The Obama administration announced new sanctions on the Iranian oil industry and on a Chinese and an Iraqi bank on Tuesday, saying “defiance” by the Iranian government would lead to “increasing consequences”.

The new measures come as Congress is also getting close to approving a new sanctions law, and after Republican presidential candidate Mitt Romney claimed the White House was not doing enough to prevent Iran from acquiring a nuclear weapon.

The new sanctions will aim to penalise foreign banks that handle transactions for National Iranian Oil Company (NIOC) or its trading subsidiary Naftiran Intertrade Company (NICO). Separately, the Treasury department said it was placing sanctions on China’s Bank of Kunlun and Iraq’s Elaf Islamic Bank, because they had been doing business with Iranian banks which were covered by sanctions.

The new sanctions are part of a broader US and international effort to put pressure on Iran to abandon its efforts to build a nuclear weapon. They follow a European ban on oil imports and US legislation passed at the end of last year placing sanctions on Iran’s central bank, which led Iran’s main customers in Asia to sharply reduce their imports in the first half of the year.

While Israeli prime minister Benjamin Netanyahu said at the weekend that sanctions were not changing Iran’s behaviour, US officials on Tuesday said the existing sanctions were already having a “crippling” effect on the Iranian economy.

Robert Einhorn, a senior state department official for non-proliferation and arms control, said Iranian exports of oil this year had been cut by around 1m barrels a day – equivalent to a decline of 40-50 per cent. The new measures were “a clear sign that the Obama administration is determined to increase the pressure on Iran until it is willing to negotiate seriously”, he said.

The sanctions were announced hours after a draft text of a new sanctions bill was agreed by negotiators from the Senate and the House of Representatives. The US Congress is now racing to try to pass the bill before the summer recess starts at the end of the week.

The bill has strong support in both political parties but is considerably weaker than some leading Republican members of Congress had wanted, which could still lead to it being held up. Ben Rhodes, a National Security Council official, said the bill was “complimentary” to the new sanctions.

The new bill aims to impose new penalties on companies that insure or ship Iranian oil and to reduce the scope for Iranian companies to reflag their vessels or turn off their tracking systems.

The new text also includes penalties for Swift, a telecommunications network used by many financial institutions, if it helps Iranian banks transfer funds electronically. It also seeks to punish companies that sell riot-control equipment such as teargas to Iran.

Some Republican senators had been pushing for a much tougher bill. One proposal was to declare the Iranian energy sector a “zone of proliferation concern”, a legal formula designed to make it much harder to do any business with Iran’s oil companies. Others wanted much broader restrictions on doing business with the Central Bank of Iran.

“It is probably too late to open up the bill again, but some senators are still calling for stronger language,” said one congressional staffer involved in the legislation.

Mahmoud Bahmani, governor of the Central Bank of Iran, said on Tuesday that the bank had begun a “guerrilla economic war” to offset the impact of international sanctions, which he described as like “military war” against the country. Mr Bahmani did not give details of what Iran’s banking system was doing to deal with the sanctions.

Bank of Kunlun is owned by CNPC, China’s largest oil company and whose listed arm is PetroChina. Based in the far-western Xinjiang province, CNPC bought the bank three years ago. Although China has a six-month exemption from a law which bars banks from doing business with Iran’s central bank, the Treasury department said Kunlun has transferred payments worth $100m for Bank Tejarat, which is subject to different sanctions.

Amid speculation about an Israeli attack on Iran’s nuclear facilities, the Obama administration has insisted that the sanctions be given time to work. Leon Panetta, the defence secretary who will visit Israel on Wednesday, said on Tuesday that sanctions would eventually persuade Iran “to do what is right”.

“These sanctions are having a serious impact in terms of the economy in Iran,” he said. “And while the results of that may not be obvious at the moment, the fact is that they have expressed a willingness to negotiate and they continue to seem interested in trying to find a diplomatic solution.”

A US jury has rejected the Securities and Exchange Commission’s allegations that a former Citigroup banker misled investors who bought a $1bn mortgage product by failing to tell them the bank had bet against it.

