Reuters News - Regulators fine global banks $3.4 billion in forex probe

A man walks past various currency signs, including the dollar (top R), Australian dollar (top L), pound sterling (centre L) and euro (bottom L), outside a brokerage in Tokyo October 28 2014.

(Reuters) - Global regulators imposed penalties totaling $3.4 billion on five major banks, including UBS  (UBSN.VX), HSBC (HSBA.L) and Citigroup (C.N) on Wednesday for failing to stop their traders from trying to manipulate foreign exchange markets.

Royal Bank of Scotland (RBS.L) and JP Morgan (JPM.N) were also fined over attempts to rig currency benchmarks in a year-long probe that has put the largely unregulated $5 trillion-a-day market on a tighter leash, with dozens of dealers suspended or fired.

Switzerland's UBS swallowed the biggest penalty, despite being the first bank to come forward with evidence of possible misconduct, paying $661 million to Britain's Financial Services Authority (FCA) and the U.S. Commodity Futures Trading Commission (CFTC).

 

UBS was ordered by Swiss regulator FINMA, which also said it had found serious misconduct of the bank's employees in precious metals trading, to hand over 134 million Swiss francs.

FINMA also instructed Switzerland's largest bank to automate at least 95 percent of its global foreign exchange trading and limit bonuses for traders of foreign exchange and precious metals, where it said it had also found evidence of serious misconduct, to 200 percent of their base salary for two years.

Other UBS high earners will have to get approval for their bonuses to go above that.

Regulators found evidence that traders had colluded to try and manipulate benchmark foreign exchange rates by sharing confidential information about client orders with one another right up until October 2013.

The traders used code names to identify clients without naming them and created online chatrooms with monikers such as "the players", “the 3 musketeers” and “1 team, 1 dream” in which to swap information.

The financial regulator in London, the global hub for foreign exchange (FX) trading, said it had launched a review of the spot FX industry that will require firms to scrutinize their systems and may involve them looking at how they do things in other markets such as derivatives and precious metals.

The FCA's first group settlement, worth more than $1.7 billion, is the biggest in British history and eclipses the 460 million pounds fines for alleged interest rate manipulation, reflecting increasing political and public demands that banks -- blamed for sparking the 2008 credit crisis -- are held accountable.

The five banks earned a 30 percent discount for agreeing to settle early.

"Today’s record fines mark the gravity of the failings we found and firms need to take responsibility for putting it right," the FCA's Chief Executive Martin Wheatley said.

"They must make sure their traders do not game the system to boost profits or leave the ethics of their conduct to compliance to worry about."

Barclays (BARC.L) had been expected to be part of the settlement but the FCA said its investigation into the UK bank was continuing.

"NICE TEAM WORK"

Investors had been braced for a speedy conclusion to the investigation after an earlier, sprawling inquiry into alleged rigging of interest rate benchmarks such as Libor gave regulators experience in how to cooperate globally.

In its settlement with HSBC, the FCA said that after attempts to manipulate one sterling/dollar currency fix that netted a $162,000 profit, traders congratulated one another, saying "nice work gents... I don my hat" and "Hooray nice team work".

Under instruction from increasingly intrusive regulators, banks did much of the groundwork themselves, handing over reams of online transcripts, clamping down on chatroom use and either suspending or firing more than 30 foreign exchange traders.

FINMA said it has started enforcement proceedings against 11 former and current employees of UBS

With the UK settlement out of the way, the focus shifts to ongoing U.S. and UK criminal investigations and potential civil law suits.

The CFTC, which regulated swaps and futures in the United States, fined the five banks more than $1.4 billion but that does not resolve probes by the U.S. Department of Justice and the New York's Department of Financial Services.

The FCA fines come days before world leaders are expected to sign off on proposals to reform currency markets when they meet at the G20 summit in Brisbane.

The foreign exchange probe proved particularly uncomfortable for British authorities because it cast a shadow over London's credentials as the world center for foreign exchange trading, and also ensnared the Bank of England whose head Mark Carney is leading global regulatory efforts to overhaul the FX market.

The Bank of England said an internal probe had found no evidence that any of its officials had been involved in unlawful or improper behavior.

The Bank has fired its chief foreign exchange dealer after it found information about serious misconduct, but said the dismissal was unrelated to a foreign exchange scandal.

(Additional reporting by Steve Slater, Huw Jones, Jamie McGeever, Clare Hutchison and Matt Scuffham in London and Katharina Bart in Zurich. Writing by Carmel Crimmins, Editing by Alexander Smith)

BBC News - 'Too big to fail' bank rules unveiled by global regulators

New global rules to prevent banks that are "too big to fail" from being bailed out by taxpayers have been proposed.

