over the line, but nonetheless it may still be illegal.”
The investigations revealed how widespread the manipulation was. At UBS, traders made about 2,000 written requests for movements in rates from late 2006 to late 2009. The majority were sent by Hayes, the Tokyo-based trader who led a “massive effort” to rig yen Libor, the CFTC said in a settlement with the bank in December. Hayes also bribed brokers to disseminate his requests to other panel banks and, on occasion, persuaded them to lie about where Libor should fix that day, the Department of Justice said. Hayes, who traded “enormous volumes” in yen swaps, made about $260 million in revenue for UBS during the three years he worked there, the CFTC said.
At Barclays, derivatives traders made 257 requests for U.S.-dollar Libor, yen Libor and euro interbank offered rate, or Euribor, submissions from January 2005 to June 2009, according to the settlement between the bank and regulators. The requests for U.S.-dollar Libor were granted about 70 percent of the time.
Manipulating Libor was a common practice in an unregulated market big enough to span the world though small enough for most participants to know one another personally, investigators found. Traders who worked 12-hour days without a lunch break were entertained by brokers soliciting business, according to three people familiar with the outings.
In March 2007, five months before the onset of the credit crisis, a dozen traders from Lehman Brothers Holdings Inc., Deutsche Bank, JPMorgan and other firms traveled to Chamonix, according to people with knowledge of the outing. The group, traders of yen-based derivatives, spent a day skiing before gathering over mulled wine at a restaurant. They flew back late on Sunday, in time for a 6 a.m. start the next day.
The trip was organized by London-based ICAP Plc, the world’s biggest interdealer broker. Brokers such as ICAP and RP Martin Holdings Ltd., also in London, were sounding boards for those trying to set rates, especially after money markets dried up, traders interviewed by Bloomberg say.
ICAP said in May that it had received requests from government agencies probing banks’ Libor submissions and is cooperating fully. The firm said it had suspended one employee and placed three others on paid leave pending the outcome of the investigation. Two RP Martin brokers were arrested in London on Dec. 11 as part of an inquiry into Libor rigging. Brigitte Trafford, an ICAP spokeswoman, declined to comment, as did RP Martin spokesman Jeremy Carey.
RBS in 2011 dismissed Tan, Danziger and White, the rate setter, following the bank’s probe into yen Libor known as Project Zen. Tan sued the bank for wrongful dismissal in Singapore in 2011, and the case is still before the court. Andy Hamilton, who traded derivatives tied to the Swiss franc, also was fired for trying to influence Libor. The bank has suspended at least three others, including Jezri Mohideen, head of rates trading for Europe and the Asia-Pacific region, according to a person with knowledge of the probe. White, Tan, Danziger and Hamilton declined to comment. Mohideen said in a statement issued by his lawyer that he never sought “to exert pressure on anyone to submit inaccurate rates.”
Deutsche Bank has dismissed two individuals, including Christian Bittar, head of money-markets derivatives trading, three people familiar with the bank’s internal investigation said. Barclays has disciplined 13 employees and dismissed five, Ricci, now head of corporate and investment banking, told British lawmakers on Nov. 28. At least 45 employees, including managers, knew of the “pervasive” practices at UBS, the FSA said. More than 25 left the Swiss bank following an internal probe, a person with knowledge of the investigation said in November.
The Barclays settlement prompted the U.K. government to order an inquiry into Libor. The report, published in September, recommended stripping the BBA of its oversight role, handing it to the Bank of England and introducing criminal sanctions for traders seeking to rig the rate. “Governance of Libor has completely failed,” FSA Managing Director Martin Wheatley, who led the review, said when he released the report. “This problem has been exacerbated by a lack of regulation and a comprehensive mechanism to punish those who manipulate the system.”
The ubiquity of contracts pegged to Libor leaves banks vulnerable to lawsuits. Barclays was ordered by a British judge in November to release the names of individuals involved in rigging rates after Guardian Care Homes Ltd., a Wolverhampton, England–based owner of about 30 homes for the elderly, sued for £38 million over interest-rate swaps that lost it money.
In Alabama, mortgage holders have filed a class action in federal court alleging that 12 banks colluded to push Libor higher on the dates when repayments are set. The plaintiffs include Annie Bell Adams, a pensioner whose home was repossessed, and Dennis Fobes, a 59-year-old salesman of janitorial supplies whose house in Mobile is now worth less than his mortgage. He says he refinanced in 2006 with a $360,000 adjustable-rate mortgage linked to six-month dollar Libor. “It’s just another example of how the banks have manipulated everything in their power,” Fobes says. “I will fight them to the day I die to save my home.”
The city of Baltimore and Charles Schwab Corp., the largest independent brokerage by client assets, have filed suits claiming banks colluded to keep Libor artificially low, depriving them of fair returns. At least 30 such cases are pending in federal court in New York.
In London, lawyers at Collyer Bristow LLP, a 252-year-old firm, are working on a plan that would force banks to reimburse customers for any payments made under contracts pegged to Libor. Stephen Rosen, who runs the firm, says clients who entered into interest-rate swaps with banks may be entitled to cancel those contracts because manipulation was so entrenched -- at a cost of hundreds of billions of dollars.
“It’s possible on legal grounds to set aside the swap contract entirely, which could mean you can recover all the payments you’ve made under the swap,” says Rosen, who wears thick-rimmed glasses and speaks in clipped, precise tones, sitting in his office in a Georgian townhouse in the legal district of Gray’s Inn. “The bank, when they entered into the swap, made an implied representation that Libor would not be unfairly manipulated.”
Rosen says his clients include a publicly traded real estate company, three nursing homes and at least 12 more firms that bought Libor-linked interest-rate swaps from banks. He declines to identify them by name, citing confidentiality rules. “The client will argue, ‘Had you told me the truth -- that you were fraudulently manipulating this rate -- I would never have entered the contract with you,’” he says. “We are calling this the nuclear option.”
To contact the reporters on this story: Liam Vaughan in London at lvaughan6@bloomberg.net and Gavin Finch in London at gfinch@bloomberg.net.
With assistance from Silla Brush in Washington, Andrea Tan in Singapore and Francine Lacqua, Lindsay Fortado and Jesse Westbrook in London.
To contract the editor responsible for this story: Robert Friedman at rfriedman5@bloomberg.net.

