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European Union Charges 13 Banks and Others With Antitrust Breaches

July 1, 2013 by Leave a Comment

The European Commission said the group, which included Citigroup, Goldman Sachs and UBS, shut out Deutsche Boerse and the Chicago Mercantile Exchange from the CDS business between 2006 and 2009.

Credit default swaps (CDS) are over-the-counter contracts that allow an investor to bet on whether a company or country will default on its bonds within a fixed period of time. Lack of transparency on such derivatives is a key target of regulators following the 2007-2009 crisis.

The case is one of several opened by the EU antitrust regulator into the financial services since the crisis. Banks and other companies involved could be fined up to 10 percent of their global turnover if found guilty of infringing EU rules.

The European Commission said on Monday it had sent a statement of objections, or charge sheet, which sets out suspected anti-competitive activities, to the companies.

“It would be unacceptable if banks collectively blocked exchanges to protect their revenues from over-the-counter trading of credit derivatives,” EU Competition Commissioner Joaquin Almunia said.

“Over-the-counter trading is not only more expensive for investors than exchange trading, it is also prone to systemic risks.”

The charges followed a two-year investigation. The other banks charged are Bank of America Merrill Lynch, Barclays, Bear Stearns, BNP Paribas, Morgan Stanley, Credit Suisse, Deutsche Bank, HSBC, JP Morgan and RBS.

UBS, Deutsche Bank, JP Morgan, HSBC and Barclays declined to comment, while the other banks and ISDA were not immediately available for comment. Markit had no immediate comment.

Almunia said some of the banks in the CDS case were also involved in separate investigations into suspected rigging of lending benchmarks Euribor and Libor, but he did not identify them.

“We are trying to follow the Article 9 route. We hope we are ready to adopt a decision towards the end of the year,” EU Competition Commissioner Joaquin Almunia told a news briefing, referring to a procedure where companies can get a 10 percent cut in fines in return for admitting wrongdoing.

(Additional reporting by Steve Slate and Laura Noonan, in London, Martin De Sa’Pinto in Zurich, Christian Plumb and Matthias Blamont in Paris, Kathrin Jones in Frankfurt; Editing by Adrian Croft and David Holmes)

Article source: http://www.nytimes.com/reuters/2013/07/01/business/01reuters-eu-banks-cds.html?partner=rss&emc=rss

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DealBook: BNP Paribas First Quarter Profit Falls 45%

May 3, 2013 by Leave a Comment

A branch of BNP Paribas in Paris.Jacky Naegelen/ReutersA branch of BNP Paribas in Paris.

PARIS – BNP Paribas, France’s largest bank, said on Friday that first-quarter profit fell from a year earlier, but it still managed to beat market expectations.

Net income for the January-March period came in at 1.6 billion euros, or $2.1 billion, down 45 percent from the same three months a year earlier, BNP Paribas said in a statement. That was slightly better than the 1.5 billion euros that analysts surveyed by Reuters had expected.

Jean-Laurent Bonnafé, the bank’s chief executive, said in a video statement that results were weaker because the European financial crisis weighed on demand for credit, even as loans were made at low interest rates. Deposits continued to grow “significantly” in all the bank’s markets, particularly in Italy, he said.

BNP Paribas noted that the year-earlier results included a one-time gain of 1.8 billion euros on the sale of a stake in its Klépierre unit, which made the most recent quarter look weaker in comparison. It said that a better reflection of its performance could be seen in the fact that pretax profit at its operating divisions fell just 8.1 percent.

The bank, based in Paris, also reported first quarter revenue of 10.1 billion euros, up 1.7 percent from a year earlier. Revenue was affected by two one-off items of note, a 215 million euro write-down on the bank’s own debt and a gain of 364 million euros as a result of its adoption of new accounting rules.

Mr. Bonnafé noted the bank had attained “a very strong solvency and liquidity positions,” with a Basel 2.5 common equity Tier 1 ratio of 11.7 percent, and a “fully loaded” Basel 3 common equity Tier 1 ratio of 10 percent. Such measures of regulatory capital provide an indication of an institution’s ability to bear financial shocks.

BNP Paribas described the period as a “transitional quarter” for its corporate and investment banking business, in which revenue slid 21.1 percent from a year earlier to 2.5 billion euros, and pretax income tumbled more than 30 percent to 806 million euros.

