UK banks allowed to cut their cash holdings

Bank of England governor Mark Carney arrives to attend the bank's quarterly inflation report news conference at the Bank of England in London August 7, 2013.

Credit: Reuters/Simon Dawson/POOL

By Huw Jones

LONDON | Wed Aug 28, 2013 6:26pm BST

LONDON (Reuters) - Britain's eight top lenders can cut their cash reserves by a collective 90 billion pounds and use the funds to support economic growth, the Bank of England's new governor Mark Carney said on Wednesday.

Britain's lenders were forced to build up buffers of cash and UK government bonds far earlier than required under a globally-agreed timetable.

The buffers help cushion them from short-term market shocks so they can keep operating for a month even if markets freeze, as they did during the 2007-09 financial crisis.

UK government bonds, known as gilts, fell after Carney's announcement as investors factored in the likelihood that the banks will sell off some of their holdings.

Carney, in his maiden speech as governor of the Bank of England, said it "will help to underpin the supply of credit, since every pound currently held in liquid assets is a pound that could be lent to the real economy".

In a separate statement, the central bank's Prudential Regulation Authority, which supervises UK lenders, said banks could scale back the liquidity buffers on condition they have a separate, minimum core capital ratio of 7 percent - a new requirement.

The watchdog has said it expects the lenders to meet this capital ratio by the end of the year after some had to take steps to find more capital.

The eight are: HSBC, Barclays, Co-op, Lloyds, RBS, Standard Chartered, Santander UK and Nationwide.

The PRA is implementing a policy that the BoE's Financial Policy Committee decided on in June. The policy would allow the four biggest banks to scale back their liquidity buffers to 80 percent of where they should be if in full compliance with the global Basel III accord, not due until 2018.

This would release 70 billion pounds but, by extending the change to the eight main lenders, a further 20 billion pounds can potentially be released.

The British Bankers' Association said banks would be re-assessing how much of the 90 billion pounds can be redeployed into lending to small and medium businesses and households, as they are committed to doing.

NO MISSION ACCOMPLISHED

The banks are under political pressure to increase lending to business following criticism that they are focusing on home mortgages and consumer credit rather than productive industry, encouraging a lop-sided economic recovery.

The banks argue that lending levels reflect the amount of demand.

Carney signalled that banks face having to hold more capital against mortgages if house price growth becomes unsustainable.

Like his predecessor Mervyn King, he insisted that well-capitalised banks are in a better position to lend, saying U.S. banks have rebuilt their capital bases and now lend far more than their British peers.

But Carney avoided some of King's harsh rhetoric towards the British banks, striking a more conciliatory tone that was welcomed by Philip Hampton, chairman of Royal Bank of Scotland, during a visit to Reuters.

"Most people like Mark Carney and they think they can do business sensibly with him," Hampton said.

Britain's banks will face further capital requirements because of their size or market dominance, but Carney said his task would be to manage this transition "in a gradual way that supports continued confidence in growth".

With a 7 percent core capital ratio, banks would be "adequately capitalised" to start that transition, he said.

"There is no mission accomplished banner that the banking system is fixed," Carney added.

Banks have been using cash and top-quality government bonds such as UK gilts in their liquidity buffers. The PRA said on Wednesday that up to 40 percent of the buffers could in future be in corporate bonds, shares and retail mortgage-backed securities, giving them greater flexibility.

(Reporting by Huw Jones; editing by Matt Scuffham and Tom Pfeiffer)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

UK banks allowed to cut their cash holdings

Bank of England governor Mark Carney arrives to attend the bank's quarterly inflation report news conference at the Bank of England in London August 7, 2013.

Credit: Reuters/Simon Dawson/POOL

By Huw Jones

LONDON | Wed Aug 28, 2013 6:26pm BST

LONDON (Reuters) - Britain's eight top lenders can cut their cash reserves by a collective 90 billion pounds and use the funds to support economic growth, the Bank of England's new governor Mark Carney said on Wednesday.

Britain's lenders were forced to build up buffers of cash and UK government bonds far earlier than required under a globally-agreed timetable.

The buffers help cushion them from short-term market shocks so they can keep operating for a month even if markets freeze, as they did during the 2007-09 financial crisis.

UK government bonds, known as gilts, fell after Carney's announcement as investors factored in the likelihood that the banks will sell off some of their holdings.

Carney, in his maiden speech as governor of the Bank of England, said it "will help to underpin the supply of credit, since every pound currently held in liquid assets is a pound that could be lent to the real economy".

In a separate statement, the central bank's Prudential Regulation Authority, which supervises UK lenders, said banks could scale back the liquidity buffers on condition they have a separate, minimum core capital ratio of 7 percent - a new requirement.

The watchdog has said it expects the lenders to meet this capital ratio by the end of the year after some had to take steps to find more capital.

The eight are: HSBC, Barclays, Co-op, Lloyds, RBS, Standard Chartered, Santander UK and Nationwide.

The PRA is implementing a policy that the BoE's Financial Policy Committee decided on in June. The policy would allow the four biggest banks to scale back their liquidity buffers to 80 percent of where they should be if in full compliance with the global Basel III accord, not due until 2018.

This would release 70 billion pounds but, by extending the change to the eight main lenders, a further 20 billion pounds can potentially be released.

The British Bankers' Association said banks would be re-assessing how much of the 90 billion pounds can be redeployed into lending to small and medium businesses and households, as they are committed to doing.

NO MISSION ACCOMPLISHED

The banks are under political pressure to increase lending to business following criticism that they are focusing on home mortgages and consumer credit rather than productive industry, encouraging a lop-sided economic recovery.

The banks argue that lending levels reflect the amount of demand.

Carney signalled that banks face having to hold more capital against mortgages if house price growth becomes unsustainable.

Like his predecessor Mervyn King, he insisted that well-capitalised banks are in a better position to lend, saying U.S. banks have rebuilt their capital bases and now lend far more than their British peers.

But Carney avoided some of King's harsh rhetoric towards the British banks, striking a more conciliatory tone that was welcomed by Philip Hampton, chairman of Royal Bank of Scotland, during a visit to Reuters.

"Most people like Mark Carney and they think they can do business sensibly with him," Hampton said.

Britain's banks will face further capital requirements because of their size or market dominance, but Carney said his task would be to manage this transition "in a gradual way that supports continued confidence in growth".

With a 7 percent core capital ratio, banks would be "adequately capitalised" to start that transition, he said.

"There is no mission accomplished banner that the banking system is fixed," Carney added.

