BBC News - China to double Iranian investment

China is set to double its investment in Iranian infrastructure projects, Iran's Mehr news agency reports

Sanctions have made it hard for Iran to finance infrastructure projects

China has raised its quota for Iranian projects to $52bn (£33bn) from $25bn the report said, quoting Iran's deputy minister for energy, Esmail Mahsouli.

Water, electricity, oil and gas projects will all benefit from the extra financing, Mr Mahsouli said.

Iran has turned to China, Russia and Turkey for financing as Europe and the US have strict sanctions on the nation.

The US has an almost total economic embargo on Iran, while the European Union tightened up its sanctions in 2012, particularly targeting the energy and banking industries.

The US, the EU and other nations suspect Iran of developing atomic weapons and have imposed sanctions over that threat.

Iran says its nuclear programme is only for civilian use.

It is holding talks with world powers aimed at reaching a deal over its nuclear programme.

Negotiators meet in Vienna this week, ahead of a deadline to reach a deal by 24 November.

The US says it will unblock $2.8bn in frozen Iranian funds, in return for Iran continuing to convert its stocks of 20%-enriched uranium into fuel.

Bloomberg News - Draghi Says ECB Measures Could Include Buying Government Bonds

Photographer: Martin Leissl/Bloomberg

Mario Draghi, president of the European Central Bank, insisted his institution can’t fix the economy on its own and began his comments in the parliament yesterday by presenting European lawmakers with a list of policy resolutions for them to pursue next year.

Mario Draghi has explicitly cited government-bond buying as a policy tool officials could use to stimulate the economy should the outlook worsen.

“Unconventional measures might entail the purchase of a variety of assets, one of which is sovereign bonds,” the European Central Bank president said in Brussels yesterday in answer to a question during his quarterly testimony to lawmakers at the European Parliament.

Draghi had stopped short of mentioning government debt in opening remarks yesterday and after the ECB’s monthly policy decision on Nov. 6, even as he said that officials have been tasked with the preparation of further stimulus measures. His latest comments come less than three weeks before the institution’s critical December meeting, when it will publish new forecasts that are likely to show a weaker outlook for growth and inflation.

While Draghi will succeed in his goal of boosting the ECB’s balance sheet back toward 3 trillion euros ($3.74 trillion), he’ll have to override some policy makers’ qualms on quantitative easing to do so, according to a majority of economists in Bloomberg’s monthly survey. So far, the ECB has restricted purchases to covered bonds, though asset-backed securities are now on its shopping list too.

Data released yesterday showed that officials accelerated covered-bond buying last week, with the total settled rising by more than 3 billion euros -- up from 2.6 billion euros the week before -- to 10.5 billion euros.

ECB Executive Board member Yves Mersch said yesterday that purchases of ABS will start this week. He also said that the central bank could “theoretically” buy sovereign debt, gold, exchange-traded funds, and even real estate to counter a longer period of low inflation, while warning against rushing in.

2015 Resolutions

“Unconventional monetary policy measures can have also unintended side effects in the medium and long term if we use them too aggressively or too extensively,” Mersch said at a conference inFrankfurt. “Every possible new measure must therefore be thoroughly screened for effectiveness, efficiency and and conformity with out mandate.”

Draghi insisted his institution can’t fix the economy on its own and began his comments in the parliament yesterday by presenting European lawmakers with a list of policy resolutions for them to pursue next year.

“2015 needs to be the year when all actors in the euro area, governments and European institutions alike, will deploy a consistent common strategy to bring our economies back on track,” he said. “Monetary policy has done a lot. It can do more if structural reforms are implemented. It can’t do everything.”

Fiscal Tension

U.S. Treasury Secretary Jacob J. Lew urged Germany last week to spend more to spur the euro-area economy, saying Europe’s “status-quo policies” don’t support the Group of 20’s growth agenda. Germany and the Netherlands should “pursue more fiscal policies to boost demand,” he said in Seattle.

That message was hinted at yesterday by the ECB’s chief economist, Peter Praet, who is also a member of the Executive Board.