The investment banking unit’s advisory and capital markets revenue fell 25 percent to 1.7 billion. Revenue in the fixed income sector fell 27 percent to 1.3 billion. The equities and advisory business posted a 20 percent decline in revenue, to 395 million euros.

BNP Paribas, which recorded 155 million euros in restructuring costs in the quarter, said “many projects” to improve and streamline its operations were getting under way, including early retirement programs at its BNPP Fortis unit in Belgium and BNL unit in Italy.

This post has been revised to reflect the following correction:

Correction: May 3, 2013

An earlier version of this article misstated when BNP Paribas reported its first-quarter earnings. It was on Friday, not Thursday.

Article source: http://dealbook.nytimes.com/2013/05/03/quarterly-profit-at-bnp-paribas-falls-45/?partner=rss&emc=rss

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Industrial Production in U.S. Falls After Storm’s Disruption

November 17, 2012 by Leave a Comment

Production at the nation’s mines, factories and refineries contracted 0.4 percent last month, after a 0.2 percent increase in September, the Fed said. It said the storm, which hit the East Coast at the end of October, cut output by nearly one percentage point. Utilities and producers of chemicals, food, transportation equipment, and computers and electronic products were the most affected, it said.

Still, the gain in output last month would have been modest even without the storm, with fears about the possibility of higher taxes and sharp cuts in government spending early next year making businesses hesitant to raise output and invest.

Those measures would drain about $600 billion from the economy unless Congress and the Obama administration agree on a plan to soften the blow.

Industrial output contracted in the third quarter for the first time since the 2007-9 recession ended, a hard landing is not expected for the industrial sector.

Economists are divided on whether industrial output will bounce back in November. Some expect the effects of the storm to linger longer.

“Sandy’s impact is also likely to be felt in the November industrial production data as power outages and other disruptions in the Northeast persisted into the second week of the month,” said Jeremy Lawson, an economist at BNP Paribas in New York.

Last month, utilities output fell 0.1 percent, even though parts of the Northeast lost power during the storm. Utilities production was flat in September. Production at mines increased 1.5 percent after rising 0.9 percent the previous month.

The amount of factory capacity in use — a measure of how fully firms are using their resources — slipped 0.8 of a point, to 75.9 percent in October, the lowest level since November 2011.

Article source: http://www.nytimes.com/2012/11/17/business/economy/industrial-production-declines.html?partner=rss&emc=rss

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DealBook: European Banks Push to Meet Capital Goals

January 25, 2012 by Leave a Comment

The European Central Bank in Frankfurt, Germany.Hannelore Foerster/Bloomberg NewsThe European Central Bank in Frankfurt, Germany.

LONDON — European banks have been busy.

Financial institutions on the Continent have raised at least 40.7 billion euros, or $52.8 billion, in new capital as of the fourth quarter of last year, according to estimates by Citigroup.

The effort is part of policy makers’ push to increase banks’ core Tier 1 ratios, a measure of a firm’s ability to weather financial shocks, to 9 percent by June. Banks must raise a combined 115 billion euros by the summer to meet that target.

Activity over the next few weeks will add to the tally. Europe’s major banks report earnings in February, and Citigroup said it expected institutions to raise a further 24.6 billion euros by June 2012 through so-called retained earnings, a category that includes reductions in employee bonuses and cuts to overall bank lending.

Deutsche Bank of Germany, for example, could pocket up to 3.6 billion euros in retained earnings by June, based on Citigroup estimates. The figure would be more than enough to cover the 3.2 billion euro shortfall the European Banking Authority wants the bank to fill by this summer. Similarly, the Citigroup research shows BNP Paribas of France may add 4.1 billion euros in the same period through this method, well ahead of its 1.4 billion euro capital-raising target.

“BNP has huge capital needs, but can make the target in one swoop by retaining its shareholder dividend,” said an investment banker at a leading European firm, who spoke on condition on anonymity because he was not authorized to talk publicly.

While some of Europe’s largest financial institutions are likely to fill the capital gap by holding on to their profits, others will have to employ different strategies. So far, the most popular method for raising new money has been through so-called liability management exercises. Citigroup estimated European institutions had raised a combined 16 billion euros through the practice, which involves buying back, or exchanging, hybrid securities — investments that pay dividends like bonds, but can be converted into equity — at a discount from investors.

Accountancy rules allow financial institutions to book the difference between the original face value of the securities and the current discounted price as a profit toward their core Tier 1 equity. Raiffeisen of Austria, for example, has pocketed 1.3 billion euros toward its 2.1 billion euro target in this manner. The Italian bank Banco Popolare has raised a further 996 million euros.

