Financial Regulatory Forum

By Jason Rhodes, Kevin Lim and Joe Rauch

ZURICH/SINGAPORE/CHARLOTTE, July 7 (Reuters) – After forcing Switzerland’s top bank UBS  to its knees for helping U.S. residents dodge taxes, U.S. authorities are moving on other banks and countries used to hide clients’ cash.

Washington inflicted a tough lesson last year on Switzerland by forcing the world’s biggest offshore banking centre to lift its treasured bank secrecy and slapping a $780-million penalty on UBS.

The Department of Justice is now going after other offshore centres like Singapore, which have attracted undeclared money that left Switzerland, and has opened a criminal inquiry into Asian clients of Britain’s HSBC Holdings Plc, Europe’s No. 1 bank.

Banks in Singapore and Hong Kong hold estimated offshore wealth worth $700 billion against Switzerland’s $2 trillion, according to the 2010 Boston Consulting Group Wealth Report.

“There are going to be more such cases,” a U.S. Internal Revenue Service source told Reuters. “There’s a lot of talk about money being moved from Switzerland into Asia.”

By Kevin Plumberg

HONG KONG, July 5 (Reuters) – Having learned lessons from the past, emerging Asia is showing caution about adopting heavy-handed capital controls to curb heavy investment inflows and is focusing instead on closing economically disruptive loopholes.

Measures announced by Indonesia and South Korea last month targetted particular areas of their markets, unlike Thailand in 2006 which effectively imposed a blanket tax on foreign investment. A Reuters poll suggests further targetted measures can be expected from the region.

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The following is a guest post by Sebastian Mallaby, the Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations and the author of More Money Than God: Hedge Funds and the Making of a New Elite. The opinions expressed are his own.

If only U.S. lawmakers were better acquainted with Jim Simons. If they understood this hedge-fund billionaire, the financial regulation now emerging from Congress might look different.

Simons is a poster child for the hedge-fund industry. His team of scientists in Long Island manages a black-box fund called Medallion, which has been up every year since 1990, usually posting gains of well over 50 percent. In several years over the past decade, Simons is said to have earned more than $1.4 billion—the amount, in today’s dollars, that J.P. Morgan accumulated during his entire lifetime. The legendary Morgan was known as Jupiter because of his godlike power over Wall Street. Hence the title of my history of hedge funds: More Money Than God.

By Jonathan Spicer

NEW YORK, July 2 (Reuters) – Abrupt halts in the trading of both Citigroup Inc and Washington Post Co shares over the last few weeks exposed some problems with new rules meant to avoid a repeat of the May “flash crash,” and may give traction to an alternative fix.

The halts came on separate days after erroneous trades were made in the shares, each time tripping new stock-specific circuit breakers that immediately stopped trading for five minutes.

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July 2 (Reuters) – Australia’s government and key mining firms have agreed a compromise on a mining tax for iron ore, coal, and onshore petroleum and gas. Here are some of the key terms of the tax and impact on the budget and tax policies.

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By Kevin Drawbaugh

WASHINGTON, July 1 (Reuters) – The sweeping Wall Street reform bill moving through the U.S. Congress calls for no fewer than 39 studies — an impressive level of trying to look busy while dodging controversy, even by Washington standards.

In what amounts to a full employment act for policy analysts, the 2,300-page bill seeks further inquiry on topics ranging from “ending the conservatorship of Fannie Mae  (and) Freddie Mac  to “oversight of carbon markets.”

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The following is a guest post by Kenneth Posner, author of “Stalking the Black Swan: Research & Decision-making in a World of Extreme Volatility.” The opinions expressed are his own.

Recently, the U.S. Financial Crisis Inquiry Commission (FCIC) held hearings on the role of the rating agencies in the near-death  experience of the U.S. financial system, an important topic given the disastrous performance of mortgage-backed securities rated AAA by Moody’s and Standard & Poors.

The problem with the rating agencies is not their role, but the oligopolistic domination of the business by these two firms. This domination is a direct result of the “issuer-paid model” under which rating agencies are paid by the issuers of securities, rather than investors.

HONG KONG, June 30 (Reuters) – Pledges in advanced economies to keep interest rates low for a long time have sent abundant liquidity looking for a home in emerging markets and other high growth areas.

But some policymakers are concerned that the inflows could prove destabilising and so have taken action.

Indonesia enacted a new set of controls this year, following moves by Brazil and Taiwan last year. South Korea has outlined a set of policies on currency derivates trading.

– John Kemp is a Reuters market analyst. The views expressed are his own –

By John Kemp

LONDON, June 30 (Reuters) – “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”, wrote Adam Smith in his famous “Inquiry into the Nature and Causes of the Wealth of Nations” in 1776.

Perhaps Smith should be resurrected as an adviser to the European Commission, which has just imposed fines totalling 518 million euros on 17 producers of prestressed steel used in the construction industry, who operated a price-fixing cartel for 18 years on the margins of trade conferences.

– John Kemp is a Reuters market analyst. The views expressed are his own –

By John Kemp

LONDON, June 29 (Reuters) – With its decision to fine and ban a former oil broker for manipulating the price of Brent crude oil last year as a result of trading while drunk, Britain’s Financial Services Authority (FSA) has continued its push to introduce higher standards into trading on the London commodity markets.

Former PVM oil broker Stephen Noel Perkins was so drunk he had a limited recollection of events and had been in an alcohol induced blackout, according to the FSA’s notice announcing a minimum five-year ban and fining him 72,000 pounds.