“Countries which have some fiscal leeway should think how to use it in the best interest of their own economies and the euro area,” Praet said in an interview published in the Nikkei newspaper.

Such comments are at odds with German Chancellor Angela Merkel’s pledge to balance Germany’s budget. Her stance was backed yesterday by the Bundesbank in its monthly bulletin.

“A still-high debt ratio and unfavorable demographic developments also speaks for Germany’s pursuit of a structurally balanced budget in the medium term,” the Bundesbank said, adding that much-needed investment in infrastructure can be financed without new debt.

In the parliament, Draghi said there is an “urgent need to agree on concrete short-term commitments for structural reforms in the member states” and on the “aggregate fiscal stance for the euro area.”

To contact the reporter on this story: Craig Stirling in London at cstirling1@bloomberg.net

BBC News - G20 summit: Leaders pledge to grow their economies by 2.1%

Australian Prime Minister Tony Abbott has closed the G20 summit by detailing economic pledges agreed by world leaders.

The leaders agreed to boost their economies by at least 2.1% by 2018, adding $2 trillion to global economies.

Much of the summit focused on Russian President Vladimir Putin's position on the crisis in Ukraine.

Mr Putin faced fierce criticism and left the meeting before it ended, but said the summit was "constructive".

Mr Putin said he was leaving before the release of the official communique, citing the long flight to home to Russia and the need for sleep.

President Putin faced a frosty reception from Western leaders at the G20 meeting

'Violating international law'

Australia, as host of the meeting, had sought to keep the focus on economic issues, but the issues of climate change and the conflict in Ukraine attracted significant attention.

US President Barack Obama met European leaders on Sunday to discuss a co-ordinated response to what they see as Russia's destabilisation of Ukraine.

Mr Obama told reporters Mr Putin was "violating international law, providing heavy arms to the separatists in Ukraine" and violating the Minsk agreement.

He said the "economic isolation" of Russia would continue unless Mr Putin changed course.

In a television interview on Saturday, Mr Putin called for an end to sanctions against Russia, saying they harmed the world economy as well as Russia.

The Kremlin denies sending military forces or heavy weapons to pro-Russia rebels in eastern Ukraine.

During the summit, Canadian Prime Minister Stephen Harper and British Prime Minister David Cameron also sharply criticised Mr Putin.

Millions of jobs

The G20 groups leaders from rich and emerging economies

World leaders agreed to plans drawn up by finance ministers from G20 countries in February, known as the Brisbane Action Plan, to boost their collective GDP growth by at least 2%.

This is a pretty ambitious target for many G20 economies that are struggling with recession or very little growth, says the BBC's James Landale from Brisbane.

In his speech, Mr Abbott said those reforms would create millions of jobs. He also outlined plans to increase the participation of women in the global workforce, and to crack down on tax avoidance by multi-national companies.

The statement also agreed to take strong, effective action on climate change, following pressure from the US and European leaders.

Mr Abbott had faced criticism from environmental campaigners for not including talks on climate change in the summit.

In other developments, President Obama met the leaders of Japan and Australia on the sidelines of the summit and they called for the peaceful resolution of maritime disputes in the South China Sea.

G20 leaders also released a statement in which they vowed to do all they could to "extinguish" the Ebola outbreak in West Africa.

It said that member states were committed to do what was necessary "to ensure the international effort can extinguish the outbreak and address its medium-term economic and humanitarian costs".

Koala diplomacy

Koala diplomacy? Australia's Tony Abbot and President Putin had this photo op, despite tensions

Some of the leaders' spouses cuddled up to koalas at a sanctuary in Brisbane

• World leaders and their spouses were given koalas to hold on the fringes of the summit - the animals are native to Australia
• First protected by law in the 1930s after being hunted to extinction by fur traders in parts of Australia; declared a threatened species in 2012
• Species recently severely affected by chlamydia, which can cause blindness, infertility and death among the animals
• Began being used as a diplomatic tool in early 1980s, after government lifts export ban - they are often given to foreign zoos as gifts
• They are not bears, but are marsupials

Reuters News - Ukraine and Russia take center stage as leaders gather for G20

British Prime Minister David Cameron addresses a joint session of the Australian Parliament in Canberra November 14, 2014.