Adjustments to banks’ balance sheets have outpaced so-called rights offerings, which allow existing shareholders to buy new stock in a company at a discount. Authorities had expected many institutions to tap investors for new capital. But only one bank, UniCredit, based in Milan, has done so. Its 7.5 billion euro rights issue, which is expected to be well subscribed by investors, closes on Friday.

Many firms are relying on multiple strategies. Along with its rights offering, UniCredit is reorganizing its balance sheet. On Wednesday, the Italian lender said it would buy as much as 3 billion euros of hybrid securities at a discount of up to 50 percent. The move could raise up to 500 million euros toward the bank’s core Tier 1 ratio. UniCredit is also planning to issue up to 25 billion euros of covered bonds — debt securities that are backed by the bank’s own assets — to ease its financing problems, according to a filing with the Luxembourg Stock Exchange on Wednesday.

Other banks are shedding assets to meet the new requirements. Citigroup estimates European banks have disposed of operations worth almost 100 billion euros, as of the fourth quarter of 2011. That helped firms, including Banco Santander of Spain, to increase their capital reserves by a combined 6.6 billion euros over the period.

“The list of asset sales is the longest I’ve seen in 10 years,” said Richard Thompson, a partner at accountancy firm PricewaterhouseCoopers in London. “Banks want to reshape their balance sheets to focus on specific territories or sectors.”

Article source: http://dealbook.nytimes.com/2012/01/25/european-banks-raise-53-billion-to-appease-regulators/?partner=rss&emc=rss

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DealBook: European Banks Prepare More Job Cuts

January 5, 2012 by Leave a Comment

LONDON — Less than a week into the new year, European banks are already planning new job cuts.

Société Générale, the second-largest French bank, announced an agreement on Wednesday with its trade unions for about 880 “voluntary departures” in its domestic investment banking business, starting in April. An additional 700 layoffs are expected in the bank’s international investment banking operations, including in New York and London, according to a company spokeswoman, Nathalie Boschat.

The Royal Bank of Scotland has hired the advisory investment bank Lazard to find a new owner for its struggling equities business, according to a person familiar with the matter.

That news comes as R.B.S., in which the British government holds an 83 percent stake after providing the bank a £20 billion ($31 billion) bailout in 2008, is attempting to reduce its investment banking unit, which currently employs about 19,000 people.

R.B.S. plans to eliminate 2,000 jobs from its global banking and markets unit in the next 12 to 18 months in response to the volatile financial markets and Europe’s debt crisis. The bank has already eliminated more than 30,000 jobs since 2008.

European banks have been cutting jobs aggressively.

In France, Crédit Agricole said late last year that it planned to eliminate 2,350 jobs as part of an effort to adapt to continued instability in world financial markets, and BNP Paribas has also announced plans for 1,400 layoffs.

The Swiss banks Credit Suisse and UBS each plan to eliminate 3,500 jobs as they shift their focus away from investment banking to their profitable wealth management operations.

The layoffs in Europe’s banking sector come as financial firms look to rein in costs and increase capital buffers to meet tough new regulatory requirements by June.

Banks have also been buffeted by the European sovereign debt crisis, which has wiped out billions of euros’ worth of shareholder value. The Euro STOXX banks index, made up of the largest banks in the euro zone region, has fallen 42 percent in the last year.

Shares in the Italian bank UniCredit, which fell on Wednesday after the bank offered newly issued stock to existing shareholders at a 43 percent discount in an effort to raise capital, continued to slide on Thursday. In afternoon trading in Milan, the share price had fallen 14 percent, to the lowest level since the 1990s.

Article source: http://feeds.nytimes.com/click.phdo?i=39b8917b0bcdb1428e831a5128ddd3e4

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Global Regulators Name 29 Banks Critical to the Financial System

November 5, 2011 by Leave a Comment

The list of banks drafted by the Financial Stability Board, a regulatory task force of the Group of 20, included 17 lenders from Europe and eight from the United States.

Leaders at the Group of 20 summit meeting endorsed a core capital requirement surcharge starting at 1 percent of risk-weighted assets and rising to 2.5 percent for the biggest banks, which would be phased in over three years starting in 2016. The board did not say which capital bracket each of the banks would fall into.

The banks will have to meet resolution planning requirements, called “living wills,” by the end of next year. National authorities can extend this requirement to other banks at their discretion, it said.

