Category Archives: Banks

(ECO) Fizemos bem em nacionalizar o BPN há dez anos? O Não de Cadilhe e o Sim de Teixeira dos Santos

(ECOFoi há dez anos que o BPN foi nacionalizado. Teixeira dos Santos continua a defender decisão que já custou 3,6 mil milhões aos contribuintes. Miguel Cadilhe, presidente do banco, lamenta “erro”.

Teixeira dos Santos mantém decisão de nacionalizar BPN 10 anos depois. Miguel Cadilhe nem por isso.Fotomontagem Lídia Leão

Quando Miguel Cadilhe soube que o Governo tinha decidido nacionalizar o Banco Português de Negócios (BPN), no dia 2 de novembro de 2008, o então presidente do banco ia a caminho de Ponte da Barca para uma visita ao cemitério que não tinha podido fazer no dia anterior. Recebeu o telefonema de Lisboa para se reunir de emergência com o ministro das Finanças Teixeira dos Santos, fez marcha atrás e voltou imediatamente para a capital. “A reunião serviu apenas para me comunicar a deliberação do Conselho de Ministros de nacionalizar o BPN”, confidencia Miguel Cadilhe ao ECO.

Uma década depois daquela que foi a primeira nacionalização após o PREC, em 1975, ainda hoje os dois antigos ministros têm visões completamente diferentes quanto a essa decisão de colocar o BPN na esfera do Estado (através da incorporação do banco na Caixa Geral de Depósitos), e às implicações que trouxe para o bolso dos portugueses.

O BPN continua a custar muito dinheiro aos contribuintes. Até 2016, o Estado já havia gastado mais de 3,6 mil milhões de euros com a instituição (o equivalente ao atual valor de mercado do BCP, o maior banco privado português), de acordo com os últimos cálculos do Tribunal de Contas. Mas a fatura para os cofres públicos está longe de ficar fechada.

O Ministro das Finanças, Teixeira dos Santos, acompanhado pelo Governador do Banco de Portugal, Vítor Constâncio, durante a conferência de imprensa, após o Conselho de Ministros extraordinário ter decidido propor a nacionalização do BPN, 02 de novembro de 2008, Lisboa.Inácio Rosa/Lusa 2 novembro 2008

Debilitado? Sim. Too big to fail? Não

Foi no dia 5 de novembro de 2008, completam-se hoje precisamente dez anos, que a Assembleia da República aprovou a nacionalização do BPN, pedida poucos dias antes pelo Executivo de José Sócrates.

O jornal Público do dia 3 de novembro de 2008 dava um contexto pormenorizado do que se tinha passado dia anterior e dos motivos que levaram à tomada da decisão: “Foi numa reunião extraordinária do Conselho de Ministros que a decisão foi tomada, depois de terem falhado as negociações com os quatro maiores bancos portugueses, que se recusaram, no entanto, a encontrar uma solução para a instituição. Práticas de ‘legalidade duvidosa’ de anteriores administrações conduziram o banco a uma situação que a crise financeira mundial acabou por agravar. Neste quadro, a atual administração, liderada por Miguel Cadilhe, não conseguiu completar o plano de recuperação que tinha delineado. O ministro das Finanças diz que todos os depósitos dos clientes do banco estão garantidos“.

Mas “a nacionalização não foi decidida de um dia para o outro”, conta Teixeira dos Santos ao ECO. “O BPN estava a ser acompanhado desde meados desse ano pelo Banco de Portugal, que todos os meses reportava informação ao Governo. O banco já tinha recorrido a financiamento de emergência e linhas concedidas pela banca, masestava muito debilitado e com problemas de liquidez para honrar os seus compromissos do dia-a-dia“, recorda.

Edição do jornal Público no dia 3 de novembro de 2008. Manchete: bancos privados não quiseram salvar BPN e o Governo optou pela nacionalização.

“Não foi a dimensão do banco que justificou esse tipo de intervenção porque o BPN não era propriamente um daqueles bancos too big to fail. Era mais o ambiente que se vivia após a falência do Lehman Brothers. Podia ser uma fagulha que, num ambiente carregado de combustível, podia provocar um incêndio de proporções maiores“, argumenta ainda.

Para Cadilhe, que ocupava do cargo de presidente do BPN há apenas cinco meses, substituindo Abdool Karim Vakil (que saltou do Banco Efisa para a liderança do BPN após a saída de José Oliveira e Costa, por motivos de saúde, em fevereiro desse ano), foi o próprio Governo quem acabou por “provocar um alarme social” em torno da situação do banco, provocando uma “sangria de depósitos e uma sangria de liquidez”.

Ainda hoje aquele que viria a ser o último presidente do BPN considera que o banco foi nacionalizado por razões “insondáveis”, por “opção política”, como teve oportunidade de dizer no Parlamento na comissão que ficou de apurar as responsabilidades pela falência da instituição.

“Não foi a dimensão do BPN que justificou esse tipo de intervenção porque não era propriamente um daqueles bancos too big to fail. Era mais o ambiente que se vivia após a falência do Lehman Brothers.”

Teixeira dos Santos

Antigo ministro das Finanças

Bancarrota do Lehman Borthers? Perigo de contaminação dos problemas para outros bancos nacionais? “O BPN representava 2% do sistema bancário português. Falar em risco sistémico a propósito do BPN é querer um pretexto para aquilo que não deveria ter sido feito. Foi um erro, ponto final”, diz o antigo ministro de Cavaco Silva.

Com os custos finais da nacionalização ainda longe de estarem fechados, Teixeira dos Santos acredita que se evitou ainda maiores prejuízos para o Estado. Miguel Cadilhe nem por isso.

Após a nacionalização, o Governo ainda tentou vender o banco logo em 2010, com as avaliações a apontarem para um encaixe de 180 milhões de euros. Sem interessados na altura, a parte boa do BPN acabaria por vendida só em 2011, já com a troika em Lisboa, e por apenas 40 milhões ao BIC, hoje em dia liderado por Teixeira dos Santos.

“O BPN representava 2% do sistema bancário português. Falar em risco sistémico a propósito do BPN é querer um pretexto para aquilo que não deveria ter sido feito. Foi um erro, ponto final.”

Miguel Cadilhe

Antigo presidente do BPN

“Foi muito difícil vender o banco porque vivemos aquele período de crise financeira, de muita instabilidade. Não era uma conjuntura fácil”, recorda o antigo governante.

Estes 40 milhões de euros foram apenas uma pequena parte do que foi possível recuperar até ao momento. O que sobra do BPN estão em três veículos criados com o intuito de maximizar as vendas de ativos que faltam vender: a Parvalorem gere os créditos problemáticos do antigo banco; a Parups tem à sua responsabilidade os imóveis, obras de arte e outros ativos do BPN; e a Participadas gere as participações do BPN noutras empresas e fundos, como o Banco Efisa.

Agência do Banco Português de Negócios, Porto.José Coelho 19 janeiro, 2011

BPN tem custo “maior do que na altura seria razoável esperar”

De ano para ano, os veículos criados para ficarem com o BPN continuam a consumir despesa que vem diretamente do Orçamento de Estado: prevê-se mais de 600 milhões de euros este ano e outros 550 milhões no próximo. Isto para lá das garantias concedidas pelo Estado à Parvalorem (1.994,83 milhões de euros) e à Parups (307,17 milhões) que, sendo executadas, vão castigar ainda mais os bolsos dos contribuintes.

