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A Stronger Economy Lifts June Auto Sales

July 2, 2013 by Leave a Comment

DETROIT — The nation’s automakers continued to make gains in June, reporting the strongest performance in six years as the improving economy supported a continued uptick in sales.

The Ford Motor Company led the growth, reporting a 13 percent increase for its Ford and Lincoln brands. General Motors reported gains of 6 percent and the Chrysler Group of 8 percent.

Sales for the Nissan Motor Company rose 13 percent, making the automaker’s best June sales month ever in the United States. The Toyota Motor Corporation, the world’s largest carmaker, reported a sales gain of 9.8 percent. Volkswagen was the only major automaker to report a decline in June sales, of 3 percent.

Over all, June showed the best performance in at least six years for Ford and Chrysler and the best month for G.M. since September 2008, when Lehman Brothers filed for bankruptcy.

“We’re in an economy that gets a little stronger each and every month,” said Kurt McNeil, G.M.’s vice president of United States sales operations.

The gains were fueled by strong sales of pickup trucks and sport utility vehicles, as well as compact cars.

G.M. said that sales of its large pickup trucks surged 29 percent. Sales for Ford’s F-Series trucks rose 24 percent, and Chrysler’s Ram truck sales rose 23 percent.

The swell in pickup sales has been helped by the continued recovery in the housing sector, as well as by lower interest rates, better fuel economy and an aging fleet, said Jenny Lin, Ford’s senior United States economist.

More than four million of the pickup trucks on American roads are more than 12 years old, so pent-up demand is bringing drivers into showrooms, Ms. Lin said.

Small and compact cars produced strong sales for all three Detroit automakers. Sales of Ford’s small cars, including the Fiesta, Focus and Fusion, rose 39 percent for the automaker’s best June sales month in 13 years.

G.M. reported that sales of Chevrolet’s small cars rose 66 percent, helped by its Cruze and Sonic models.

Chrysler and Fiat brand sales rose 1 percent, but sales for the Chrysler 200 midsize sedan were up 14 percent.

Ford and Chrysler estimated a seasonally adjusted annual sales rate of 16 million vehicles for the industry, the highest in six years. G.M. estimated a rate of 15.8 million, the highest since November 2007.

Article source: http://www.nytimes.com/2013/07/03/business/a-stronger-economy-lifts-june-auto-sales.html?partner=rss&emc=rss

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DealBook: Global Rule Maker Defends Regulatory Efforts From Criticism

January 26, 2013 by Leave a Comment

Stefan Ingves, the chairman of the Basel Committee on Banking Supervision and governor of the Riksbank, the Swedish central bank.Bertil Ericson/Scanpix, via Associated PressStefan Ingves, the chairman of the Basel Committee on Banking Supervision and governor of the Riksbank, the Swedish central bank.

DAVOS, Switzerland — The head of a panel that writes the global financial rulebook answered criticism that the so-called Basel Committee has gone soft on banks, arguing that lenders need more time to adjust to new regulations because the financial crisis has lasted longer than anyone expected.

Stefan Ingves, the chairman of the Basel Committee on Banking Supervision, was responding to some economists and other critics who interpreted a recent decision by the committee as a signal that regulators were losing their resolve to contain risk-taking by banks.

Earlier this month, the committee decided to give banks got more time to comply with a requirement that they maintain a 30-day supply of cash other assets that are easy to sell. The rule is supposed to make banks better able to survive a financial crisis like the one that occurred after Lehman Brothers collapsed in 2008.

When regulators drafted the rule in 2010, they did not expect the crisis to last so long and for banks to still be in such a weakened state, said Mr. Ingves, who is also governor of the Riksbank, the Swedish central bank. The important thing is that there is a rule at all, he said.

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“The Basel Committee has been discussing liquidity in different forms for 30 years,” Mr. Ingves said in an interview on Friday here at the World Economic Forum. “To get to a point where a global liquidity standard has been established is an achievement in itself.”

Banks will have until 2019 to fully comply with the requirement, instead of 2015 as originally planned. The rule will still achieve its purpose of making banks safer, Mr. Ingves said.

“If there’s stress in the system, a bank shouldn’t run out of money,” Mr. Ingves said. “It should take longer than the last time before you need to go to the central bank. It’s buying insurance within the private sector itself.”

The loosening of the rule this month raised concerns that members of the Basel Committee, whose decisions serve as a benchmark for national regulators around the world, would also become more lenient on other issues as they conduct a comprehensive overhaul of banking rules.

The Basel Committee also expanded the definition of liquid assets to include even securities backed by home mortgages, one of the financial instruments that helped case the crisis. Mr. Ingves pointed out that the rules contain safeguards to ensure that banks only use high-quality mortgage-backed securities.

Following the initial outcry about changes in the rules, some other leading economists have welcomed the decision, saying it simply acknowledges the need to balance stricter oversight with the need to make sure credit keeps flowing.