The list of institutions will be reviewed annually each November.

Following are the 29 global systemically important financial institutions identified by the board: Bank of America, Bank of China, Bank of New York Mellon, Banque Populaire, Barclays, BNP Paribas, Citigroup, Commerzbank, Crédit Agricole, Credit Suisse, Deutsche Bank, Dexia, Goldman Sachs, HSBC, ING Bank, JPMorgan Chase, Lloyds Banking Group, Mitsubishi UFJ, Mizuho, Morgan Stanley, Nordea, Royal Bank of Scotland, Santander, Société Générale, State Street, Sumitomo Mitsui, UBS, Unicredit Group and Wells Fargo.

Article source: http://www.nytimes.com/2011/11/05/business/global/global-regulators-name-29-banks-critical-to-the-financial-system.html?partner=rss&emc=rss

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Bucks Blog: Morgan Stanley to Equalize Health Costs for Gay Employees

October 18, 2011 by Leave a Comment

Starting on January 1, Morgan Stanley will begin reimbursing employees for the extra taxes they pay on health insurance for their same-sex partners.Mary Altaffer/Associated Press Morgan Stanley plans to extend a health benefit to its gay and lesbian employees.

The Cost of Being Gay

A look at the financial realities of same-sex partnerships.

Another financial titan has decided to extend a benefit that will put its gay and lesbian employees on equal footing with their heterosexual co-workers.

Beginning Jan. 1, Morgan Stanley will begin reimbursing employees for the extra taxes they pay on health insurance for their same-sex partners. The news follows a similar announcement last week from Bank of America, which makes Morgan Stanley the sixth financial services firm to adopt the policy, joining Barclays, Goldman Sachs, Credit Suisse and BNP Paribas.

The new policy has also spread relatively quickly among big consulting companies, law firms and handful of big technology companies. We’ve been keeping close track of who’s doing what on a scorecard. (You can see if your company made the list here.)

For those of you who haven’t been following the issue closely, here’s some background: Under federal law, employer-provided health benefits for domestic partners are counted as taxable income, if the partner is not considered a dependent. On top of that, the employees cannot use pretax dollars to pay for their premiums — unlike their opposite-sex married counterparts.

Since gay unions are not recognized by the federal government, same-sex couples can not avoid the extra costs by getting married. So while many large employers offer health insurance coverage for domestic partners, these employees must pay more to use it.

Like several other firms, Morgan Stanley is covering the costs only for same-sex partners and their dependents. Eligible employees will be reimbursed with a lump sum once a year, a company spokeswoman said.

Let us know if you’ve heard of any other companies that have adopted the policy, and we’ll add them to our chart. And if you have asked your company to adopt the policy, let us know in the comment section below what kind of response you received.

Article source: http://feeds.nytimes.com/click.phdo?i=aca3683ada76b1ff56ab37f3cf8ff6ef

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Moody’s Cuts SocGen and CreditAgricole, BNPP Still on Review

September 14, 2011 by Leave a Comment

The ratings agency said it was extending its review of BNP Paribas (BNPP), but any downgrade was unlikely to be by more than one notch.

Moody’s had put the banks under review for possible downgrade on June 15, citing their exposure to Greece’s debt crisis.

Moody’s at the time had cited French banks’ exposure to Greece’s debt-stricken economy as the reason behind the review. Outside commentators had said the ratings were ripe for a downgrade because of rising borrowing costs in the face of sovereign debt turmoil.

The agency said that during the review, Moody’s concerns about the structural challenges to banks’ funding and liquidity profiles increased, in light of worsening of refinancing conditions.

Moody’s cut SocGen’s debt and deposit ratings by one notch to Aa3 from Aa2. The outlook on the long-term debt ratings was negative. Moody’s anticipated that the impact of its review on the Bank Financial Strength Rating (BFSR) would be limited to a one-notch downgrade.

For Credit Agricole, Moody’s downgraded its BFSR by one notch to C from C+, and cut its long-term debt and deposit ratings by one notch to Aa2 from Aa1.

However, Moody’s said it believed SocGen has a level of capital that can absorb potential losses it is likely to incur on its Greek government bonds and to remain capitalized at a level consistent with its BFSR even if the creditworthiness of Irish and Portuguese government bonds were to deteriorate further.

Moody’s said that BNPP had a sufficient level of profitability and capital that it can absorb potential losses it is likely to incur over time on its Greek, Portuguese and Irish exposures.