The UK government still owns an 80% stake in Royal Bank of Scotland

The rules, created by the Financial Stability Board (FSB), a global regulator, will require big banks to hold much more money against losses.

Mark Carney, FSB chairman and governor of the Bank of England, said the plans were a "watershed" moment.

He said it had been "totally unfair" for taxpayers to bail out banks after the financial crisis of 2008 and 2009.

"The banks and their shareholders and their creditors got the benefit when things went well," he told the BBC.

"But when they went wrong the British public and subsequent generations picked up the bill - and that's going to end".

Mr Carney explained that the new system would ensure that bank shareholders, and lenders to banks such as bondholders, would become first in line to bear the brunt of future losses if banks could not pay out of their own resources.

"Instead of having the public, governments, [and] the taxpayer rescue banks when things go wrong; the creditors of banks, the big institutions that hold the banks' debt - not the depositors - will become the new shareholders of banks if banks make mistakes."

"Let's face it, the system we've had up until now has been totally unfair," he added.

Bigger cushion

Governments around the world spent hundreds of billions of pounds bailing out stricken banks during the financial crisis of 2007-08.

At its peak in the UK alone, taxpayers' direct subsidy to banks stood at more than £1 trillion according to a recent report from the National Audit Office.

In the wake of the financial crisis, world leaders asked the FSB to come up with proposals to prevent similar bailouts from happening in the future.

The proposed new rules, which are up for consultation and should take effect in 2019, require "global systemically important banks" to hold a minimum amount of cash to ensure they will be able to survive big losses without turning to governments for help.

The capital set aside should be worth 15-20% of the bank's assets, the FSB said. That is a far bigger cushion against losses than is required by current banking rules.

The FSB hopes this stronger policy will prevent taxpayers from being forced to pay billions of pounds again to stop big banks from collapsing, in the event of another financial crisis.

Anthony Browne of the British Bankers' Association welcomed the proposals.

"The banking industry strongly supports this work, which is a really important step in ending 'too big to fail' and ensuring that never again will taxpayers have to step in to bail out banks," he said.

"We agree with the aims and objectives of the proposals for total loss absorbing capacity ('TLAC'), that there should be sufficient resources available to absorb losses in the event of bank failure and provide new capital to ensure critical economic functions can continue to be provided," he added.

Less disruption

"Agreement on proposals for a common international standard on total loss-absorbing capacity for [big banks] is a watershed in ending 'too big to fail' for banks," said Mr Carney.

"Once implemented, these agreements will play important roles in enabling globally systemic banks to be resolved without recourse to public subsidy and without disruption to the wider financial system."

According to the BBC's business editor Kamal Ahmed, analysts estimate the new capital requirements could cost €200bn (£157bn) for Europe's banks alone, with the cost for globally significant banks in the US, Japan and China likely to be much higher.

The FSB has published a list of 30 banks it regards as "systemically important", meaning their collapse could have a wider impact on global financial systems.

In the UK, the banks are Barclays, Standard Chartered, HSBC and the Royal Bank of Scotland.

Lloyds Banking Group has been removed from the list as its potential impact on financial systems has declined in recent years.

The UK government spent around £65bn directly bailing out RBS and Lloyds during the crisis. The government still owns an 80% stake in RBS and 25% of Lloyds.

Analysis: Andrew Walker, economics correspondent, BBC News.

Lehman Brothers was the classic case of a financial institution that was too big to fail - or at least it probably was according to the previous Federal Reserve chairman Ben Bernanke.

Of course it DID fail, and the financial crisis entered a new and more dangerous phase after Lehman filed for bankruptcy in September 2008. The immediate lesson that many policy makers drew - and this is contested - was that it should have been rescued.

And so they decided that other big financial firms would not fail and taxpayers' money was thrown at the banks around the world.

But there is another lesson drawn from the Lehman episode: that it would be far better to change the rules of finance to ensure that any bank could safely fail if it gets into serious difficulty no matter how big it is.

That's where the Financial Stability Board's new proposals come in.

Bloomberg News - China’s $50 Billion Bank Would Bolster Competition, Abbott Says

The U.S., Japan and other nations yet to join China’s proposed $50 billion Asia regional bank shouldn’t fear the competition it will bring, Australian Prime Minister Tony Abbott said, while calling for the new institution to be more multilateral.

“None of us should be frightened of competition, let’s try and make this thing happen,” Abbott said today in an interview in Beijing, where he’s attending the Asia-Pacific Economic Cooperation summit. For nations including Australia to join, the Asian Infrastructure Investment Bank would have to be more multilateral, “rather than an arm of any one country’s foreign policy,” Abbott said.