Saldo das receitas e despesas orçamentais relativas ao BPN

AnoMilhões de eurosSaldo acumuladoAté 20122013201420152016-4000-3000-2000-10000

Fonte: Tribunal de Contas

Com a fatura nos 3.600 milhões em 2016, Teixeira dos Santos reconhece que “o BPN acabou por impor um custo aos contribuintes maior do que na altura seria razoável esperar”, sendo que na altura da nacionalização se esperava recuperar grande parte do valor do banco.

“Mesmo assim, atentos aos riscos que havia, estou convencido que evitamos uma crise financeira que se poderia estender para lá do BPN e impor um custo superior àquele que estamos a suportar com o banco”, frisa.

Cadilhe contrapõe. Em vez de se ter nacionalizado o banco há dez anos, “o Governo poderia ter apostado no nosso plano e nós assumíamos a responsabilidade”, diz. “De certeza que o Estado não gastaria mais do que veio a gastar, pelo contrário“.

“Mas é claro que com a nacionalização do banco não houve depositante que quisesse deixar lá o dinheiro. Não há nenhum banco que resista“, sublinha.

(DW) German police raid BlackRock offices

(DW) BlackRock controls trillions of dollars of assets and has now been caught up in the monumental cum-ex tax scandal. The investment funds involvement has particular significance for the German government.

    
Blackrock logo

German investigators raided the offices of finance giant BlackRock on Tuesday, several media outlets reported.

The raid is part of the country’s biggest post-war fraud investigation, known as the cum-ex scandal.

BlackRock said it was cooperating fully with investigators. Its chairman for Germany, Friedrich Merz, told he had ordered management to “investigate all instances and make documents available to authorities.”

What is the cum-ex scandal? The scandal came to light in 2016 when it emerged that several German banks had exploited a legal loophole which allowed two parties simultaneously to claim ownership of the same shares. This contrived “dual ownership” allowed both parties to then claim tax rebates even though both were not entitled to it. The scandal cost taxpayers billions of euros.

The Day – Tax Scam

What is BlackRock? It is a vast investment management organization that oversees more than $6.4 trillion (€5.6 trillion) in assets — putting it on par with the world’s third biggest GDP. BlackRock is also the biggest stockholder on the German DAX blue chip market index. On top of asset management, it also advises central banks, financial ministries, big investors like state funds, pension funds, insurance companies and foundations.

What is the significance for German politics? The raids could make things tricky for chairman Merz. The Christian Democrat politician is a leading candidate to succeed German Chancellor Angela Merkel as party leader when she steps down. The scandal predates Merz’s time at the company, however, the Greens have seized upon the raids to question the government’s commitment to prosecuting those involved.

(Independent) Swift payment system bows to Iran sanctions

(Independent)

Rial talk: European Economic Affairs Commissioner Pierre Moscovici said the EU was opposed to US sanctions against Iran. Photo: Bloomberg1
Rial talk: European Economic Affairs Commissioner Pierre Moscovici said the EU was opposed to US sanctions against Iran. Photo: Bloomberg

THE European Union is opposed to the United States’ decision to reimpose oil and financial sanctions against Iran, European Economic Affairs Commissioner Pierre Moscovici said yesterday.

“The European Union does not approve of it,” Moscovici told Franceinfo radio, hours after further US sanctions on Iran came into force.

Washington decided to reinstate punitive measures that were lifted under a 2015 nuclear deal negotiated by the administration of President Barack Obama, and added 300 new designations in Iran’s oil, shipping, insurance and banking sectors.

The Belgium-based Swift financial messaging service said it is suspending some unspecified Iranian banks’ access to its messaging system in the interest of the stability and integrity of the global financial system.

Swift is used to send data, including money transfers, between banks.

In a brief statement, Swift made no mention of US sanctions coming back into effect on some Iranian financial institutions on Monday as part of US President Donald Trump’s effort to force Iran to curtail its nuclear, missile and regional activities.

The Swift statement said suspending the Iranian banks’ access to the messaging system was a “regrettable” step, but was “taken in the interest of the stability and integrity of the wider global financial system”.

Having abandoned the 2015 Iran nuclear deal, Mr Trump is trying to cripple Iran’s oil-dependent economy and force Tehran to quash not only its nuclear ambitions and its ballistic missile program but its support for militant proxies in Syria, Yemen, Lebanon and other parts of the Middle East.

Swift is caught between two contrary regulatory demands.

The US government has told Swift that it is expected to comply with US sanctions and it could face sanctions itself if it fails to do so. On the other hand, Swift is barred from doing so under the European Union’s so-called blocking statute, which could subject it to European penalties for complying with US law.

(JE) Millennium na Polónia compra Euro bank por 428 milhões de euros

(JEO BCP comunicou esta segunda-feira, antes da abertura do mercado, à Comissão do Mercado de Valores Mobiliários que chegou a acordo com a Société Générale para a aquisição de uma participação de 99,79%.

O BCP anunciou esta segunda-feira que, através da sua subsidiária na Polónia (Bank Millennium), chegou a acordo para a compra de uma participação de 99,79% no Euro Bank à Société Générale, por cerca de 428 milhões de euros (1.833 milhões de zlotys). A aquisição foi comunicada esta segunda-feira, antes da abertura do mercado, à Comissão do Mercado de Valores Mobiliários (CMVM).

“A aquisição do eurobank permite reforçar a posição do Bank Millennium na banca polaca. Levará, adicionalmente, a um aumento da sua base de Clientes, e torná-lo-á um dos seis maiores bancos na Polónia em número de clientes de retalho, reforçando a presença geográfica do Bank Millennium em cidades polacas de menor dimensão”, refere o banco.

A instituição bancária salienta, no mesmo documento divulgado pela CMVM, que o negócio com a Societe Generale Financial Services Holding tem “implícito um múltiplo P/BV de 1,20x (preço final de aquisição sujeito aos ajustes habituais ao net asset value na data da transação), a ser pago em cash e totalmente financiado por meios próprios do Bank Millennium”.

O BCP prevê que, cerca de dois anos depois de a operação estar concluída, o que deverá acontecer no segundo trimestre de 2019, os resultados do banco polaco subam 26% e o rácio CET1 se situe em 15,9%. Em relação ao Millennium bcp, a operação deverá causar um impacto de -40 pontos base no rácio CET1 e de -30 pontos base no rácio de capital total fully implemented na alturaa da compra e fazer crescer os resultados consolidados da entidade bancária já a partir de 2020, considerando custos de integração.

Miguel Maya, CEO do Millennium bcp, considera que se trata de um mercado “com elevado potencial de crescimento” e explica que a aquisição “foi analisada com o máximo detalhe dada a relevância que a gestão rigorosa do capital e dos riscos de negócio assumem para a comissão executiva do BCP”. “O banco não perspetiva qualquer aquisição adicional, sendo o crescimento previsto no plano estratégico exclusivamente suportado no desenvolvimento orgânico”, assegura, no comunicado.

(BBG) Former Julius Baer Banker Gets 10 Years for Venezuelan Plot

(BBG) A former Swiss banker was sentenced to 10 years in prison for his role in a plot to launder $1.2 billion stolen from Venezuela’s state-owned oil producer, but the judge said she may reduce his term if prosecutors are satisfied with his cooperation.

The banker, Matthias Krull, 45, was sentenced Monday in federal court in Miami, where he pleaded guilty on Aug. 22. He admitted that he joined a network of money launderers that used real estate and false-investment schemes to hide funds taken from Petroleos de Venezuela S.A., known as PDVSA.

