Bankrupt Banker

Banks hit back at PIRC’s £40bn undeclared losses claim

PIRC has taken issue with international accounting standards that prevent banks from reflecting “expected losses” in their profits. The UK’s top five banks had an estimated £27bn of “expected losses” last year, PIRC said, and overstated profits by a further £13bn due to the accounting treatment of deferred bonuses and the value of their own debt. The rules, it said, were “masking the true position by including fictional assets and fictional profits” – allowing banks to award larger bonuses and dividends. The banks disputed the claim, saying that PIRC had over-extended its analysis. They stressed they already declare some “expected losses” under regulatory rules and that those are typically a multiple of eventual write-offs. Standard Chartered said PIRC’s estimate that it had $3.6bn (£2.3bn) of undeclared losses was “fundamentally incorrect”. In its 2010 accounts, it pointed out, the “expected loss” for the following year was $3.19bn, but its write-off in 2011 was just $584m. It added that it was “obliged to report in this way” under the accounting standards and that it “vigorously disputed [PIRC’s] rationale”. Barclays added that PIRC had been "purposely misleading". "Suggesting that those accounting standards have in some way reduced our appetite to lend to creditworthy businesses or individuals is unjustifiable," it said.  PIRC described its £40bn estimate as “conservative” and said its calculations were supported by the losses the Treasury expects at Royal Bank of Scotland, as disclosed in the state-backed Asset Protection Scheme. Including deferred bonuses, fair value of its own debt, de-risking costs and expected losses, PIRC said RBS’s total undeclared losses came to £18bn. PIRC has been campaigning for a change to the accounting rules for banks. Senior regulators have also expressed concerns with the standards and the House of Lords has described them as deeply flawed. The banks said their accounts are transparent and that they “look through” volatile items such as gains made on their own debt.

Banks hit back at PIRC’s £40bn undeclared losses claim

PIRC has taken issue with international accounting standards that prevent banks from reflecting “expected losses” in their profits. The UK’s...

mini-war being fought on Spanish doorsteps

There is a mini-war being fought on Spanish doorsteps, between members of the public who can no longer afford to pay their mortgages and the banks who are threatening to evict them. Last year there were 58,000 evictions in Spain - a 22% percent rise. It means on average there are 159 evictions every day, and four in every five involves families with children. Bankia already owns it. But I still owe them 199,000 euros on the mortgage, and even if I paid it I still would not own the property. Hilda Marisol But protest groups have begun show up at evictees' front doors to try to stop the bailiffs gaining access to properties. With certain banks taking bailouts from the state, the campaign groups say institutions who are looking for support from the taxpayer shouldn't be throwing customers out on to the streets. Sky News went to meet Maclovia Luzmila and her 12 year-old daughter Vivian. The next day they were due to be evicted from their home after failing to make mortgage repayments and Maclovia feared Vivian may be taken into social care. "I'm not going to let her be taken somewhere else," she said. "We don't want to be separated. I only live for her." More than 300 people attended a meeting set up for those struggling with repayments Later when we met Maclovia at her work caring for the elderly she added: "I just want to pay what I can afford. "But with this job I don't earn the money to cover the repayments on my 200,000 euro mortgage. So we are going to resist. They will have to pull me out." In another suburb of Madrid, Hilda Marisol lives in a flat with five children. She was also due to be evicted this week but her bank, Bankia has given her till the end of school term to leave. Her sparse flat has no electricity, but she doesn't want to leave. "Bankia already owns it," she says. "But I still owe them 199,000 euros on the mortgage, and even if I paid it I still would not own the property." Bankia is currently asking for a 23.4 billion euro state bailout due to debts caused by the property crash. Which is why some anti-eviction groups feel they should be more sympathetic to people in debt. In response to the growing number of evictions one group has occupied a Bankia owned property in central Madrid, offering rooms for evicted families. Sky News attended a local support meeting for those having problems paying their mortgage, where 300 people turned up - many of them looking for legal advice. At the meeting, Maclovia appealed to the group to help her resist the bailiffs the following morning.

mini-war being fought on Spanish doorsteps

There is a mini-war being fought on Spanish doorsteps, between members of the public who can no longer afford to pay their mortgages and the...

Bank of England meets amid talk of £50bn stimulus

Bank of England policymakers meet today to decide whether to change interest rates or to pump in more money into the ailing economy, with le...

Europe is on the verge of financial chaos.

