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from Financial Regulatory Forum:
Banks, policymakers spar over new rules
By Huw Jones and Eva Kuehnen
LONDON/FRANKFURT, Nov 17 (Reuters) - Big banks stepped up warnings on Tuesday that tightening capital rules too soon could stall economic recovery, but policymakers said the bailed out sector cannot rely on taxpayers again in future.
Regulators are drafting tough rules that will force banks to hold far more capital and lessen the need for the kind of public rescues seen during the credit crunch.
Bankers said the new rules spearheaded by the G20 group of leading countries also need better coordination and timing to avoid a patchwork of implementation emerging.
"There is once again a real danger that the cumulative impact of doctrinaire policy could have some perverse and unintended effects on the economy and for wider society," said Stephen Green, chairman of HSBC <HSBA.L>, Europe's biggest bank.
"Cumulative enhancement of capital ratios at the wrong stage of the economic cycle could easily withdraw credit from the economy and cause a new credit crunch. This in turn would interrupt and delay a fragile economic recovery," Green said.
Banks, despite public outrage at bonuses and huge bailouts that have wrecked government finances, appear more willing to question new rules that are expected to dampen profitablity.
This is in spite of the G20 reassuring them that the bulk of new requirements will not take effect until the end of 2012 so that economic recovery has enough time to find its feet.
The Basel Committee on Banking Supervision, a global body that is mapping out new bank capital rules, will also test their combined impact next year before fixing tougher levels.
Major banks like HSBC face a plethora of changes, ranging from higher and better quality basic capital to new caps on leverage and possible liquidity and capital surcharges because of their sheer size and cross-border reach.
Britain's government is due on Wednesday to unveil plans for a sweeping new law to crack down on bank bonuses, beef up enforcement of financial rules and make it easier for investors to group together to seek compensation.
Andrew Bailey, Chief Cashier at the Bank of England, told a banking conference in Spain the sector cannot justify relying on public money to douse the fire during a crisis.
"And we also cannot allow conditions to exist where risks are taken on the basis that this backstop exists," Bailey said.
"Regulation seeks to re-build fire prevention systems with action on capital and liquidity requirements. Prevention might also involve re-drawing the financial landscape, its structure," Bailey added.
Some policymakers fear that topping up capital and liquidity levels won't be enough to avoid a public bailout in future and that big banks should be split up to ringfence deposits.
The Financial Services Forum of top banks urged the U.S. Congress on Monday not to pursue big bank break-up legislation, saying it could lead to long term damage to the economy.
Spain's Banco Santander <SAN.MC> echoed this on Tuesday.
"Limiting or penalising the size of banks through greater regulatory capital requirements will not solve the problem," Santander chairman, Emilio Botin, said.
Bankers said not all countries are singing from the same regulatory hymn sheet despite the G20's coordinating efforts.
"We're at risk of pursuing so many different complicated subjects that we make slow progress on all of them. I would be prioritising capital and liquidity," Peter Sands, chief executive of Standard Chartered <STAN.L> told the Financial Times.
HSBC's Green said more capital for bank trading books would certainly happen in Europe as Brussels and Basel are pressing so hard, but he said it was uncertain if it will be implemented more broadly across G20.
Credit Agricole <CAGR.PA>, France's biggest retail bank, said that changes in rules for banker pay had been felt in London more than anywhere else.
"There is an impact, but a small one," Credit Agricole Chief Executive George Pauget said at the Reuters Finance Summit on Monday. "It's mainly in London, where it can be difficult to hire specialists in specific businesses. We'll see rules converging, but before that it can cause some difficulties," he said.
A top EU insurance watchdog urged regulators to stand firm.