Australia, which will push for more private-sector funding of infrastructure projects when Abbott hosts the Group of 20 summit in Brisbane this weekend, has declined to sign a memorandum of understanding to create the AIIB, a key component of China’s efforts to expand its regional influence. President Xi Jinping, who first put forward the bank’s concept in October last year, is scheduled to address Australia’s parliament in Canberra on Nov. 17, with the nations still locked in negotiations for a free-trade pact.

The bank, a potential rival to institutions such as the Asian Development Bank, has been opposed by the U.S., which has asked its allies not to participate, the New York Times reported last month.

“I think China’s intention is for it to be a multilateral institution,” Abbott said. “As soon as the governance and transparency arrangements reflect those of other multilateral institutions, well not only would Australia be in it but I’d expect that Japan, the United States, Korea and everyone else will be in it.”

FTA Optimism

Abbott said he was “very optimistic” about the chances of signing a free-trade agreement with China next week.

“Things have accelerated dramatically this year,” he said. “I am optimistic that we can get an agreement, but nothing’s concluded until it’s over and we’re not quite there yet.”

President Barack Obama is scheduled to meet with Abbott at APEC for bilateral talks, three years after the U.S. leader pledged to strengthen his nation’s alliance with Australia, including stationing as many as 2,500 Marines in the northern city of Darwin. The U.S. is keen to expand Australia’s role in regional peacekeeping to check China’s military power and territorial claims in the East and South China seas.

Leading Country

U.S. leadership in the Asia-Pacific and elsewhere benefits the world, Abbott said.

“Notwithstanding the economic rise of China, notwithstanding the comparative diminution in the U.S. economic preponderance, America is still the world’s leading country,” Abbott said. “Obviously it’s important for the United States to remain very heavily engaged here in the Asia-Pacific and I am delighted that that seems to be the strong intention of President Obama.”

The prime minister, whose Liberal-National coalition won government in September last year, confirmed he will be meeting with President Vladimir Putin tomorrow in Beijing. Abbott said last month that he would use the G-20 meeting in Brisbane to confront the Russian leader for his nation’s alleged support of separatist rebels believed responsible for the shooting down of Malaysian Airline System Bhd. Flight 17 in Ukraine in July, killing 298 people including 38 Australians.

“My very consistent message all along has been that Russia needs to fully cooperate with the investigation” into MH17, Abbott said. “Mr. Putin certainly indicated at the United Nations and on the phone at the time that Russia would be cooperative. There’s been some signs subsequently that Russia was not as cooperative. I’d like his assurance that that was an aberration.”

To contact the reporters on this story: Jason Scott in Canberra at jscott14@bloomberg.net; Rosalind Mathieson in Singapore at rmathieson3@bloomberg.net

BBC News - EU finance ministers back new Greek credit agreement

Eurozone ministers have moved towards agreeing a new credit line for Greece as it prepares to exit its bailout at the end of the year.

Greece had to impose harsh economic austerity measures in return for the bailout

The Greek government is trying to balance austerity measures imposed by the EU and the IMF with a return to regaining economic policy-making power.

Greece has had two bailouts totalling €240bn (£188bn) since 2010 when private investors refused to lend to Athens.

Greece wants to return to market financing from next year.

"Taking into account the still fragile market sentiment and the many reform challenges ahead there is strong support for a precautionary credit line," said Eurogroup President Jeroen Dijsselbloem at a meeting of eurozone finance ministers in Brussels.

Greek Finance Minister Gikas Hardouvelis told the Reuters news agency he hopes for a grace period of up to a year after exiting the bailout, during which Greece will still get a financial safety net but would not be "micro-managed" by lenders.

The credit deal will use €11bn already granted to Greece by the eurozone to strengthen Greek banks. The money was not needed after the European Central Bank tested eurozone banks last month.

Reuters News - China draft rules ease limits on foreign investment

A view shows people visiting different booths at the Guandong Import and Export Fair in Guangzhou, Guangdong province May 4, 2014.

CREDIT: REUTERS/ALEX LEE

(Reuters) - China is moving to raise its global competitiveness by loosening restrictions on foreign investment in more manufacturing and services sectors, the country's top regulator said.

In a draft foreign investment catalog China's National Development and Reform Commission (NDRC) cut the number of sectors where China limits foreign investment to 35 from 79, opening up areas such as real estate, steel, oil refining, paper making and premium spirits.

