Lloyds, 43 percent owned by the British government, will sell 600 branches as part the restructuring and exit all non-core businesses and risky portfolios inherited from HBOS, which it acquired in January, the European Commission said.

Lloyds earlier this month unveiled a series of regulatory-enforced asset sales.

"This plan effectively addresses the Commission's competition concerns and at the same time ensures the return of Lloyds Banking Group to long term viability," European Competition Commissioner Neelie Kroes said in a statement.

The EU executive said Lloyds would pay a significant proportion of the restructuring costs to ensure a level playing field.
(Reporting by Foo Yun Chee)
((foo.yunchee@thomsonreuters.com; tel +32 2 287 6844; Reuters Messaging: foo.yunchee.reuters.com@reuters.net))

Britain succeeded in delaying the EU plan in October because it feared the new bodies would be able to overrule its national regulators too easily.

"I am confident we will secure a satisfactory outcome," British financial services minister, Paul Myners, told the UK parliament's treasury committee.

EU finance ministers are due to try again to reach a political agreement on the new bodies when they meet at the start of December.

The EU's executive European Commission has drafted a law to set up three new pan-EU banking, insurance and securities authorities with binding powers over national watchdogs.

They form a core part of the bloc's response to the financial crisis by having more consistent supervision.

But the Commission has "gone further" than EU leaders agreed in June when they said the bodies cannot take binding decisions that affect public finances, such as forcing a bank bailout.

"There can be no interventions that have fiscal consequences," Myners said.

"I am confident that the agreement reached by the European Council in June will be reflected in the final outcome."

Britain, as home to Europe's biggest financial centre, wants two key aspects of the draft law changed -- how appeals by a member state against a binding decision are handled, and new powers conferred on the Commission.

Under the draft, Britain would need to get the support of two-thirds of EU states to scrap a binding decision. It wants this reversed so that a binding decision would need two-thirds backing to survive an appeal.

It also wants to scrap a proposal that would allow the Commission to declare an emergency, thereby ratcheting up pressure on a country to take action.

"I cannot conceive a situation where the Commission is the natural body to decide on this," Myners said.

Myners could not give "cast iron" guarantees that Britain can change the draft law as it has no veto.

The EU's 27 states and European Parliament have the final say on the draft law that will also set up a new pan-EU body to monitor risks across the financial system.

There are also concerns the three new authorities are being built on shaky legal grounds as they ultimately depend on the European Commission's authority under the EU treaty.

"We must have a robust framework that reduces the areas and risks of challenges," Myners said.
(Reporting by Huw Jones, editing by Ron Askew)
((Reuters messaging: huw.jones.reuters.com@reuters.net; + 44 207 542 3326; huw.jones@thomsonreuters.com))

The bill was scheduled to be considered and possibly voted on this week. But lobbyists said Democrats on the U.S. House of Representatives Financial Services Committee disagree over how to fund the program and need to extend debate on it.

As presented last week, the bill called for large financial firms to repay the U.S. Treasury Department on a case-by-case basis for Treasury loans used to finance government regulators' interventions to fix troubled financial firms.

But committee Chairman Barney Frank on Friday decided he would no longer support that funding approach for the proposal, which is meant to deal with the question of financial mega-firms that markets have come to see as "too big to fail."

Instead, a spokesman for the chairman said last week that Frank would back having large firms make regular payments into a pre-established fund for unwinding troubled competitors.

Frank has scheduled a press conference for Tuesday afternoon at which he is expected to discuss the issue.

His shift last week aligned him with Federal Deposit Insurance Corp Chairman Sheila Bair, who argued in favor of firms prepaying into an established resolution fund, rather than paying case-by-case after the fact.

Treasury Secretary Timothy Geithner said last week that after-the-fact funding would avoid the "moral hazard" of firms assuming that there is a pre-funded government "insurance" pool available to protect them from failure.

Financial companies with more than $10 billion in assets would be assessed under the "resolution authority" program proposed by Frank and the Obama administration.