Banks have been using cash and top-quality government bonds such as UK gilts in their liquidity buffers. The PRA said on Wednesday that up to 40 percent of the buffers could in future be in corporate bonds, shares and retail mortgage-backed securities, giving them greater flexibility.

(Reporting by Huw Jones; editing by Matt Scuffham and Tom Pfeiffer)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Sweden flags tougher rules for banks

By Anna Ringstrom and Simon Johnson

STOCKHOLM | Mon Aug 26, 2013 4:33pm BST

STOCKHOLM (Reuters) - Sweden should introduce tough new capital requirements for its banks, already subject to some of the world's most stringent regulations, to shield taxpayers from any future bailouts, the government said on Monday.

Although none of Sweden's banks went bust in the financial crisis, the sector is viewed as a potential pressure point because it dwarfs the domestic economy with assets about four times the size of annual output and because of high levels of household debt.

The country plans to introduce so-called "counter-cyclical" capital buffers for its banks next year, which will be in addition to other capital requirements.

Financial Markets Minister Peter Norman told a news conference the government wanted these buffers to start at the high end of a previously given range of 0-2.5 percent of banks' risk-weighted assets, despite a still sluggish economy.

"It's up to the Financial Supervisory Authority to decide their exact levels but with the structure of the Swedish bank system, it is reasonable to have high (levels)," he said.

He said such buffers should be lowered in the event of another financial crisis but should remain high otherwise.

Most analysts had expected the counter-cyclical buffers to be introduced at the lower end of the range, and bank shares fell on Monday.

Nordea (NDA.ST) shares were down 2.3 percent, Handelsbanken (SHBa.ST) 1.9 percent, SEB SEBa.SST 1.8 percent and Swedbank (SWEDa.ST) 1.4 percent at 1325 GMT (02.25 p.m. British time), lagging the wider market in Stockholm .OMXS30 and the European banking index .SX7P.

The banks declined to comment on the news.

Norman said Sweden's banks were well capitalised and robust, but that more needed to be done to ensure financial stability and the centre-right government was looking at further ways to tighten regulations.

"It is ... our view that going forward we need to further increase the buffers in the Swedish bank system," Norman told a news conference.

Norman did not specify what any extra measures might be.

Sweden's banks already face a requirement to hold capital equivalent to 10 percent of their risk-weighted assets, rising to 12 percent by 2015. The Basel Committee on Banking Supervision requires banks to have a core tier one capital ratio of 7 percent by 2019.

Household debt in Sweden - at about 170 percent of disposable incomes - is among the highest in Europe, worrying the central bank which has kept monetary policy relatively tight despite high levels of unemployment, low inflation and a slowdown in the economy.

The government also said on Monday that banks should pay a charge to finance the country's increased foreign currency reserve, needed because the banks borrow heavily in currencies other than the krona.

Last year, Sweden toughened rules for how much banks much put aside to cover possible losses for mortgage lending.

The major banks have been building up capital, raising costs but also making them some of Europe's safest, most attractive lenders for investors.

(Additional reporting by Johan Ahlander, Daniel Dickson and Oskar von Bahr; Editing by Louise Heavens and Mark Potter)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Central banks don't need to rush ultra-easy money exit: IMF's Lagarde

International Monetary Fund (IMF) managing director Christine Lagarde gestures as she speaks during the debate ''European Economic Integration: Challenges and Opportunities'' in Vilnius July 18, 2013.

Credit: Reuters/Ints Kalnins

By Alister Bull and Pedro da Costa

JACKSON HOLE, Wyoming | Fri Aug 23, 2013 4:05pm EDT

JACKSON HOLE, Wyoming (Reuters) - Central banks in Europe, the United States and Japan have no need to rush to exit the ultra-easy monetary policies they have put in place to spur growth, IMF Managing Director Christine Lagarde said on Friday.

But in prepared remarks at the U.S. Federal Reserve's annual Jackson Hole policy symposium, she also said that central banks must work with each other to minimize spillover from any withdrawal of policy accommodation that could stifle world growth.

"Policies and policy coordination are not yet where they need to be. Failing to act at the global level, with each country playing its part, could put the global recovery at risk," she said.

Central bankers from around the world are attending the annual conference hosted by the Kansas City Federal Reserve Bank in the mountainous splendor of Wyoming's Grand Teton National Park.

Lagarde, speaking during lunch on the first day of the two-day gathering, noted that concerns about the Fed withdrawing its support had knocked emerging markets in recent days. But she said the exit would proceed more slowly than "feared."

"I do not suggest a rush to the exit. UMP (unconventional monetary policy) is still needed in all places it is being used, albeit longer for some than for others. In Europe, for example, there is a good deal more mileage to be gained from UMP. In Japan too, exit is very likely some way off."

TAPER TANTRUM

The Fed expects to being scaling back monthly purchases of bonds later this year. But in June it set off violent swings in global financial markets by just talking about tapering its campaign of so-called quantitative easing.

However, Lagarde said there was no reason central banks could not manage this exit with the same success they had when they launched unconventional policies amid the financial crisis.

These include forward interest rate guidance and quantitative easing, adopted after banks lowered rates nearly to zero to shelter their economies from a severe recession sparked by the collapse of a bubble in the U.S. housing market.

The measures have been controversial, with critics, including some U.S. lawmakers, castigating the Fed for measures that could lead to further bubbles or future inflation.

But Lagarde said the steps had clearly worked for both the countries putting them in place and for other nations that benefited from the global recovery that these actions delivered.

That said, as the Fed, European Central Bank and Bank of Japan begin to normalize policies, emerging economies that have experienced massive capital inflows as a byproduct of their ultra-low interest rates will have to take steps to prepare.

"Exchange rate flexibility will help, but not at all cost. Some market intervention may help moderate exchange rate volatility or short-term liquidity pressures," she said.

Turkey and India have both announced foreign exchange measures after their currencies fell sharply this week, and there has been talk that the top emerging economies could set up currency swap lines to protect others from speculative attack.

Lagarde pointedly said that swap lines "can help" defend emerging markets from exit spillovers, and pledged that the IMF was ready to help with advice, and money, if needed.

"For the Fund's part, we stand ready to provide policy advice and financial support, including on a precautionary basis, through our various instruments," she said.

(Reporting by Alister Bull and Pedro da Costa; Editing by Dan Grebler)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Central banks told to cooperate on managing global liquidity

The facade of the U.S. Federal Reserve building is reflected on wet marble during the early morning hours in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

JACKSON HOLE, Wyoming | Sat Aug 24, 2013 10:12am EDT

JACKSON HOLE, Wyoming (Reuters) - Central banks should coordinate to avoid unwanted side effects as they exit from ultra-easy monetary policies that have left the world awash in cheap money, top policymakers were told on Saturday.