Tuesday’s loss comes as the SEC faced the first courtroom test of its allegations that investors, including hedge funds and insurers, were misled by banks during the financial crisis when they bought mortgage-linked securities. Citigroup agreed to pay $285m to settle the allegations, without admitting or denying wrongdoing, but the pact was rejected by a judge and is on appeal.

The verdict also comes as the SEC has been under pressure to hold individuals accountable for the financial crisis. The SEC accused Brian Stoker, the former Citigroup banker, of being negligent – a charge with a lower burden of evidence than accusing him of intentionally misleading investors – when he failed to disclose that Citigroup selected some securities referenced in the portfolio, a collateralised debt obligation known as Class V Funding III, and had placed a bet against it.

Several investigations into the sale of CDOs and residential mortgage-backed securities are under way. Two other bankers who were sued in connection with CDO sales are fighting the allegations.

In delivering its verdict, the jury had a written message for the SEC, saying, “This verdict should not deter the SEC from continuing to investigate the financial industry, to review current regulations and modify existing regulations as necessary.”

Robert Khuzami, the SEC’s director of enforcement, said “We respect the jury’s verdict and will continue to aggressively pursue misconduct arising out of the financial crisis.”

John Keker, a lawyer for Mr Stoker said: “We are grateful that justice was done. Now Brian Stoker has his life back.”

Mr Stoker’s legal team, lead by Mr Keker, argued during the two-week trial that the investors involved, including insurer Ambac, were sophisticated and had all the information they needed to access the CDO investment. He argued that the offering documents were standard for the industry and that it was not common to disclose interests of the bank arranging the security.

One challenge for the SEC was that most of its witnesses were employees of Citigroup who described how the product was put together as a regular part of their business.

Mr Stoker lost a bid to argue that Citigroup’s internal and external lawyers were involved in the structuring of the deal but several witnesses testified that lawyers were involved in the process. The SEC maintained the lawyers were not given complete information at the time.

Citigroup said, “We agree with the jury’s verdict, and hope to secure final judicial approval of our settlement with the SEC and put this matter behind us.”

In addition to the SEC, the Department of Justice has been criticised for not holding individuals accountable for conduct that contributed to the financial crisis; government officials have said errors were made but they did not rise to criminal conduct. They have pointed to the layers of review from lawyers making it difficult to prove any statements were intentionally misleading.

Tuesday’s verdict follows a decision last October when an administrative law judge threw out a SEC case against two State Street bankers accused of misleading investors about a fund’s exposure to subprime mortgages.

Commenting on the Stoker case, Jacob Frenkel, a securities lawyer said, “It’s reasonable for the jury simply to have concluded that the structure of this transaction was not rooted in fraud, period.”

Mr Frenkel said he doesn’t expect this verdict to chill the SEC’s enforcement efforts.

Among the samosa stalls and sari shops of Southall, uniformed airport workers stand at the bus stop on their way to nearby Heathrow. Overhead, it is silent.

But if a third runway receives the go-ahead, the jets that rumble over parts of London just a 20-minute bus ride away, are likely to fill the sky over this district as well.

MPs, advocating compensation for the inevitable noise, may think everyone has their price. But the message from the residents of Southall is that everyone needs their peace.

A few people said they would accept compensation – with estimates of how much varying widely from £1,000 to £20,000. But the vast majority were riled by the idea of a pay-off, describing it as “blackmail”, “adding insult to injury” and, appropriately, as “hush money”.

“No way,” said Nadia, who did not want to give her last name because she works at the airport. “Money doesn’t buy you rest and peace when you are tired after a long day at work.” It was already noisy when aircraft were diverted over Southall in bad weather, she added.

Balbi Dogra, a pensioner, chimed in, saying it was impossible to put a price on the local community that could be spoiled. “We have two temples, a church and a mosque all alongside each other – it is very hard to find,” he said.

Mr Dogra said an airport should be built where it would disturb fewer people – such as on the Isle of Wight. Robert Conway, 45, said the only alternative was to buy everyone’s houses and create green space underneath the flight path. “They will make what? At least £100m? They should use the extra money to buy the houses,” he said.

Down the road in Heston, the aircraft already fly low over the well-kept semi-detached houses but a third runway would increase the air traffic.

Noelia and Carla, who both work on check-in at the airport, cannot open their windows because of the noise. They would take the money if they were offered it, but do not think cash would help when they were lying awake at 3am.