Global capital markets, now the most powerful force on earth, are rapidly losing confidence in the financial coherence of the 17-nation euro zone. A market implosion there, like that triggered by Lehman Brothers collapse in 2008, may not be far off. Not only would that dismantle the euro zone, but it could also usher in another global economic slump: in effect, a second leg of the Great Recession, analogous to that of 1937. This risk is evident in the structure of global interest rates. At one level, U.S. Treasury bonds are now carrying the lowest yields in history, as gigantic sums of money seek a safe haven from this crisis. At another level, the weaker euro-zone countries, such as Spain and Italy, are paying stratospheric rates because investors are increasingly questioning their solvency. And there’s Greece, whose even higher rates signify its bankrupt condition. In addition, larger businesses and wealthy individuals are moving all of their cash and securities out of banks in these weakening countries. This undermines their financial systems. 423 Comments Weigh InCorrections? Personal Post The reason markets are battering the euro zone is that its hesitant leaders have not developed the tools for countering such pressures. The U.S. response to the 2008 credit market collapse is instructive. The Federal Reserve and Treasury took a series of huge and swift steps to avert a systemic meltdown. The Fed provided an astonishing $13 trillion of support for the credit system, including special facilities for money market funds, consumer finance, commercial paper and other sectors. Treasury implemented the $700 billion Troubled Assets Relief Program, which infused equity into countless banks to stabilize them. The euro-zone leaders have discussed implementing comparable rescue capabilities. But, as yet, they have not fully designed or structured them. Why they haven’t done this is mystifying. They’d better go on with it right now. Europe has entered this danger zone because monetary union — covering 17 very different nations with a single currency — works only if fiscal union, banking union and economic policy union accompany it. Otherwise, differences among the member-states in competitiveness, budget deficits, national debt and banking soundness can cause severe financial imbalances. This was widely discussed when the monetary treaty was forged in 1992, but such further integration has not occurred. How can Europe pull back from this brink? It needs to immediately install a series of emergency financial tools to prevent an implosion; and put forward a detailed, public plan to achieve full integration within six to 12 months. The required crisis tools are three: ●First, a larger and instantly available sovereign rescue fund that could temporarily finance Spain, Italy or others if those nations lose access to financing markets. Right now, the proposed European Stability Mechanism is too small and not ready for deployment. ●Second, a central mechanism to insure all deposits in euro-zone banks. National governments should provide such insurance to their own depositors first. But backup insurance is necessary to prevent a disastrous bank run, which is a serious risk today. ●Third, a unit like TARP, capable of injecting equity into shaky banks and forcing them to recapitalize. These are the equivalent of bridge financing to buy time for reform. Permanent stability will come only from full union across the board. And markets will support the simple currency structure only if they see a true plan for promptly achieving this. The 17 member-states must jointly put one forward. Both the rescue tools and the full integration plan require Germany, Europe’s strongest country, to put its balance sheet squarely behind the euro zone. That is an unpopular idea in Germany today, which is why Chancellor Angela Merkel has been dragging her feet. But Germany will suffer a severe economic blow if this single-currency experiment fails. A restored German mark would soar in value, like the Swiss franc, and damage German exports and employment. The time for Germany and all euro-zone members to get the emergency measures in place and commit to full integration is now. Global capital markets may not give them another month. The world needs these leaders to step up.

Europe is on the verge of financial chaos.

Global capital markets, now the most powerful force on earth, are rapidly losing confidence in the financial coherence of the 17-nation euro...

Banco Santander scorched by the domestic blowback

Banco Santander's (SAN.MC) red and white flame logo popped up around the world when Spain was booming, but now the country's fortunes have turned, the global bank is being scorched by the domestic blowback. It has come a long way since it was founded in 1857 in the northern Spanish port from which it takes its name, building a strong presence in mature markets such as the UK, and growth markets including Brazil, Mexico and Poland.  But it seems investors and depositors alike are struggling to see past the turbulence in its home market. Its shares have dropped about 40 percent in the last year as the bank, along with Spanish rival BBVA (BBVA.MC), has been lumped together with the rest of the country's domestic-focused lenders, which are in urgent need of more capital after a property boom abruptly turned to bust. This was evident last month when British customers at Santander's UK subsidiary took fright and withdrew about 200 million pounds ($308 million) in deposits, spooked by the misfortune of Spanish lender Bankia (BKIA.MC), which the government in Madrid was obliged to rescue. COLLATERAL DAMAGE "Santander and BBVA are in another league. Whatever they do in Spain has a limited impact on their balance sheet, and it (the share price fall) is unjustified collateral damage," a senior Madrid-based financier said. Dig into its profitability, and from Brazil to Boston, Santander's presence in 10 major markets has kept it relatively insulated from the worst of the Spanish real estate collapse and the euro zone crisis. Over the past five years, it has made 40.5 billion euros in attributable profit and paid out 24 billion euros to shareholders in dividends, while many of its rivals have cut or stopped their pay-outs. In its most recent quarterly figures, 56 percent of its profits came from high-growth emerging countries such as Brazil and Mexico, while only 13 percent came from Spain and Portugal. That has not translated into the bank's price to book ratio Of 0.53 - a measure of its shares against the value of its assets - which lags behind "safe-haven" banks such as HSBC (HSBA.L), on 0.89, and JPMorgan (JPM.N), on 0.66, according to Thomson Reuters data. Even if Spain's downturn worsens - the economy is forecast to shrink this year and next - the country accounted for only 26 percent of Santander's total assets at the end of March, about the same as it has in Latin America and the United States, and less than the 29 percent held in the UK. While the bank is likely to set aside more for bad loans in its home market after an external audit of Spanish banks commissioned by the government, few expect it to have to raise more capital. "Banks like Santander will have to provision more, but Santander won't need more capital," one senior Madrid-based investment banker said. SUBSIDIARY MODEL Although British depositors did pull out cash in May when fears about Spanish banks mounted due to a rapidly worsening situation at Bankia, this amounted to just 1 percent of customer deposits. That was in part due to Santander's move last December to mitigate the perceived risk of being owned by a Spanish bank. The bank's British subsidiary decided to make any transfers out of Britain subject to the consent of the UK regulator, the Financial Services Authority (FSA). "With the full cooperation of Santander UK, the FSA has in place arrangements which require the FSA to give permission to any transfer of funds out of the UK by Santander UK," an FSA spokesman said. Santander Chairman Emilio Botin stressed in March at the bank's annual meeting that subsidiaries such as the UK unit were "autonomous in terms of capital and liquidity". This structure has reassured some. "You can't completely ignore the contagion from Spain and the headline risk, but Santander UK should be able to operate as a separate entity in a worst-case scenario," said Robert Montague, Senior Investment Analyst, European Credit Management, which manages $9.5 billion invested in European credit markets. "In the case of Santander's business model, its subsidiaries are fairly independent in terms of funding, and its UK operations also report publicly on a standalone basis," Montague added. That has not stopped some depositors, notably a handful of local councils, from withdrawing their cash. But such moves are illogical, says Ben Bennett, credit strategist at Legal & General Investment Management, one of the UK's biggest investors. "It's not something that's specific to its balance sheet that is putting it under pressure; it's just purely an association with a Spanish parent company," said Bennett. "When you start talking about the worst-case scenario, the whole argument is a systemic one. That's an added reason why it's illogical to target these banks in the UK which have exposure to Spain because actually ... you're probably questioning banks that have nothing to do with Spain," he added. MEXICAN WAVE There has been no sign of a depositor flight from Santander in Mexico, where the bank had customer deposits of 26.1 billion euros at the end of the first quarter. The Mexican banking and securities commission said it was in continuous contact with Spain's central bank as well as with the head offices of banks that have units in Mexico and is confident Mexico's banking system insulates domestic subsidiaries from distress at their foreign parents. "In Mexico we have worked for more than 15 years to create a regulatory framework for subsidiaries with clear rules on capitalization and limited exposure to their parent banks, which we believe is a strength of our banking system," a spokesman for the regulator said. It is a similar tale in Brazil, where there has been no sign of any depositor flight. Santander has been overcapitalised in Brazil since it listed publicly there in 2009. In the first quarter, the Basel ratio of Santander Brasil was 24 percent, well above the average of 14-15 pct of its main competitors as well as the regulatory floor of 11 percent. As such, regulators are not concerned about Santander Brasil's capital position, despite occasional rumours that Santander is repatriating capital to Spain. Local Santander executives have repeatedly denied this, and Santander Brasil CEO Marcial Portela recently said: "The only way to send money to headquarters is through dividends." Brazil remains a bright spot for Santander, representing 25 percent of the group's overall profit, surpassing headquarters in Spain last year. The bank expects this number to rise to 30 percent in the next couple of years.