Opening the second day of an annual monetary symposium in Jackson Hole, Wyoming, after a week in which several top emerging markets suffered steep losses, a former Bank of France deputy governor painted a grave picture of the problem.

"The main challenge will be to manage the consequences of monetary policies, and their evolutions, on cross-border liquidity movements," Jean-Pierre Landau concluded in a paper he presented to an audience that included top central bankers from advanced as well as emerging market economies.

"Amplifications, feedback loops and sensitivity to risk perceptions will complicate the task of exit and necessitate very close and constant dialogue and cooperation between central banks," said Landau, now a professor at Princeton.

But he lamented that the necessary coordination on monetary policy was unlikely, and warned of the potential for the "fragmentation" of global capital markets.

Stocks and currencies plunged in India, Indonesia, Brazil and Turkey this week as investors fretted over a looming reduction in the U.S. Federal Reserve's monthly bond purchases.

Turkish Central Bank Governor Erdem Basci was attending the conference, although his Brazilian counterpart, Alexandre Tombini, canceled to stay home and deal with the crisis.

The Fed's bond buying, or so-called quantitative easing, has been at the heart of its aggressive efforts to revive U.S. economic growth after it cut interest rates to nearly zero in 2008. Interest rates in Europe and Japan are also ultra-low.

However, the purchases have spurred massive capital inflows into faster growing emerging economies, which are now suffering as investors anticipate an end to the easy money.

COORDINATION

Landau acknowledged that central bankers dislike the idea of coordinating monetary policy because their job is to focus on domestic goals. But they worked well together during the 2007-2009 financial crisis, when the Fed, European Central Bank, Bank of Japan and other central banks coordinated rate cuts and currency swap lines.

As cross-border liquidity pressures build, they will find it productive to do so again, although cooperation is more likely through regulatory and financial structures aimed at preventing excessive leverage or harmful asset bubbles, he said.

In an ideal world, the cooperation would extend to monetary policy because policies in major economies such as the United States can have an international impact that amplifies their magnitude with domestic implications, Landau argued.

"The system itself is producing more accommodative monetary conditions than warranted by the situation," he said. "In a reverse environment, when monetary policies need tightening, the effects could be symmetrical and complicate the exit from non-conventional measures."

In addition, much could be gained through an international "lender of last resort," which would remove the motive for some nations to maintain massive foreign exchange reserves, he added.

"All countries have a common interest in finding ways to disconnect reserve accumulation from exchange-rate management," Landau said. "The need for national reserves could be reduced if credible mechanisms exist to provide for the supply of official liquidity on a multilateral basis."

That said, he freely admitted that this goal will be very hard to reach. Such an international agreement ultimately puts taxpayers in one country on the hook to bale out debtors in another, which would very hard to sell politically.

"It is hard to imagine that any government could bring the necessary fiscal backing to issuance of potentially unlimited liabilities to non-residents in times of crisis," Landau said.

As a result, the outlook for global capital markets is not encouraging, Landau said, warning of a "segmentation" between nations with surplus capital and others that will suffer from a dearth of investment due to a lack of access to capital.

"The most likely scenario is that of progressive fragmentation of the international financial system," he added.

(Reporting by Alister Bull. Editing by Andre Grenon)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

JPMorgan curbs business with banks to tighten controls

The entrance to JPMorgan Chase's international headquarters on Park Avenue is seen in New York October 2, 2012.

Credit: Reuters/Shannon Stapleton

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Central banks don't need to rush ultra-easy money exit: IMF's Lagarde

International Monetary Fund (IMF) managing director Christine Lagarde gestures as she speaks during the debate ''European Economic Integration: Challenges and Opportunities'' in Vilnius July 18, 2013.

Credit: Reuters/Ints Kalnins

By Alister Bull and Pedro da Costa

JACKSON HOLE, Wyoming | Fri Aug 23, 2013 4:05pm EDT

JACKSON HOLE, Wyoming (Reuters) - Central banks in Europe, the United States and Japan have no need to rush to exit the ultra-easy monetary policies they have put in place to spur growth, IMF Managing Director Christine Lagarde said on Friday.

But in prepared remarks at the U.S. Federal Reserve's annual Jackson Hole policy symposium, she also said that central banks must work with each other to minimize spillover from any withdrawal of policy accommodation that could stifle world growth.

"Policies and policy coordination are not yet where they need to be. Failing to act at the global level, with each country playing its part, could put the global recovery at risk," she said.

Central bankers from around the world are attending the annual conference hosted by the Kansas City Federal Reserve Bank in the mountainous splendor of Wyoming's Grand Teton National Park.

Lagarde, speaking during lunch on the first day of the two-day gathering, noted that concerns about the Fed withdrawing its support had knocked emerging markets in recent days. But she said the exit would proceed more slowly than "feared."

"I do not suggest a rush to the exit. UMP (unconventional monetary policy) is still needed in all places it is being used, albeit longer for some than for others. In Europe, for example, there is a good deal more mileage to be gained from UMP. In Japan too, exit is very likely some way off."

TAPER TANTRUM

The Fed expects to being scaling back monthly purchases of bonds later this year. But in June it set off violent swings in global financial markets by just talking about tapering its campaign of so-called quantitative easing.

However, Lagarde said there was no reason central banks could not manage this exit with the same success they had when they launched unconventional policies amid the financial crisis.

These include forward interest rate guidance and quantitative easing, adopted after banks lowered rates nearly to zero to shelter their economies from a severe recession sparked by the collapse of a bubble in the U.S. housing market.

The measures have been controversial, with critics, including some U.S. lawmakers, castigating the Fed for measures that could lead to further bubbles or future inflation.

But Lagarde said the steps had clearly worked for both the countries putting them in place and for other nations that benefited from the global recovery that these actions delivered.

That said, as the Fed, European Central Bank and Bank of Japan begin to normalize policies, emerging economies that have experienced massive capital inflows as a byproduct of their ultra-low interest rates will have to take steps to prepare.

"Exchange rate flexibility will help, but not at all cost. Some market intervention may help moderate exchange rate volatility or short-term liquidity pressures," she said.

Turkey and India have both announced foreign exchange measures after their currencies fell sharply this week, and there has been talk that the top emerging economies could set up currency swap lines to protect others from speculative attack.

Lagarde pointedly said that swap lines "can help" defend emerging markets from exit spillovers, and pledged that the IMF was ready to help with advice, and money, if needed.

"For the Fund's part, we stand ready to provide policy advice and financial support, including on a precautionary basis, through our various instruments," she said.