There was a danger that banks in western Europe would curtail lending in eastern Europe even more severely than they already have, said Erik Berglof, chief economist of the European Bank for Reconstruction and Development. The development bank, partly owned by the United States as well as European countries, supplies credit to the former Soviet Bloc countries as well as newly democratic countries in the Middle East.

The decision by the Basel Committee this month “was a good thing,” Mr. Berglof said in an interview. “It was particularly good for emerging markets.” In eastern Europe and many developing regions, most banks are foreign owned and dependent on their parent banks for financing.

The Basel Committee’s decisions are not binding and must be put into force by individual countries. The United States has agreed to the rules, but has come under criticism for being too slow to implement them and not sticking to the agreed blueprint. American officials point out that big banks in the country are healthier and already comply with the Basel rules that have yet to take effect.

Mr. Ingves was diplomatic when asked about the United States implementation, pointing out that the European Union is also taking longer to agree on how to apply the rules.

“They are a bit behind schedule but work is being done,” he said. “Both have said they will get this done. I have no doubt they will.”

At the World Economic Forum, the central issue is probably whether the euro zone crisis has reached a turning point. Mr. Ingves, a former official at the International Monetary Fund with decades of experiences in banking crises, was fairly optimistic.

“You never know, but it looks like it,” he said.

Article source: http://dealbook.nytimes.com/2013/01/25/amid-criticism-global-rule-maker-defends-regulatory-efforts/?partner=rss&emc=rss

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DealBook: HSBC Is Said to Avoid Charges Over Laundering

December 11, 2012 by Leave a Comment

HSBC's headquarters in London.Facundo Arrizabalaga/European Pressphoto AgencyHSBC’s headquarters in London.

9:49 p.m. | Updated
State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.

Instead, authorities on Tuesday are expected to announce a record $1.9 billion settlement with the bank, according to law enforcement officials briefed on the matter. The bank, which is based in Britain, faces accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money illegally through its American subsidiaries.

While the settlement is a major victory for the government, the case raises questions about whether certain financial institutions, having grown so large and so interconnected, are too big to indict. Four years after the failure of Lehman Brothers nearly toppled the financial system, regulators are still wary that a single institution could undermine the recovery of the industry and the economy.

But the threat of criminal prosecution acts as a powerful deterrent. If authorities signal such actions are remote for big banks, the threat could lose its sting.

Behind the scenes, authorities debated for months the advantages and perils of a criminal indictment against HSBC.

Some prosecutors at the Justice Department’s criminal division and the Manhattan district attorney’s office wanted the bank to plead guilty to violations of the federal Bank Secrecy Act, according to the officials, who spoke on the condition of anonymity. The law forces financial institutions to report any cash transaction of $10,000 or more and requires banks to bring any dubious activity to the attention of regulators.

Given the extent of the evidence against HSBC, some prosecutors saw the charge as a healthy compromise between a settlement and a harsher money-laundering indictment. While the charge would most likely tarnish the bank’s reputation, some officials argued that it would not set off a series of devastating consequences.

A money-laundering indictment, or a guilty plea over such charges, would essentially be a death sentence for the bank. Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its charter to operate in the United States, officials said.

Despite the Justice Department’s proposed compromise, Treasury Department officials and bank regulators at the Federal Reserve and the Office of the Comptroller of the Currency pointed to potential issues with the aggressive stance, according to the officials briefed on the matter. When approached by the Justice Department for their thoughts, the regulators cautioned about the impact on the broader economy.

“The Justice Department asked Treasury for our view about the potential implications of prosecuting a large financial institution,” David S. Cohen, the Treasury’s under secretary for terrorism and financial intelligence, said in a statement. “We did not believe we were in a position to offer any meaningful assessment. The decision of how the Justice Department exercises its prosecutorial discretion is solely theirs and Treasury had no role.”

Still, some prosecutors proposed that Attorney General Eric H. Holder Jr. meet with Treasury Secretary Timothy F. Geithner, people briefed on the matter said. The meeting never took place.

After months of discussions, prosecutors decided against a criminal indictment, but only after securing record penalties and wide-ranging sanctions.

The HSBC deal, which is expected to be filed on Tuesday in the Eastern District of New York, includes a deferred prosecution agreement with the Manhattan district attorney’s office and the Justice Department. The deferred prosecution agreement, a notch below a criminal indictment, requires the bank to forfeit more than $1.2 billion and pay about $650 million in fines, according to the officials briefed on the matter. The case, officials say, will claim violations of the Bank Secrecy Act and Trading with the Enemy Act.

As part of the deal, one of the officials briefed on the matter said, HSBC must also strengthen its internal controls and stay out of trouble for the next five years. If the bank again runs afoul of the federal rules, the Justice Department can resume its case and file a criminal indictment.

“We are cooperating with authorities in ongoing investigations,” said Rob Sherman, a spokesman for the bank. He added, “The nature of any conversations is confidential.”

The Justice Department and the Manhattan district attorney’s office declined to comment, as did the bank regulators.