"This is the moment of truth. There are clear measures in there, in the list of G20 recommendation, and surely they need to come to life on both sides of the Atlantic," Gabriel Bernardino, chairman of pan-EU insurance regulatory body, CEIOPS, told a financial conference in Frankfurt. (Writing by Huw Jones; Additional reporting by Steve Slater; Editing by David Cowell) ((Reuters messaging: huw.jones.reuters.com@reuters.net; + 44 207 542 3326; huw.jones@thomsonreuters.com))
Keywords: REGULATION
Tuesday, 17 November 2009 13:20:08RTRS [nLH575675 ] {C}ENDS
from Financial Regulatory Forum:
Taiwan, China ink financial pact, to take effect soon
By Faith Hung
TAIPEI, Nov 16 (Reuters) - Taiwan has signed a financial service pact with China, the Taiwan government said on Monday, allowing its banks to tap China's massive market and paving the way for banks on both sides to invest in each other.
The much-anticipated pact, or memorandum of understanding (MOU), will mainly cover cross-border financial supervision and is expected to take effect within two months from now, Taiwan's
Financial Supervisory Commission said in a statement.
from Financial Regulatory Forum:
U.S. looks to cut deficit with unused TARP funds- WSJ
Nov 12 (Reuters) - The White House is looking to cut its budget deficit by using some unspent funds from the the U.S. government's Troubled Asset Relief Program (TARP), the Wall Street Journal said, citing people familiar with the matter.
Members of the Obama administration are still debating the idea, the paper said, adding that the administration would still like to keep some of the unspent money in case of emergencies.
A U.S. Treasury source told Reuters that it was shifting the focus of the TARP program toward helping small business and the housing sector rather than large banks.
"As that focus shifts, we expect to use significantly less TARP funding than authorized," the source said. "We will maintain the flexibility to deal with a future crisis, and uninvested TARP money is dedicated to reducing the debt."
The U.S. budget deficit soared to a record $1.4 trillion in the fiscal year that ended on Sept. 30 and is expected to be about the same this fiscal year as the economic slump caused tax revenues to plunge and spending soared.
Budget experts project deficits will remain stubbornly high over the next 10 years even as the economy improves, which could lead to increased borrowing costs, further weakness in the U.S. dollar and runaway inflation.
The Journal added that the projected long-term cost of TARP will likely be lowered from $341 billion to as little as $200 billion.
(Reporting by Ajay Kamalakaran in Bangalore and Glenn Somerville in Singapore; Editing by Kim Coghill)
((ajay.kamalakaran@reuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800 +1 646 897 1898; Reuters Messaging: ajay.kamalakaran.reuters.com@reuters.net)) Keywords: USA DEFICIT/TARP
Thursday, 12 November 2009 05:45:31RTRS [nBNG147589] {C}ENDS
from FaithWorld:
Orthodox Patriarch Bartholomew meets Obama on U.S. visit
Greek Orthodox Ecumenical Patriarch Bartholomew, the "green patriarch" who leads 300 million Orthodox Christians, spoke with President Barack Obama on Tuesday about the fight against climate change.
"We view with alarm the dangerous consequences of disregard for the survival of God's creation," His All Holiness told a gathering at Georgetown University after his White House meeting.
from Funds Hub:
Morning Line-up
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
High frequency traders harm conventional players- Reuters
Asian hedge funds recovering from record losses- Reuters
Brazilian hedge funds attract more money than any other investments- Bloomberg
US authorities to bring high profile hedge funds to book - FT
from Financial Regulatory Forum:
FACTBOX-Tax amnesties around the world
Oct 15 (Reuters) - A U.S. voluntary disclosure programme that helps wealthy Americans avoid criminal prosecution when disclosing secret offshore bank accounts expires on Oct. 15.
The Internal Revenue Service began the offer in March, soon after Swiss bank UBS <UBSN.VX> <UBS.N> turned over the names of some U.S. account holders as part of a $780 million criminal settlement with the U.S. government.
Some 7,500 wealthy Americans turned over information about hidden overseas assets, including some valued at more than $100 million, ahead of the amnesty programme's Thursday deadline, the top U.S. tax collector said. [ID:nN13186960]
Other governments around the world have also launched amnesty programmes to attract money back home.