(Reporting by Alister Bull and Pedro da Costa; Editing by Dan Grebler)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Central banks told to cooperate on managing global liquidity

The facade of the U.S. Federal Reserve building is reflected on wet marble during the early morning hours in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

JACKSON HOLE, Wyoming | Sat Aug 24, 2013 10:12am EDT

JACKSON HOLE, Wyoming (Reuters) - Central banks should coordinate to avoid unwanted side effects as they exit from ultra-easy monetary policies that have left the world awash in cheap money, top policymakers were told on Saturday.

Opening the second day of an annual monetary symposium in Jackson Hole, Wyoming, after a week in which several top emerging markets suffered steep losses, a former Bank of France deputy governor painted a grave picture of the problem.

"The main challenge will be to manage the consequences of monetary policies, and their evolutions, on cross-border liquidity movements," Jean-Pierre Landau concluded in a paper he presented to an audience that included top central bankers from advanced as well as emerging market economies.

"Amplifications, feedback loops and sensitivity to risk perceptions will complicate the task of exit and necessitate very close and constant dialogue and cooperation between central banks," said Landau, now a professor at Princeton.

But he lamented that the necessary coordination on monetary policy was unlikely, and warned of the potential for the "fragmentation" of global capital markets.

Stocks and currencies plunged in India, Indonesia, Brazil and Turkey this week as investors fretted over a looming reduction in the U.S. Federal Reserve's monthly bond purchases.

Turkish Central Bank Governor Erdem Basci was attending the conference, although his Brazilian counterpart, Alexandre Tombini, canceled to stay home and deal with the crisis.

The Fed's bond buying, or so-called quantitative easing, has been at the heart of its aggressive efforts to revive U.S. economic growth after it cut interest rates to nearly zero in 2008. Interest rates in Europe and Japan are also ultra-low.

However, the purchases have spurred massive capital inflows into faster growing emerging economies, which are now suffering as investors anticipate an end to the easy money.

COORDINATION

Landau acknowledged that central bankers dislike the idea of coordinating monetary policy because their job is to focus on domestic goals. But they worked well together during the 2007-2009 financial crisis, when the Fed, European Central Bank, Bank of Japan and other central banks coordinated rate cuts and currency swap lines.

As cross-border liquidity pressures build, they will find it productive to do so again, although cooperation is more likely through regulatory and financial structures aimed at preventing excessive leverage or harmful asset bubbles, he said.

In an ideal world, the cooperation would extend to monetary policy because policies in major economies such as the United States can have an international impact that amplifies their magnitude with domestic implications, Landau argued.

"The system itself is producing more accommodative monetary conditions than warranted by the situation," he said. "In a reverse environment, when monetary policies need tightening, the effects could be symmetrical and complicate the exit from non-conventional measures."

In addition, much could be gained through an international "lender of last resort," which would remove the motive for some nations to maintain massive foreign exchange reserves, he added.

"All countries have a common interest in finding ways to disconnect reserve accumulation from exchange-rate management," Landau said. "The need for national reserves could be reduced if credible mechanisms exist to provide for the supply of official liquidity on a multilateral basis."

That said, he freely admitted that this goal will be very hard to reach. Such an international agreement ultimately puts taxpayers in one country on the hook to bale out debtors in another, which would very hard to sell politically.

"It is hard to imagine that any government could bring the necessary fiscal backing to issuance of potentially unlimited liabilities to non-residents in times of crisis," Landau said.

As a result, the outlook for global capital markets is not encouraging, Landau said, warning of a "segmentation" between nations with surplus capital and others that will suffer from a dearth of investment due to a lack of access to capital.

"The most likely scenario is that of progressive fragmentation of the international financial system," he added.

(Reporting by Alister Bull. Editing by Andre Grenon)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

JPMorgan curbs business with banks to tighten controls

The entrance to JPMorgan Chase's international headquarters on Park Avenue is seen in New York October 2, 2012.

Credit: Reuters/Shannon Stapleton

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Central banks told to cooperate on managing global liquidity

JACKSON HOLE, Wyoming | Sat Aug 24, 2013 3:02pm BST

JACKSON HOLE, Wyoming (Reuters) - Central banks should coordinate to avoid unwanted side effects as they exit from ultra-easy monetary policies that have left the world awash in cheap money, top policymakers were told on Saturday.

Opening the second day of an annual monetary symposium in Jackson Hole, Wyoming, after a week in which several top emerging markets suffered steep losses, a former Bank of France deputy governor painted a grave picture of the problem.

"The main challenge will be to manage the consequences of monetary policies, and their evolutions, on cross-border liquidity movements," Jean-Pierre Landau concluded in a paper he presented to an audience that included top central bankers from advanced as well as emerging market economies.

"Amplifications, feedback loops and sensitivity to risk perceptions will complicate the task of exit and necessitate very close and constant dialogue and cooperation between central banks," said Landau, now a professor at Princeton.

But he lamented that the necessary coordination on monetary policy was unlikely, and warned of the potential for the "fragmentation" of global capital markets.

Stocks and currencies plunged in India, Indonesia, Brazil and Turkey this week as investors fretted over a looming reduction in the U.S. Federal Reserve's monthly bond purchases.

Turkish Central Bank Governor Erdem Basci was attending the conference, although his Brazilian counterpart, Alexandre Tombini, cancelled to stay home and deal with the crisis.

The Fed's bond buying, or so-called quantitative easing, has been at the heart of its aggressive efforts to revive U.S. economic growth after it cut interest rates to nearly zero in 2008. Interest rates in Europe and Japan are also ultra-low.

However, the purchases have spurred massive capital inflows into faster growing emerging economies, which are now suffering as investors anticipate an end to the easy money.

COORDINATION

Landau acknowledged that central bankers dislike the idea of coordinating monetary policy because their job is to focus on domestic goals. But they worked well together during the 2007-2009 financial crisis, when the Fed, European Central Bank, Bank of Japan and other central banks coordinated rate cuts and currency swap lines.

As cross-border liquidity pressures build, they will find it productive to do so again, although cooperation is more likely through regulatory and financial structures aimed at preventing excessive leverage or harmful asset bubbles, he said.

In an ideal world, the cooperation would extend to monetary policy because policies in major economies such as the United States can have an international impact that amplifies their magnitude with domestic implications, Landau argued.

"The system itself is producing more accommodative monetary conditions than warranted by the situation," he said. "In a reverse environment, when monetary policies need tightening, the effects could be symmetrical and complicate the exit from non-conventional measures."