Banco Santander scorched by the domestic blowback

Banco Santander's (SAN.MC) red and white flame logo popped up around the world when Spain was booming, but now the country's fortune...

Prince Philip in hospital

The Duke of Edinburgh has been taken to hospital with a bladder infection and will miss the rest of the Diamond Jubilee celebrations. Bucki...

Luka Rocco Magnotta, the 'Canadian Psycho,' arrested in Berlin

Luka Rocco Magnotta was arrested in Berlin Monday after a four-day international manhunt that spanned three countries. The 29-year-old Canadian wanted over a horrific Montreal ice pick murder and decapitation of a Chinese student that he allegedly filmed and posted to the Internet, was arrested in or near an Internet cafe, Berlin police said. Montreal police confirmed they are aware of the reports that Magnotta was arrested, but said they are still in the process of contacting their Berlin counterparts. The arrest comes after French authorities said they were investigating a tip that Magnotta travelled from Paris to Berlin via bus on the weekend. “Somebody recognized him and (then) all the police recognized him,” Berlin police spokesperson Stefan Redlich told CP24 Monday. Handout (Click to enlarge) Magnotta's alleged victim is Lin Jun, a 33-year-old Concordia University student from Wuhan, Hubei, China. He was last seen on May 24, police said, and reported missing on May 29. Redlich said police were called in by a civilian who spotted Magnotta and he was arrested after police asked for his identification at about 2:00 p.m. local time in Berlin. Reuters is reporting it was an employee of the cafe, Kadir Anlayisli, that recognized Magnotta. The cafe is on Karl Marx Strasse, a busy shopping street filled with Turkish and Lebanese shops and cafes in the Neukoelln district of Berlin. German television quoted the owner of the cafe saying Magnotta was surfing the Internet for about an hour before his arrest. Redlich said Magnotta has been taken into custody without incident and will go in front of a judge Tuesday. Canadian officials are expected to start the extradition process for Magnotta in the near future.

Luka Rocco Magnotta, the 'Canadian Psycho,' arrested in Berlin

Luka Rocco Magnotta was arrested in Berlin Monday after a four-day international manhunt that spanned three countries. The 29-year-old Cana...