However, residents have little faith their views will be listened to. “Whatever we say, they will just do what they want. They will decide ‘it is good for you’ and do it,” Nadia said.

One of Nigeria’s largest banks has won a ruling in London’s High Court against a former executive, who is now liable to pay the bank more than £600m in damages.

Access Bank, which acquired Intercontinental Bank last year, brought legal action in the High Court against Erastus Akingbola, the former managing director of Intercontinental Bank.

Mr Akingbola was removed from his post in 2009 after an investigation into the bank by the Central Bank of Nigeria, which later had to rescue Intercontinental – at the time one of Nigeria’s largest banks, employing 20,000 people.

Intercontinental was one of eight stricken lenders bailed out by the Nigerian central bank following a debt crisis caused partly by loans to speculators in equities.

The civil lawsuit brought by Access alleged there were unlawful share purchases – spearheaded or at least known about by Mr Akingbola – whereby Intercontinental bought its own shares in order to bolster its stock price.

It was claimed that Intercontinental eventually owned approximately 25 per cent of its own share capital, and when the Nigerian stock market collapsed in 2009 the bank was left owning worthless shares.

Mr Akingbola had denied there was an unlawful scheme or that he was part of it.

The legal action was brought in London because at the time the lawsuit was issued, the former managing director was living in London.

Access also claimed that Mr Akingbola “misappropriated the claimants’ monies” and paid it to various companies owned directly and indirectly by him and his family. It also alleged he made two transfers to a law firm that were used to buy luxury property in London. He had denied these claims.

Mr Justice Burton ruled in favour of the bank and added on the unlawful share purchase allegation: “The claimant’s case is proved.” He said that the amount claimed by the bank was “well over half £1bn”.

The judge called the defendant “a most impressive man” but added: “I have no doubt that all the staff in the bank were in awe of him and of his authority and that, although he was plainly not a ‘details’ man, leaving it to others to put into effect what he instructed, I do not accept or believe that anything major in the bank could have occurred or did occur without his knowledge.”

Segun Osuntokun, a partner at the law firm Berwin Leighton Paisner, who acted for Intercontinental, said: “This judgment is a significant result for Access but is also a testament to the continuing efforts of participants in and regulators of the Nigerian banking sector to sanitise and restore a sense of accountability to Africa’s most exciting and dynamic banking sector.

“This judgment sends a strong message to international investors in Nigeria that it is no longer ‘business as usual’ in its banking sector.”

Italian police seized documents at Barclays’ Milan offices as part of an investigation that seeks to see if Italian consumers were hurt by the British bank’s manipulation of Libor, the London Interbank Offered Rate, and its euro equivalent Euribor.

The search, which took place on Friday, netted documents, emails and other digital material, according to two consumer groups that sparked the investigation by filing an initial complaint with investigative magistrates.

US and UK authorities fined Barclays more than £290m for its role in the Libor scandal. At least 10 authorities around the world are investigating whether 20 companies rigged Libor, Euribor and Tibor, the Tokyo equivalent.

Adusbef and Federconsumatori, the two Italian consumer watchdogs, estimate that 2.5m Italian families with mortgages linked to Euribor were damaged by the manipulation for a total loss of €3bn.

“The rules must be there and they must be respected,” said Elio Lannutti, a senator for the Italy of Values party and chairman of Adusbef. “A market without rules is not sustainable so it is very important that something is done.”

Barclays declined to make any comment.

The Italian investigation is being led by Michele Ruggiero, a magistrate in the town of Trani in southeastern Italy. He was present when the police requisitioned the documents at Barclays offices in Milan and is part of a team that is investigating Moody’s, Standard & Poor’s and Fitch for alleged market manipulation over downgrades of Italy’s sovereign rating.

The spreading scandal over the manipulation of key lending rates and the downturn of Europe’s economy took their toll on two of the region’s leading investment banks, Deutsche Bank and UBS, which both revealed increased provisions and sharp profit falls.

Both banks are caught up in the scandal around the alleged manipulation of the London Interbank Offered Rate and related benchmark lending rates and on Tuesday topped up their estimates for litigation risk by a combined €580m. This reflects in part the expected costs of settling regulatory probes round the world.