In addition, much could be gained through an international "lender of last resort," which would remove the motive for some nations to maintain massive foreign exchange reserves, he added.

"All countries have a common interest in finding ways to disconnect reserve accumulation from exchange-rate management," Landau said. "The need for national reserves could be reduced if credible mechanisms exist to provide for the supply of official liquidity on a multilateral basis."

That said, he freely admitted that this goal will be very hard to reach. Such an international agreement ultimately puts taxpayers in one country on the hook to bail debtors in another, which would very hard to sell politically.

"It is hard to imagine that any government could bring the necessary fiscal backing to issuance of potentially unlimited liabilities to non-residents in times of crisis," Landau said.

As a result, the outlook for global capital markets is not encouraging, Landau said, warning of a "segmentation" between nations with surplus capital and others that will suffer from a dearth of investment due to a lack of access to capital.

"The most likely scenario is that of progressive fragmentation of the international financial system," he added.

(Reporting by Alister Bull. Editing by Andre Grenon)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

JPMorgan curbs business with banks to tighten controls

A sign stands in front of the JPMorgan Chase & Co bank headquarters building in New York, March 15, 2013.

Credit: Reuters/Lucas Jackson

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Central banks don't need to rush ultra-easy money exit: IMF's Lagarde

International Monetary Fund (IMF) managing director Christine Lagarde gestures as she speaks during the debate ''European Economic Integration: Challenges and Opportunities'' in Vilnius July 18, 2013.

Credit: Reuters/Ints Kalnins

By Alister Bull and Pedro da Costa

JACKSON HOLE, Wyoming | Fri Aug 23, 2013 4:05pm EDT

JACKSON HOLE, Wyoming (Reuters) - Central banks in Europe, the United States and Japan have no need to rush to exit the ultra-easy monetary policies they have put in place to spur growth, IMF Managing Director Christine Lagarde said on Friday.

But in prepared remarks at the U.S. Federal Reserve's annual Jackson Hole policy symposium, she also said that central banks must work with each other to minimize spillover from any withdrawal of policy accommodation that could stifle world growth.

"Policies and policy coordination are not yet where they need to be. Failing to act at the global level, with each country playing its part, could put the global recovery at risk," she said.

Central bankers from around the world are attending the annual conference hosted by the Kansas City Federal Reserve Bank in the mountainous splendor of Wyoming's Grand Teton National Park.

Lagarde, speaking during lunch on the first day of the two-day gathering, noted that concerns about the Fed withdrawing its support had knocked emerging markets in recent days. But she said the exit would proceed more slowly than "feared."

"I do not suggest a rush to the exit. UMP (unconventional monetary policy) is still needed in all places it is being used, albeit longer for some than for others. In Europe, for example, there is a good deal more mileage to be gained from UMP. In Japan too, exit is very likely some way off."

TAPER TANTRUM

The Fed expects to being scaling back monthly purchases of bonds later this year. But in June it set off violent swings in global financial markets by just talking about tapering its campaign of so-called quantitative easing.

However, Lagarde said there was no reason central banks could not manage this exit with the same success they had when they launched unconventional policies amid the financial crisis.

These include forward interest rate guidance and quantitative easing, adopted after banks lowered rates nearly to zero to shelter their economies from a severe recession sparked by the collapse of a bubble in the U.S. housing market.

The measures have been controversial, with critics, including some U.S. lawmakers, castigating the Fed for measures that could lead to further bubbles or future inflation.

But Lagarde said the steps had clearly worked for both the countries putting them in place and for other nations that benefited from the global recovery that these actions delivered.

That said, as the Fed, European Central Bank and Bank of Japan begin to normalize policies, emerging economies that have experienced massive capital inflows as a byproduct of their ultra-low interest rates will have to take steps to prepare.

"Exchange rate flexibility will help, but not at all cost. Some market intervention may help moderate exchange rate volatility or short-term liquidity pressures," she said.

Turkey and India have both announced foreign exchange measures after their currencies fell sharply this week, and there has been talk that the top emerging economies could set up currency swap lines to protect others from speculative attack.

Lagarde pointedly said that swap lines "can help" defend emerging markets from exit spillovers, and pledged that the IMF was ready to help with advice, and money, if needed.

"For the Fund's part, we stand ready to provide policy advice and financial support, including on a precautionary basis, through our various instruments," she said.

(Reporting by Alister Bull and Pedro da Costa; Editing by Dan Grebler)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Central banks told to cooperate on managing global liquidity

The facade of the U.S. Federal Reserve building is reflected on wet marble during the early morning hours in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

JACKSON HOLE, Wyoming | Sat Aug 24, 2013 10:12am EDT

JACKSON HOLE, Wyoming (Reuters) - Central banks should coordinate to avoid unwanted side effects as they exit from ultra-easy monetary policies that have left the world awash in cheap money, top policymakers were told on Saturday.

Opening the second day of an annual monetary symposium in Jackson Hole, Wyoming, after a week in which several top emerging markets suffered steep losses, a former Bank of France deputy governor painted a grave picture of the problem.

"The main challenge will be to manage the consequences of monetary policies, and their evolutions, on cross-border liquidity movements," Jean-Pierre Landau concluded in a paper he presented to an audience that included top central bankers from advanced as well as emerging market economies.

"Amplifications, feedback loops and sensitivity to risk perceptions will complicate the task of exit and necessitate very close and constant dialogue and cooperation between central banks," said Landau, now a professor at Princeton.

But he lamented that the necessary coordination on monetary policy was unlikely, and warned of the potential for the "fragmentation" of global capital markets.

Stocks and currencies plunged in India, Indonesia, Brazil and Turkey this week as investors fretted over a looming reduction in the U.S. Federal Reserve's monthly bond purchases.

Turkish Central Bank Governor Erdem Basci was attending the conference, although his Brazilian counterpart, Alexandre Tombini, canceled to stay home and deal with the crisis.

The Fed's bond buying, or so-called quantitative easing, has been at the heart of its aggressive efforts to revive U.S. economic growth after it cut interest rates to nearly zero in 2008. Interest rates in Europe and Japan are also ultra-low.

However, the purchases have spurred massive capital inflows into faster growing emerging economies, which are now suffering as investors anticipate an end to the easy money.

COORDINATION

Landau acknowledged that central bankers dislike the idea of coordinating monetary policy because their job is to focus on domestic goals. But they worked well together during the 2007-2009 financial crisis, when the Fed, European Central Bank, Bank of Japan and other central banks coordinated rate cuts and currency swap lines.

As cross-border liquidity pressures build, they will find it productive to do so again, although cooperation is more likely through regulatory and financial structures aimed at preventing excessive leverage or harmful asset bubbles, he said.