The HSBC case is part of a sweeping investigation into the movement of tainted money through the American financial system. In 2010, Lanny A. Breuer, the head of the Justice Department’s criminal division, created a money-laundering task force that has collected more than $2 billion in fines from banks, a number that is set to double with the HSBC case.

The inquiry — led by the Justice Department, the Treasury and the Manhattan prosecutors — has ensnared six foreign banks in recent years, including Credit Suisse and Barclays. In June, ING Bank reached a $619 million settlement to resolve claims that it had transferred billions of dollars in the United States for countries like Cuba and Iran that are under United States sanctions.

On Monday, federal and state authorities also won a $327 million settlement from Standard Chartered, a British bank. Standard, which in September agreed to a larger settlement with New York’s top banking regulator, admitted processing thousands of transactions for Iranian and Sudanese clients through its American subsidiaries. To avoid having Iranian transactions detected by Treasury Department computer filters, Standard Chartered deliberately removed names and other identifying information, according to the authorities.

“You can’t do it. It’s against the law, and today Standard Chartered is being held to account,” Mr. Breuer said in an interview.

HSBC’s actions stand out among the foreign banks caught up in the investigation, according to several law enforcement officials with knowledge of the inquiry. Unlike those of institutions that have previously settled, HSBC’s activities are said to have gone beyond claims that the bank flouted United States sanctions to transfer money on behalf of nations like Iran. Prosecutors also found that the bank had facilitated money laundering by Mexican drug cartels and had moved tainted money for Saudi banks tied to terrorist groups.

HSBC was thrust into the spotlight in July after a Congressional committee outlined how the bank, between 2001 and 2010, “exposed the U.S. financial system to money laundering and terrorist financing risks.” The Permanent Subcommittee on Investigations held a subsequent hearing at which the bank’s compliance chief resigned amid mounting concerns that senior bank officials were complicit in the illegal activity. For example, an HSBC executive at one point argued that the bank should continue working with the Saudi Al Rajhi bank, which has supported Al Qaeda, according to the Congressional report.

Despite repeated urgings from federal officials to strengthen protections in its vast Mexican business, HSBC instead viewed the country from 2000 to 2009 as low-risk for money laundering, the Senate report found. Even after HSBC’s Mexican operation transferred more than $7 billion to the United States — a volume that law enforcement officials said had to be “illegal drug proceeds” — lax controls remained.

HSBC has since moved to bolster its safeguards. The bank doubled its spending on compliance functions and revamped its oversight, according to a spokesman. In January, HSBC hired Stuart A. Levey as chief legal officer to come up with stricter internal standards to thwart the illegal flow of cash. Mr. Levey was formerly an under secretary at the Treasury Department who focused on terrorism and financial intelligence.

On Monday, the bank said it was promoting Robert Werner, who oversaw the group at the Treasury Department that enforces sanctions, to run a specially created division focused on anti-money laundering efforts.

Regulators have also vowed to improve. The Congressional hearings exposed weaknesses at the Office of the Comptroller of the Currency, the national bank regulator. In 2010, the regulator found that HSBC had severe deficiencies in its anti-money laundering controls, including $60 trillion in transactions and 17,000 accounts flagged as potentially suspicious, activities that were not reviewed. Despite the findings, the regulator did not fine the bank.

During the hearings this summer, lawmakers blasted the regulator. At one point, Senator Tom Coburn, Republican of Oklahoma, called the comptroller “a lapdog not a watchdog.”

Article source: http://dealbook.nytimes.com/2012/12/10/hsbc-said-to-near-1-9-billion-settlement-over-money-laundering/?partner=rss&emc=rss

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DealBook: Nomura Seeks to Save $1 Billion by Scaling Back Mainly in Europe

September 7, 2012 by Leave a Comment

Nomura also eliminated 1,000 jobs last year as part of a cost-cutting.Simon Dawson/Bloomberg NewsNomura also eliminated 1,000 jobs last year as part of a cost-cutting.

8:38 p.m. | Updated

TOKYO — Nomura Holdings, the scandal-hit Japanese investment bank, outlined a broad reorganization plan on Thursday that would pare back its business to a shadow of what it held after acquiring parts of Lehman Brothers in 2008.

Most of the $1 billion in cuts, initially announced last week, will be made abroad. They are driven by a grim outlook for the global economy, Koji Nagai, Nomura’s new chief executive, told analysts and investors at the company’s headquarters in Tokyo.

Nomura’s operations in Europe, which will account for 45 percent of the cost savings, and the Americas, which will account for 21 percent, will take the brunt of the cutbacks, the bank said.

Though Mr. Nagai declined to specify the number of jobs Nomura would eliminate, the company said it would shave $450 million from personnel expenses. Other cuts would come from savings made by optimizing spending on information technology, the bank said.

“We will take stock of the company from the roots upward and rebuild,” Mr. Nagai said.

It has been a swift and striking fall for Nomura. For a nominal sum, it bought the Asian and European operations of Lehman Brothers, the American brokerage firm that failed in 2008, and set out to build a global investment franchise.