CREDIT: REUTERS/DAVID GRAY

 (Reuters) - The G20 leaders summit in Australia starting on Saturday is setting up as a showdown between Western leaders and Russian President Vladimir Putin, following fresh reports of Russian troops pouring into eastern Ukraine.

Ukraine has accused Russia of sending soldiers and weapons to help separatist rebels in eastern Ukraine launch a new offensive in a conflict that has killed more than 4,000 people.

British Prime Minister David Cameron blasted Russia's actions as unacceptable on Friday, warning that they could draw greater sanctions from the United States and the European Union.

"I would still hope that the Russians will see sense and recognize that they should allow Ukraine to develop as an independent and free country, free to make its choices," Cameron told reporters in Canberra.

"If Russia takes a positive approach towards Ukraine's freedom and responsibility, we could see those sanctions removed, if Russia continues to make matters worse then we could see those sanctions increased, it's as simple as that."

Russia denies sending troops and tanks into Ukraine.

But increasing violence, truce violations and reports of unmarked armed convoys traveling from the direction of the Russian border have aroused fears that a shaky Sept. 5 truce could collapse.

The G20 leaders summit in Brisbane is focused on boosting world growth, fireproofing the global banking system and closing tax loopholes for giant multinationals.

But with much of the economic agenda agreed and a climate change deal signed last week in Beijing between the United States and China, security concerns are moving to center-stage.

Ukraine has not been a top focus during a pair of summits in Asia this past week, U.S. Deputy National Security Advisor Ben Rhodes said, although President Barack Obama did raise it briefly with Putin when both attended the Asia Pacific Economic Cooperation forum in China.

Obama arrives in Brisbane on Saturday and will be discussing his frustration over Ukraine with a key bloc including German Chancellor Angela Merkel, French President Francois Hollande and Cameron.

"They've been key towards sending a shared message to the Russians and the Ukrainian government," Rhodes told reporters. "So it will be an opportunity for him to check in with them."

CONSENSUS TO ALLOW PUTIN

There had been calls from some in Australia to block Putin from attending the summit given Russia's actions in Ukraine and the downing of Malaysia Airlines Flight MH17 by Russian-backed rebels, but the overwhelming consensus was against it.

News reports that a convoy of Russian warships had arrived earlier this week in international waters north of Brisbane, the venue of the summit, also created a flutter.

Australian Prime Minister Tony Abbott said it was unusual but not unprecedented for the Russian navy to be so far south.

"Let’s not forget that Russia has been much more militarily assertive in recent times," he said on Thursday. "We're seeing, regrettably, a great deal of Russian assertiveness right now in Ukraine."

Merkel, speaking to reporters in Auckland, played down any threat posed by the warships but joined the leaders speaking out against Putin ahead of his arrival in Brisbane on Friday evening.

"What is concerning me quite more is that the territorial integrity of Ukraine is being violated and that the agreement of Minsk is not followed," she said, referring to the truce accord.

In addition to Ukraine, the crises in the Middle East are threatening to overshadow the economic agenda.

British nationals who become foreign fighters abroad could be prevented from returning home under new laws to deal with jihadists fighting in conflicts like Iraq and Syria, Cameron said in an address to the Australian parliament on Friday.

As host, Australia will continue pushing its growth agenda despite growing security tensions.

"The focus of this G20 will be on growth and jobs," Abbott said at a press conference with Cameron. "You can't have prosperity without security."

Canberra is pushing for an increase in global growth targets of 2 percent by 2018 to create millions of jobs and that goal appears on track. Over 1,000 policy initiatives proposed by G20 nations should add around 2.1 percent, the head of the Paris-based Organisation for Economic Co-operation and Development (OECD) said.

Taxation arrangements of global companies such as Google Inc (GOOG.O), Apple Inc(AAPL.O) and Amazon.com Inc (AMZN.O) have become a hot political topic following media and parliamentary investigations into how many companies reduce their tax bills.