Rush for safe havens as euro fears rise

US benchmark borrowing costs plunged to levels last seen in 1946 and those for Germany and the UK hit all-time lows as investors took fright at what they see as a disjointed policy response to the debt crisis in Spain and Italy. In a striking sign of the flight to haven assets, German two-year bond yields fell to zero for the first time, below the equivalent rate for Japan, meaning investors are willing to lend to Berlin for no return. US 10-year yields fell as low as 1.62 per cent, a level last reached in March 1946, according to Global Financial Data. German benchmark yields reached 1.26 per cent while Denmark's came close to breaching the 1 per cent level, hitting 1.09 per cent. UK rates fell to 1.64 per cent, the lowest since records for benchmark borrowing costs began in 1703. "They are extreme levels because we are in an extremely perilous situation. People just want to put their money somewhere where they think they will get it back. People may soon be paying Germany or the US to look after their money," said Gary Jenkins, head of Swordfish Research, an independent credit analysis company. The flight to safety came as the situation in Italy and Spain, the eurozone's third- and fourth-largest economies, deteriorated further. Italy held a disappointing debt auction and saw its benchmark borrowing costs rise above 6 per cent for the first time since January. The euro fell 0.8 per cent against the dollar to under $1.24 for the first time in two years. Confusion over how the Spanish government's rescue of Bankia, the stricken lender, will be structured led the premium Madrid pays over Berlin to borrow to hit fresh highs for the euro era at 540 basis points. Analysts said the elevated level meant that clearing houses could soon raise the amount of margin, or collateral, that traders need to post against Spanish debt, a move that led to the escalation of crises in Portugal and Ireland. The European Central Bank has made clear to Spain that it cannot use the bank's liquidity operations as part of a recapitalision of Bankia. However, the central bank said on Wednesday it had not been officially consulted on the plans. Equity markets globally fell on the eurozone fears with bourses in Paris, Frankfurt and London all dropping 2 per cent. But Nick Gartside, international chief investment officer for JPMorgan Asset Management, noted that while US bond yields had halved since April last year the S&P 500 equity market was at the same level. "One of those two markets is mispriced. Core government bonds are an efficient market and they are ahead," he added. Investors said borrowing costs for the US, UK and Germany were likely to continue to fall amid a worsening economic backdrop and the threat of more central bank intervention. Wealth managers have been moving client assets into currency havens in recent weeks, with the Swiss franc and the US dollar among the biggest beneficiaries "Risk aversion, a rapidly slowing global economy and unusually low policy rates will pin these short and intermediate maturity bonds at unprecedented low levels for quite a while," said Mohamed El-Erian, chief executive of Pimco, one of the world's largest bond investors. Mr Gartside said he could easily see German rates going below 1 per cent, following a path that only Japan and Switzerland have taken among major economies, while the US and UK could dip under 1.5 per cent. Markets are increasingly resigned to more turmoil until policy makers take more radical action. The two most popular plans of action for investors are for the ECB to buy Spanish and Italian bonds in unlimited size or for eurozone countries to agree on a fiscal union involving the pooling of debt. "You have to throw everything at it. Spain is just too big for half measures. The next intervention has to be not just massive in size but it has to show a total commitment," said Mr Jenkins. He recommends that the ECB set targets either for the premium Spain and Italy pay to borrow over Germany or for their yields.

Rush for safe havens as euro fears rise

US benchmark borrowing costs plunged to levels last seen in 1946 and those for Germany and the UK hit all-time lows as investors took fright...

Euro break-up 'could wipe 50pc off London house prices'

Property prices in the capital’s most sought-after postcodes have been driven up by investors moving funds out of assets held in euros to bu...

Europeans lose faith in EU but few want to drop euro

A growing number of Europeans in Britain, France, Spain, Italy, the Czech Republic, Poland and Greece say integration has weakened their economies and question whether membership of the European Union is a good thing, according to a report by the non-profit, Washington-based Pew Research Centre. The study aims to provide a greater insight into attitudes and trends in Europe and has been taken into account previously by U.S. officials when formulating policies towards the continent. Only in Germany, Europe's largest economy and biggest contributor to the bailout programmes supporting indebted Ireland, Greece and Portugal, has enthusiasm for the EU grown since 2009. Sixty-five percent of Germans see membership in a positive light, up 2 percent from a Pew poll in 2009. Yet even as 54 percent of Spaniards doubt the value of being in the European Union - a huge political and economic project created in the aftermath of World War Two - the fall in support does not translate into calls to ditch the euro currency.

Europeans lose faith in EU but few want to drop euro

A growing number of Europeans in Britain, France, Spain, Italy, the Czech Republic, Poland and Greece say integration has weakened their eco...

House prices continue to slide except in London

Prices are likely to continue their "slow, downward grind" in the coming months, analysts said, as Land Registry figures showed a 1pc annual drop across England and Wales in April to reach £160,417 on average, continuing an unbroken negative trend stretching back as far as January last year. Meanwhile, house prices in London increased by 5.1pc both annually and month on month to reach £360,721. The capital city has not seen a year-on-year decline since September 2009. The "safe haven" of London is enjoying strong interest from overseas buyers as the eurozone crisis continues. A separate report published by Hometrack yesterday found that demand from buyers registering with estate agents has outpaced the number of homes coming to the market in the capital over the last three months. The Hometrack study also said that much of London's recent price rises have also come from the largely domestic markets of south west, south east and north London. The latest dip across the country also follows the ending of a stamp duty concession for first-time buyers in March, which saw a last-minute rush of people trying to snap up deals before the deadline ended.

House prices continue to slide except in London

Prices are likely to continue their "slow, downward grind" in the coming months, analysts said, as Land Registry figures showed a ...

Solicitor sues after being accused of charging client while playing golf

Property tycoon Colin Sullivan, 69, claims his lawyer, Stewart Wiseman, demanded more than £4,000 for thirteen and a half hours work, despit...