Krull was among eight people charged by the Justice Department in July in the matter and was the first to plead guilty. Another defendant, Abraham Edgardo Ortega, the former executive director of finance at PDVSA, is scheduled to appear in Miami federal court on Wednesday and plead guilty, court records show. Like Krull, Ortega is also charged with conspiracy to commit money laundering.

U.S. District Judge Cecilia Altonaga imposed a $50,000 fine on Krull and ordered him to forfeit $600,000, or the amount in fees that he earned for helping to launder funds. Prosecutors said he tried to launder $600 million and actually moved $60 million.

The judge said Krull had led an “honorable and righteous life” and had been active in his church before he helped to funnel money out of Venezuela.

“These actions seem to be at odds with the man I have before me,” Altonaga said. “It’s almost like you’re two people. You allowed yourself to go along and take actions which you knew in your heart of hearts were wrong.”

While she imposed the maximum sentence he faced, she said she may lower the term if prosecutors say he provided “substantial assistance” to their investigation. Krull attorney Oscar Rodriguez said Krull has been cooperating with prosecutors. They’re looking into Venezuelan President Nicolas Maduro, his three stepsons, and Raul Gorrin, owner of the Globovision television network in Venezuela, a person familiar with the matter said.

‘Blame Myself’

At the hearing, Krull apologized to the people of Venezuela, the U.S. government, his wife and his three young children.

“I fully blame myself for being in this situation,” Krull said as he sobbed. “I apologize for making a bad decision. I pray and hope you won’t look at me as a bad person.”

Krull, who is free on $5 million bail, won’t have to report to prison until April 29, the judge ordered.

His arrest on July 24 set off an internal investigation by his former employer, Julius Baer Group Ltd., Switzerland’s third-largest wealth manager, to determine whether others at the bank played a role in the scandal. The bank is also reviewing all of its client accounts worldwide to determine the source of funds, placing a particular emphasis on Latin America.

Read More: Julius Baer Is Said to Have Law Firm Look at Banker Accounts

The bank is in the third and final year of a so-called deferred-prosecution agreement to avoid U.S. prosecution after admitting in 2016 that it helped thousands of Americans conceal billions of dollars in assets. Julius Baer paid $547 million in penalties, and two bankers pleaded guilty. A former Julius Baer banker also pleaded guilty last year in New York for his role in funneling money from an Argentinian sports-marketing company to officials at world soccer’s governing body, FIFA.

“Mr. Krull is a former employee who has been sentenced to charges brought against him in his personal capacity — the bank is not charged of any wrongdoing,” said Julius Baer spokeswoman Larissa Alghisi. “The charges brought against Mr. Krull are not related to the matters covered in the bank’s DPA, and we have no indication that these events will have any impact on the DPA.”

Panama Rainmaker

Krull, who was born in Germany, lived in Venezuela as a boy and later in Mexico and Switzerland before joining Julius Baer and moving to Panama. He was considered a rainmaker who managed accounts for Venezuelan officials and kleptocrats, and he amassed more than 500 accounts with more than $500 million in assets, the person familiar with the matter said.

Prosecutors say he joined a conspiracy that involved money managers and brokerages, as well as banks and real-estate firms.

Aside from the PDVSA, FIFA and tax-evasion scandals, Julius Baer said in March that it suspended an employee in Russia while the bank looked into allegations made by Swiss federal prosecutors.

(ZH) Deutsche Bank Shares Tumble After Net Income Plunges 65% On Lowest Revenue In 8 Years

(ZH) There was some good, but mostly bad news in Deutsche Bank’s Q3 earnings report.

The good news is that after years of turmoil, the biggest German bank is showing signs of stabilization under new CEO Christian Sewing after a bitter boardroom battle. The bad news is that the bank missed across all key revenue metrics as Sewing scrambles with a looming problem: how to boost revenue after firing thousands of banks in a multi-year long cost-cutting campaign.

The German bank reported net income of €229 million on Wednesday, above the €160 million expected but 65% below the €649 million reported a year ago. Profit before tax also tumbled by nearly half, dropping from €933 million to €506 million.

Investors were closely watching the bank’s costs: the new management team, which was appointed last April, promised to deliver further cost-cutting to revamp the balance sheet. In the third quarter of 2018, the bank said that adjusted costs dropped 1% from a year ago to 5.5 billion euros, with the aim for the full year to bring adjusted costs down to €23 billion and €22 billion in 2019. A core part of the new “restructuring” effort have been mass layoffs as the number of workers is set to come down to 93,000 by the end of 2018, and 90,000 one year later.

But while costs and the bottom line beat were a modest positive surprise, the same could not be said for the bank’s revenue which disappointed across the board: total revenue of €6.17BN missed expectations of €6.34BN and guided lower, now predicting a slight decline for full year revenue after earlier guiding for a flat result; trading income in the key FICC division tumbled 15% from a year earlier, while equities trading, a sector where Wall Street banks generally posted gains, also dropped at the same pace as these two key businesses have been hardest-hit by executives departures recently.

More Q3 revenue details:

  • FICC revenue: €1.32BN vs €1.545BN in Q3 2017, and missing expectations of €1.365BN
  • Equities trading revenue: €466BN vs €548BN in Q3 2017, and missing expectations of  Exp. €473BN
  • Total sales and trading revenue: €1.79BN, missing expectations of €1.84BN
  • Total revenue: €6.17BN, missing expectations of €6.34BN

In total, Deutsche reported its lowest third-quarter revenue since 2010 and now expects a slight decline for the full year, after earlier guiding for a flat result according to Bloomberg.

The silver lining is that while revenue was a disappointment, costs also shrank which should allow the bank to post its first annual profit in four years according to Sewing who added that the focus now has to be on growing the top line without compromising controls: “With profit before tax of 506 million euros, this result is another milestone on our way to becoming a sustainably profitable bank. We have our costs under control and sufficient capital to grow. We are on track to be profitable in 2018, for the first time since 2014.”

Of course, being profitable by butting into the muscle is hardly what shareholders expected, and the CEO admitted as much writing in a memo to employees that while “we made headway on our cost reductions,” he admitted that “we have not yet achieved a turnaround in terms of revenues.

As Bloomberg notes, for investors who have been through the bank’s previous turnaround plans, “it’s a familiar pattern.” John Cryan, Sewing’s predecessor, had vowed to restore “controlled growth” last year after raising fresh funding, but failed to deliver. Sure enough, the stock was promptly punished for this latest disappointment, with Deutsche Bank shares falling 3.5%, having lost 44% of its value this year and trades near its record low.

Sellside reactions were mixed, with JPM analyst Kian Abouhossein writing that Deutsche Bank “has done an excellent job under Sewing” on cost reductions and improving the bank’s capital strength, however “we remain concerned about DB’s inability to turn around” the investment bank division.”

On the other hand, Goldman analyst Jernej Omahen was more critical, writing that the third quarter results were “weak” from an operational perspective, noting underperformance relative to U.S. peers in investment bank revenue progression, as well as the underlying pretax profit miss. The silver lining: capital was better-then-expected, as was bottom line, due to lower burden of non-operating items.

But the one recurring theme was the lack of top-line growth: “Costs are in line with targets,” said Daniel Regli, an analyst with MainFirst who has a hold recommendation on the stock. “But there is continued weakness in investment bank revenue. That needs to be fixed.”

* * *

Sewing had staked his restructuring effort, and Deutsche’s fourth in three years, on boosting profitability by trimming costs and refocusing on fewer, core activities. Yet the continued contraction in the top line risks undermining investor confidence in the strategy and may fuel speculation that the lender needs to combine with a rival in the long run, BBG adds.