The "resolution authority" proposal is part of a larger financial regulatory overhaul moving through Congress after the worst financial crisis in generations.

In the Bush administration's confused handling of the crisis, some firms were allowed to collapse, such as Lehman Brothers, some got huge taxpayer bailouts, such as Citigroup and American International Group, and some were acquired in government-engineered deals.

President Barack Obama and congressional Democrats want to avoid another such episode by setting up a more orderly protocol for dealing with large non-bank financial firms that get into trouble. The resolution process they have proposed resembles the FDIC's process for handling troubled banks.

(Editing by Chizu Nomiyama) ((kevin.drawbaugh@thomsonreuters.com; Tel: +1 202 898 8390; Fax: +1 202 488 3459))

Bankers who gathered for the American Bankers Association annual meeting were hesitant to dismiss the administration's efforts, but said the government's programs have largely been unappealing for smaller banks.

"I just haven't heard a lot of interest," said Mark Tenhundfeld, senior vice president for regulatory policy for the ABA.

He said the issue is not the willingness of community banks to lend, but the scarcity of small businesses seeking loans. "The biggest issue first and foremost is demand," he said.

Tenhundfeld said he did not want to be too negative about the programs, but banks don't want the taint of the bailout perception.

The administration last week unveiled new efforts to improve small businesses' access to credit. The programs largely rely on community banks to provide that credit.

Under one program, the government would provide low-cost capital to the banks, contingent on the banks submitting a plan on how the capital will allow them to increase lending to small businesses.

The other program would increase the maximum Small Business Administration loan size to $5 million from $2 million and would provide partial guarantees on the loans.

Bankers said they are hesitant to take capital injections from the government because of the stigma and the potential restrictions on dividends and compensation.

"I think if it doesn't come with a lot of strings, it might be OK," said John Boyer, chief executive of Kanza Bank, a Kansas-based, family-owned community bank that has been operating since 1905.

But he was quick to add that his bank does not want to take a capital injection. "I wouldn't be in support of participating in the program," he said.

"We don't really think a lot of banks would take advantage of that," Diane Casey-Landry, chief operating officer for the ABA, told the conference attendees on Monday.

Norman Williams, CEO of Illinois Service Federal, a Chicago-based savings and loan, said the administration has a good vision on how to improve credit for small businesses.

However, he said, the government has not smoothly distributed funds from the Troubled Asset Relief Program and he is not sure the newly announced plans will do any better.

"There's no incentive for me to take TARP money," he said. "Unless these initiatives really accomplish what they're designed to do, we may lose a lot of small businesses."

He said some small businesses have been hesitant to reach out to banks for a loan because they have been rejected multiple times by risk-averse banks.

The bankers said the SBA loan program has promise but
involves a lot of paperwork and takes a long time to process the loans.

The ABA's Tenhundfeld also said he doubts how much demand there is for loans in the $2 million to $5 million range.

Small businesses are a critical component of the U.S. economy, with more than 50 percent of workers on their payrolls, according to U.S. Census Bureau data in 2002.

As the economy shows tentative signs of recovery, there is some evidence that bank credit is loosening slightly.

In a quarterly U.S. Federal Reserve survey of bank loan officers in July, 3.7 percent of respondents said their lending standards had "eased somewhat" to firms with annual sales under $50 million, the first easing since July 2007. But 35.2 percent of respondents also said their lending standards had "tightened somewhat," indicating there is still a long way to go.

(Reporting by Karey Wutkowski; Editing by Gary Hill) ((karey.wutkowski@thomsonreuters.com; + 1 202 898 8374)) Keywords: BANKS/SMALLBUSINESS

Last week, the SEC voted unanimously for ways to make the dark pools more transparent, such as revealing the electronic trading messages that are sent to a limited group of market participants.

In a report submitted to the SEC on Oct. 22, Goldman said the investing community -- especially retail -- has benefitted from the evolving market structure and industry competition.

The Goldman report, posted on the SEC website, summarized a meeting held on Sept. 24 between its executives and the commission staff to discuss issues involving market structure including short selling and dark pools.

