Bloomberg News

Oil-Price Reporting, Floating NAV, Nuke Rules, Italian Bankers: Compliance

March 02, 2012

A commission appointed by the Group of 20 nations called for stricter regulation of price-reporting agencies to prevent the manipulation of oil markets.

The consultation report, published yesterday by the International Organization of Securities Commissions, said that price-reporting companies are at risk from oil prices being manipulated and called for greater regulation in their complaints process and in the appointment of board members.

The G-20 appointed IOSCO in November last year to look into the role played by oil-price reporting agencies, including Platts, the energy and pricing unit of McGraw-Hill Cos. (MHP) and Argus Media Ltd., in the functioning of oil markets, their methods of operation and governance and options for future oversight. Platts has reported on oil markets since 1909.

The closing date for responses to the consultation report is March 28. A final report will be submitted to the G-20 Finance Ministers in June.

Compliance Policy

Fidelity Says Floating NAV Would Destroy Money Market Funds

Fidelity Investments, the largest manager of U.S. money market mutual funds, said reforms contemplated by regulators would “destroy” the industry and were unnecessary following rule changes two years ago.

The impact of the 2010 reforms “should be explored and understood more thoroughly” before regulators make additional changes, the Boston-based company said yesterday in a report that accompanied a letter from the firm to the Securities and Exchange Commission.

The SEC’s staff is expected to propose two separate rules changes later this month that fund companies have said would drastically reduce the attraction of money funds to investors and disrupt the financing they provide to U.S. businesses. Regulators have debated how to make the funds more stable since the September 2008 collapse of the $62.5 billion Reserve Primary Fund, which triggered an industrywide run on funds by clients and helped freeze global credit markets.

The Fidelity report seeks to bolster the industry’s argument by outlining how the 2010 rules changes -- which introduced liquidity minimums, average maturity limits and new disclosure requirements -- have already made funds safer.

The first of two proposals being prepared by the SEC’s staff would force money funds to drop their traditional $1 share price. The second would require funds to create capital cushions capable of absorbing losses and hold back a portion of any client withdrawal for as much as 30 days.

Fidelity managed $419 billion in money market mutual funds as of Jan. 31, according to Crane Data LLC.

Post-Fukushima Rules May Prompt Nuclear Sales, PPL CEO Says

New U.S. operating standards imposed in the wake of the reactor meltdowns in Fukushima, Japan, last year may prompt owners of single nuclear plants to consider selling them, PPL Corp. (PPL) Chief Executive Officer William Spence said.

Requirements that are more efficiently met by owners of multiple plants may lead companies that own a single plant to sell it, Spence said in an interview at Bloomberg headquarters in New York Feb. 29. PPL has no such plans and views its 2,289- megawatt Susquehanna nuclear plant 70 miles (113 kilometers) northeast of Harrisburg, Pennsylvania, as a key strategic asset, Spence said.

The five-member Nuclear Regulatory Commission is weighing rules to improve safety at U.S. nuclear reactors and may issue its first Fukushima-related orders by March 9, David McIntyre, an NRC spokesman, said in an e-mail Feb. 29.

For more, click here.

U.K. Regulator Said to Quiz Banks About U.S. Swap Registration

Britain’s Financial Services Authority, concerned that proposed new rules across the Atlantic may limit its powers, began quizzing firms last week on their plans to register as swaps dealers in the U.S., according to two people familiar with the talks.

The British agency’s role in setting capital levels may be limited for non-U.K. banks with substantial operations in London if those lenders register as swap dealers in the U.S., according to one of the people, who declined to be identified because the talks are private.

Agencies including the Commodity Futures Trading Commission have formulated rules to reduce the likelihood of a default by a major counterparty in the U.S. market for swaps. The CFTC commissioners delayed a vote on a rule defining which banks, hedge funds and energy companies would be considered swap dealers under the Dodd-Frank Act, and may take up the measure on March 20, according to a person briefed on the schedule.

The rules being written by the SEC, CFTC and other regulators may result in companies designated as swap dealers facing higher capital and margin costs to reduce trading risks. Steven Adamske, director of public affairs at the CFTC, and Joseph Eyre, a spokesman at the FSA, both declined to comment.

The FSA is concerned disputes may arise between U.S. and U.K. regulators should a bank default on derivative contracts, said one of the people. The agency would still have oversight of capital ratios for banks domiciled in the U.K. that want to participate in the U.S. swaps market.

For more, click here.

Insurance Rules Threaten U.K. Infrastructure Investment, FT Says

The European Union’s planned Solvency II rules could prevent insurers from making long-term investments in the U.K., the Financial Times reported, citing a speech by Otto Thoresen, director general of the Association of British Insurers.

Insurers may be barred from playing “a major role in infrastructure investing” in the U.K., preventing them from meeting investment expectations outlined by the government, Thoresen said, according to the FT. He said the draft regulations need clarification and rewording, the FT reported.

Compliance Action

Bank of Portugal Says Inspections on Country’s Lenders Completed

The Bank of Portugal said it completed the inspections on Portuguese banks required by the country’s external aid package.

The central bank concluded the process Feb. 29 with the assessment of the lenders’ methodologies to evaluate their future solvency, the Bank of Portugal said in a statement on its website yesterday.

Most of the eight banks assessed use adequate methods, the central bank said, although some need to introduce improvements. The Portuguese unit of Banco Santander SA (SAN) and Espirito Santo Financial Group SA (ESF) said, in separate statements, that they achieved the highest possible classification. Banco Comercial Portugues SA (BCP) said the central banker found it used “appropriate parameters and methodologies.”