Bank of England prepares plans for euro collapse

A senior official for the Bank said the measures would "again play [their] part in mitigating the impact" of Greece or other countries leaving the single currency. The comments come after the head of the IMF suggested last week that British interest rates may have to be cut to zero if the economic situation deteriorates. The Bank has already completed a quantitative easing programme, effectively printing more money worth £325billion and this may be extended again. Yesterday, David Cameron hosted a meeting with Sir Mervyn King, Governor of the Bank; Lord Turner, the chairman of the Financial Services Authority; and the Chancellor, to discuss contingency plans to deal with the collapse of the euro. There is growing speculation that Greece may be forced out of the euro following new elections next month, if a coalition government cannot be formed that will back austerity measures.In Britain, ministers have already overseen extensive contingency planning to prepare for the possible impact of the break–up of the euro. This extends from asking banks to insure their holdings in Greece to considering new border controls to prevent a wave of immigration from beleaguered European economies. A disorderly eurozone break–up could spark another deep recession comparable to that caused by the banking crisis. Yesterday, Dr Ben Broadbent, a member of the Bank's monetary policy committee and former Treasury adviser, said that the Bank was ready to intervene. He said: "Were the still unlikely worst case risks in the euro area actually to be realised, then our own monetary policy would again play its part in mitigating the impact." But he added: "While they are both necessary and effective, these domestic interventions have their limits. It remains the case that, for the time being at least, the most important policy decisions affecting the UK are being taken in other parts of the continent. "Fears have increased of a rare but bad economic outcome. These heightened fears may already have been affecting the growth of UK activity, investment and productivity for some time." The economist also indicated that the financial markets may already be overreacting to events in Europe. "Markets and businesses possess 'animal spirits' and can overreact to events," Dr Broadbent said. "They may have done so again." Yesterday, the Greek government announced another €18 billion (£14.4 billion) of funding for the country's beleaguered banks. The Spanish government reiterated assurances that it did not require an international bail–out, despite this now being seen as inevitable by many financial experts

Bank of England prepares plans for euro collapse

A senior official for the Bank said the measures would "again play [their] part in mitigating the impact" of Greece or other cou...

Director Of Spain's Failed Bankia To Leave With €13.8 Million Termination

Bancaja and general Bank of Valencia, Aurelio Izquierdo, former financial director is entitled to a pension for cessation of 13.8 million euros, according to the annual report of bank financial and savings (BFA), matrix of Bankia, corresponding to 2011.   In accordance with the information contained in the report submitted to the National Commission of the market of values (CNMV) and Tuesday indicated in various media, Izquierdo would receive this payment in respect of the insurance policy contracted to his retirement, death and disability, which joins a savings insurance by early retirement.   “Box of the savings bank of Valencia, Alicante, Castellon, Bancaja, has made the following commitments with a person during the year 2011 was part of the high Directorate of the Bank and causing the same low 13 October 2011: 7.633 thousands of euros in a policy of defined contribution covering the contingency of retirement, death and disability”", and 6,285 thousands of euros in insurance of individual savings contribution defined to cover the option of that, under certain circumstances, the person taking by early retirement”, explains BFA in its report.   The compensation to which he was entitled was already known, but it is the first time that it appears fixed in a public document.   According to the newspaper ‘Expansion’, the now Chief Financial Officer of Bancaja, Aurelio Izquierdo, published in March has an armor that could charge about 14 million euros if he ceases the entity between compensation and pension, which has not gone through the governing bodies of the entity or it has been reflected in the report of the Council. So... with one hand taxpayers (either those of Spain, or of Germany, assuming Spain "bails out" Bankia with more debt, which is then pledged at the ECB as worthless repo further diluting the value of the joint currency, and whose unwind costs are now solely footed by Germany) are paying billions to preserve the illusions that Spain's zombies are in check, while on the other they fund the expatriation costs of the bank's former directors before all those who have lost everything - investment and deposits - come knocking on Aurelio's door? Fear not: according to El Pais: According to sources of the Finance and Savings Bank (BFA), that money will not come out of the accounts of the entity, but from Bancaja, and therefore "not a single euro" of the 23,500 million of public money will go to pay such compensation. Oh, ok, so this is money of the non-fungible variety. Something like the JPM deposit cash not being used to fund JPM's prop trading operations. Got it. That makes everything so much better.

Director Of Spain's Failed Bankia To Leave With €13.8 Million Termination

Bancaja and general Bank of Valencia, Aurelio Izquierdo, former financial director is entitled to a pension for cessation of 13.8 million eu...