In the report, Goldman stated five common myths regarding dark pool trading and supplied arguments in an effort to dispel those myths.

Dark pools are trading platforms where buyers and sellers can anonymously match large blocks of stock, keeping details of the deals and prices concealed to prevent distorting prices in the broader market.

Dark pools, the largest of which are run by banks such as Goldman Sachs and Credit Suisse <CSGN.VX>, account for an estimated 10 to 15 percent of overall U.S. equity volume.

Goldman said in the report that increased competition from dark pools pushes all execution venues to compete for retail order flow in a superior manner.

"While market structure evolution has not been without its challenges, they have been accompanied by a secular decline in both implicit and explicit trading costs, benefiting primarily retail investors," Goldman said in the report.

(Reporting by Sakthi Prasad in Bangalore; Editing by Jon Loades-Carter)
((sakthi.prasad@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: sakthi.prasad.reuters.com@reuters.net))

"I am extremely sensitive to the public outrage about this," Feinberg told reporters.

He said that without exception, all of the pay plans that the firms submitted were inconsistent with the public's interest.

Feinberg's long-awaited pay rulings will apply largely to November and December. However, because those months determine the year-end bonuses that make up a large chunk of pay in the financial sector, it will have a profound effect on the earnings of the five top executives and 20 other highest-paid employees at each of the firms.

In all cases, Feinberg capped base cash salaries at $500,000 and ordered that the remainder of salaries be paid in company stock that must be held for the long-term.
Below are key details of his rulings for individual firms:

AMERICAN INTERNATIONAL GROUP:
Cash salaries for the top 25 earners for 2009 will be cut by 91 percent from 2008 levels. Total direct compensation will fall 58 percent from 2008 levels.

BANK OF AMERICA:
Cash salaries for the top 25 earners for 2009 will be cut 94 percent, total direct compensation will fall 62 percent.

CHRYSLER GROUP LLC:
No specific percentage cuts were listed. Base salary should not exceed $500,000 per year, except in appropriate cases for good cause shown.

CHRYSLER FINANCIAL:
Cash salaries for the top 25 earners will be will fall 30 percent; total direct compensation will fall 56 percent

CITIGROUP:
Cash salaries for the top 25 earners will be cut 96 percent, totoal direct compensation will be cut 70 percent;

GENERAL MOTORS:
Cash salaries for the top 25 earners will be cut 31 percent, total direct compensation will fall 20.4 percent.

GMAC LLC
Cash salaries cut for the top 25 earners will be cut 50 percent, total direct compensation will fall 86 percent. 

(Reporting by Karey Wutkowski and David Lawder, Editing by Chizu Nomiyama) ((david.lawder@thomsonreuters.com; +1 202 898 8395; Reuters Messaging: david.lawder.reuters.com@reuters.net))

Public debate on tightening exchange position limits could begin as soon as late November, another CFTC commissioner said.

Meanwhile, lawmakers in Washington took another step toward regulating the $450 trillion over-the-counter derivatives market, widely blamed for amplifying the financial crisis. A second House committee voted to require many swaps to move onto regulated exchanges, but with exemptions for end-users such as airlines and utilities.

Any clearing exemptions for end-users, such as airlines and manufacturers, should "be very narrowly defined to include only nonfinancial entities that use swaps as an incidental part of their business to hedge actual commercial risks," Gensler told a Futures Industry Association conference in Chicago.

He said hedge funds, financial firms or other investment funds should not be exempted from a clearing requirement -- which is intended to shed more light on the private OTC markets and protect participants from the default of a major player.

"We need to protect the public, that large swap dealers and entities that are holding themselves out to the public dealing in these complex derivatives are registering and regulated as swap dealers -- that we cover the next AIG so to speak," Gensler told reporters, alluding to the near collapse last year of U.S. insurer American International Group.

Nonfinancial companies say it would be a burden to go through clearing and have to post cash reserves. They say it is common to pledge noncash assets as collateral.