The new CEO has vowed the investment banks will remain a core business for Deutsche Bank, with at least half of the revenue coming from the unit. And yet, he’s cutting at least 7,000 jobs and retrenching in areas such as prime finance, U.S. rates and corporate finance in the U.S. and Asia. The bank cut another 700 positions in the third quarter after eliminating about 1,700 jobs in the three months through June; it said it remains on track to hit its job target of well below 90,000 by end of 2019.

The bank’s steady exodus of employees has left the business stuck in what CFO James von Moltke called a “vicious circle” of declining revenue, “sticky” expenses, a lowered credit rating and rising funding costs. Additionally, the bank on Wednesday highlighted higher funding costs and geopolitical events among the headwinds for the securities unit.

Meanwhile, as the one-time financial titan continues to shrink, all management can do is try to boost morale: Garth Ritchie, head of the bank’s securities unit urged employees in a memo to “focus resolutely on rebuilding revenue momentum” in the final quarter; surely a preferable alternative to being fired. Von Moltke said on a conference call that the bank wants to redeploy excess cash to return to growth, as restructuring expenses are likely to be lower than previously expected. He said rating companies would be comfortable with such use of capital.

“We need to end the year on a strong note,” Sewing wrote in his memo. “We’ll stay disciplined on costs, and we’ll turn around revenues.”

Indeed…

(JE) Fitch sobe rating do BPI para ‘BBB’

(JE“A Fitch acredita que Portugal é um mercado estrategicamente importante para o CaixaBank”, refere a agência de notação financeira norte-americana.

A Fitch reviu em alta o rating do BPI para ‘BBB’ após o upgrade do CaixaBank. A agência de notação financeira norte-americana anunciou esta segunda-feira, 15 de outubro, que aumentou o rating de emissor de longo prazo de ‘BBB-‘ para ‘BBB’ e o de curto prazo de ‘F3’ para ‘F2’.

“A Fitch acredita que Portugal é um mercado estrategicamente importante para o CaixaBank, como demonstrado pelo seu investimento de longa data no Banco BPI e pelo seu envolvimento na conceção e implementação dos objetivos estratégicos da sua subsidiária. A venda, em novembro de 2017, de alguns negócios de seguros, gestão de ativos, cartões de crédito e corporate finance do BPI ao CaixaBank reflete uma maior integração”, refere a entidade, em comunicado.

Para a Fitch, os ratings de emissor de longo prazo (IDR), de dívida sénior e de suporte do BPI espelham uma elevada probabilidade de apoio do seu ‘dono’ CaixaBank (BBB + / Estável), em caso de necessidade. De acordo com os analistas, o IDR do BPI e seus os ratings da dívida sénior poderiam ser melhorados se o IDR do CaixaBank tivesse um update ou se a Fitch considerasse que a propensão do CaixaBank para lhe dar apoio tinha aumentado – factor este que, a seu ver, está associado ao ambiente operacional de Portugal.

(NYT) Swiss Bank Discourages China Travel After Banker Is Kept in Beijing

(NYT

An advertisement for the Swiss banking giant UBS in Hong Kong last year.CreditCreditBobby Yip/Reuters

UBS, the Swiss banking giant, has asked dozens of its wealth managers to check with their bosses before making any trips to mainland China in the coming days, after one of the bank’s advisers to wealthy Chinese clients was prevented last week from flying home to Singapore from Beijing.

The incident is the latest sign of the Chinese government’s growing assertiveness in preventing foreign citizens from leaving the country in connection with investigations.

Swiss banks occupy a difficult niche in China. They are widely known for protecting clients’ secrecy, although the United States government has been chipping away at Switzerland’s stringent regulations. Singapore also has strict bank secrecy laws, and has become a popular place for many Asians to park their money beyond the easy scrutiny of tax investigators and the police.

Preventing a Swiss bank manager from leaving China until she speaks to the authorities could represent a new challenge to banking secrecy.

UBS issued an announcement late Tuesday morning that it had lifted the travel advisory to its staff. The announcement hinted at uneasiness about the attention that the advisory had drawn, noting that, “UBS has had a strong franchise in China for 30 years and remains fully committed to further developing our business on the mainland.”

The bank had no further comment on the whereabouts of its Singaporean banker.

The advisory came as Xi Jinping has embarked on an extensive anticorruption campaign in the six years since he became China’s leader as the general secretary of the Chinese Communist Party. The campaign has also been used to enforce political loyalty to him.

A growing number of multinational companies have begun reviewing and sometimes tightening their travel policies on mainland China. Some of these have been victims of Chinese industrial espionage or trade violations, such as dumping or export subsidies.

“As the crackdown has intensified we’ve seen more frequent cases where foreign firms introduce temporary, precautionary restrictions for a specific reason — usually involving the possibility of staff detention in connection with investigations,” said Andrew Gilholm, a Shanghai-based analyst with Control Risks, a global consulting company.

The Chinese government has also prevented the departure of members of the families of people living in the United States. That has become a popular way to put pressure on overseas targets of investigations for them to return to China even when Beijing does not have enough evidence to extradite them.

The UBS client adviser, a Singaporean woman, tried to check in for her flight at Beijing International Airport last Friday, only for the airline counter employee to give her a phone number to call instead of her boarding pass, said a person with detailed knowledge of the case who insisted on anonymity because of the legal issues involved.

When the woman called the number, she was told that the authorities in another Chinese city wanted to talk to her this week, the person said. The woman returned to her Beijing hotel, moved about the city without difficulty over the weekend and was planning to fly to the other Chinese city early this week, the person said.

The woman was not told that either she or UBS was under investigation, the person said. The names of the UBS adviser and her Chinese clients have not been disclosed.

The travel warning to the bank’s wealth managers covers 50 to 100 people, mostly based in Hong Kong or Singapore, but is not an actual travel ban. Some of them are continuing to make trips to mainland China this week after checking with their superiors, so as to keep appointments made previously, the person said.

The bank’s investment banking, asset management and back-office operations have not been covered by the travel advisory.

The travel restriction on the woman and UBS’s response were first reported on Sunday by Bloomberg.

Big American financial institutions like Bank of America Merrill Lynch and Goldman Sachs continued to allow their employees to come and go from mainland China on Monday without travel restrictions.

The United States issued a travel advisory in January cautioning Americans traveling to China — particularly if they were born there and had become naturalized American citizens — that the Chinese government might not allow them to leave if it wanted to put pressure on them, a member of their family or their employer.

(ElEconomista) Santander planea ajustes de plantilla en Portugal tras cerrar la integración con Popular

(ElEconomista)

  • El banco adquirido cuenta con 115 oficinas y unos 900 empleados
santander-totta-portugal-770.jpg
Sucursal de Banco Santander en Portugal.

Banco Santander culminó con éxito en tan sólo un fin de semana la integración tecnológica con el Popular en Portugal. El grupo cántabro realizó la integración de los sistemas en las 115 oficinas que tiene el Popular en el país de un sólo golpe. La unificación tecnológica en España, sin embargo, se hará de manera gradual, y comenzará el próximo noviembre con tan sólo dos sucursales. Después, la entidad que encabeza Ana Botín, irá ampliando gradualmente la integración al resto de oficinas.

Tras la fusión de los sistemas en Portugal, el banco, al igual que en España, también se plantea ajustes para mejorar la eficiencia del grupo, puesto que algunas sucursales pueden duplicar esfuerzos. En la actualidad, el número de empleados que tiene el Popular en el país vecino está en torno a los 900.

