Private equity houses are muttering proposed U.S. rules won’t make it any easier for them to use their fabled treasure chest to buy troubled banking assets and clear out some toxic asset waste.

In China things are different: the watchdog there is encouraging China Mobile (0941.HK) to buy shares in the country’s biggest commercial bank ICBC (1398.HK), possibly with a view to propping up banking stock. For all other deals stories on Reuters, click here.

One other item of interest in today’s newspapers: Germany’s Frankfurter Allgemeine Zeitung says Chinese state-owned automaker Beijing Automotive (BAIC) will unveil an improved non-binding offer for German carmaker Opel today. The Wall Street Journal has a similar story.

Boutique investment bank Rothschild appears to be joining others such as Moelis and Greenhill in tapping investment banking talent that’s coming lose amid the financial crisis.

Rothschild, a more than two centuries old family-owned business, is planning to hire financial institutions and other investment bankers in the United States, a source briefed on the matter said. 

A Rothschild official wasn’t available for comment.

In October, the bank snapped up some FIG bankers in Europe, including from Lehman. Antonio Villalon, a Lehman vice chairman, was named as the co-head of its global financial institutions group.

The interest in the financial institutions sector is, of course, due to expectations of even more activity as things begin to look better in the economy. 

Moelis, which has already hired some 15 managing directors this year, is also looking for FIG bankers. Deutsche Bank and Greenhill have also already hired a bunch. 

Other active sectors have seen investment banks across the spectrum bulk up on talent as well, a recent - and remarkable — case being that of an exodus of healthcare bankers from UBS to Jefferies.

Top Watson Wyatt executives got generous bonuses for fiscal year 2008, with CEO John Haley getting $1.3 million, which was 148.6 percent of the target bonus. 

Haley also recommended annual bonuses ranging from 112.3 percent to 154.2 percent of the target bonus for the other named executives, according to an SEC filing.

Haley’s bonus depended on 11 principal factors, including how well the company met its financial goals for the year. 

For fiscal year 2008, the plan was that revenues would increase by 9.3 percent to $1.6 billion and that earnings would increase by 8.9 percent to $2.90 per share. The actual results: revenues of $1.760 billion and earnings of $3.50 per share.

It will be interesting to see what the company’s executives are paid this year. 

The sector faces challenges as clients continue to cut discretionary spending. And so far this year, its shares are down roughly 23 percent, falling more than 10 percent since its deal to buy Towers Perrin on Sunday.  

Executive compensation is drawing intense scrutiny, with activist shareholders urging the government to get more involved in overseeing multimillion-dollar pay packages received by a growing number of American chief executives.

Final, first-half M&A data from Thomson Reuters, released earlier on Thursday, filled out the picture painted by preliminary data last week — deal-making has shrunk dramatically, even as investment bankers find solace in a record flurry of bonds and rights issues.

One interesting wrinkle, compared to the earlier numbers, is the inclusion of Xstrata’s unwanted approach for rival miner Anglo American, valued by the number-crunchers at $42.5 billion. That helped propel Goldman Sachs to the global top spot for M&A advice, and boosted several other banks engaged on the deal.

Some other nuggets:

* Compared to the first half of 2008, announced M&A is down 40.2% to $941 billion, the slowest H1 since 2004.

* Geographically, M&A by dollar value is down 49.2% in the U.S., 42.5% in Europe, 28.4% in Asia-Pacific, and 51.2% in emerging markets. Cross-border M&A totalled $287 billion, down 54.5%.

* Buyouts plunged 78.8% to $32.9 billion , the lowest H1 since 1997. They made up just 3.5% of announced transactions, the lowest percentage since H1 2000.

Among the law firms, who are also having a pretty tough time, Linklaters came top for deal advice, outflanking U.S. rival Skadden, Arps.

As usual for the day before the July 4th weekend, bankers rushed to get deals tied up so they can enjoy the break.

Among the spurt of pre-Independence Day activity was Exelon bumping its bid for rival NRG and Johnson & Johnson buying a stake in Elan. Last night, Flagstone Reinsurance made a competing bid for rival IPC.