U.S. and European lawmakers moved in the last seven days on new derivatives rules meant to avoid a repeat of Wall Street-inspired economic meltdown.  While the European Commission unveiled its plans on Tuesday, the U.S. House Financial Services Committee passed a bill last week.

"We look forward to working with both committees and the rest of Congress to build upon this effort," Gensler said of the two U.S. bills, in an interview with Reuters TV, adding he will work with Congress to expand the number of transactions run through exchanges or clearinghouses.

CENTRAL CLEARINGHOUSES

The two U.S. proposals would require many OTC swaps run through a central clearinghouse, but, in general, would not require as many as the original Obama administration proposal.

The versions will be merged in a wider package of financial rule reforms for a House vote expected early next month.

DRIVE FOR LIMTS
Gensler also defended his push to impose position limits on energy traders. The CFTC faces intense pressure from Congress to tighten limits on the size of positions traders take in markets after crude oil futures hit a record near $150 a barrel last year and gas prices topped $4 a gallon at the pump.

"Excessive speculation in terms of concentrated large
positions can -- particularly in stormy times, and we did have a crisis last year -- (be) very tricky and treacherous for the economy," Gensler told the conference.

The proposed regulations target crude oil and energy
markets, but would also affect everything from trading in
currencies, securities -- even corn and wheat.

The CFTC could call for public comments on new position
limit rules by the end of November, CFTC Commissioner Bart
Chilton said on the sidelines of an energy conference in
Houston on Wednesday.

In some commodities, such as agricultural products, the CFTC puts position limits on how many contracts an investor can hold. In energy markets, the limits are set by the exchanges, like CME Group and IntercontinentalExchange.

"We're trying to find the right balance," Gensler said.

Traders and some exchanges warn that limits could reduce market liquidity and actually drive prices higher, or shift trading to overseas markets with looser rules. Large investors are preparing by rebalancing their portfolios, often sharply reducing positions that fall under U.S. regulation.

"There is already a lot of evidence of people migrating to these alternative markets," said Craig Donohue, chief executive of CME Group, the world's largest derivatives market operator.

Fund managers in Singapore with fewer than 30 "accredited" investors are currently exempt from holding a capital markets services license, freeing top managers from requirements such as filing certain reports to regulators and passing examinations set here.

The Monetary Authority of Singapore (MAS), the central bank, is likely to issue draft guidelines for public comment in November following consultations with interested parties on tightening supervision of hedge funds, sources said.

The changes could affect possibly hundreds of fund managers in Singapore.

Figures from Marsh, an insurance broking firm and risk advisor, say there are about 495 fund managers in Singapore currently exempt from some of the MAS capital market services licence rules.

The proposed rules will likely spell out the qualifications and experience required of managers planning to set up a fund as well as the standards of governance and similar infrastructure required, but will not remove tax incentives enjoyed by fund managers in Singapore, the sources said.

"MAS is studying the existing arrangements and the expectation is that something more rigorous will result from it," said Michael Coleman, chairman of the Singapore chapter of the Alternative Investment Management Association (AIMA).

Coleman, who is also managing director of commodities hedge fund Aisling Analytics, one of Singapore's largest hedge funds with about $1.5 billion in assets, said it was unclear how the new regulations will affect the industry financially.

"MAS is monitoring market developments and global initiatives, and will fine-tune our regulatory approach as appropriate," a spokeswoman for the MAS said.

There are some 138 hedge fund managers in Singapore and they manage at least $34.9 billion in assets, AIMA says. The industry, which suffered record losses in 2008 as markets tumbled during the global financial crisis, is growing.

"Under the current guidelines, any Tom, Dick and Harry with no relevant experience in fund management can set up his own hedge fund," said a hedge fund manager, who declined to be identified.

The manager said he was most concerned that MAS may force exempt funds to take up professional indemnity insurance, which could raise the cost of managing a small fund.

FEW TWO-MAN BANDS
But the changes may well be "cosmetic" because market forces will ensure that even small hedge funds are run by people with track record in the industry, he said.