But that acquisition saddled Nomura with huge personnel costs, and the task of marrying two vastly different corporate cultures undermined efforts to capitalize on Lehman’s talent pool.

Many top Lehman executives left Nomura, and it was forced to cut costs and try to end the hemorrhaging of money in its wholesale operations, which include equities, fixed income and investment banking. Nomura’s foreign operations have lost money for nine consecutive quarters.

One of the last Lehman executives at Nomura, William Vereker, stepped down this week as joint head of investment banking. He is widely expected to leave the company soon.

Compounding the problems, an insider trading scandal in Japan this year led Nomura to replace its chief executive, Kenichi Watanabe, who had handled the bank’s takeover of Lehman and had pushed for global expansion. His successor, Mr. Nagai, had been head of the Japanese domestic securities unit.

Under Mr. Nagai, the bank is narrowing its global aspirations and will focus closer to home in Asia, where it can better leverage its dominant position in Japan, senior executives said.

“When the global economy comes back, the recovery will start in Asia,” Atsushi Yoshikawa, Nomura’s new chief operations officer, said, “so we place great weight on Asia. But we have no plans to make aggressive investments like the kind we’ve made in America over the past three years. We intend to make good with what we have.”

The latest retrenchment comes on top of a $1.2 billion cost-cutting Nomura struggled through last year. That effort eliminated 1,000 jobs.

The company plans to scrutinize sectors or businesses that perform poorly for two years in a row. Nomura’s electronic brokerage unit Instinet, which it bought in 2006, will handle most equities execution outside Japan.


Hisako Ueno contributed reporting.

A version of this article appeared in print on 09/07/2012, on page B5 of the NewYork edition with the headline: Nomura Seeks to Save $1 Billion By Scaling Back Mainly in Europe.

Article source: http://dealbook.nytimes.com/2012/09/06/nomura-outlines-1-billion-restructuring/?partner=rss&emc=rss

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DealBook Column: David Ebersman, the Man Behind Facebook’s I.P.O. Debacle

September 4, 2012 by Leave a Comment

It is David Ebersman’s fault. There is just no way around it.

Mr. Ebersman is Facebook’s well-liked, boyish-looking 41-year-old chief financial officer. He’s not as well known as Mark Zuckerberg, Facebook’s founder and chief executive, or Sheryl Sandberg, its chief operating officer and recently appointed director.

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But when it came to Facebook’s catastrophe of an initial public offering — the stock reached a new low on Friday, closing at $18.06 — it was Mr. Ebersman, not Mr. Zuckerberg or Ms. Sandberg, who was ultimately the one pulling the strings.

Now, three months after the offering, the company has lost more than $50 billion in market value. Let me say that again for emphasis: Facebook’s market value has dropped more than $50 billion in 90 days.

To put that in perspective, that’s more market value than Lehman Brothers gave up in the entire year before it filed for bankruptcy.

A lot of ink has been spilled over Facebook’s I.P.O., with investors and pundits mostly pointing the finger at the Wall Street banks, particularly Morgan Stanley, which led the offering, and at Nasdaq, whose numerous computer glitches on Facebook’s first day of trading undermined confidence in the stock. They clearly deserve blame.

David Ebersman, Facebook's chief financial officer.Paul Sakuma/Associated PressDavid Ebersman, Facebook’s chief financial officer.

Mr. Ebersman’s name, however, is mentioned only occasionally, usually in passing and typically only among Silicon Valley’s cognoscenti.

And yet if there is one single individual more responsible than any other for the staggering mispricing of Facebook’s I.P.O., it is Mr. Ebersman. He signed off on the ever-increasing offer price, which ended up at $38 after the company had originally planned a price range of $29 to $34.

He — almost alone — pushed to flood the market with 25 percent more shares than originally planned in the final days before the offering. And since then, as the point person for investors, he has done little to articulate how or why the company’s strategy will lift the stock price any time soon.

At a time when investors are looking for some semblance of accountability on Wall Street and in corporate America, it is remarkable that nobody — no bankers, no one at Nasdaq, no one at Facebook — has been fired for botching the offering.

Mr. Zuckerberg reportedly told his employees after the I.P.O., “So, you’ve heard we’re firing David?” But it was only a joke.

Facebook’s falling stock price is not just a problem for investors; it is quickly creating real questions inside the company about its ability to retain and attract talented engineers, the lifeblood of any technology company.

Employees who joined the company starting in 2010, for example, are now holding onto restricted shares that were granted at a higher price — $24.10 — than the current trading price. (It should be noted that these are restricted stock units, not underwater stock options, so they do still have real value, but not nearly what the employees had expected.)

Employees with some two billion shares will have the opportunity to begin selling them this fall, which is one reason Facebook shares have been depressed lately.

A spokesman for Facebook, Elliot Schrage, declined to comment and would not make Mr. Ebersman available.