BNPP on Wednesday announced a plan to sell 70 billion euros ($95.7 billion) of risk-weighted assets to help ease mounting investor fears about French bank leverage and funding, two days after smaller rival Societe Generale unveiled a similar plan.

France’s lenders — two of which own local banks in Greece — have the highest overall bank exposure to Greece, according to the Bank for International Settlements. They have begun to take writedowns on their Greek sovereign debt holdings as part of a new rescue package but some say not aggressively enough.

Greece vowed on Saturday to stay the course of austerity and avoid bankruptcy as anger at the country’s failure to meet fiscal targets under its EU/IMF bailout reached boiling point.

(Reporting by Wayne Cole; Editing by Ed Davies)

Article source: http://www.nytimes.com/reuters/2011/09/14/business/business-us-frenchbanks-moodys.html?partner=rss&emc=rss

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Swiss Central Bank Acts to Halt Franc’s Rise

September 6, 2011 by Leave a Comment

The Swiss currency, long considered a safe haven, has surged against the euro and the dollar this year as investors flee turmoil in the markets. That has raised fears among Swiss businesses that the country’s exporters will be priced out of major markets. Switzerland’s biggest trading partner is the European Union.

“The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development,” the Swiss National Bank said in a statement
. It said it “is therefore aiming for a substantial and sustained weakening of the Swiss franc.”

The central bank “will no longer tolerate” a euro-franc rate below a floor of 1.20 francs, it said, and “will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities.”

The franc fell sharply, with the euro rallying to 1.20 Swiss francs from 1.11 francs late Monday. The dollar soared to 0.8483 Swiss franc from 0.7872 franc.

The euro has traded as low as 1.03 francs this summer.

The central bank’s new target commits it to buying euros and selling francs any time the euro falls below 1.20 francs. That amounts to the setting of a “floor” for the euro.

The authorities had also considered implementing a currency “peg,” in which the franc would be defended at a specific rate. In reality, considering the downward pressure on the euro, the 1.2 franc level will probably prove a de facto peg for the time being.

Currency market intervention, when it is not coordinated among the major central banks, has failed to have a lasting effect in recent years, as the Bank of Japan has learned to its chagrin.

Steven Saywell, head of global currency strategy at BNP Paribas in London, said he thought it “very unlikely” that the Swiss National Bank’s counterparts at the Federal Reserve and European Central Bank would be eager to follow suit, even though a Friday-Saturday meeting of Group of 7 finance and central bank officials in Marseilles would give them an opportunity to coordinate policy.

“The G-7 has far greater issues to deal with,” Mr. Saywell said, “like preventing the U.S. economy from sliding into recession and supporting the ongoing political discussions about addressing Europe’s debt problems.”

Indeed, the E.C.B. appeared to distance itself from the S.N.B. decision, saying in a two-sentence statement that the Swiss central bank had made the decision to hold down the value of the franc “under its own responsibility.”

Mr. Saywell said investors were certain to test Switzerland’s resolve, as the authorities there were attempting to buck a strong tide.

“In an environment of strong growth and economic stability, the franc might weaken,” he said. “But in this climate, we expect the market to challenge the S.N.B. over the next few days.”

The move is but the latest by the central bank in seeking to check the rise in the franc. Last month, it said that it would significantly increase the supply of liquidity to the Swiss franc money market. It increased banks’ sight deposits, a liquidity facility through which banks can withdraw money, to 120 billion francs from 80 billion francs. It also said it would conduct foreign exchange swap transactions to create liquidity in Swiss francs.

Even at a rate of 1.20 francs per euro, the central bank said Tuesday, “the Swiss franc is still high and should continue to weaken over time. If the economic outlook and deflationary risks so require, the S.N.B. will take further measures.”

The central bank’s action “is a bold move, but that level is still relatively high, implying that the economy will suffer nonetheless,” Jennifer McKeown, an economist with Capital Economics in London, wrote in a research note. “It sounds like, rather than using foreign exchange swaps to flood the market with francs as it has in the recent past, the bank plans to revert to its earlier strategy of intervening directly in currency markets.”

Ms. McKeown noted that the euro had averaged about closer to 1.7 francs over the long run, so “we suspect that Swiss exports will drop anyway, given the still relatively high level of the franc.”

Article source: http://feeds.nytimes.com/click.phdo?i=5bd8fa129636d4b06914e97b2243f7ce

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