In an ideal world, the cooperation would extend to monetary policy because policies in major economies such as the United States can have an international impact that amplifies their magnitude with domestic implications, Landau argued.

"The system itself is producing more accommodative monetary conditions than warranted by the situation," he said. "In a reverse environment, when monetary policies need tightening, the effects could be symmetrical and complicate the exit from non-conventional measures."

In addition, much could be gained through an international "lender of last resort," which would remove the motive for some nations to maintain massive foreign exchange reserves, he added.

"All countries have a common interest in finding ways to disconnect reserve accumulation from exchange-rate management," Landau said. "The need for national reserves could be reduced if credible mechanisms exist to provide for the supply of official liquidity on a multilateral basis."

That said, he freely admitted that this goal will be very hard to reach. Such an international agreement ultimately puts taxpayers in one country on the hook to bale out debtors in another, which would very hard to sell politically.

"It is hard to imagine that any government could bring the necessary fiscal backing to issuance of potentially unlimited liabilities to non-residents in times of crisis," Landau said.

As a result, the outlook for global capital markets is not encouraging, Landau said, warning of a "segmentation" between nations with surplus capital and others that will suffer from a dearth of investment due to a lack of access to capital.

"The most likely scenario is that of progressive fragmentation of the international financial system," he added.

(Reporting by Alister Bull. Editing by Andre Grenon)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

JPMorgan curbs business with banks to tighten controls

The entrance to JPMorgan Chase's international headquarters on Park Avenue is seen in New York October 2, 2012.

Credit: Reuters/Shannon Stapleton

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Central banks told to cooperate on managing global liquidity

JACKSON HOLE, Wyoming | Sat Aug 24, 2013 3:02pm BST

JACKSON HOLE, Wyoming (Reuters) - Central banks should coordinate to avoid unwanted side effects as they exit from ultra-easy monetary policies that have left the world awash in cheap money, top policymakers were told on Saturday.

Opening the second day of an annual monetary symposium in Jackson Hole, Wyoming, after a week in which several top emerging markets suffered steep losses, a former Bank of France deputy governor painted a grave picture of the problem.

"The main challenge will be to manage the consequences of monetary policies, and their evolutions, on cross-border liquidity movements," Jean-Pierre Landau concluded in a paper he presented to an audience that included top central bankers from advanced as well as emerging market economies.

"Amplifications, feedback loops and sensitivity to risk perceptions will complicate the task of exit and necessitate very close and constant dialogue and cooperation between central banks," said Landau, now a professor at Princeton.

But he lamented that the necessary coordination on monetary policy was unlikely, and warned of the potential for the "fragmentation" of global capital markets.

Stocks and currencies plunged in India, Indonesia, Brazil and Turkey this week as investors fretted over a looming reduction in the U.S. Federal Reserve's monthly bond purchases.

Turkish Central Bank Governor Erdem Basci was attending the conference, although his Brazilian counterpart, Alexandre Tombini, cancelled to stay home and deal with the crisis.

The Fed's bond buying, or so-called quantitative easing, has been at the heart of its aggressive efforts to revive U.S. economic growth after it cut interest rates to nearly zero in 2008. Interest rates in Europe and Japan are also ultra-low.

However, the purchases have spurred massive capital inflows into faster growing emerging economies, which are now suffering as investors anticipate an end to the easy money.

COORDINATION

Landau acknowledged that central bankers dislike the idea of coordinating monetary policy because their job is to focus on domestic goals. But they worked well together during the 2007-2009 financial crisis, when the Fed, European Central Bank, Bank of Japan and other central banks coordinated rate cuts and currency swap lines.

As cross-border liquidity pressures build, they will find it productive to do so again, although cooperation is more likely through regulatory and financial structures aimed at preventing excessive leverage or harmful asset bubbles, he said.

In an ideal world, the cooperation would extend to monetary policy because policies in major economies such as the United States can have an international impact that amplifies their magnitude with domestic implications, Landau argued.

"The system itself is producing more accommodative monetary conditions than warranted by the situation," he said. "In a reverse environment, when monetary policies need tightening, the effects could be symmetrical and complicate the exit from non-conventional measures."

In addition, much could be gained through an international "lender of last resort," which would remove the motive for some nations to maintain massive foreign exchange reserves, he added.

"All countries have a common interest in finding ways to disconnect reserve accumulation from exchange-rate management," Landau said. "The need for national reserves could be reduced if credible mechanisms exist to provide for the supply of official liquidity on a multilateral basis."

That said, he freely admitted that this goal will be very hard to reach. Such an international agreement ultimately puts taxpayers in one country on the hook to bail debtors in another, which would very hard to sell politically.

"It is hard to imagine that any government could bring the necessary fiscal backing to issuance of potentially unlimited liabilities to non-residents in times of crisis," Landau said.

As a result, the outlook for global capital markets is not encouraging, Landau said, warning of a "segmentation" between nations with surplus capital and others that will suffer from a dearth of investment due to a lack of access to capital.

"The most likely scenario is that of progressive fragmentation of the international financial system," he added.

(Reporting by Alister Bull. Editing by Andre Grenon)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

JPMorgan curbs business with banks to tighten controls

A sign stands in front of the JPMorgan Chase & Co bank headquarters building in New York, March 15, 2013.

Credit: Reuters/Lucas Jackson

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

ICE hires banks to advise on flotation of NYSE's Euronext: sources

Traders work on the floor of the New York Stock Exchange in New York December 20, 2012.

Credit: Reuters/Andrew Kelly

By Sophie Sassard and Anjuli Davies

LONDON | Wed Aug 21, 2013 11:55am EDT

LONDON (Reuters) - IntercontinentalExchange (ICE.N) (ICE) has hired three banks to advise on the listing of Euronext, whose sale is crucial to its $8.2 billion takeover of NYSE Euronext (NYX.N), three sources familiar with the situation said.

ABN Amro and existing advisers on the ICE/NYSE deal, Societe Generale (SOGN.PA) and JP Morgan (JPM.N), will act as global coordinators on the flotation of the combined Paris, Lisbon, Brussels and Amsterdam exchanges, the sources said.

ICE decided to float Euronext when it sealed a deal with NYSE Euronext last year in order to fund the transaction, to ease regulatory approval in Europe and to keep the combined group's focus on U.S. operations, one of the people said. ICE will however keep NYSE's Liffe interest rate futures exchange.

The U.S.-based exchange operator is planning to float about 50 percent of Euronext in Paris in the second half of next year and will retain about 30 percent, one of the sources said.