3 Years After Taxpayer Bailout, Bank of America Ships Jobs Overseas

Bank of America, which last fall announced plans to lay off 30,000 workers, is about to go on a hiring spree—overseas. America's second-largest bank is relocating its business-support operations to the Philippines, according to a high-ranking Filipino government official recently quoted in the Filipino press. The move, which includes a portion of the bank's customer service unit, comes less than three years after Bank of America received a $45 billion federal bailout. Roman Romulo, deputy majority leader of the Philippine House of Representatives, bragged to the Manila Standard Today earlier this month that the Philippines "has secured its place as the world's fastest-growing outsourcing hub." Romulo pointed out that BofA is the last of the "big four" US banks to move their business-support network to his island nation, where the average family makes $4,700 a year. A spokesman for Bank of America, Mark Pipitone, was unable to provide additional information about the bank's offshoring plans on Friday. "We have employees and operations where we can ensure that we best serve our customers and clients," he told me in an email. Advertise on MotherJones.com The bank's outsourcing comes amid rising concerns about the security of customers' financial data in the hands of foreign contractors. In March, undercover reporters for England’s Sunday Times met in India with "IT consultants" who claimed they were call center workers, and offered to sell them credit card and medical information for 500,000 Britons—including account holders at major banks such as HSBC. To prevent similar scandals from rocking the Philippines, Romulo is pushing a law that would require Filipino companies to "protect the integrity and confidentiality of any personal information collected from their clients, in compliance with international privacy standards," according to the Philippines television network ABS/CBN News. US banks already are operating call centers in the Philippines, "despite the fact that they haven't actually passed this rudimentary legislation," says Shane Larson, legislative director for the Communication Workers of America, which represents 150,000 American call center workers. The Indian government is ahead of the Philippines in passing data privacy laws, notes the union, but those laws specifically exempt the call center industry. And that could lead to problems: In a 2005 survey by PricewaterhouseCoopers, 85 percent of the Indian outsourcing companies that responded said they had experienced information security breaches in the previous year. In a 2010 report on the offshoring of technical jobs, New York's Department of Labor concluded that data security in the medical and financial fields is "of critical concern" and that "other nations' legal systems (especially in developing countries such as India) require reform to match that of the US with respect to privacy and computer security." Don't miss the brilliant longread: "My Summer at an Indian Call Center" Needless to say, the outsourcing is bad news for an already hurting US call center industry, which has shed some 500,000 jobs over the past four years—about 10 percent of the total. The CWA hopes to reverse this trend by pushing the US Call Center and Consumer Protection Act, a bill that would make any company that outsources call center jobs ineligible for federal loans and grants. In recent years, local governments in the deindustrializing Midwest have tried to boost their economies by luring call center with generous tax breaks and economic incentives. T-Mobile, for instance, accepted more than $61 million in state and local recruitment subsidies to locate call center jobs here. But it recently announced it would close seven American call centers, putting around 2,000 people out of work—even as it continues to operate centers in the Philippines and Honduras. (The CWA called the company out in a recent report, titled "Why Shipping Call Center Jobs Overseas Hurts Us Back Home.") In addition to the "frustrations" of dealing with customer-service workers halfway around the globe, "there is the bigger picture of how opaque the process is, and, as a result, some of the security questions that are raised," says Larson of the CWA. "I think Americans deserve to know to whom they are speaking and to where their information is going."

3 Years After Taxpayer Bailout, Bank of America Ships Jobs Overseas

Bank of America, which last fall announced plans to lay off 30,000 workers, is about to go on a hiring spree—overseas. America's second...

JP Morgan Chase is London's problem

UK politicians and regulators may feel good. It was an American, bank, not a British one, whose CEO had grimly to announce that “errors, sloppiness, and bad judgment” would cost it $2 billion – and now probably more – in losses. And it’s American pundits who are doing the handwringing, wondering what went wrong with President Barack Obama’s two-year-old, 848-page financial-regulation law that allowed JPMorgan Chase to take such a risk.Yet Britain should feel a bit queasy – for failing to heed the right lesson could cost HM Treasury.The storyline is that JPMorgan absorbed this loss because it allowed a French-born London trader, Bruno Michel Iksil, to make reckless bets with money collected from the bank’s depositors. This narrative is fodder for regulators eager to implement the “Volcker Rule” part of American financial reform.<div><img alt="Crisis: US investment bank JP Morgan Chase is being investigated by the FBI over its shock £1.2bn trading loss" height="286" src="http://i.dailymail.co.uk/i/pix/2012/05/28/article-2151251-0000233B00000CB2-298_634x286.jpg" width="634" />Crisis: US investment bank JPMorgan Chase is being investigated by the FBI over its shock £1.2bn trading loss</div>The Volcker Rule, the suggestion of Reagan-era Federal Reserve chief Paul Volcker, will forbid American banks from an engaging in an activity called “proprietary trading.” The point is to keep banks from speculating with customer deposits, because such deposits carry a government guarantee.The concept is easy, but the practical reality is hard. It’s been difficult for regulators to figure out what, exactly, defines proprietary trading. Is a bank engaging in such forbidden activity if it purchases securities on the open market in the expectation that its clients will soon want to purchase those securities at a higher price?The debate gets muddier when one considers that the Volcker Rule doesn’t apply only to old-fashioned banks such as JPMorgan; it applies, too, to market-makers such as Goldman Sachs.<div><img alt="Chief executive Jamie Dimon narrowly escaped a full-scale rebellion from investors" height="423" src="http://i.dailymail.co.uk/i/pix/2012/05/28/article-2151251-131C7C4D000005DC-978_306x423.jpg" width="306" />Chief executive Jamie Dimon narrowly escaped a full-scale rebellion from investors</div>Because civil servants haven’t answered such questions, and because banks have been trying to confuse the civil servants further, the government has said that it won’t enforce the rule until, probably, 2014.Now, we can expect a call for speed – and for fewer exceptions. If what JPMorgan did wasn’t an example of proprietary trading – and an object lesson in why it should be banned – what is? Moreover, if the Volcker rule were in place, it would have captured trading in London, proponents note, as overseas affiliates will have to comply.The problem with the focus on the Volcker Rule is that it is only part of the story – the superfluous part.What really happened in London is a tale not about regulating banks right, but about regulating markets right. This is where London should pay attention. It looks like JPMorgan made its ill-fated trades not in stock and bond markets, but in the credit derivatives markets.The fact that these derivatives markets aren’t regulated like stock markets has something to do with their attractiveness to financial firms. Among other things, it’s likely that JPMorgan did not have to provide a lot of upfront capital behind its trades, meaning that the bank thought it could make a bigger profit. It’s likely, too, that JPMorgan thought it could reap a big fee from the institutions on the other side of its transactions – a fee made bigger by the fact that opacity in these markets hampers competition on price.Half a decade ago, largely for these reasons, the insurance giant AIG employed credit derivatives to make the gambles on mortgages that eventually brought it down. AIG, another “American” company, made these trades from London.On derivatives, American regulators got something halfway right. American regulators soon will force financial firms to bring derivatives trades out into the open. Banks and other investment firms will have to execute more of these transactions on exchanges and central clearinghouses, which, in turn, will require the firms to put up some cash behind these bets.<div><img alt="Damage: It's not just the financial fall-out that has been wounding for JP Morgan, but revelations about a culture of squabbling at the highest level" height="286" src="http://i.dailymail.co.uk/i/pix/2012/05/28/article-2151251-008AB46A1000044C-630_634x286.jpg" width="634" />Damage: It's not just the financial fall-out that has been wounding for JPMorgan, but revelations about a culture of squabbling at the highest level</div>But the regulations contain too many exemptions for “custom” derivatives – including, possibly, some of the credit derivatives into which JPMorgan plunged.Another thing: although American commodities regulator Gary Gensler told Congress that he wants the new rules to apply to overseas affliliates of American banks, there is no certainty yet that the rules will be global. It’s likely no coincidence that JPMorgan, as it’s been experimenting with new ways to make money, decided to try this experiment in London, not in New York.That’s a warning for London. Europe, too, after a European Parliament vote two months ago, is creating rules to push derivatives onto central clearinghouses and exchanges and to require more cash down behind such bets. London regulators will be responsible for enforcement at home. <div> </div><div><h4>More...</h4><ul><li>US investment bank JP Morgan Chase being investigated by FBI over shock £1.2bn trading loss</li><li>London Whale that scuppered Dimon's reputation: How JP Morgan's perfect record was stained by a £4.4bn scandal</li></ul></div> Their earliest task should be to ask: if the rules had been in place already, would they have forced JPMorgan to put hefty capital behind opaque transactions? If not, then the rules aren’t good enough.Most important, U.K. regulators should make sure that financial firms cannot get away with putting little capital behind big speculations by virtue of their credit rating.<div><img alt="Warning: Goldman Sachs and Citigroup have warned that a Moody's ratings downgrade could force them to put more cash behind derivative trades" height="423" src="http://i.dailymail.co.uk/i/pix/2012/05/28/article-2151251-00F7102900000578-415_306x423.jpg" width="306" />Warning: Goldman Sachs and Citigroup have warned that a Moody's ratings downgrade could force them to put more cash behind derivative trades</div>That is the case today. Over the past few weeks, firms including Goldman Sachs and Citigroup have warned that a Moody’s ratings downgrade could force them to put more cash behind derivative trades. That’s worrisome, not because highly rated firms shouldn’t be getting a break on cash-down requirements in the first place. As the JPMorgan incident shows, no firm should be able to engage in especially risky ventures because, firm-wide, investors and regulators consider that firm to be “safe.”If London ensures that its derivatives regulations are as tough as – or tougher – than America’s, it may sacrifice some short-term profits, sure, but it also may protect its own taxpayers down the road.Good regulation has global benefits. If Britain is tough in not allowing for exemptions that banks will exploit, America will have to be tougher, too.For in a few months’ or years’ time, if an “American” firm uses looser London derivatives markets to make bets that bring down the global economy, there’s one thing upon which everyone else can bet: American voters and taxpayers are not going to tolerate bailing out a mess that originated across the ocean.American regulators should realise that the opposite is true, as well. Let’s have a race to the top – not the bottom.