BRITAIN
* Britain's New Disclosure Opportunity runs from September 2009 until March 2010. It targets British subjects that have not paid taxes on foreign bank accounts. Those choosing to come clean would have to pay all tax due plus a surcharge of 10 percent. If they had received a letter from tax authorities during a previous 2007 amnesty but did not take advantage of it the penalty would be 20 percent.
* Britain expects to recoup 500 million pounds ($800 million) of unpaid taxes through the scheme over four years.
* Britain has also agreed to a special five-year tax disclosure facility aimed at covering fines or retention taxes on property in Liechtenstein. The deal would cover about 5,000 investors [ID:nLB642083]
FRANCE
* France has for the first time opened a dedicated office for voluntary disclosure that would allow those with undeclared money stashed abroad to come clean. Those taking advantage of this option, would benefit from reduced sanctions and some form of anonymity. [ID:nLF949428]
ITALY
* The Italian tax amnesty, known as "scudo fiscale" runs from Sept. 15 until Dec. 15. It offers anonymity and involves a one-off payment of 5 percent of the total funds disclosed. The amnesty law was recently amended to include accounting fraud as well as tax evasion. [ID:nLU341460]
* The amnesty is the country's third in nine years. The government expects it to cover offshore funds worth 300 billion euros ($447 billion) but private bankers put the figure at between 50 and 100 billion euros.
CANADA
* More than 50 Canadian clients of UBS have come forward to disclose unpaid taxes and investigations have so far found $6.4 million in unreported income, according to Revenue Canada.
* Canada did not create a special amnesty program because Canadians have 10 years to report undeclared income and pay the taxes, plus interest, to avoid prosecution.
HUNGARY
* A tax amnesty runs from January 2008 until December 2009.
SOURCES: Reuters, Withers, KPMG, AIPB ($1=.6710 euros) ($1=.6259 pounds) (Compiled by Lisa Jucca, Julie Vorman; Editing by Greg Mahlich) ((zurich.newsroom@reuters.com; +41 (0)58 306 7354))
Keywords: US/TAX EUROPE
Thursday, 15 October 2009 07:40:56RTRS [nLE145761 ] {C}ENDS
from Financial Regulatory Forum:
US House begins assembly of financial reform plan
WASHINGTON, Oct 14 (Reuters) - The House Financial Services Committee is to begin work on Wednesday on a top priority for the U.S. Congress -- legislation to mend regulatory holes exposed by last fall's financial crisis.
The committee will focus this week on bringing the $450 trillion market in over-the-counter derivatives under federal regulation and creation of an agency to protect consumers from risky financial products.
A reform package could go to a floor vote next month. The committee has scheduled sessions next week to work on provisions on hedge funds, insurers and brokerages.
Financial regulatory reform was one of the top three issues when Congress convened this year. Momentum has slowed as markets stabilized.
Chairman Barney Frank said at a hearing last week that more OTC derivatives should go through clearinghouses but "that won't always be possible." Frank also supported an exemption from clearing for nonfinancial firms that use derivatives as part of acquiring supplies for their operations.
The Obama administration says all "standardized" OTC derivatives should go through clearing and all cleared swaps should be traded on regulated exchanges. It would put higher capital and margin requirements on customized contracts.
Frank indicated he would tighten language in a preliminary draft to prevent large swaps users from evading regulation by declaring they use derivatives as a risk management tool.
A draft circulated by Frank would give the new consumer agency broad powers to examine all financial firms, to set compensation practices rules for their executives, to create a central database of consumer complaints.
Financial firms strongly opposed the administration proposal that banks offer plain vanilla versions of their products. The draft would not require that step.