While an initial public listing (IPO) remains the most likely route, Euronext may also combine part or all of its activities with European rivals such as Germany's Deutsche Borse (DB1Gn.DE) or the Russian (MOEX.MM), Polish GPW.WA or Austrian stock exchanges, two of the people said.

"ICE and NYSE will listen to propositions," said one source, who asked not to be named because the talks are private.

Another of the three sources said that the IPO could be "pre-empted with a good offer".

"They've had a few discussions with possible buyers so far," he said.

OPEN GAME

Bankers expect further sector consolidation in the coming months as exchanges try to boost revenues by diversifying products and buying into settlement and clearing operations.

"It's very clear that sector consolidation is not over yet. Europe is pretty busy at the moment but you could see intra-consolidation in Eastern Europe, Asia and cross-border deals to combine geographies too," the third source said.

"The game is pretty open," he said.

Deutsche Borse may try to buy into Euronext's cash equities operation to diversify from its core derivatives business, two of the sources said, although another source close to the German exchange told Reuters that that was not an area where it was looking for acquisitions.

U.S. rival Nasdaq (NDAQ.O) and London's LSE (LSE.L) are also among the interested parties, all three sources said, although the EU's regulator may block a non-European sale, one said.

Deutsche Boerse is under the most pressure to act and, while a tie-up with its larger peer in Hong Kong would mean selling out, it could buy the Singapore stock exchange, he said, although it would be hard to create synergies across continents.

Deutsche Boerse's diversification strategy centers on expanding post-trade services such as clearing, the same source said.

Asian stock exchanges such as Singapore, Seoul or Hong Kong could also be targets for Nasdaq or the Tokyo and Shanghai exchanges, a separate source said.

Nasdaq is also looking to expand in the Middle East and may be interested in operators such as Dubai stock exchange, the same person said.

Euronext, JP Morgan, Deutsche Borse all declined to comment, while other parties were not immediately available for comment.

(Additional reporting by Christian Plumb, Alexandre Bokenbaum-Granier in Paris and Ed Taylor in Frankfurt; Editing by Louise Ireland)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

ICE hires banks to advise on flotation of NYSE's Euronext: sources

Traders work on the floor of the New York Stock Exchange in New York December 20, 2012.

Credit: Reuters/Andrew Kelly

By Sophie Sassard and Anjuli Davies

LONDON | Wed Aug 21, 2013 11:55am EDT

LONDON (Reuters) - IntercontinentalExchange (ICE.N) (ICE) has hired three banks to advise on the listing of Euronext, whose sale is crucial to its $8.2 billion takeover of NYSE Euronext (NYX.N), three sources familiar with the situation said.

ABN Amro and existing advisers on the ICE/NYSE deal, Societe Generale (SOGN.PA) and JP Morgan (JPM.N), will act as global coordinators on the flotation of the combined Paris, Lisbon, Brussels and Amsterdam exchanges, the sources said.

ICE decided to float Euronext when it sealed a deal with NYSE Euronext last year in order to fund the transaction, to ease regulatory approval in Europe and to keep the combined group's focus on U.S. operations, one of the people said. ICE will however keep NYSE's Liffe interest rate futures exchange.

The U.S.-based exchange operator is planning to float about 50 percent of Euronext in Paris in the second half of next year and will retain about 30 percent, one of the sources said.

While an initial public listing (IPO) remains the most likely route, Euronext may also combine part or all of its activities with European rivals such as Germany's Deutsche Borse (DB1Gn.DE) or the Russian (MOEX.MM), Polish GPW.WA or Austrian stock exchanges, two of the people said.

"ICE and NYSE will listen to propositions," said one source, who asked not to be named because the talks are private.

Another of the three sources said that the IPO could be "pre-empted with a good offer".

"They've had a few discussions with possible buyers so far," he said.

OPEN GAME

Bankers expect further sector consolidation in the coming months as exchanges try to boost revenues by diversifying products and buying into settlement and clearing operations.

"It's very clear that sector consolidation is not over yet. Europe is pretty busy at the moment but you could see intra-consolidation in Eastern Europe, Asia and cross-border deals to combine geographies too," the third source said.

"The game is pretty open," he said.

Deutsche Borse may try to buy into Euronext's cash equities operation to diversify from its core derivatives business, two of the sources said, although another source close to the German exchange told Reuters that that was not an area where it was looking for acquisitions.

U.S. rival Nasdaq (NDAQ.O) and London's LSE (LSE.L) are also among the interested parties, all three sources said, although the EU's regulator may block a non-European sale, one said.

Deutsche Boerse is under the most pressure to act and, while a tie-up with its larger peer in Hong Kong would mean selling out, it could buy the Singapore stock exchange, he said, although it would be hard to create synergies across continents.

Deutsche Boerse's diversification strategy centers on expanding post-trade services such as clearing, the same source said.

Asian stock exchanges such as Singapore, Seoul or Hong Kong could also be targets for Nasdaq or the Tokyo and Shanghai exchanges, a separate source said.

Nasdaq is also looking to expand in the Middle East and may be interested in operators such as Dubai stock exchange, the same person said.

Euronext, JP Morgan, Deutsche Borse all declined to comment, while other parties were not immediately available for comment.

(Additional reporting by Christian Plumb, Alexandre Bokenbaum-Granier in Paris and Ed Taylor in Frankfurt; Editing by Louise Ireland)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Exclusive: China's banks to take next step in rate reform push - sources

A woman walks past a sign of Bank of China at its branch in Beijing March 26, 2013.

Credit: Reuters/Kim Kyung-Hoon

By Shengnan Zhang and Hongmei Zhao

BEIJING/HONG KONG | Thu Aug 22, 2013 6:41am EDT

BEIJING/HONG KONG (Reuters) - China's top banks are expected to win approval for the issuance of tens of billions of yuan in negotiable certificates of deposit (NCD) as early as next month, in another step towards developing market-determined interest rates.

NCDs would enable banks to access large amounts of funds at relatively stable costs, providing some alternative to borrowing from the inter-bank market, where the cost of funds can be volatile, as seen in June when a liquidity squeeze briefly sent short-term money market rates to nearly 30 percent.

Bank of China, the Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank and Bank of Communications, have submitted their plans for NCDS to the central bank, people familiar with the development told Reuters.

The NCD, or large denomination certificates of deposit tradeable on the interbank market, would be offered with maturities from three to six months and be priced with a premium over the Shanghai interbank offered rate (SHIBOR), the sources said.

Each bank is planning an NCD issuance of more than 10 billion yuan ($1.63 billion), one of the sources said. The likely face value of single certificates was unknown.