The draft catalog, the latest revision of a list first distributed in 2011, also removes restrictions on foreign participation in some financial services, including finance companies and insurance brokerages, which are still subject to Chinese regulations.

Beijing, however, will continue to bar foreign investment in 36 key sectors, the draft said, with Chinese legal affairs consulting, tobacco and cultural relics businesses added to the list.

The NDRC said that the measures were aimed at adapting to a more globalized economyand would help China actively hasten its "opening up" process and improve transparency.

"This is kind of piecemeal," said Todd Wang, an attorney at DLA Piper, who specializes in US-China business transactions. "(The draft list) represents what has been happening over the past few years."

The European Union Chamber of Commerce in China said the draft catalog fell short of expectations and appeared "to be another incremental development" for some foreign firms.

"The removal of the investment catalog altogether, in favor of a short negative list, and increased opening in the service sectors, would have been more ambitious," the European Chamber said in a statement.

Beijing is keen to improve China's inefficient state-owned firms by adopting market friendly policies to stave off slowing growth. But despite plans for reform of state-owned enterprises, the government has also been reluctant to cede too much control over the economy.

"The focus will be on opening up manufacturing and services sectors to the outside," the NDRC said in a statement on its website, adding that the move would help boost China's international competitiveness.

"Allowing foreign investment to enter industries with overcapacity and outdated technology can accelerate efforts to upgrade the industrial structure through market competition," Long Guoqiang, an NDRC researcher, told the official Xinhua News.

The NDRC is seeking feedback on the proposed revisions until Dec. 3, it said. China has issued a similar list since 1995 and has been revising it every three years. The current version was issued in 2011, state news agency Xinhua said on Tuesday.

In total, the draft lists 349 sectors that welcome foreign investment, including vocational training, homes for seniors, and services for children and the disabled.

(Reporting by Adam Jourdan, Matthew Miller, Michael Martina and Beijing Newsroom; Editing by Eric Meijer)

Bloomberg News - Prepare for Gold Rally If Swiss Bullion Referendum Passes

Photographer: Gianluca Colla/Bloomberg

The word "Switzerland" sits stamped on the side of a newly manufactured 400 ounce gold bar at a precious metal refinery near Mendrisio. A “Save Our Swiss Gold” victory means Switzerland would face buying the metal at prices that quadrupled since it began selling more than half its reserves in 2000

There are people in Switzerland who resent that the country sold away much of its gold last decade. They may be a splinter group of Swiss politics, but they’re a persistent bunch.

And if they get their way in a referendum this month, these voters will make their presence known to gold traders around the world.

The proposal from the “Save Our Swiss Gold” proponents is simple: Force the central bank to build its bullion position up to at least 20 percent of total assets from 8 percent today. Holding 522 billion Swiss francs ($544 billion) of assets in its coffers, the Swiss National Bank would have to buy at least 1,500 tons of gold, costing about $56.3 billion at current prices, to get to the required threshold by 2019.

Those purchases, equal to about 7 percent of annual global demand, would trigger a 17 percent rally, giving a lift to gold bulls who’ve suffered 32 percent losses in the past two years, Bank of America Corp. estimates. With polls showing voters split before the Nov. 30 referendum, the SNB and national government are warning that such a move could undermine efforts to prevent the franc from surging against the euro and erode the bank’s annual dividend distribution to regional governments.

“It would have a major impact if it passes,” said Joni Teves, an analyst at UBS AG in London. “If they do launch a buying program, it would have effectively a constant bid in the market.”

Repatriate Bullion

A “yes” victory means Switzerland would face buying the metal at prices that quadrupled since it began selling more than half its reserves in 2000. The move would make the SNB the world’s third-biggest holder of gold. The initiative would also force the central bank to repatriate the 30 percent of its gold held abroad in the U.K. and Canada and bar it from ever selling bullion again.

With 1,040 metric tons, Switzerland is already the seventh-largest holder of gold by country, International Monetary Fund data show. According to UBS, a change in the law may force the SNB to buy about 1,500 tons, while ABN Amro Group NV and Societe Generale SA estimate the need at closer to 1,800 tons.

The SNB’s assets have expanded by more than a third in the past three years because of currency interventions to enforce a minimum exchange rate of 1.20 per euro. As of August, just under 8 percent of its assets were in gold, compared with a ratio of 15 percent for Germany’s Bundesbank.

Buying at least another 1,500 tons of gold would place the Swiss central bank behind only the U.S. and Germany, and just above Italy’s 2,451.8 tons, IMF data show.

Biggest Reserves

On a five-year deadline, that’s 300 tons a year, roughly the average amount investors accumulated annually through exchange-traded products from 2003 through 2012. Global gold demand totaled 4,065.5 tons in 2013, the London-based World Gold Council estimates.