Mr. Ebersman appears to have badly misjudged the demand for Facebook’s I.P.O. He was aided by errant advice from a cadre of banking advisers, who all had an incentive to sell as many shares as possible at the highest price possible. Morgan Stanley liked $38 a share, JPMorgan Chase thought the shares could be sold for even more, while Goldman Sachs thought they should be sold for slightly less — but all of them quickly jumped on board when Mr. Ebersman made his final decision.

Determining the price of an I.P.O. is as much an art as a science. After a company’s roadshow presentations, investors indicate how many shares they plan to buy. They typically ask for more shares than they expect to receive, sometimes twice as many. But in the case of Facebook, investors, anticipating huge demand, put in requests for triple or quadruple the number of shares they expected to get.

The bankers — and Mr. Ebersman — did not seem to appreciate what was happening. They seem to have believed their own hype and took those orders as real, giving them the misplaced confidence to push the I.P.O. to the highest possible price and issue more shares.

But this wasn’t a traditional I.P.O. and should never have been priced that way. (People close to Mr. Ebersman say that he decided to issue additional shares with the goal of steadying the price this fall when the lockup on employee share sales expired. Consider that another miscalculation.)

Another issue that weighed on Mr. Ebersman, as well as the bank underwriters, was the example set by LinkedIn. Its shares rose 110 percent on its first day of trading. That might sound good, but it meant that the company mispriced the shares so badly that it effectively gave investors a gift of nearly $350 million. Mr. Ebersman was intent on making sure Facebook didn’t “leave money on the table,” according to several people close to him. But by leaving investors with little upside, he may have created additional pressure on the stock.

Both LinkedIn’s and Facebook’s I.P.O.’s should be considered failures — they were extreme examples of what could happen on the upside and the downside. The ideal offering lands somewhere in the middle. Still, there is no question that investors would prefer another LinkedIn over a Facebook, and they have every incentive to make an example of the company — and Mr. Ebersman — so that other companies don’t try to wipe out that first-day “pop.”

None of this is meant to suggest that Mr. Ebersman is dumb or unqualified. A graduate of Brown who was the chief financial officer of Genentech when he was just 34, Mr. Ebersman is bright, perhaps even brilliant. He was recruited to Facebook by Ms. Sandberg, a hire that was considered quite a coup at the time. He should clearly be given credit for negotiating favorable and extraordinarily large credit lines — $8 billion worth — with Wall Street banks, which could provide the company with an important lifeline should the economy and the company’s fortunes suffer.

The disclosures in the company’s I.P.O. prospectus — which were Mr. Ebersman’s responsibility — were, for the most part, pretty transparent, giving investors a good sense of the business, despite all the hype. And the I.P.O., for all its failures, filled Facebook’s coffers with some $10 billion.

Still, Mr. Ebersman has his work cut out for him as he tries to regain the trust of shareholders. He recently came to New York to meet with big investors, including hedge funds and institutional investors. Some invitations for meetings were oddly, and somewhat imperiously, sent out on Thursday night for meetings on Friday. Given that it was summer, some investors sent their junior analysts.

When Facebook’s I.P.O. first started to appear troubled back in May, I purposely avoided weighing in. Frankly, I thought it was too soon to judge.

But we have passed the pivotal three-month mark.

Statistically, the three-month mark is a much better predictor of a company’s future share price than any of the closing prices in the first week or two. According to Richard Peterson of Capital IQ, 67 percent of technology companies whose shares lagged their I.P.O. price after 90 days were still laggards after a year. Until Facebook’s stock rebounds, Mr. Ebersman will be feeling the pressure.

Article source: http://dealbook.nytimes.com/2012/09/03/david-ebersman-the-man-behind-facebook%E2%80%99s-i-p-o-debacle/?partner=rss&emc=rss

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DealBook: Barclays’ Profit Falls as New Regulatory Problems Emerge

July 27, 2012 by Leave a Comment

The letter B is hoisted up the side of Barclays' headquarters in London.Simon Newman/ReutersThe letter “B” is hoisted up the side of Barclays‘ headquarters in London.

LONDON — The problems continue to mount for Barclays, as the British bank disclosed that it was facing lawsuits related to a rate-rigging scandal and that regulators were investigating the company’s financial director on a different matter.

The bank’s legal and regulatory burdens have been a continued source of financial pain for Barclays.

On Friday, Barclays reported that net profit dropped 76 percent to $752 million during the first six months of the year after taking an accounting charge on its debt and a charge for inappropriately selling complex financial products to small businesses. Last month, Barclays and other banks settled with British regulators over those sales, of interest rate swaps.

On Friday, Barclays said that the Financial Services Authority, the British regulator, was looking into the actions of some current and former employees, including the finance director, Chris Lucas, over the disclosure of fees related to the bank’s capital-raising efforts in 2008. The issues revolve around agreements with the Qatar Investment Authority and the Sumitomo Mitsui Banking Corporation of Japan, according to regulatory filings.

After the collapse of Lehman Brothers in 2008, the British bank tapped Middle Eastern investors for a combined £11.8 billion, or $18.6 billion, in two rounds of capital raising. Existing shareholders have voiced concerns that their rights were overlooked when Barclays turned to outside investors for a fresh injection of capital.