HSBC profits near double to $8.43bn in 'calmer waters'


HSBC has reported its best quarterly performance in several years as
Britain’s largest bank saw its pre-tax profits nearly double to $8.4bn.








HSBC customers were frustrated
to find they could not use their cards Photo:
Reuters






By Harry Wilson, Banking
Editor

1:08PM BST 07 May 2013


30 Comments




Pre-tax profits rose 95pc year-on-year to $8.43bn, as impairment charges
halved and cost fell to $9.3bn, down about $1bn compared to the same period in
2012. Revenue rose 14pc to $18.4bn.





The rise in profits was helped by a fall in bad debt charges across HSBC’s
global business, as well as the results of a cost reduction programme that has
led to more than 30,000 jobs cut.


Losses from bad debts dropped 51pc to $1.2bn in the quarter as the bank
reduced costs and sold off businesses to recover from the financial crisis. The
bank has sold 52 businesses in the last two years.


Stuart Gulliver, chief executive of HSBC, said the bank had “moved into
calmer waters”, but warned there were “still challenges ahead” as he pointed to
further cost cuts that are likely to see thousands more staff lose their jobs.
At the time of the full-year results, Mr Gulliver said the bank had exceeded its
annual cost savings target of $3.5bn.



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He said: "We have had a good start to the year, with growth in reported and
underlying profit before tax. These results demonstrate our progress in
implementing the strategy we set out in May 2011.

"While continuing
uncertainty in the global economy has created a relatively muted environment for
revenue growth, we have increased revenue in key areas including residential
mortgages and Commercial Banking in both our home markets of Hong Kong and the
UK, and in our Financing and Equity Capital Markets business."

About half of HSBC’s profits came from its global banking and markets
business, which reported a pre-tax profit for the quarter of $3.59bn, up about
$500m year-on-year and a close to threefold increase on the final three months
of last year.

The profits were ahead of market forecasts of $8.04bn and shares in the bank
rose 2.6pc this morning to 733p, valuing the bank at £136bn.

On a macro-economic level, Mr Gulliver said he expected the mainland Chinese
economy to accelerate after a slower than expected start to the year; the US to
continue to outperform its peers but at a slower pace of growth than in the
past; the eurozone to contract; emerging markets to grow at around 5pc and
global growth to be around 2pc for 2013.