The Bank of Portugal said four banks used methods that are “generally” adequate, although they need to introduce improvements in some areas.

Courts

ING Wins Challenge Forcing EU to Reconsider Bailout Terms

ING Groep NV (INGA) won a court ruling forcing European Union regulators to re-examine the conditions they imposed on the Dutch lender’s government rescue in the wake of the financial crisis.

The EU’s General Court said the European Commission wrongly considered a revision of repayment terms as 2 billion euros ($2.65 billion) of additional aid on top of 10 billion euros it received in 2008. The court struck down part of the EU’s decision, which will force regulators to re-open their assessment of part of the Dutch government’s bailout to the bank.

ING and the Dutch government challenged the terms of the EU’s approval, which the bank says punished it too harshly for state help in 2008 and 2009. ING said the regulator miscalculated the amount of aid and imposed excessive restructuring demands.

The commission didn’t show that changes to the bailout terms agreed by ING and the Dutch government were on conditions that a private investor would have refused to give the bank, the court said.

“ING welcomes the judgment to partially annul the EC decision,” the Amsterdam-based bank said in a statement. “ING will carefully assess the full judgment and its consequences. Announcements on any potential further actions will only be made if and when appropriate.”

“We are satisfied with the ruling. We will study the ruling to further assess the consequences,” Ben Feiertag, a spokesman for the Dutch Finance Ministry in The Hague, said by telephone.

The European Commission said it will publish a revised decision on the terms of aid to ING following today’s court ruling. The regulator will “adopt a new decision taking the judgment into account,” Antoine Colombani, spokesman for Joaquin Almunia, the EU’s antitrust commissioner, said in an e- mail.

The cases are T-33/10, ING Groep v. Commission and T-29/10, Netherlands v. Commission.

Interviews/Speeches

Mussari Says Italian Bank Association Heads May Resign

Italian Banking Association Chairman Giuseppe Mussari talked to reporters in Rome after he and seven other executives offered to resign in protest over new banking-fee rules included in the government’s legislation on boosting competition.

The eight members of the presidential committee of the association known as ABI tendered their resignations to the board after the Senate Industry Committee approved new rules on commissions received by banks, Mussari said yesterday. The offer to step down will be reviewed in the coming days by ABI’s board and executive committee, which can reject it.

For the video, click here, and for more, click here.

Bernanke Says Volcker Rule Criticism Taken Seriously

Federal Reserve Chairman Ben S. Bernanke says the central bank takes criticism of the so-called Volcker Rule “seriously.”

He spoke in response to a question in his testimony yesterday before the Senate Banking Committee in Washington.

For the video, click here.

Separately, Arthur Levitt, former chairman of the Securities and Exchange Commission, said the Volcker rule will be “out of action” until after the presidential election. Levitt talked with Bloomberg’s Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.”

For the audio, click here.

Silva Says Italian Banks Need More Diversified Boards

Ralph Silva, a strategist at Silva Research Network, talked about Italian banks and the European Central Bank’s long-term refinancing operation.

He spoke with Mark Barton on Bloomberg Television’s “On the Move.”

For the video, click here.

Atlanta Fed Regulator Says Half of Region’s Banks Still Troubled

More than half of banks in the U.S. Southeast supervised by the Federal Reserve Bank of Atlanta remain troubled more than 2 1/2 years after the recession ended, said Michael Johnson, senior vice president for supervision and regulation.

Johnson, who spoke at an Atlanta Fed banking conference, said regarding the more than 600 bank holding companies in the district, “to this day over 50 percent of them are in troubled or problem condition.”

The Atlanta Fed district includes Alabama, Florida, Georgia and portions of Louisiana, Mississippi and Tennessee.

While that is “bad news,” profit trends have improved, and banks in the Atlanta Fed district were profitable overall in 2011 for the first time in several years, Johnson said.

Georgia led the U.S. in bank failures between late 2007 and 2011’s third quarter with 75, followed by Florida’s 57, according to Trepp LLC, a provider of mortgage information.

Saluzzi Says High-Frequency Trading ‘Corrupted’ System

Joseph Saluzzi, co-head of equity trading at Themis Trading LLC, talked about high-frequency trading and the Security and Exchange Commission’s review of the practice.

He spoke with Pimm Fox on Bloomberg Television’s “Taking Stock.”

For the video, click here.

Rodge Cohen Says Dodd-Frank Fixes ‘Too Big To Fail’

Rodge Cohen, partner and senior chairman at Sullivan & Cromwell LLP (1147L), talked with Bloomberg Law’s Lee Pacchia on Feb. 23 about the regulatory landscape for banks and financial institutions in the U.S. after the implementation of Dodd-Frank. The interview was aired on Bloomberg News yesterday.

For the video, click here.

Comings and Goings

Iceland FSA Fires CEO for Failing to Disclose Bank Holdings

Iceland’s Financial Supervisory Authority fired its director Gunnar Andersen following an investigation into his failure to disclose holdings at Landsbanki Islands hf, where he worked 11 years ago.

Andersen, who took over as the Reykjavik-based watchdog’s head in 2009, will step down immediately, the regulator said in a statement. The FSA also reported to the police that Andersen gathered information on the island’s financial system without authorization, according to the statement.

State broadcaster RUV reported in November that Andersen had been involved with offshore companies owned by Landsbanki in 2001, and that he failed to disclose this to the regulator 11 years ago.

Andersen on Feb. 17 refused a request to step down. “The continued and pointless probes are in reality a servitude to those parties that most fear the FSA and the efficient operations of the regulator,” he said in a letter to the board in February, according to a copy obtained by Bloomberg.

To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.

To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net.


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