An umbrella group of consumer, community and civil rights groups, Americans for Financial Reform, said there was broad support for the proposed Consumer Financial Protection Agency and to regulate financial derivatives. The group found strong support for both ideas in polling of likely votes in 77 swing House districts.
(Reporting by Charles Abbott; Editing by Diane Craft)
((chuck.abbott@thomsonreuters.com; +1 202 898 8319)) Keywords: FINANCIAL REGULATION/USA
Wednesday, 14 October 2009 05:01:02RTRS [nN13206911] {C}ENDS
from Financial Regulatory Forum:
1-Year after slump, US lawmakers begin swaps reform
By Rachelle Younglai and Charles Abbott
WASHINGTON, Oct 13 (Reuters) - One year after financial markets faltered worldwide, U.S. lawmakers are determined to write a softer package of regulatory reforms than those requested by the Obama administration.
"End users" such as airlines and utilities would not be required to process their swaps through clearinghouses, for instance. Nor would banks be required to offer "plain vanilla" versions of financial products, such as mortgages with simple terms.
Both ideas were part of a panoramic set of reforms proposed by the White House.
Another administration proposal, the creation of a systemic risk regulator, is foundering. When Congress convened in January, regulatory reform was a top priority.
The House Financial Services Committee planned to meet, beginning on Wednesday, to draft legislation to bring over-the-counter derivatives under U.S. regulation, to create an agency to protect consumers from risky financial products, and amend the fair-credit reporting and truth-in-lending laws.
Chairman Barney Frank has a target to bring a reform package to a vote on the House floor in November. After this week's sessions, he plans to "mark up" provisions on hedge funds, insurers and brokerages next week -- on Oct 21 and 22.
Treasury Secretary Timothy Geithner said Frank has set an ambitious timetable for passing legislation.
"I think we're making a lot of progress, I think momentum is now with Chairman Frank and (Senate Banking) Chairman Christopher Dodd and, as the president said last week, it's very important that we try to get this done this year," Geithner told reporters on Tuesday.
NO 'PLAIN VANILLA' RULE
The legislation under consideration in the House would toughen U.S. financial regulation, although not as far as the administration wants.
Frank said he expected "significant change" to his outline to regulate the $450 trillion market in over-the-counter (OTC) derivatives. His plan would exempt end users from sending their swaps through clearing. A U.S. futures regulator said the bill might unintentionally exempt large swaps users if they say they use derivatives as a risk management tool.
End users, who include manufacturers and distributors, say it is common to pledge assets as collateral in a deal and it would be a burden to post cash as a reserve.
The administration says all "standardized" OTC derivatives should go through clearing and all cleared swaps should trade on regulated exchanges. It says clearinghouses play a vital role in stabilizing markets by assuring payment and making public the terms of trade and names of who made a deal.
During a hearing last week, Frank said there would be a presumption that standardized contracts would go through clearinghouses, but it would not be an iron-clad rule. By one estimate, 60 percent to 80 percent of OTC derivatives are standardized.
A draft circulated by Frank would give the new consumer agency broad powers to examine all financial firms, to set compensation practices rules for their executives and to create a central database of consumer complaints.
Financial firms strongly opposed the administration's proposal that banks offer plain vanilla versions of their products. The draft would not require that step.
Four large banks control over 90 percent of the U.S. derivatives market: JPMorgan Chase <JPM.N>, Goldman Sachs <GS.N>, Bank of America <BAC.N> and Citigroup <C.N>.
One type of derivative, credit default swaps, is widely blamed for amplifying economic distress last fall and nearly toppling insurer AIG Inc <AIG.N>.