JP Morgan Chase is London's problem

UK politicians and regulators may feel good. It was an American, bank, not a British one, whose CEO had grimly to announce that “errors, slo...

EU cookie implementation deadline is today

A year after its implementation in May 2011, the European Commission's Privacy and Electronic Communications Directive will finally start to be enforced as of tonight, meaning visitors to websites are required to be informed of, and given choice over, the site's intentions to store their data in cookies. Though there has been fierce opposition to the directive, some companies, such as the BBC, Channel 4 and the Guardian, have now begun implementing measures that range from multiple user choices in the level of information shared with the site, to a single message informing the user that, by continuing to browse, they have automatically agreed to have their information stored. Further reading EU cookie law is a 'restraint to trade online', says online retailer Most UK organisations not compliant with EU cookie law New EU cookie law set to come into force But the majority of companies, it is widely reported, will miss tonight's deadline. While the Information Commissioner's Office (ICO) still disagrees that a "one size fits all" policy of standardisation is not the way forward when enforcing cookie legislation, some believe such a framework is the only way forward. Society for engineering and technology professionals, the Institution of Engineering & Technology said, "The implementation of this directive is likely to prove very variable until the introduction of a set of standards on the best way to provide a balance between easy browsing and personal privacy. "We had hoped that more progress would have been made on achieving this in the 12 month implementation delay that the Information Commissioner, Christopher Graham, gave British organisations."

EU cookie implementation deadline is today

A year after its implementation in May 2011, the European Commission's Privacy and Electronic Communications Directive will finally star...

Google plans to warn more than half a million users of a computer infection that may knock their computers off the Internet this summer.