A “yes” vote may push gold above $1,350 an ounce, or 17 percent more than now, said Bank of America analyst Michael Widmer. Approval, although unlikely in Widmer’s view, would create a “firm” support at $1,200 because the SNB would need to buy about 1,500 tons, he said. Widmer forecasts gold will average $1,150 in the second quarter, rising to $1,225 for the whole year.

The initiative was started by several members of the Swiss People’s Party who argue it will preserve national wealth and enhance, rather than diminish, the central bank’s ability to act. They argue the SNB was wrong to sell more than 1,500 tons between 2000 and 2008.

“They can print money from noon until night,” said Luzi Stamm, one of the initiators. “But if they do, they’ll have to hold a portion as bullion.”

Balance Sheet

Gold fell the most in more than three decades last year and is now 40 percent below its September 2011 record. The metal, trading near a four-year low, was at $1,150.48 an ounce today. Investors trimmed their holdings of gold-backed funds to a five-year low this week.

Swiss buying would help replace lost consumption in recent years from ETP hoarding and because mining companies have mostly closed out hedges, a process that had added demand, Barclays Plc estimates.

Last year’s 28 percent gold price drop dealt a blow to the SNB’s balance sheet, prompting the century-old institution to scrap its dividend. Its governing board members have warned that passing the initiative would jeopardize their annual profit distribution to cantonal governments, which rely on the SNB’s payment to fund public services.

SNB Governing Board Member Fritz Zurbruegg said last month that the proposal would “seriously impair our ability to fulfill our legal mandate.” He points out that per capita, Switzerland already has the world’s highest gold reserves.

Short-Term Rally

A “yes” vote “could maybe rally gold in the short term,” said Robin Bhar, an analyst at Societe Generale in London. “Does it turn gold into a bull market and do we see new peaks? I doubt it.”

The SNB buying gold at a time when other nations are also accumulating would signal a reversal of selling that spurred an agreement starting in 1999 between European central banks to cap disposals. The accord, designed to reduce market disruption, was renewed this year without any limit.

The World Gold Council declined to comment on the pending initiative.

In repatriating its gold, the SNB wouldn’t be alone. Venezuela took back some gold in 2011 and 2012 and the Bundesbank brought some back last year, part of a plan to store half of Germany’s gold in domestic vaults by 2020.

According to the Swiss government, the initiative’s ban on gold sales would deprive the SNB of an asset should it find itself in dire straits. Several analysts share that view.

“You hold gold in terms of an emergency that you can liquidate if you really need to,” said Georgette Boele, an analyst at ABN Amro in Amsterdam. She sees gold averaging $925 next year, which would be the lowest since 2008. “It’s an interesting vote, let me put it that way.”

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Catherine Bosley in Zurich at cbosley1@bloomberg.net

BBC News - Singapore tops World Bank business ranking for ninth year

Singapore has been ranked the best country to do business for a ninth consecutive year, according to an annual survey by the World Bank.

Singapore is used as the regional headquarters for many of the world's biggest multinational firms

New Zealand came second and Hong Kong third in the lender's "Doing Business" report which rates 189 nations by the ease in which firms can operate there.

The UK moved up one position to eighth while the US stayed at number seven.

Eritrea was at the bottom of the table, along with Libya, the Central African Republic and South Sudan.

The World Bank ranking uses metrics such as the time taken to launch and close a business, gain construction permits and pay taxes in a country's largest business city.

"The list remains very similar to last year's" the report said. "Economies in the top 20 continued to improve their business regulatory environment."

"Ease of Doing Business" Ranking
SOURCE: WORLD BANK
1. Singapore	6. Norway
2. New Zealand	7. UK
3. Hong Kong	8. USA
4. Denmark	9. Finland
5. South Korea	10. Australia

The survey, which was first published in 2004, was expanded this year to include the second-largest business city in countries that have more than 100 million people.

There were 11 countries that were affected by this change, including China, India, Indonesia, Bangladesh and Pakistan.

China advanced three places to 90th while Japan fell two spots to 29th.

Overall, the report found it is easier to do business globally in both developed and emerging economies as they adopt better practices and regulatory reforms that facilitate businesses.

Sub-Saharan African countries were among the most improved although many of them continue to occupy the bottom of the rankings.

The World Bank said 39 African nations had "reduced the complexity and cost of regulatory processes" while 36 had strengthened legal institutions.

Tajikistan in Central Asia topped the most improved countries list, but the rest of the top five were made up of Benin, Togo and the Ivory Coast.