Barclays last month paid £290m to settle its case with regulators in the UK and US over the Libor affair in a move that led within days to the resignation of the bank’s top three directors, including Bob Diamond, chief executive.

The dual impact of recent banking scandals, including the Libor affair, and struggling profitability has led to a crisis of confidence in the sector. Sentiment has been particularly bleak in Europe, amid growing anxiety that the eurozone crisis will worsen over the coming months.

In the three months to the end of June, Deutsche increased its estimate on unprovisioned litigation costs from €2.1bn to €2.5bn, while UBS added SFr210m to its litigation and regulatory provisions.

Both banks revealed more information about their potential exposure to the issue. UBS said the Libor affair had been taken up by attorneys-general in several US states, in addition to regulators and the US Department of Justice. Deutsche said it was being sued over claims it manipulated the Yen Libor rate and the price of derivatives tied to the Euroyen benchmark in a suit filed by US litigants in April.

However, neither bank would comment on suggestions that talks with regulators could lead to settlement deals as soon as the autumn.

Both banks were also hit by the ongoing impact of the economic downturn, with net profits for the three months to June falling 58 per cent at UBS and 46 per cent at Deutsche.

“The current environment continues to result in significantly lower levels of client activity, both in investment banking as well as in certain parts of our retail business,’’ Deutsche Bank said in its quarterly report. ‘’We expect this to continue in the second half of the year.’’

The hits were hardest in investment banking, as clients reduced business volumes dramatically, particularly in equities trading. Second-quarter profits at Deutsche’s investment banking unit fell by nearly two-thirds to €357m. At UBS operating income in investment banking tumbled from SFr2.9bn to SFr1.7bn, with the unit generating a pre-tax loss of SFr130m, thanks to a one-off hit of SFr349m from the botched flotation of Facebook three months ago.

UBS announced plans to take legal action against Nasdaq over the affair, which left brokers including UBS with excess supplies of shares when orders were duplicated.

Deutsche announced it would eliminate €3bn of overheads and cut 1,900 jobs from its payroll of 100,000. Anshu Jain, co-chief executive, also pledged to lead the way in reforming the culture of the investment banking industry.

Though Deutsche made clear that no senior manager had been implicated in the Libor probes, Mr Jain said he would put renewed emphasis on ethical standards throughout the bank and “root out bad behaviour”. He also promised to be “at the forefront” of reforms to investment banker pay.

There is a “new China” active in the currency markets, according to analysts, as Switzerland’s battle to weaken the franc inflates its stockpile of foreign currency reserves.

The Swiss National Bank was forced to buy tens of billions of euros in May and June after the eurozone crisis worsened, creating strong haven demand for the franc and threatening the ceiling the central bank set for its currency last September. The SNB is prepared to buy as many euros as it takes to hold the franc at SFr1.20 against the euro to protect the country’s exporters.

As a result, Switzerland’s foreign currency reserves have leapt more than 40 per cent this year to SFr365bn ($375bn), propelling it to the sixth largest holder of foreign exchange in the world from ninth last year, behind China, Japan, Saudi Arabia, Russia and Taiwan.

The proportion of euros held by the SNB also ballooned in the second quarter of the year, rising from 51 per cent to 60 per cent. Foreign currency analysts said the bank was buying SFr3bn worth of euros a day to defend the Swiss franc, with serious knock-on effects for the global forex market.

“Switzerland is the new incipient China,” said Steven Englander, Citigroup’s head of foreign exchange strategy.

The SNB is believed to be partly responsible for recent moves in major currencies including the Australian dollar and the Swedish krona as it seeks to offload some of its euros.

But that has consequences for other central banks, whose own currencies are rising in value as Switzerland sells its euros back to the market. The Swedish krona has hit a 12-year high against the euro in recent days, while the Australian dollar is at record highs against the single currency.

“Sweden will need to set monetary policy now with the SNB in mind,” said Geoffrey Yu, foreign currency analyst at UBS.

Analysts also warned that SNB’s half-year results, released on Tuesday, indicated that the central bank was struggling to rebalance its holdings as it appeared to be buying euros more quickly than it could exchange them for other currencies.