HSBC reported a fall in pre-tax profits for 2012 to $20.6bn after the bank
was hit by record fines and the mis-selling claims but remained upbeat as it
raised its dividend. The fall was largely due to a $5.2bn charge against changes
in the value of the bank's own debt, as well a $1.9bn fine related to a US
money-laundering investigation, and $1.4bn of provisions for the mis-selling of
payment protection insurance and interest rate swaps.

Exodus Gathers Pace At RBS Investment Arm


Fresh wave of departures from state-backed lender reflects
political pressure to refocus on domestic UK market.


10:25pm UK,
Tuesday 07 May 2013

RBS chief Stephen Hester is under pressure from George
Osborne to lend

• 
  
• 
  
• 
  
  
  
  
  
  
  By Mark Kleinman, City Editor
  
  The exodus of senior executives at Royal Bank of Scotland's (RBS)
  investment banking arm is poised to accelerate as pressure mounts on the
  state-backed lender to strengthen its capital base and refocus on its home UK
  market.
  
  I understand that John McCormick, the chairman and chief executive of RBS's
  markets and international banking division in Asia, is expected to step down
  from the role.
  
  His future has not yet been finally determined, and he may remain with the
  bank in another position, but insiders said he was almost certain to vacate his
  current Hong Kong-based job.
  
  RBS's board, chaired by Sir Philip Hampton, will discuss the revised strategy
  of its investment bank next week.
  
  Sources said on Wednesday that the outcome was likely to involve further
  swingeing job cuts in addition to the thousands of jobs which have already
  disappeared since RBS's rescue by British taxpayers in 2008.
  
  If he does leave the bank, Mr McCormick would be the most senior executive to
  depart the M&IB business since the exit of John Hourican, the division's
  overall chief executive, earlier this year.
  
  Mr Hourican fell on his sword as part of RBS's £390m settlement for rigging
  the interbank borrowing rate Libor, despite the fact that he had had no
  knowledge of or involvement in any wrongdoing.
  
  Mr McCormick has worked for RBS for more than a decade, holding roles which
  included managing the integration of the Asian operations of RBS and ABN Amro,
  the Dutch lender that was acquired in 2007 in an ill-fated deal that led to the
  British bank's near-collapse.
  
  His departure would be symbolic in underlining the huge international
  retrenchment of RBS, which expanded under Fred Goodwin, the former chief
  executive, to the point where it acquired a stake in the giant state-owned Bank
  of China.
  
  In recent weeks, a number of other senior M&IB personnel, including
  William Fall, who ran RBS's financial institutions group, and Sian Hurrell, its
  European head of sales, have also left the bank.
  
  George Osborne, the Chancellor, has been applying relentless pressure on
  Stephen Hester, RBS chief executive, to shrink the investment bank and plough
  more capital into the UK economy.
  
  Mr Hester said at the weekend in an interview with The Sunday Times that RBS
  had £20bn of existing balance sheet capacity available to lend to British
  businesses but that demand for capital was anaemic.
  
  Last Friday, RBS announced that it had returned to the black in the first
  quarter of 2013, but disappointed the City over the weak performance of its
  investment bank.
  
  Like other British banks, RBS is also being ordered to strengthen its capital
  position, a target it intends to meet partly through the sale of assets such as
  its US retail arm, Citizens.
  
  An RBS spokeswoman declined to comment specifically on Mr McCormick but said:
  "The group is going through a strategic review of its Markets business and the
  consequences of that may have implications for senior staff just as it could for
  employees in general as signalled on Friday.
  
  "As always, strategic changes can give opportunities for individuals to
  assess their career options. Similarly these changes also allow the bank to
  assess the level of leadership needed."
  

Free banking at risk as EU wants us to bank anywhere in Europe


European proposals that would allow Britons to switch to a bank account in
another country could hasten the demise of free banking, experts have warned.









'Would you really want to bank
in Greece or Italy?' one banking expert
asked






By Richard Evans

6:15PM BST 08 May 2013


404 Comments




Draft EU laws published today say that customers must be able to compare the
cost of bank accounts across the EU on a
like-for-like basis. But this would require many banks to change their business
models, which vary widely across the continent, analysts say.