"The instrument could be rolled out soon, which not only opens up a liquidity channel for banks but also pushes forward interest rate reforms by gradually loosening controls on deposit rates," said a source close to the banking regulator.

The People's Bank of China (PBOC), the central bank, could give its approval as early as September, according to the sources, who all requested anonymity due to sensitivity over the issue.

The central bank, under the helm of reform-minded Zhou Xiaochuan, has been trying to promote the role of the SHIBOR as the benchmark for short-term borrowing costs.

The PBOC has been following a step-by-step approach in liberalizing interest rates, shifting its focus on loosening controls on bank deposit rates after it freed up bank lending rates in July.

Last month's decision to remove the floor on bank lending rates was seen as a largely symbolic prelude to removing caps on deposit rates, a much more difficult task that will take time.

Interest rate reforms are part of a broader effort of China's new leadership to steer the world's second-largest economy towards a growth model that relies more on domestic consumption and gradually scale back controls and directives and allow market forces to play a greater role.

The introduction of NCDs may have limited immediate impact on money market rates that are already moving in line with market supply and demand, but the pilot is widely seen as a heralding the eventual dismantling of controls on bank deposits rates.

The sources said that permission for NCDs will be expanded to other banks and non-banking institutions, paving the way for launching certificates of deposit for corporate and individual investors.

The central bank was not immediately available for comment.

The central bank has said that more preparations, including a deposit insurance scheme, are needed before a move on deposits. Economists said its caution also reflected concerns that freeing up deposit rates would squeeze banks' profits.

In 2012, the central bank gave lenders freedom to set a ceiling for deposit rates at up to 110 percent of the benchmarks set by the PBOC. The current benchmark for a one-year deposit, for example, is 3 percent. Analysts expect the PBOC to remove the ceiling slowly and cautiously in order to reduce risks to the banking system. ($1 = 6.1234 Chinese yuan)

(Writing and additional reporting by Kevin Yao; Editing by Simon Cameron-Moore)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

U.S. looks to turn the screw in Swiss banks talks

The logo of Swiss bank Credit Suisse is seen at his headquarters at the Paradeplatz square in Zurich July 25, 2013.

Credit: Reuters/Arnd Wiegmann

By Martin de Sa'Pinto, Katharina Bart and Patrick Temple-West

ZURICH/WASHINGTON | Thu Aug 22, 2013 10:58am EDT

ZURICH/WASHINGTON (Reuters) - The United States is pushing Switzerland for a deal to settle a long-running dispute over banks that shelter tax evaders, a Swiss government source said on Thursday, ratcheting up the pressure after parliament rejected an accord in June.

With many Swiss banks under U.S. investigation for helping American clients dodge taxes, the government is anxious to secure an agreement that satisfies U.S. demands for data to help catch the tax cheats but also wants to preserve at least some elements of its cherished tradition of banking secrecy, which has long been a key part of the Alpine nation's allure for depositors.

Two months ago the Swiss parliament voted down a law that would have eased the transfer of client data for the entire industry, angering the United States and raising fears in Switzerland of further indictments.

The United States has since tightened its negotiating terms, the Swiss government source said. He declined to give details except to say that the stiffer terms did not include higher fines for culpable banks.

A spokesman for the Department of Justice in Washington declined to comment.

Roughly a dozen banks are under U.S. investigation, including Credit Suisse, Julius Baer, the Swiss arm of Britain's HSBC, privately held Pictet and state-backed regional banks Zuercher Kantonalbank and Basler Kantonalbank.

The Swiss government has said it will grant these banks permission to hand over data to the U.S. that will allow them to avoid charges as they cut individual deals.

But as the two governments wrangle over the terms of an over-arching accord, Swiss banks not yet under investigation find themselves in a legal limbo, prolonging a scandal that has already cost the sector billions of francs in withdrawals.

Swiss banks are keen to cooperate with U.S. prosecutors to avoid an indictment of the kind that felled Switzerland's oldest private bank, Wegelin, earlier this year, but they are unsure what information they can hand over.

"What's unfolding is almost like a game of chess," said one U.S.-based lawyer with knowledge of the discussions.

"The U.S. Department of Justice (DoJ) has a lot of active investigations going, and ... they have plenty of time. Conversely, the Swiss don't want one-by-one investigations over the next several years; everyone is sick of it."

DOJ ON STEROIDS

The U.S. Justice Department has valuable tools to squeeze Swiss banks into complying with settlements, said Jeffrey Neiman, a former federal prosecutor involved in other Swiss bank investigations who is now in private law practice in Fort Lauderdale, Florida.

He cited three such tools: a database of voluntary disclosures from U.S. taxpayers; a relationship with Liechtenstein to obtain information; and a lucrative whistleblower program to entice Swiss bankers, he said.

"You're dealing with a Justice Department on steroids compared to what it was like in 2008 and 2009," Neiman said. "They have so much information."

Even so, while U.S. prosecutors have greater powers to root out U.S. citizens with untaxed money in Swiss accounts, the lack of a defined framework is limiting the banks' cooperation.

Until the United States and Switzerland agree a framework and restitution to settle the dispute, the scandal will continue to weigh on the industry, which is bracing for up to 200 billion francs in withdrawals in the four years to 2016, out of 789 billion francs of untaxed assets in Swiss banks, according to consultancy Zeb/Rolfes Schierenbeck Associates.

UBS, Switzerland's biggest bank, has said it could see client money outflows of 12 billion Swiss francs ($13 billion) in Europe as a result of a crackdown on tax evasion there, while rival Credit Suisse said clients in western Europe could withdraw up to $37 billion in the next few years.

The sector is unsure how much an eventual settlement with the United States will cost them, but total fines are likely to run into billions of dollars.

UBS paid a fine of $780 million in 2009 and delivered the names of more than 4,000 clients to avoid indictment, giving the U.S. authorities information that allowed them to pursue other Swiss banks.

A source at one of the banks targeted said talks between the banks under investigation and the DoJ are at a standstill because the DoJ cannot conclude an agreement without a legal framework for the entire Swiss banking industry.

In the meantime, up to 100 others of Switzerland's 300 or so banks are suspected of having tax evaders among their clients. They have no clear guidance on what data they will need to send.

"It's a complex task to go through thousands of emails that might or might not be relevant. Now it's not the 11 or 13 banks that are on the list that have a problem, it's the other 90 or so who don't really know what to do," said another Swiss banking source who asked not to be named.

($1 = 0.9205 Swiss francs)

(Additional reporting by Albert Schmieder and Oliver Hirt; Editing by Carmel Crimmins and Will Waterman)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.