Unknown to most of them, their problem began when international hackers ran an online advertising scam to take control of infected computers around the world. In a highly unusual response, the FBI set up a safety net months ago using government computers to prevent Internet disruptions for those infected users. But that system will be shut down July 9 -- killing connections for those people.The FBI has run an impressive campaign for months, encouraging people to visit a website that will inform them whether they're infected and explain how to fix the problem. After July 9, infected users won't be able to connect to the Internet.<dl id="related-media"><dt>LONG ARM OF SCOFFLAW</dt>An online ad scam is having some unintended ramifications: The fix may prevent as many as 360,000 from getting online. Several sites will show if you're infected:DNS Changer Working Group: can discern whether you’re infected and explain how to fix the problem.DNSChanger Eye Chart: if the site goes red, you’re in harm’s way. Green means clean.The FBI website: type in the IP address of your DNS server to find out if it is infected.Read more on how to stay safe</dl>On Tuesday, May 22, Google announced it would throw its weight into the awareness campaign, rolling out alerts to users via a special message that will appear at the top of the Google search results page for users with affected computers, CNET reported. “We believe directly messaging affected users on a trusted site and in their preferred language will produce the best possible results,” wrote Google security engineer Damian Menscher in a post on the company’s security blog.“If more devices are cleaned and steps are taken to better secure the machines against further abuse, the notification effort will be well worth it,” he wrote.The challenge, and the reason for the awareness campaigns: Most victims don't even know their computers have been infected, although the malicious software probably has slowed their web surfing and disabled their antivirus software, making their machines more vulnerable to other problems.Last November, when the FBI and other authorities were preparing to take down a hacker ring that had been running an Internet ad scam on a massive network of infected computers, the agency realized this may become an issue."We started to realize that we might have a little bit of a problem on our hands because ... if we just pulled the plug on their criminal infrastructure and threw everybody in jail, the victims of this were going to be without Internet service," said Tom Grasso, an FBI supervisory special agent. "The average user would open up Internet Explorer and get `page not found' and think the Internet is broken."On the night of the arrests, the agency brought in Paul Vixie, chairman and founder of Internet Systems Consortium, to install two Internet servers to take the place of the truckload of impounded rogue servers that infected computers were using. Federal officials planned to keep their servers online until March, giving everyone opportunity to clean their computers.But it wasn't enough time.A federal judge in New York extended the deadline until July.Now, said Grasso, "the full court press is on to get people to address this problem." And it's up to computer users to check their PCs.<div>'We started to realize that we might have a little bit of a problem on our hands...'- Tom Grasso, an FBI supervisory special agent</div>This is what happened:Hackers infected a network of probably more than 570,000 computers worldwide. They took advantage of vulnerabilities in the Microsoft Windows operating system to install malicious software on the victim computers. This turned off antivirus updates and changed the way the computers reconcile website addresses behind the scenes on the Internet's domain name system.The DNS system is a network of servers that translates a web address -- such as http://www.foxnews.com -- into the numerical addresses that computers use. Victim computers were reprogrammed to use rogue DNS servers owned by the attackers. This allowed the attackers to redirect computers to fraudulent versions of any website.The hackers earned profits from advertisements that appeared on websites that victims were tricked into visiting. The scam netted the hackers at least $14 million, according to the FBI. It also made thousands of computers reliant on the rogue servers for their Internet browsing.When the FBI and others arrested six Estonians last November, the agency replaced the rogue servers with Vixie's clean ones. Installing and running the two substitute servers for eight months is costing the federal government about $87,000.The number of victims is hard to pinpoint, but the FBI believes that on the day of the arrests, at least 568,000 unique Internet addresses were using the rogue servers. Five months later, FBI estimates that the number is down to at least 360,000. The U.S. has the most, about 85,000, federal authorities said. Other countries with more than 20,000 each include Italy, India, England and Germany. Smaller numbers are online in Spain, France, Canada, China and Mexico.Vixie said most of the victims are probably individual home users, rather than corporations that have technology staffs who routinely check the computers.FBI officials said they organized an unusual system to avoid any appearance of government intrusion into the Internet or private computers. And while this is the first time the FBI used it, it won't be the last."This is the future of what we will be doing," said Eric Strom, a unit chief in the FBI's Cyber Division. "Until there is a change in legal system, both inside and outside the United States, to get up to speed with the cyber problem, we will have to go down these paths, trail-blazing if you will, on these types of investigations."Now, he said, every time the agency gets near the end of a cyber case, "we get to the point where we say, how are we going to do this, how are we going to clean the system" without creating a bigger mess than before

Google plans to warn more than half a million users of a computer infection that may knock their computers off the Internet this summer.

Unknown to most of them, their problem began when international hackers ran an online advertising scam to take control of infected computers...

Adam Smith texted Fred Michel 257 times during BskyB bid

The extent of the contact between Mr Smith and Mr Michel was revealed at the Leveson Inquiry where both are giving evidence. Mr Michel agree...

UK economy in deeper recession than previously feared

The Office for National Statistics (ONS) had originally said in its first estimate that GDP was down 0.2 per cent between January and March, plunging the UK into a double-dip recession after the economy contracted in the final quarter of 2011. The news is a further blow to the coalition government's austerity programme amid signs from the recent G8 and eurozone summits that the mood over deficit reduction was changing. This week International Monetary Fund (IMF) chief Christine Lagarde praised chancellor George Osborne for tackling Britain's deficit but urged the UK to come up with a plan B of infrastructure investment and tax reform. Driving the ONS revision today was a 4.8 per cent fall in construction output, the steepest decline in 11 years. Household spending meanwhile slowed; up 0.1 per cent in the first quarter compared to 0.4 per cent at the end of last year. But government spending - driven by health and defence - was up 1.6 per cent, the biggest rise since the first quarter of 2008. Despite the UK being back in technical recession the current downturn is not expected to be as severe as its 2008/09 counterpart, which lasted for more than a year.

UK economy in deeper recession than previously feared

The Office for National Statistics (ONS) had originally said in its first estimate that GDP was down 0.2 per cent between January and March,...

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