The OECD has unveiled a series of measures that could stop companies from employing many commonly used practices to shift profits into low-tax centers.

Australian Treasurer Joe Hockey said Australia had won U.S. cooperation to launch an "aggressive crackdown" on tax avoidance.

(Additional reporting by Lincoln Feast and Jane Wardell in Brisbane and Gernot Heller in Auckland; Editing by Michael Perry and Raju Gopalakrishnan)

Bloomberg News - RBA’s Kent Sees Growth Picking Up in 2016 as Currency Falls

Photographer: Brendon Thorne/Bloomberg

Christopher Kent, Assistant Governor at the Reserve Bank of Australia, said the central bank’s assessment of recent data is that the moderate growth recorded in the second quarter -- 0.5 percent -- has been maintained over recent months

Australia’s economy will probably accelerate in 2016 as the currency falls in response to higher U.S. interest rates, central bank Assistant Governor Christopher Kent said.

Any Federal Reserve tightening would likely see “a further depreciation of the Australian dollar, which remains above most estimates of its fundamental value, particularly given the substantial declines in commodity prices,” Kent, who oversees economic forecasts, said in a speech text in Sydney today. “Growth will continue to be a bit below trend for a time, picking up gradually to be a bit above trend pace by 2016.”

Australia’s central bank has adopted a policy of patience, keeping rates at a record-low 2.5 percent for 15 months and flagging they will remain unchanged, as it aims to stimulate domestic growth drivers. In response, housing has boomed, while companies have refrained from opening their pocket books.

Business investment outside mining has been hampered by “a period of greater uncertainty and below-average confidence,” Kent said. “Both of these have changed for the better more recently, yet firms still seem reluctant to take on risks associated with substantial new investment projects. If the appetite of businesses, and shareholders, for risk were to improve, investment could pick up.”

Aussie Strength

The central banker reiterated that intervention in foreign-exchange markets remained an option if needed to push the Australian dollar lower. It fell after his comments and was trading at 86.94 U.S. cents at 2:53 p.m. in Sydney from 87.28 cents before the remarks.

“We haven’t ruled it out,” Kent said. “It’s still there as an option if needed.”

The currency averaged 93 U.S. cents in the past seven years and touched a record high of more than $1.10 in 2011. That compares with an average 68 U.S. cents in the previous seven years that included a record low of 47.8 cents in 2001.

Australia & New Zealand Banking Group Ltd. senior economist Felicity Emmett said intervention is unlikely.

“The Bank has previously highlighted that successful intervention occurs when market dysfunction has removed liquidity or when valuation is at an extreme,” she said in a research note today. “We are not at this point now.”

Moderate Growth

Kent said the Reserve Bank of Australia’s assessment of recent data is that the moderate growth recorded in the second quarter -- 0.5 percent -- has been maintained over recent months. “Pulling this all together suggests that growth has been below trend for the past two years or more,” he said.

“The near-term weakness reflects a combination of three forces: a sharper decline in mining investment over the coming quarters than seen to date; the effects of the still high level of theexchange rate; and ongoing fiscal consolidation at state and federal levels,” Kent said.

He repeated the nation’s 11-year high unemployment rate of 6.2 percent “is likely to remain elevated for some time.”

Kent said the central bank projects long-term average growth for Australia’s major trading partners for the next two years.

The RBA cut rates by 2.25 percentage points from a developed-world high of 4.75 percent between late 2011 and August 2013. Loose policy has boosted house prices, which climbed 13.1 percent in Sydney in the year through October and 8.9 percent in Melbourne, according to an RP Data-CoreLogic Home Value Index. Retail sales also surged in September by 1.2 percent, four times faster than economists estimated.

“Low interest rates, and higher housing prices, have also lent support to the growth of consumption, which has picked up over the past year or so, notwithstanding the weak growth of incomes,” Kent said. “The strength of this effect is most apparent in those states for which housing market conditions have been strongest.”

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

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.