British banks might decide to fall into line with the widespread practice of
charging for services, such as cash machine withdrawals, that are currently free
in order to avoid being undercut on other services.


The draft directive, which could become law in three years, says banks must
provide consumers with a "fee information document" listing the most common
services provided and the fees charged for each of them, drafted "using
standardised terminology and standard formats, to facilitate comparison between
the offers" of different banks.


"The problem is that pricing models vary from country to country," said
Gareth Lodge of Celent, a consultancy. "In France, for example, you pay to have
the account, then you get a number of free ATM withdrawals, you pay to have your
credit card but pay a lower rate of interest.


"So any price comparison will between apples and pears unless this proposal
leads to a harmonisation of banks' business models throughout Europe. This could
hasten the demise of free banking in Britain."



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  08 May 2013
  
• 
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• 
  EU rules threaten free banking
  05 May 2013
  

He added that, while the UK had an established system for switching bank
accounts, many countries did not and would face large costs to establish one.


Mr Lodge also questioned the demand for cross-border account switching.
"Would you really want to bank in Greece or Italy?" he asked.

Ralph Silva of SRN, a research company, said: "The problem with comparable
and transparent banking charges is that each European country has a radically
different infrastructure. Some countries emphasise different products and have
built scale around those products, so they are able to offer lower prices on
those products. The price comparison will not be fair."

He added: "The overall cost of adding a new customer to a banking system is
not trivial. If customers start bouncing back and forth, costs for the bank are
going to go up."

The European Commission said consumers "often pay above the odds" for the
services they receive from their bank and "struggle to have clarity on the
various fees charged".

Michel Barnier, the European commissioner for the internal market, said: "By
making it easier to compare fees and change bank accounts, we hope to see better
offers from banks and lower costs."

Other recent proposals from the EU have also threatened free banking.
Customers could be charged for using credit or
debit cards if European plans to limit or scrap the fees that
retailers pay on card transactions go ahead. The move could also cause the bring
about the demise of cashback on credit cards.

The UK Cards Association, which represents the debit and credit card
industry, said the European Commission's plans would hurt British consumers for
little or no corresponding benefit.

"The British are used to, and like, free banking," said Richard Koch, a
senior executive at the Cards Association. "The commission's model would impact
on the card issuers' ability to continue that."

The commission is expected to issue a White Paper next month with decisions
about capping the fees.

Under this week's proposals, every country would have to have at least on
bank offering "basic" bank accounts to all citizens, regardless of their
financial circumstances. Each state would also be required to have at least one
independent comparison website for banking charges.

Mr Silva said: "It makes sense to make access to a bank account a right in
Europe. It's impossible to live as a lawful citizen without access to a bank
account or electronic payment method yet banks in many European countries have
the right to refuse a bank account to a citizen."

But Mr Lodge said: "While I support financial inclusion, forcing banks to
accept customers regardless of profitability or risk moves the banks from a
business to a social tool."

TIPS FOR SWITCHING BANK ACCOUNTS


Which?, the consumer group, suggests the following steps to ensure that
switching to a new bank goes smoothly.

• Let your new bank know whether you want your balance on your old bank
account to be transferred across and your old account closed or not.

• Agree a switching date with your new bank. Think about the best date in the
month for your direct debits and standing orders to be transferred and agree
this with your new bank.

• It's a good idea to keep some money in both accounts during the switching
process. Some banks do, however, offer a special overdraft facility while the
transfer is taking place.

• Check that your direct debit and standing order details have been
transferred correctly

• Tell your employer or pension provider that you're switching bank accounts


• If anything goes wrong with the switch and you incur bank charges as a
result of a mistake or unavoidable delay by either bank during the switch, you
will be reimbursed.

Would move to a bank in another EU country? Email us at money@telegraph.co.uk

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1. Banks and Finance
   

Co-op Bank could need taxpayer support, says Moody's


The Co-op could require taxpayer support for its banking arm after the
business had its credit rating downgraded by Moody’s, which warned the mutual
faced losses that it might not be able to afford.








The Co-op is reckoned by some
estimates to be facing a capital hole in its banking arm of about £1bn, raising
fears the mutual may struggle to meet the PRA’s new capital
requirements Photo:
Alamy






By Harry Wilson

11:42PM BST 09 May 2013


47 Comments




The ratings agency warned that Co-op Bank might need “external support” as a
result of new writedowns on bad debts linked to commercial real estate and
belated costs linked to its acquisition of the Britannia Building Society in
2009.