Asimismo, el grupo realizará el proceso de recortes bajo la negociación con los sindicatos. No obstante, y hasta que no se dé inicio a las conversaciones con los representantes de los trabajadores, el banco descarta plantear una cifra certera del ajuste.

El proceso de integración no tiene ningún impacto sobre los clientes puesto que no cambian ni de número de cuenta ni de tarjeta

El consejero delegado del Banco Santander, José Antonio Álvarez, destacó el pasado día 10 que el proceso de integración no tiene ningún impacto sobre los clientes puesto que no cambian ni de número de cuenta ni de tarjeta. Asimismo, el Portugal, el único efecto que tuvo fue que los usuarios no tuvieron acceso a internet durante el pasado sábado, aunque sí a los cajeros automáticos.

En España, el proceso es más largo y culminará en junio. A partir de esa fecha desaparecerá completamente la marca Popular. La entidad adquirida tenía un total de 1.416 oficinas en nuestro país a cierre del ejercicio 2017. Las negociaciones del banco con los sindicatos comenzarán a partir de marzo, según adelantó Álvarez.

El consejero delegado pasará a asumir a partir del 1 de enero la vicepresidencia del grupo Santander tras la salida de Rodrigo Echenique. Álvarez, conocedor del proceso de compra e integración del Popular, pilotará el proceso de fusión, que alcanza su punto álgido estos meses. El italiano Andrea Orcel, procedente del área de banca de inversión de UBS, le sucederá en el cargo.

(BBG) Swiss Banking Secrecy Rule Dealt Setback in Month to Forget

(BBG) Two events this month may have finally brought the curtain down on secrecy rules that were the key to Geneva and Zurich’s private banking heyday, when foreign clients could come armed with suitcases of cash and their bankers would look the other way.

Swiss tax authorities announced they’d shared details on 2 million accounts with other countries for the first time as part of rules on information exchanges introduced last year. Then last week Switzerland’s Supreme Court said a former Julius Baer Group Ltd. executive didn’t break secrecy rules, ruling Swiss law didn’t apply at the Cayman Islands unit where he worked.

“Bank secrecy used to be sacrosanct even in Switzerland, but now with automatic exchange of information agreements kicking in and then this decision, we see that’s being steadily eroded,” said Kern Alexander, chair of finance and law at the University of Zurich.

It’s been a rough few years for Switzerland’s banks and confidentiality. U.S. prosecutors in 2013 opened a program allowing Swiss banks to come clean on American clients evading taxes in exchange for leniency.

Credit Suisse Group AG paid a $2.6 billion fine and more than 80 other Swiss banks coughed up over $1.3 billion in penalties. The 272-year old Wegelin & Co. was forced to close after striking its deal with the U.S.

Vontobel Holding AG, a Swiss bank founded 94 years ago, has taken a different approach. It’s registered an entity with the U.S. Securities and Exchange Commission that focuses on wealthy clients liable for U.S. taxes, Bloomberg reported. On Friday, it took over $1.2 billion in U.S. client assets from a Swiss rival.

While the bad October started with the government’s data transfers, the Baer ruling raises difficult questions about how Swiss banks can in future control the flow of information out of tax havens around the globe. Lenders had been able to safeguard foreign clients’ anonymity through the nation’s legendary bank secrecy laws.

According to Article 47 of the Swiss Banking Act first crafted in 1934, anyone who divulges clients’ secrets can be sentenced to five years in prison. The rule was used to convict self-described whistleblower Herve Falciani who gave stolen information about HSBC Holdings Plc clients to French tax authorities.

But last week the Supreme Court put clear geographic limits on Article 47 when it upheld the acquittal of Rudolf Elmer, a Swiss accountant who worked at a Baer unit in the Cayman Islands. The court said that secrecy rules stop at the border and don’t apply to Swiss lenders’ far-flung entities around the world.

‘Not Exportable’

“Banking secrecy is not exportable,” Judge Laura Jacquemoud-Rossari said in the Elmer ruling.

The verdict was delivered after Jacquemoud-Rossari and the other judges expressed their opinions at a public hearing, an unusual format that shows it was intended for a broader audience, said Ursula Cassani, a University of Geneva law professor.

“It’s a precedent as precedents go in Switzerland,” Cassani said.

Swiss banks rely on foreign units in the Caribbean and Channel Islands to attract wealthy offshore customers. Some of the units are created as locally-domiciled entities both to limit a bank’s legal exposure and also to cut its corporate tax bill. But trying to tap those benefits while also invoking Article 47 is greedy, says the University of Zurich’s Alexander.

“They want the limited liability, the tax advantages such a structure offers and then they want to have extraterritorial application of Swiss bank secrecy law,” says Alexander. “It’s trying to have your cake and eat it too, to put it mildly.”

The unpleasant October surprises could continue beyond Halloween. UBS is on trial in Paris over accusations it illegally sent Swiss employees across the border to poach clients — and launder undeclared money. The Zurich-based bank rejects the allegations.

Silver Lining?

There may be a silver lining if the Elmer case motivates Swiss banks to bring operations and clients back “home,” says Daniel Zuberbuehler, the former head of the Swiss Federal Banking Commission.

“It’s certainly not good when someone gets away with behaving rather unproperly,” he said. “If they want to offer them the maximum protection, they’ll have to tell them: ‘Keep your account in Switzerland, we’re no longer giving you an offshore account.’ So that might even bring business back home.”

(Economist) London’s financial flows are polluted by laundered money

(Economist) BRITAIN likes to see itself as a leader in the fight against illicit finance and corruption. The government has recently been talking even tougher, as worsening relations with Russia have focused attention on the number of oligarchs who have interests in London. Anyone looking to stash dirty money “should be in no doubt that we will come for them,” warns Ben Wallace, the economic-crime minister.

In fact the record suggests that wrongdoers can sleep easy (see article). The National Crime Agency (NCA) reckons that “many hundreds of billions of pounds” of international money is rinsed through British banks each year, much of it from kleptocrats and their cronies. Almost every big cross-border corruption case in recent years has had a connection to Britain or its palm-fringed overseas territories. British limited-liability partnerships were the vehicle of choice for suspicious clients of Danske Bank, which is embroiled in the laundering of as much as €200bn ($230bn).

Some people in the governing Conservative Party and the City argue that a big clean-up would be harmful just when British finance risks losing its lustre because of Brexit. The more important point is that, in a country which has undergone bail-outs and austerity following the financial crisis of 2008, doing nothing to tackle dirty capital flows could further undermine the legitimacy of capitalism.

Thames and misdemeanours

London is hardly unique. Other financial centres, including New York, Dubai and Singapore, also wash dodgy cash. The more clean money sloshes around, the easier it is to hide the dirty sort. But London has exceptionally enticing attributes. It handles vast cross-border capital flows. It boasts the English language, good schools and, ironically, a respected legal system (which shields tycoons against the arbitrary plunder they suffer at home). Relaxed rules on ownership are geared towards rich foreigners. Armies of lawyers and public-relations firms specialise in rinsing reputations. Tough libel laws help keep prying journalists and NGOs at bay. On top of all this, Britain has its own network of secretive offshore territories, dubbed its “second empire” by anti-corruption campaigners. London is, in short, ideal for money-laundering.