“Barclays considers that it satisfied its disclosure obligations and confirms that it will cooperate fully with the F.S.A.’s investigation,” the bank said in a statement.

Last month, Barclays announced a $450 million settlement with American and British authorities over the manipulation of benchmark rates, including the London interbank offered rate, or Libor. On Friday, Barclays disclosed that it was facing class-action lawsuits in the United States related to such issues. One of the lawsuits also cites unnamed current and former members of the bank’s board as defendants, according to a statement from the bank.

Barclays said it was “not practical” to estimate the costs related to the legal proceedings. Morgan Stanley analysts have said global banks may have to pay more than a combined $20 billion in penalties and fines related to the manipulation of Libor.

“We are sorry for the issues that have emerged over recent weeks and recognize that we have disappointed our customers and shareholders,” Barclays’ chairman, Marcus Agius, who will step down, said in a statement.

As it deals with the fallout, Barclays must also remake its management team. As the rate manipulation scandal unfolded, Robert E. Diamond Jr., the company’s former chief executive, and Jerry del Missier, the former chief operating officer, both resigned. Mr. Agius said in a conference call that the firm would appoint a new chairman before selecting its next chief executive.

The bank is also taking a close look at its actions. Barclays has appointed Anthony Salz, vice chairman of the advisory firm Rothschild, to conduct a review into the British bank’s business practices. Some current and former Barclays employees may still face criminal charges related to the rate-rigging scandal.

Despite the bad news, investors found a reason to be upbeat. By the close of trading in London, the bank’s shares had jumped nearly 9 percent.

Without the accounting charge and other one-time costs, Barclays’ net profit in the first half of the year rose 9 percent, to £3.07 billion, compared with £2.8 billion a year earlier. The earnings, which beat analysts’ estimates, were driven by an improved performance in the bank’s retail and corporate banking divisions.

Barclays’ investment banking unit, however, continued to get hit by the European debt crisis. Other global rivals, like Morgan Stanley and Goldman Sachs, have faced weakness in their investment banking activity, but analysts said that Barclays had done better than most to maintain its trading income.

The bank reported a £1 billion pretax profit in its investment banking unit in the three months through June 30, a 2.5 percent increase over the previous year. Barclays does not report net income for its separate business units.

“Despite the more recent regulatory assault, this underpins the belief that, in challenging conditions, Barclays Capital should continue to consolidate market share,” Ian Gordon, a banking analyst at Investec in London, said in a note to investors.

The British bank said it had reduced its exposure to the debt of Southern European countries by 22 percent, to £5.6 billion, during the first six months of the year. The bank’s core Tier 1 ratio, a measure of ability to weather financial shocks, fell slightly to 10.9 percent.

“We continue to be cautious about the environment in which we operate and will maintain the group’s strong capital, leverage and liquidity positions,” Mr. Lucas of Barclays said in a statement.

Article source: http://dealbook.nytimes.com/2012/07/27/barclays-profit-falls-amid-rate-rigging-scandal/?partner=rss&emc=rss

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DealBook: Nomura Chief Quits Amid Insider Trading Scandal

July 26, 2012 by Leave a Comment

Kenichi Watanabe, right, announces his resignation on Thursday as his successor, Koji Nagai, looks on.Yoshikazu Tsuno/Agence France-Presse — Getty ImagesKenichi Watanabe, right, announces his resignation on Thursday as his successor, Koji Nagai, looks on.

TOKYO — In a resignation more reminiscent of Nomura’s scandal-plagued 1990s than the global investment bank it has sought to become, the firm’s chief executive and his top lieutenant resigned on Thursday over recent revelations their employees abetted insider trading.

The bank’s chief executive, Kenichi Watanabe, who was the architect of Nomura’s takeover of Lehman Brothers‘ assets in Asia and Europe, resigned to take responsibility for the scandal, together with Takumi Shibata, the chief operating officer.

They will be succeeded by Koji Nagai, who leads Nomura’s securities unit, and Atsushi Yoshikawa, chief of the bank’s operations in the United States, according to a company announcement. The management changes were approved by Nomura’s board on Thursday.

“I resign,” Mr. Watanabe bluntly told reporters, offering no apology in his opening remarks at a Tokyo news conference.

He said he had overseen the start of promised measures to bolster Nomura’s internal controls, and to further investigate insider trading practices at the firm. “Now it is time for a new era with new people,” he added.

Mr. Nagai promised to regain investor trust in the disgraced bank. “I intend to reform the company mind-set,” he said.

The resignations mark a fresh low for an institution that has struggled since snapping up Lehman’s international operations four years ago.

Nomura, together with the British bank Barclays, swallowed Lehman’s businesses at the height of the financial crisis in 2008 in risky bids to bolster their global standings.

But now, as Barclays faces an investigation of interest-rate manipulation, Nomura is embroiled in its own new scandal: accusations of widespread leaks of privileged information, which are part of a widening insider-trading investigation by Japanese regulators.