The downgrade of Co-op Bank comes weeks after it pulled out of a deal to
acquire 632 branches from Lloyds Banking Group that analysts thought could
bolster the business.


In a note published on Thursday night, Moody’s said it believed the lender
could need help from the authorities to fill any capital hole in its balance
sheet, warning it saw “moderate potential for systemic support likely to be
forthcoming from the UK authorities”.


Moody’s calculates that the Co-op Bank’s “problem loan ratio” had increased
by the end of last year to 10.9pc from 8.1pc 12 months earlier as it was hit by
a deterioration in its commercial real estate portfolio.


The Prudential Regulation Authority (PRA), Britain’s banking regulator, is
expected this month to order several lenders to raise new capital. The PRA’s
actions follow a call by the Bank of England’s Financial Policy Committee for
banks to raise more than £20bn in new capital.



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  10 May 2013
  
• 
  Co-op Bank could need taxpayer help - Moody's
  
  09 May 2013
  
• 
  Co-op pulls out of deal to buy 632 Lloyds bank
  branches
  24 Apr 2013
  
• 
  Why Co-op pulling out is not necessarily bad news
  for Lloyds
  24 Apr 2013
  
• 
  KPMG faces double inquiry by reporting
  watchdog
  09 May 2013
  

The Co-op is reckoned by some estimates to be facing a capital hole in its
banking arm of about £1bn, raising fears the mutual may struggle to meet the
PRA’s new capital requirements.

In a statement on Thursday night, the Co-op Banking Group said: “We are
disappointed by the ratings downgrade announced by Moody’s. We have a strong
funding profile and high levels of liquidity, which are significantly above the
regulatory requirements.

“We do acknowledge, like the rest of our banking sector peers, the need to
strengthen our capital position in light of the broader economic downturn and
the pending introduction of enhanced regulatory requirements, and we have a
clear plan to drive this forward throughout the coming months.

"In March, we announced the sale of our life business to Royal London and
also our intention to sell our general insurance business. In addition to these
measures we plan to significantly simplify our business, which will greatly
improve our operational effectiveness and also enhance our capital position in
the process.

“Our banking business is already characterised by excellent levels of
customer service and advocacy, as recently highlighted in reports by YouGov and
uSwitch. Our primary current account base in recent years has enjoyed
significant growth.

"The actions we will now take to strengthen our balance sheet and simplify
our business model around a core relationship banking offer, will create a
compelling co-operative banking business which is truly distinctive within the
banking sector.”

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New Co-op chief to launch strategic review


The new chief executive of the Co-operative Group is to undertake a
strategic review of its businesses in the wake of the downgrade of its bank’s
debt status to “junk”.








Moody's said the bank's capital
levels were too low and had been made worse by 'substantial
losses'






By James Quinn

10:00PM BST 11 May 2013


1 Comment




Euan Sutherland, who officially takes over from the outgoing Peter Marks at
the mutual’s annual meeting this Saturday, is to evaluate each of the group’s
main businesses to establish which it wants to hold on to and which might be
sold to generate further capital.


The results of the review could be presented as soon as August, when the
Co-op is due to publish its half-year results.


High on the agenda of the review will be the financial health of the bank,
which on Thursday night saw its debt downgraded by Moody’s from A3 to
Ba3 on capital concerns.


The agency warned that the Co-op Bank — which last month pulled out of a
£750m deal to buy 632 branches from Lloyds Banking Group — might need “external
support”.


The news led to the resignation of bank chief executive Barry Tootell, and
saw its subordinated debt fall by 26pc as bondholders feared they may be “bailed
in” to absorb future losses.



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Before Thursday night’s news, the Co-op had already attempted to bolster its
capital shortfall, which industry sources estimated stands between £1bn and
£1.5bn.

It has signed a deal with Royal London to sell its life insurance arm for
£219m, and has already appointed Deutsche Bank to run the £600m-plus sale of its
general insurance arm, for which there are understood to be in excess of 10
interested bidders.

Mr Sutherland’s review is likely to focus on the sustainability of the bank,
which has 342 branches, and whether it is possible for it to be sold or wound
down in some way.