A bill pending in the House Agriculture Committee, which oversees the futures market, also would exempt end users from clearing. The bill also would let U.S. regulators set position limits for physically deliverable goods -- such as grains and oil -- and set aggregate limits across markets on look-alike swaps that affect futures prices. (Writing by Charles Abbott. Additional reporting by Glenn Somerville: Editing by Chizu Nomiyama and Jan Paschal) ((chuck.abbott@thomsonreuters.com; +1 202 898 8319)) Keywords: FINANCIAL REGULATION/USA
Tuesday, 13 October 2009 23:37:45RTRS [nN13192342] {C}ENDS
from Financial Regulatory Forum:
Obama to push consumer financial watchdog agency
WASHINGTON, Oct 7 (Reuters) - President Barack Obama will seek this week to rally support for his proposal to create a watchdog agency that would protect consumers from risky financial products.
The Consumer Financial Protection Agency idea was included in a sweeping package of financial regulatory proposals Obama unveiled in June. He is seeking passage of the regulatory package by the end of the year.
The agency is one of the more controversial elements of the package and is opposed by many in the financial industry.
The bill would also bring new oversight to derivatives markets and hedge funds and would create a process for winding down troubled financial firms whose failure could threaten market stability.
A U.S. official said that on Friday, Obama will host an event at the White House in which "he will call on Americans to stand up to the opponents of a new Consumer Financial Protection Agency" and urge swift action on the regulatory reform measures.
The regulatory package is aimed at tightening oversight of banks and capital markets to try to prevent a repeat of the 2008-2009 financial crisis.
Obama will be joined at Friday's event by Treasury Secretary Timothy Geithner. The two will meet with four people who have been hurt by lack of oversight in the financial system, the U.S. official said.
The U.S. House of Representatives is on track to vote on a financial regulation bill next month, leaders in that chamber said this week.
The Senate, however, has yet to set a timetable, leaving undefined the final steps for Obama's reforms. (Reporting by Caren Bohan; Editing by Chris Wilson) ((caren.bohan@thomsonreuters.com; +1 202 898 8300)) Keywords: FINANCIAL REGULATION/OBAMA
Thursday, 08 October 2009 02:02:27RTRS [nN07498102] {C}ENDS
from Financial Regulatory Forum:
U.S. banking regulator eyes bank creditor claims
ISTANBUL, Oct 5 (Reuters) - Federal Deposit Insurance Corp Chairman Sheila Bair told a group of international bankers on Sunday that officials might want to consider "the very strong medicine" of limiting secured claims to 80 percent, although she said such a proposal would need to be carefully weighed.
She said curbing claims would encourage secured creditors, who are protected from losses when a bank fails, to more closely monitor the risks a bank is taking and could speed up the process when an institution needs to be wound down.
"This could involve limiting their claims to no more than say 80 percent of their secured credits. This would ensure that market participants always have 'skin in the game'," Bair told a meeting of the Institute of International Finance here.
While Bair said the far-reaching proposal could have a "major impact" on the cost of funding for banks subject to any official resolution mechanism, it also had advantages.
"A major advantage is that all general creditors could receive substantially greater advance payments to stem any systemic risks without the extensive delays typically characteristic of the bankruptcy process," she said.
"Obviously, the advantages and disadvantages need to be thoroughly vetted. In any event, there is a serious question about whether the current claims priority for secured claims encourages more risky behavior," Bair added.
The U.S. Congress is currently considering wide-ranging regulatory reforms that would give regulators the authority to "resolve" -- or wind down -- systemically important non-bank institutions. The FDIC already has such authority for deposit-taking banks.
Bair said officials around the world should consider resolution regimes that cover both banks and non-bank operations of financial conglomerates, whether or not their failure might spark wider troubles for the financial system.
She said resolution authority should include the ability to reject "burdensome" contracts, sell assets, resolve claims, and establish and operate bridge financial companies. (Reporting by Tim Ahmann; Editing by Ruth Pitchford) ((Reuters Messaging: tim.ahmann.reuters.com@reuters.net; e-mail: tim.ahmann@thomsonreuters.com; +90 212 296 3621))
Keywords: FINANCIAL REGULATION/BAIR
Monday, 05 October 2009 08:29:31RTRS [nN05344612] {C}ENDS