After an internal investigation, Nomura has acknowledged that employees leaked information on at least three public offerings in 2010 to favored fund managers, who then made money by pre-empting the expected drop in the share price with heavy short-selling.

Investors reacted positively to reports of the management shake-up, first reported on Thursday by the Nikkei business daily, driving Nomura shares up almost 6 percent ahead of its earnings announcement later in the day.

After stock markets closed, Nomura said it had squeezed out a net profit of 1.98 billion yen ($24.2 million) in the three months through June, down almost 90 percent from 17.7 billion yen for the period a year earlier, but beating analysts’ expectations.

Nomura’s chief financial officer, Junko Nakagawa, credited a $1.2 billion cost-cutting drive, which she said was completed ahead of schedule.

Article source: http://dealbook.nytimes.com/2012/07/26/nomura-chief-resigns-amid-insider-trading-scandal/?partner=rss&emc=rss

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DealBook: Greenlight Capital to Pay $11 Million Fine in Insider Case

January 26, 2012 by Leave a Comment

David Einhorn, the head of the hedge fund Greenlight Capital.Jonathan Fickies/Bloomberg NewsDavid Einhorn, the head of the hedge fund Greenlight Capital.

8:43 p.m. | Updated

The prominent money manager David Einhorn and his hedge fund, Greenlight Capital, were fined about $11 million by Britain’s financial regulator on Wednesday for using confidential information to trade in the stock of a British pub chain.

The Financial Services Authority of Britain penalized Mr. Einhorn for selling shares in Punch Taverns shortly after learning that the company was considering a large stock sale, a move that would be expected to drive down a company’s share price.

Mr. Einhorn denied any wrongdoing, and in an hourlong conference call with his investors and the media on Wednesday afternoon, he denounced the regulator, which has vowed to take a tougher stance on white-collar crime.

“This resembles insider dealing the way that soccer resembles football,” said Mr. Einhorn, who delivered 40 minutes of prepared remarks on the call. He described the regulator’s case as “something more akin to a traffic cop with a quota at the end of the month and a miscalibrated radar gun.”

The regulator’s civil penalty is a setback for Mr. Einhorn, whose Greenlight hedge fund manages about $8 billion in assets. And his unusual rebuke of a regulatory authority is just the latest public episode in the money manager’s colorful career. Unlike many of his peers who try to remain below the radar, Mr. Einhorn has carved out one of the most public faces and opinionated voices in the hedge-fund industry.

Mr. Einhorn, 43 and a native of Milwaukee, has made a name for himself as a short-seller. For example, he bet against Lehman Brothers stock several months before the 2008 collapse of the Wall Street bank. His market bets are now closely followed. Last year, when he told an investment conference that the shares of Green Mountain Coffee Roasters were overvalued, the company’s shares promptly fell about 50 percent.

His activities away from Wall Street have also captured headlines. In 2006, with little experience in the professional gambling arena, he entered the World Series of Poker and finished 18th out of 8,773 contestants. Last year, he offered $200 million for a noncontrolling stake in the New York Mets baseball team, but the deal fell through.

The British regulator’s case against Mr. Einhorn arose out of a June 2009 conference call with the management of Punch Taverns, the British pub operator in which Greenlight owned a large stake. Mr. Einhorn learned on the call that Punch was contemplating issuing new shares, a move that most likely would have driven down the company’s stock price.

After the call, Greenlight significantly reduced its stake in Punch. By selling its holdings while knowing about the likely stock sale, Greenlight avoided several millions of dollars in losses, the regulator said.

“This was inside information, and Einhorn should have appreciated this,” the regulator said in a statement.

Yet the regulator also said that Mr. Einhorn’s “market abuse” was inadvertent and unintentional because he did not believe that he had been given any inside information.

“However, this was not a reasonable belief,” it said.

Mr. Einhorn said that he did not enter into any confidentiality agreement with the company and explicitly requested that Greenlight not be given any confidential information.

“We didn’t believe in 2009, and we don’t believe now, that there was anything wrong with our conduct and our action,” Mr. Einhorn said.

The securities laws in Britain have a broader definition of improper trading than the laws in the United States. In Britain, an insider trading suspect must know that he or she was in possession of secret information.

Mr. Einhorn told his investors that even though Greenlight believed it had done nothing wrong, he decided to settle the case rather than fight it.

“As much as we think the current case was unjust, we would face an uphill battle as a high-profile U.S. hedge fund challenging a British regulator in a British court,” he said. “We have chosen to pay the fine and return to the business of generating returns.”

Article source: http://dealbook.nytimes.com/2012/01/25/british-regulator-fines-einhorn-in-insider-trading-case/?partner=rss&emc=rss

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New Spanish Leader Asks Banker to Fix State Finances

December 22, 2011 by Leave a Comment

The official, Luis de Guindos, the new economics minister, had most recently been director of the Center for the Financial Sector, an institute in Madrid run by PricewaterhouseCoopers and the IE Business School. Before that, however, he was secretary of state for the economy until 2004, when Mr. Rajoy’s Popular Party was last in power.