People give all sorts of reasons not to strangle this golden goose. The ancillary industries that depend on all that wealth would suffer. A clampdown risks scaring away legitimate investment, especially if it is seen as targeting entire nationalities: many Russians own London pads through offshore companies for reasons of privacy or legal tax planning. Some fear it would clobber the property market and the pound, just when a Brexit-bound Britain needs all the investment it can get.

But the case for action is stronger. Predictions of severe economic damage from a crackdown are overdone. Russians and Ukrainians hold only 0.2% of total British assets owned by foreigners. Targeting iffy Russian money would reinforce Britain’s efforts to embarrass Vladimir Putin’s intelligence agencies (see article). Providing financial refuge for bent elites fuels corruption in other countries.

The challenge is less to write new laws than to enforce what is on the books—a common malaise in Britain. This month the first “Unexplained Wealth Order”, which requires targets to show the sources of their wealth, survived a legal challenge from the wife of a jailed Azerbaijani banker. The government rightly trumpets reforms launched after David Cameron, a former prime minister, declared that corruption-fighting should be a priority. In 2016 Britain became the first G20 country to launch a public register of companies’ beneficial owners, designed to shed light on the shell companies behind which wrongdoers often hide. But the system relies on self-reporting. Companies House, a government agency, has neither the powers nor the resources to check what is submitted. The supervision of firms that set up other companies is so weak, and the fines for breaches so paltry—typically £1,000-2,000 ($1,310-2,620)—that it makes the British Virgin Islands look robust. Inevitably, therefore, the honest comply and criminals lie.

Worse, law enforcers lack the resources to pursue enough big cases. The NCA’s budget, already stretched, is falling. It has perhaps a few dozen investigators with the skills for complex cases; America and Italy have hundreds. This is not an area where justice comes cheap. On average, a big corruption case takes seven years. Prosecuting agencies need to be able to absorb hefty costs, especially if they lose—and, as oligarchs can afford the best lawyers, that is always a risk. Britain has not taken the lead on a large, cross-border case for years.

Devoting greater resources to corruption cases would go a long way towards fixing things. Some of the extra cash should be used to raise investigators’ salaries, which are far below those of their American peers. Strengthening oversight of shell companies and the firms that set them up would also help, as would money for the verification of ownership information. Some of the funding for this could come from an increase in incorporation fees, which are as little as £12. One piece of new legislation would help: a “failure to prevent” law that makes it easier to prosecute senior managers or companies if they fail to take adequate measures against money-laundering. A similar provision on bribery works well.

The fair mile

The City matters to Britain. It is a big employer (two-thirds of the jobs are outside London). It generates a trade surplus of 3% of GDP and pays roughly a tenth of the country’s taxes. It is a hub for fintech, and Britain’s smaller firms appear to secure financing more easily than their typical European counterparts do (see Schumpeter). The opposition Labour Party under Jeremy Corbyn sees things differently. It makes no secret of its deep hostility to finance. If the City does not demonstrate that its markets are clean and honest, it will be giving the next Labour government a freer hand to act—savagely.

Britain’s response to the threat posed by illicit financial flows has so far been more thundering rhetoric than meaningful action. It is time to put that right.

(JN) A Zona Euro tem um novo mega banco. E é demasiado grande para falir

(JNNo arranque deste mês, o número de bancos considerados demasiado grandes para falir na Zona Euro passou de sete para oito. O recém-chegado é o Nordea Bank Abp, que vai transferir a sua sede de Estocolmo para Helsínquia.

O banco, cujos 670 mil milhões de dólares em activos representam mais do dobro do PIB da Finlândia, deixou claro que a mudança foi motivada por questões regulatórias e pelo desejo de estar dentro da união bancária europeia.

“Estaremos no núcleo da Europa”, disse o CEO Casper von Koskull aos jornalistas, em Estocolmo. “Acho importante que também possamos influenciar a Europa”.

Sob a liderança de Von Koskull, que ocupou vários cargos importantes no Goldman Sachs antes de se juntar ao Nordea, o banco vendeu vários activos fora da região nórdica, incluindo no Luxemburgo, nos países bálticos e na Rússia.

Em entrevista à Bloomberg TV, na segunda-feira, Von Koskull disse que crescer através de aquisições na Europa não está na agenda.

“Liderar um banco com foco no seu tamanho não é um bom sinal, pelo menos para mim”, disse. “A consolidação europeia, claro, é algo que acompanhamos, mas que não está nos nossos planos por enquanto”.

O Nordea está a atravessar uma grande transformação, na qual os serviços automatizados e digitalizados estão a substituir os seres humanos. O Nordea afirma que precisa de cortar cerca de 6.000 postos de trabalho como parte deste plano. Von Koskull acredita que todo o sector financeiro global precisa de adoptar uma abordagem semelhante para manter a competitividade.

A chegada de um banco internacional sistemicamente importante mudará de forma significativa o sector financeiro da Finlândia. Os activos da indústria financeira daquele país subirão para 400% do PIB após a mudança e o Nordea substituirá a Nokia no lugar de maior empresa de capital aberto com sede na Finlândia.

O regulador do sector financeiro da Finlândia teve mesmo de aumentar a sua equipa em 10% para se preparar para a chegada do Nordea.

O presidente do Banco da Finlândia, Olli Rehn, disse que a decisão do Nordea de se mudar para Helsínquia “deve ser vista como um voto de confiança na união bancária da Zona Euro”, em entrevista à emissora finlandesa YLE TV1, no sábado.

“Para a Finlândia, a união bancária garante mais resistência para enfrentar possíveis dificuldades e isso é importante” se considerarmos o tamanho do sector financeiro em comparação com a economia do país quando o Nordea chegar, acrescentou.

A Suécia, por seu lado, ficará com um sector financeiro consideravelmente mais pequeno, o que está a gerar preocupações a respeito da posição de Estocolmo como centro financeiro quando o Nordea sair. O governo liderado pelo Partido Social-Democrata adoptou uma postura mais dura em relação aos bancos quando esteve no poder, e os partidos da oposição afirmam que isso acabou por afastar do país o maior banco da região nórdica.

(BBG) German Bankers Brace for More Cuts After Losing 188,000 Jobs

(BBG) After lenders in Germany have already slashed about 188,000 jobs since the year 2000, many employees are now increasingly seeing digitalization as the next big threat to employment.

In the country’s private banking industry alone, around 40 percent of employees believe that digitalization will worsen long-term job security over the next two years, according to a study by the employers’ association seen by Bloomberg. In a 2015 survey, only 31 percent of respondents expected a deterioration. At the same time, the proportion of those predicting improvements has remained almost constant at around 25 percent.

“Many lenders are currently changing their business models, with jobs being lost as a result of digitalization, but there are also many new jobs, especially at the interface between banking and IT,” said Carsten Rogge-Strang, Managing Director at the employer association for private banks.

He represents the interests of private lenders in Germany, among them Deutsche Bank AG, Commerzbank AG, Bankhaus Lampe KG as well as Bausparkasse Schwaebisch Hall AG. Savings banks, cooperative banks and development banks are organized differently.

According to Rogge-Strang, many jobs that are currently being created by lenders are increasingly for professions that are not part of the traditional banking business, for example from areas like mathematics. “For some positions, it does not even matter what field applicants come from, as long as they do have interest and expertise in designing digital transformation processes,” he said.

In addition, specialists for regulation, compliance and control functions are increasingly in demand, he added.

Matthias Schellenberg, CEO of Merck Finck Privatbankiers AG, also stressed the importance of new jobs. “If you look at what vacancies are advertised by lenders, then two areas have gained tremendous weight – IT and compliance,” he told Bloomberg. “However, anyone who understands digitalization as a pure cost-cutting and job-cutting program does not see the challenges behind it and the opportunities that arise.” Digitalization creates more time for advising clients, he added.