It doesn’t yet compare, however, to July 3rd 2007 when KKR announced plans to IPO, HIlton went private and Apollo made a $6 billion approach to chemicals firm Huntsman.

Other deals announced today:

    ** International Assets Holding Corp agreed to buy commodity risk management firm FCStone Group Inc in an all-stock deal valued at about $130 million, as it looks to expand its presence in the commodities market. 

    ** GlaxoSmithKline expanded its emerging markets footprint by buying Bristol-Myers Squibb’s branded generics drugs business in Lebanon, Jordan, Syria, Libya and Yemen for $23.2 million. 

     ** Lufthansa could still win quick European Union regulatory approval for its planned takeover of Austrian Airlines if it makes concessions within days, the European Commission said. 
 
    ** Opel frontrunner Magna’s consortium partner Sberbank said the race to acquire the carmaker was all but over, though Beijing Automotive Industry Holding Co (BAIC) may still lodge a bid in the coming days.  
 
    ** Onex Corp said it acquired a majority stake in the Tropicana Las Vegas Hotel and Casino after the property emerged from bankruptcy protection. 
 
    ** China National Petroleum Corp, the country’s largest oil company, plans to revive a $17 billion bid for the Argentinian unit of Spanish oil major Repsol-YPF, the South China Morning Post reported on Thursday, citing sources.  
 
    ** Rio Tinto Ltd sold virtually all of the UK part of its $15.2 billion rights offer, the world’s fifth-biggest, easing its huge debt burden and putting the world’s top iron ore miner back in growth mode.  
 
    ** Swedish Match said it had agreed to sell its South African operations to Philip Morris International for 1.75 billion rand ($224.7 million). 

    ** Spanish holding company Alba has bought a 10 percent stake in technology firm Indra from utility Union Fenosa at 15 euros per share, Alba and Fenosa said.

    ** Icelandic investment firm Novator sold its 20.11 percent stake in sporting goods firm Amer Sports to institutional investors at roughly a 15 percent discount to Wednesday’s closing price. 

    ** The head of Russia’s Sberbank said he sees no serious competition in its takeover of German carmaker Opel, which it has agreed to buy in partnership with Canadian auto parts group Magna.

Big numbers abound on today’s deal-making menu. Shareholders rapidly snapped up Rio Tinto’s (RIO.L) (RIO.AX) $15.2 billion rights issue, allowing the miner to ease its debt burden. And China National Petroleum Corp (CNPC) reportedly plans to revive a $17 billion bid for the Argentinian unit of Spanish oil major Repsol-YPF (REP.MC). For all the Reuters top deals stories, click here.

Here’s what we found interesting in today’s newspapers:

Spain’s Telefonica (TEF.MC) is looking at the case for buying T-Mobile UK, the British mobile phone operator owned by Deutsche Telekom (DTEGn.DE), the Financial Times reports, citing people familiar with the situation.

Chinese carmaker Beijing Automotive Industry Holding Co plans to present a detailed bid for General Motors Corp’s Opel unit in the next few days, the Wall Street Journal says.

Valentino Fashion Group’s lenders are seeking to renegotiate the Italian luxury group’s debt by the end of the summer, the Wall Street Journal says. UniCredit, Mediobanca and Citigroup (C.N) are pressing Valentino and its owner, private equity group Permira, to agree to new lending terms to avoid defaulting on debt.

At AIG’s annual meeting, one upset shareholder pointed out how much PwC, the insurer’s independent auditor, had been paid over the past two years. 

AIG paid PwC a total of $131 million in audit and other fees in 2008 and $119.5 million in 2007. 

“I want to know what these fees were paid for,” shareholder Kenneth Steiner of Great Neck, New York said. “Why didn’t anybody know what was going on? What were the accountants doing? Were they sleeping?”

The fees look large but are not unheard of.  GE, for instance, paid KPMG $133 million in 2008 and $122.5 million in 2007.