He returned to investment banking and ended up confronting the financial crisis from the frontline as head of the Spanish subsidiary of Lehman Brothers in the two years before its bankruptcy.

A month after the Popular Party routed the Socialists in the Nov. 20 general election, Mr. Rajoy read out his list of ministers in a televised address on Wednesday night, without making any further comment. The government will have 14 members, compared with 16 in the previous Socialist administration of José Luis Rodríguez Zapatero.

Mr. Rajoy had refused to discuss his ministerial choices until his presentation to King Juan Carlos earlier in the day. In the end, the prime minister opted for a team containing several party veterans, including some, like Mr. de Guindos, who already formed part of the government of José María Aznar, Spain’s last conservative prime minister, a decade ago.

In contrast, two other countries with troubled economies now have governments that are led by respected — albeit unelected — technocrats: Lucas Papademos in Greece and Mario Monti in Italy. In Portugal, which is also struggling, a third of the ministerial portfolios in the center-right government that won a snap election in June were given to independents with no party affiliation, including Vítor Gaspar, the finance minister.

“This is a government that is very solid and predictable and will stick to the austerity line drawn by Mr. Rajoy,” Arturo Fernández, vice president of the CEOE, the employers’ federation, told Spanish television. “De Guindos already did a very good job during his time” in the Aznar government, he added.

Mr. Rajoy is taking charge after eight years as opposition leader and two losses to Mr. Zapatero, in 2004 and 2008.

Alberto Ruiz-Gallardón, the mayor of the capital, Madrid, will become justice minister. His departure paves the way for Ana Botella, the wife of Mr. Aznar, to take charge of the city.

Mr. Rajoy’s deputy will be Soraya Sáenz de Santamaría, one of his closest allies within the Popular Party.

Miguel Arias Cañete is Spain’s new agriculture minister, returning to take charge of a portfolio that he had in Mr. Aznar’s government.

The Socialists are leaving office discredited by the downturn of a once seemingly robust economy that, since the onset of the world financial crisis, has been shredded by the collapse of the property sector and debt obligations that are also now consuming the other South European economies that use the euro.

Article source: http://feeds.nytimes.com/click.phdo?i=6cf3d0ae5760a26ed28d36d1594df8cd

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E.C.B. Warns of Dangers Ahead for Euro Zone Economy

December 19, 2011 by Leave a Comment

But the E.C.B., in its twice-yearly assessment of risks to the euro area financial system, did not mention one risk that clearly weighs on many investors, economists and political leaders: the possibility that the euro zone could break up.

“I have no doubt about the euro,” Mario Draghi, the president of the E.C.B., told members of the European Parliament in Brussels. “The one currency is irreversible.”

He said he had discussed the possibility of a euro breakup in an interview with The Financial Times, published Monday, to counter “morbid speculation” about the demise of the common currency.

By some measures, the stresses on the European financial system are approaching or even exceeding levels last seen after the bankruptcy of Lehman Brothers in 2008. For example, market perception of the risk that two large banks in the euro area could fail in the next year have surpassed the previous peak in 2009, according to data in the E.C.B.’s Financial Stability Review.

“The transmission of tensions among sovereigns, across banks and between the two intensified to take on systemic crisis proportions not witnessed since the collapse of Lehman Brothers three years ago,” the report said.

Several negative developments are converging, the report said. Banks must roll over about €220 billion, or $286 billion, in debt during the first three months of 2012, even as market funding has become scarce and expensive. Credit crunches are already visible in some countries like Ireland, Vitor Constâncio, the vice president of the E.C.B., told reporters Monday.

Meanwhile, slower economic growth is likely to lead to an increase in bad loans, which will further weaken lenders.

“The whole year is going to be a difficult year for the banks,” Mr. Draghi said.

But Mr. Draghi and Mr. Constâncio said that the E.C.B. addressed the problem when, earlier this month, the bank announced plans to begin lending money to banks at 1 percent interest for as long as three years. The action was one of a series of moves designed to ensure that banks have the money they need to support economic growth.

The measures “will eliminate all excuses to say that credit could decelerate,” Mr. Constâncio said.

Echoing recent statements by Mr. Draghi, the Stability Review leaned on political leaders to swiftly deploy measures they have agreed on to contain the crisis, such as the new euro area bailout fund.

Mr. Constâncio also criticized European leaders for a plan, supposedly voluntary, under which investors would accept a 50 percent decline in the value of their holdings of Greek bonds. That action in July put markets on notice that default of a euro zone country was not unthinkable, and raised pressure on other countries, Mr. Constâncio said.

Political leaders have since said that Greece will be a unique case, a statement some investors have taken as an implied guarantee on the debt of other countries. Asked if there was in fact a guarantee, Mr. Constâncio put the onus on governments to implement policies “that will counter the risk of that happening.”

Article source: http://feeds.nytimes.com/click.phdo?i=74c747d7383b2e23afeacd365a2a24d8

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