All in all, new hires do not make up for the reduction in staff numbers caused mainly by digitalization, Rogge-Strang said. According to him, simple activities in processing and service units are being eliminated now.

The number of employees at private lenders, savings banks, cooperative banks, regional state lenders and development banks in Germany shrank from 774,550 in 2000 to 586,250 in 2017, according to numbers from the employer association for private banks which also collects data from other banking groups. Job losses occurred in all banking subsectors.

(OBS) Horta Osório recomenda prudência mas afasta sinais de nova crise

(OBS) Presidente executivo do Lloyds Bank destaca as boas perspectivas de crescimento mundial que podem ajudar a afastar cenários mais pessimistas. Ainda assim, recomenda prudência.

ANDY RAIN/EPA

O banqueiro António Horta Osório considera que não existem, atualmente, sinais de que se esteja à beira de uma nova crise, mas recomenda prudência e tomada de medidas que tornem Portugal mais forte para essa eventualidade.

Questionado pelas recentes declarações de economistas como Nouriel Roubini que, numa coluna de opinião do Financial Times, disse prever uma próxima crise financeira e recessão global em 2020, ou do ex-presidente do Banco Central Europeu (BCE) Jean-Claude Trichet — que alertou para o risco do aumento das dívidas públicas e privadas em todo o mundo e do recurso à alavancagem nos mercados financeiros como antes da crise financeira –, o presidente executivo do Lloyds Bank mostrou-se mais otimista.

É um facto que, como esses economistas dizem, as crises financeiras são cíclicas, de tantos em tantos anos, normalmente, existe algum tipo de recessão ou algum tipo de crise. Isso é normal nos ciclos económicos. Eu não vejo indicadores que mostrem que estamos à beira de ter uma nova crise, seja económica, seja financeira. O que não quer dizer que não devamos ser prudentes”, disse à Lusa, em Lisboa, onde esteve para dar uma palestra sobre previsões económicas na Cimeira do Turismo.

Ordenado de Horta Osório é o mais elevado da banca inglesa

“Devemos ser prudentes e nunca embandeirar em arco. E, apesar do crescimento mundial, que está a aumentar e deve ser cerca de 4% este ano, o que é muito relevante, devemos ser muito prudentes e tomar as medidas agora que tornem Portugal mais forte para quando, eventualmente, haja uma recessão ou uma crise. E isso significa vivermos dentro das nossas possibilidades, continuarmos a exportar bastante como temos vindo a fazer, e onde o turismo tem vindo a ter poder crítico, e a não gastar mais do que aquilo que podemos”, acrescentou.

Para o responsável, a ajudar a afastar os receios mais pessimistas estão as perspectivas de crescimento mundial que, neste momento, “são bastante favoráveis”, reforçou.

Já relativamente às preocupações que alguns responsáveis revelam com o ainda endividamento das famílias que, como mostram os dados do Banco de Portugal, têm recorrido mais ao crédito, o que fez já com que o presidente do regulador bancário, Carlos Costa, tenha admitido pôr um travão à banca nos créditos à habitação, por exemplo, Horta Osório também desdramatiza, mas aplaude a atitude prudente.

“Acho que o Banco de Portugal tem vindo a ter exatamente uma atitude prudente, o que só lhe fica bem como regulador, fazer os avisos para os bancos serem prudentes e não terem uma atitude complacente. O crédito às famílias baixou muito após a crise, as famílias fizeram um ajustamento muito significativo e muito penoso e, neste momento, o crédito às famílias é muito mais baixo, é cerca de 20% mais baixo em percentagem do PIB do que era há 12 anos. Recomeçou as crescer, o que é positivo, mas não deve crescer muito mais do que PIB [Produto Interno Bruto] nominal, que é cerca de 4%-5% ao ano”, afirmou o banqueiro.

Acho que os avisos do Banco de Portugal estão dentro de uma política de ser prudente, são bem-vindos porque mais vale prevenir do que remediar e a função do regulador é exatamente fazer isso.”

Sobre o Turismo, um dos sectores que mais tem contribuído para o crescimento da economia em Portugal, Horta Osório lembra que “deve ser, como tem vindo a ser, acarinhado pelas autoridades”.

“Este ano vamos ter mais de 13 milhões de turistas em Portugal, o que significa o dobro daquilo que tínhamos há 12 anos. O peso do Turismo no PIB praticamente dobrou nestes últimos 12 anos, sendo, neste momento, praticamente 9% da totalidade do que produzimos em Portugal por ano. Portanto são números muito importantes por ano”, disse.

O banqueiro considera, contudo, que aquele que é um dos sectores mais importantes da economia tem espaço para crescer.  “Temos visto a oferta hoteleira a aumentar, o País é um país pacífico, os portugueses acolhem bem os estrangeiros, temos todas as condições para Portugal continuar a ser o ‘país da moda’ em termos de Turismo, o que só beneficia o país”, acrescentou.

“Quando a crise financeira aconteceu tínhamos um défice da balança corrente muito importante, cerca de 10% do PIB, hoje em dia temos as contas externas equilibradas, o número de turistas dobrou, o mercado está a funcionar bem nesse aspeto, e penso que é importante o Governo ter em atenção em não prejudicar a situação e sempre que tome medidas ter em atenção que o Turismo é um sector empresarial e que, pelo emprego que cria, pelas receitas que traz, deve ser acarinhado”, concluiu.

(EUobserver) Danske Bank whistleblower seeks protection

(EUobserver) Howard Wilkinson, a Briton who blew the whistle on Danske Bank’s Estonian money-laundering practices has asked Danish and Estonian authorities to protect him, complaining that his identity had been leaked without his consent by Estonian media, according to a statement from his American law firm. Berlingske, the Danish newspaper breaking the scandal originally, on Friday listed 72 Danish customers responsible for one percent of the total amount laundered.

(Economist) A scramble to replace LIBOR is under way

(Economist) Scandal and rickety economics have undermined the benchmark interest rate.

SITTING in his office in the Wrigley Building overlooking the Chicago river in 2012, Richard Sandor, who has spent his career inventing financial products, was reading about the scandals surrounding the London Interbank Offered Rate (LIBOR), an array of interest rates set daily by a club of banks in Britain and used to price trillions of dollars’ worth of loans, derivatives and more. “This is stupid,” Mr Sandor recalls saying to a colleague. “Let’s make a bet; LIBOR will lose its pre-eminence.”

Two years later the Federal Reserve reached the same conclusion. It formed a group, the Alternative Rate Reference Committee, which has created a new benchmark dollar interest rate, the Secured Overnight Financing Rate (SOFR). Since April, SOFR has been used for a handful of bond offerings by large institutions including the World Bank, MetLife and Fannie Mae. Central banks in Britain, the euro zone, Japan and Switzerland are also constructing new benchmark rates.

LIBOR is heading for extinction. Its fate was sealed in July 2017 when Andrew Bailey, head of Britain’s Financial Conduct Authority, a regulator, said it would be phased out in 2021. It had been undermined by twin scandals. In the first, a product of the crisis, the rate-setting banks tweaked their quotes, possibly with supervisors’ implicit support, to limit the chances of market panic. In the second traders manipulated the rates subtly, to gild their profits.