"No bank will act as your counterparty or prime broker unless you have the relevant knowledge or experience," he said.

There have been 20 relatively large hedge funds set up in Singapore this year, UBS's head of Asia Pacific prime services David Gray said last week.

New funds need to be bigger since after the financial crisis clients were demanding a lot more compliance, due diligence and solid risk management, he said.

"It's very rare to get a two-man band anymore," Gray said.

Asian hedge funds have returned gains of 21.45 percent in the nine months to September, following losses of 20.57 percent last year, Singapore-based fund tracker Eurekahedge estimates.

Singapore has attracted asset managers, private banks and hedge funds in recent years with tax incentives and strict secrecy rules. It also provides investors the opportunity to manage part of the more than $300 billion in assets held by its sovereign wealth funds GIC and Tem
asek.
(Editing by Neil Chatterjee and Neil Fullick) ((kevin.lim@thomsonreuters.com; +65 6403 5663; Reuters Messaging: kevin.lim.reuters.com@reuters.net))

"He has very extensive experience of financial supervision and he has the qualities that are ideally suited to this very challenging role," Honohan said in a statement.

The government decided to put the responsibilities of the central bank and financial regulator back under one roof earlier this year after controversies surrounding now nationalised Anglo Irish Bank.

Authorities have been investigating Anglo Irish Bank directors' loans from their own bank, allegations of share price manipulation and claims it used multibillion euro transfers from assurer Irish Life & Permanent to boost its deposit base.

Honohan will oversee both the supervision of individual firms and the financial system generally, and Elderfield will report to him as financial regulatory chief.

At the Bermuda Monetary Authority Elderfield introduced a stress-test based capital requirement for banks to provide a buffer against the financial crisis and structured a government bailout of a local bank.

This year, Bermuda, a British territory in the Atlantic, moved to The Organization for Economic Co-operation and Development's (OECD) "white list" from its "gray list" of questionable tax jurisdictions.

(Reporting by Andras Gergely; editing by Patrick Graham) ((andras.gergely@reuters.com; +35315001518; Reuters Messaging: andras.gergely.reuters.com@reuters.net))

Prime Minister Johanna Sigurdardottir said the new deal would have a number of positive effects, including helping Iceland remove currency restrictions -- put in place at the height of the crisis -- and to ease interest rates.

It should also get international financial aid flowing again.

"I predict the IMF review will take place by the end of the month," Sigurdardottir said at a press conference.

When the bill is passed, Iceland, Britain and the Netherlands will issue a statement about the deal that will also include British and Dutch backing for the IMF review, the government said.

Dutch Finance Minister Wouter Bos said on Monday his country's government expects a "positive signal" from the International Monetary Fund on support for Iceland after the deal.

The deal has been accepted by Iceland's cabinet and the two parties in the coalition, and the government said the new bill would go before parliament on Oct. 19.

Iceland's banks collapsed in late 2008 at the height of the credit crunch and its economy has imploded, leaving it dependent on a $10 billion aid package headed by the IMF.

After initial payments, money has been held up by squabbles over the Icesave issue.

Britain and the Netherlands objected to terms in the original law that meant the Icelandic government's repayment guarantee ran out in 2024.

Under the new terms, should the money not be repaid by that date, the repayment period will be extended in five-year blocks.

Britain and the Netherlands have agreed that Iceland can seek a court ruling as to whether its Depositors' and Investors' Guarantee Fund has first claim on whatever is recovered from collapsed bank Landsbanki, whose depositors in Britain and the Netherlands had to be bailed out by the two states.

(Reporting by Omar Valdimarsson, via Stockholm newsroom; editing by Maureen Bavdek) ((simon.c.johnson@reuters.com; Reuters Messaging: simon.c.johnson.reuters.com@reuters.net; tel: +46 8 700 1045)) Keywords: ICELAND/

Sunday, 18 October 2009 14:25:01RTRS [nN18327939] {C}ENDS