Co-op management remains in discussions with the Prudential Regulatory
Authority about the nature of its capital requirements.

In addition Mr Sutherland, the former chief operating officer of Kingfisher,
will look at the other parts of the mutual’s business, including its sprawling
retail arm and its funeral business, to assess whether any other parts might be
disposed of to bolster the group’s financing structure.

He is understood, however, to feel that the supermarket business is at the
heart of the mutual’s operations

The Libor scandal

Year of the lawyer

Banks face another punishing year of fines and lawsuits

Jan 5th 2013 |From the print edition

• 
  
• 
  

THE lights still burn late into the night at the offices of the “magic circle” of London’s biggest law firms, but they are now on in different bits of the building. The legions of transaction lawyers who worked late before the crisis drawing up merger contracts are home to tuck the children into bed. Yet even as a dearth of dealmaking has slowed one part of the legal business, there is booming demand for litigation and regulatory lawyers who are preparing banks for another year of fines and lawsuits.
The main legal risk facing big international banks relates to a widening scandal over attempts to rig benchmark interest rates, including the London Interbank Offered Rate, or LIBOR. The most recent LIBOR-related fine was levied on December 19th, when British, Swiss and American authorities imposed penalties of SFr1.4 billion ($1.5 billion) on UBS, a Swiss bank. In its legal settlement with regulators UBS admitted to “widespread and routine” attempts to manipulate LIBOR rates. Its fine came six months after an earlier settlement and admission by Barclays that its traders, too, had tried to rig LIBOR.

In this section

• Edifice complex
  
• Hope springs eternal
  
• Year of the lawyer
  
• Banking on the ummah
  
• Huddling for comfort
  
• Fitter yet fragile
  
• Stoneless rivers
  

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Related topics

• Industries
  
• Investment services
  
• Securities Services
  
• Investment brokerages
  
• Financial services
  

The UBS case marked an escalation of the risk faced by big banks in two respects. The first was in the size of its fine, which was three times larger than that paid by Barclays, and far larger than many expected given that UBS (like Barclays) had co-operated with investigators. Moody’s, a ratings agency, noted the fine was “credit negative not only for UBS, but for all banks with sizeable capital-markets activities.”
The fine was so large partly because of the pervasive violations at UBS: investigators found more than 2,000 documented attempts to manipulate rates. But it also confirms that the authorities in America and Britain are ready to impose far harsher penalties than they used to. The Royal Bank of Scotland, which hopes to reach an agreement with regulators within the next two months, is thought likely to pay a fine of at least $500m. It will not be the last. More than 20 banks in total are understood to be under investigation or co-operating with various regulatory authorities.
A second reason the UBS settlement upped the ante for banks is that it exposes them to greater risk from LIBOR-related civil lawsuits that are currently making their way through New York courts. Lawyers involved in the main class-action lawsuit against banks—brought by, among others, the City of Baltimore, Charles Schwab and holders of mortgages linked to LIBOR—say the disclosures in the UBS case point to wider efforts to manipulate rates than previously thought, including allegations of banks making improper payments to some interdealer brokers. (For their part, banks argue that even the recent revelations contain no evidence of a concerted conspiracy to fiddle LIBOR.)
The LIBOR scandal is not the only thing keeping the lawyers busy. One measure of the litigation risk facing banks can be found in the latest quarterly report of JPMorgan Chase, a large American bank with an unusually open policy of disclosing its litigation risks. It reckons that the range of “reasonably possible losses” it faces from litigation runs from zero to as high as $6 billion. Among the cases it is contesting are relatively recent ones, such as those brought over the losses incurred by its trading arm in London in 2012, as well as others dating back years, including one relating to Enron.
Its ongoing litigation expenses are also hair-raising—$3.8 billion during the first nine months of 2012, compared with $4.3 billion in the same period of 2011. Making comparisons with other banks is difficult, as few quantify their potential exposure in the way that JPMorgan Chase does. But most large international lenders face a similar raft of lawsuits and investigations.
One bank boss says he now spends about half of his time dealing with regulatory and legal issues, rather than meeting clients or running the business. Worse, the costs of pursuing the banks for wrongdoing are difficult to contain: uncertainty over legal risks may make it harder for them to attract capital, which would affect their capacity to lend. Only the late-night lawyers will be happy with that.