The ruckus cost Bob Diamond, the chief executive of Barclays, his job and Tom Hayes, a trader at UBS and Citigroup who was jailed for 11 years, his liberty. Oversight of LIBOR was transferred from the British Bankers Association, a trade body, to British regulators and then to Intercontinental Exchange, an American stock- and derivatives-exchange group. In June Société Générale agreed to pay American authorities $750m to settle a charge of manipulation, adding to a list of seven other big banks. (The French bank also agreed to pay a large sum to settle charges related to a bribery scheme in Libya.)

From fiction to friction

LIBOR also rests on shaky economics. Its roots go back to an informal coalition of London banks in the 1960s. This was formalised into a panel of 20, which submitted daily estimates of their borrowing costs for up to five currencies and seven maturities of up to a year. Yet some quotes are little better than guesses. In July Randal Quarles, the vice-chairman of the Fed in charge of bank supervision, noted that just six or seven transactions a day were used to set one- and three-month dollar LIBOR and an average of one for the 12-month rate, for which on “many days there are no transactions at all”. A few banks have dropped out of the panel; some are staying until 2021 only at the FCA’s request.

On this flimsy foundation a staggering $260trn-worth of financial products, from interest-rate swaps to retail mortgages, are priced, estimates Oliver Wyman, a consulting firm. Dollar LIBOR accounts for by far the biggest chunk, not far short of $200trn; sterling and yen weigh in at $30trn apiece and Swiss francs at $5trn. The chief benchmarks for euros, EURIBOR and EONIA, face an even tighter timetable for reform and replacement than LIBOR. (EONIA does not comply with a recent European Union directive and must go by the end of 2019.)

Creating and then switching to truly market-based alternatives is an almighty task. The Fed’s approach was to tap into the “repo” (repurchase) market. Banks seeking short-term cash sell securities with little credit risk, such as Treasuries, to other banks with a promise to buy them back the next day at a slightly higher price. The difference is in reality the interest rate on an overnight loan. To ensure repayment, they provide collateral. There are $700bn-worth of these transactions daily, which are reported to the Fed through the Depository Trust & Clearing Corporation and the Bank of New York Mellon. After ingesting and processing vast quantities of data to produce a weighted average, the Fed publishes the result, SOFR, at 8am.

Take-up has been slow. So far only seven or eight bonds have been sold using SOFR as a reference price. Doubtless this is partly because of investors’ unfamiliarity with a new product, compounded by the Fed’s inability to explain itself to those who do not understand its jargon. But it may also reflect difficulties with using overnight, near-risk-free rates.

For a start, an overnight rate is exactly that: a term structure has to be constructed for longer maturities, for instance from expected or actual overnight rates. SOFR also reflects the rate on extraordinarily high-quality, essentially risk-free credits, which would default only if America’s government failed. Using it as a benchmark may therefore risk creating a mismatch for the average bank. In a crunch, SOFR may fall as investors run for safe assets, pushing down banks’ revenues from SOFR-linked loans. Yet banks’ own borrowing costs on wholesale markets will increase.

In addition, legal problems loom, and time is short. Contracts continue to be written on LIBOR, of which plenty extend beyond 2021. The Bank of England noted in June that the number of such LIBOR-linked sterling derivatives had risen since the previous year. Many contracts, the bank went on, lack “fallback” clauses setting out which rate applies once LIBOR goes. British regulators wrote to banks on September 19th instructing them to provide by December a summary of their plans for mitigating LIBOR-related risks.

Meanwhile Mr Sandor has developed his own benchmark, which is steadily attracting customers. By 2015 he had convinced a handful of small banks to join his new American Financial Exchange, which now has 99 members and where $1bn-worth of loans are traded daily. From those transactions, a benchmark overnight interest rate for unsecured loans, Ameribor, has been derived.

This month Ameribor was used for the first time in pricing a loan, by ServisFirst Bank of Birmingham, Alabama, to a car dealer in Tennessee. The bank’s chief executive, Tom Broughton, says that it considered SOFR, but because it does not use Treasury repos and its liabilities are not secured, it needs a rate that can accommodate credit risk. Mr Sandor hopes that in two to three years Ameribor will become a benchmark for many of America’s 5,000 regional and community banks and their customers. Whether or not that happens, the era of LIBOR is ending.

(ZH) German Regulator Orders Deutsche Bank To Take Action To Prevent Money Laundering

(ZH) With Europe still reeling over the recent revelations of Danske Bank’s $234 Billion money-laundering scandal, another target emerged moments ago – and a far more prominent one – when Germany’s markets regulator ordered Deutsche Bank to “improve its controls to prevent money laundering and the financing of terrorism.”

The regulator BaFin instructed Deutsche Bank to “take appropriate internal safeguards and comply with general due diligence obligations” under German law, Bloomberg reported. Suggesting that there may be far more behind the scenes, BaFin also appointed a monitor to assess the bank’s efforts, the first time BaFin has taken such action against a bank in relation to money laundering, the authority said in a statement on Monday.

In August, Deutsche Bank acknowledged that its anti-money laundering processes remained inefficient more than a year after it was fined almost $700 million for helping wealthy Russians move money out of the country. Deutsche Bank has also been mentioned frequently in the context of providing president Trump with loans for his various business ventures when few other banks were willing to lend to the now-US president.

Following the news, Deutsche Bank shares – which recently were lifted by news the largest German lender was looking to convert into a holding company in order to make itself easier to sell – dropped by 1%, but quickly recovered.

“We are in agreement with the BaFin that we have to improve these processes in the corporate and investment bank further,” Deutsche Bank said in response. “The bank will work together with the BaFin and the special representative KPMG to fulfill the regulatory requirements as soon as possible and within the given time frame.”

(CNBC) Jamie Dimon says cyber warfare is the biggest risk to the financial system

(CNBC)

  • The “biggest vulnerability” for the financial system is the threat of cyberattacks, J.P. Morgan’s Jamie Dimon said on Thursday.

Biggest vulnerability today is cyber, JPMorgan CEO says

Biggest vulnerability today is cyber, JPMorgan CEO says  

Banks may be in sound condition post-Lehman Brothers, but the financial system could crack again if hit with a devastating cyber attack, J.P. Morgan Chief Executive Jamie Dimon warned on Thursday.

“I think the biggest vulnerability is cyber, just for about everybody” he told CNBC’s Indian affiliate CNBC TV-18 on Thursday. “I think we have to focus on it, the United States government has to focus on it.”

“We have to make sure because cyber — terrorist and cyber countries — they could cause real damage. We’re already spending a lot of money and J.P. Morgan is secure but we should really worry about that,” Dimon told CNBC-TV18’s Shereen Bhan in New Delhi.

Dimon put inflation running too hot as his second biggest concern, warning the reactionary raising of interest rates from the U.S. Federal Reserve could be the cause of a “traditional” recession.

Industry experts have placed increasing importance on the threat of cyber warfare as attacks become more sophisticated.

Jamie Dimon, chief executive officer of JPMorgan Chase & Co

Eric Piermont | AFP | Getty Images
Jamie Dimon, chief executive officer of JPMorgan Chase & Co

In the past, western officials have warned of increasing suspicious cyber activity originating from countries of concern including Russia, Iran and North Korea.

Earlier this year, America’s Department of Homeland Security and Federal Bureau of Investigation, alongside the U.K.’s National Cyber Security Center, released a joint technical alert warning of the threat of malicious digital activity being carried out by the Kremlin.

Meanwhile, authorities are worried about the heightened threat of cyberattacks from Iran on the U.S. and Europe, especially as the country becomes increasingly ostracized by the U.S., which has reintroduced sanctions on Tehran.