Still, Microsoft paid its auditor, Deloitte & Touche, a fraction of that — only $27.9 million in 2008 and $23.5 million in 2007.

AIG CEO Edward Liddy defended PwC, saying the auditor had raised early concerns about controls at the division blamed for AIG’s near collapse — AIG Financial Products. 

“PricewaterhouseCoopers conducted itself well over the last couple of years,” Liddy said. “They put a material weakness on the company with respect to its controls around FP (AIG Financial Products).”

A potential deal between Paramount and rivals Sony and Fox to merge DVD operations would save costs for the studios amid a slump in sales. Hollywood studios are cutting expenses to cope with stagnant video sales and new technology that is steering people online. A portfolio manager called the potential move a “monumentally sensible thing to do” according to Reuters’ story here.

Deals announced on Wednesday include:

Britain’s International Power said on Wednesday it would sell its Czech business to the Czecho-Slovak investment firm J&T Group for 581 million pounds ($963 million), net of expenses, boosting its shares. 

 CEZ has agreed to purchase a 49 percent stake in heating plant Prazska Plynarenska from Czech-Slovak private equity firm J&T, the Czech power group said.

Asia-focused Standard Chartered is in talks to purchase banking assets in China and India owned by the Royal Bank of Scotland (RBS) a source with direct knowledge of the matter said on Wednesday. 

Japan’s Shinsei Bank plans to buy rival Aozora Bank in a deal that brings together two loss-making lenders in hopes of building a stronger bank that can return to growth in both retail and corporate banking.

 World No. 2 brewer SABMiller will sell 10 percent of its South African unit to black investors in a deal worth $750 million to meet the country’s affirmative action rules, it said on Wednesday.  

 Saudi-based dairy firm Almarai Co said on Wednesday it has reached an agreement to buy all shares in Hail Agricultural Development Co (Hadco) widening its scope to the poultry business.

The bidding war for U.S.-based Borland Software Corp heated up on Wednesday as British software firm Micro Focus International Plc sweetened its cash offer to $1.50 per share from $1.15 per share, topping a proposal made by an unnamed bidder last week.

General Motors is back in bankruptcy court on Wednesday, seeking approval to sell its choice assets to a “New GM” in a plan to reinvigorate the automaker under U.S. government ownership.

Reuters reporters Emily Chasan and Phil Wahba will be filing updates from the hearing in the live headline box below and on the DealZone Twitter feed.

Japan’s Shinsei Bank (8303.T) and Aozora Bank (8304.T) say they plan to merge at a ratio of one to one — creating a bank with combined assets of $186 billion. Morgan Stanley (MS.N) and Japan’s Mitsubishi UFJ Financial Group (8306.T) have agreed to pool their lending resources. And China approves its first major IPO in almost a year, giving Sichuan Express Co approval to float. For these and other Reuters deal stories, click here.

And here’s our press digest on things deals-related.

Citigroup Inc (C.N) is in final talks to sell its Japanese trust bank, NikkoCiti Trust & Banking Corp, to a Nomura Holdings Inc (8604.T) subsidiary for an estimated $210 million, the Nikkei business daily says.

India’s United Spirits (UNSP.BO) has received term sheets from Blackstone (BLK.N), KKR and Capital International interested in buying a stake worth $250-300 million in the company, the Economic Times says.

British retailer Tesco (TSCO.L) is a potential bidder for nationalised bank Northern Rock, UK newspaper the Times reports.

Bank of America Corp’s (BAC.N) primary investment management unit is drawing lower than expected bids after likely suitor Blackrock’s (BLK.N) acquisition of Barclays Global Investor (BARC.L), the Financial Times says.

Shinsei Bank (8303.T) and Aozora Bank (8304.T) are likely to seek an injection of public funds to shore up their capital as the two loss-making lenders merge their businesses, the Nikkei business daily says.

Patrick Degorce is planning to launch his own fund after splitting from high-profile hedge-fund manager Christopher Hohn, hoping to raise as much as $1 billion over time, the Wall Street
Journal says.