Figures showed a drop in the maturity of the SNB’s bond holdings from four years to 2.8 years, which analysts said indicated that the bank was taking shorter term positions because it did not know how long it would carry on accumulating euros at the current rate.

“The picture is one of a central bank that’s not coping with how much money is coming in,” said Kit Juckes, foreign currency analyst at Société Générale. The SNB declined to comment on its foreign exchange management strategy.

Underwriters who cover bank executives and provide professional indemnity insurance are watching nervously as class action suits and legal demands mount against big banks caught in the Libor scandal.

Libor claims could be “a bigger game changer” for such insurers than the fallout from the financial crisis of 2008, according to one of the world’s biggest insurance brokers.

“This impacts so many people,” says Richard Magrann-Wells, financial services leader at the broker Willis. “Trillions of dollars [worth of financial instrument] could be impacted.”

If a class action suit goes the wrong way, “that’s the big scary thing”, says a financial services underwriter, pointing to a possible legal precedent in the US, the world’s litigation hotspot.

Lawsuits by banks, funds and municipalities have been filed over the past year as regulators and prosecutors stepped up efforts to uncover alleged manipulation of the London Interbank Offered Rate, or Libor, and its Brussels and Tokyo equivalents, Euribor and Tibor.

Banks’ potential exposure to those and future class actions have been estimated by analysts to be as high as $35bn. Plaintiff law firms have set the costs higher, with estimates of potential payouts reaching $1tn.

“The fear is that Libor will become a litigation-fest for four years or more,” says Saul Haydon Rowe, a partner at structured credit specialist Devon Capital.

While Libor was hitherto a technical financial term, it has become ingrained in the popular consciousness since Barclays paid £290m to settle with US and UK regulators last month.

Since then, Barclays shares have fallen by as much as 16 per cent, wiping £3.4bn off its market value.

The plummeting share price prompted some US investors earlier this month to sue the bank – adding to the legal problems facing the UK bank. Other plaintiffs who have filed class actions against the Libor panel banks include the City of Baltimore, the broker Charles Schwab and buyers of interest-rate derivatives.

What differentiates the Barclays investors’ claim from others is that they are not maintaining that Libor fluctuations had a direct effect on purchases; rather they argue that they were harmed because Barclays lied about being a “model corporate citizen” and they blame it for causing the drop in the share price
.

Regulatory settlements do not shelter defendants from class-action payouts.

Any findings by regulators of collusion – and settlements tend to be reached by defendants making admissions, or not contesting facts – could be particularly troublesome for the banks because antitrust cases in the US can potentially award treble damages; this can be limited to actual damages for those who won leniency through co-operation with authorities.

The UK does not have a class-action system and awards tend to be far lower in comparison with the US. Commercial-court judges in London will also be wary of handing down a decision that could “open the flood gates” and risk unravelling worldwide contracts based on Libor, according to Simon Hart, a litigator at Reynolds Porter Chamberlain.

However, existing lawsuits filed in London against Barclays and other banks over alleged mis-selling of interest-rate swaps are now studying whether Libor-rigging accusations can be included in their complaint, says Susannah Sheppard, a lawyer at Sheppard & Smith.

Ms Sheppard is examining potential collusion arguments for Guardian Care Homes, which is already suing Barclays for £12m over how it was sold interest-rate swaps.

As banks enter reporting season, there will be much scrutiny over their stated planning around the Libor probe, because under US accounting guidelines, banks and other companies are required to disclose potential litigation risks and estimate their costs.

In the case of Barclays, which published its financial results on Friday, it disclosed for the first time that it had set aside £450m for potential claims from allegations of mis-selling of interest-rate swaps.

Insurers are unlikely to wait to see what the courts do. With policies renewed annually, a hesitancy in the market is palpable, brokers warned.

“You’re not going to see a large number of new carriers wanting to jump in when there’s been major, major losses,” says Mr Magrann-Wells of Willis.

Reporting by Lina Saigol, Caroline Binham and Alistair Gray

Regulators’ plans to designate big global insurers as too big to fail could have unintended consequences that risk “destabilising the financial system”, an industry body has claimed.

In a sign that insurers are stepping up their lobbying against the proposals, the Geneva Association said they might prompt insurers to cut holdings of government bonds as well as bank debt and equity.

The body urged regulators to change draft criteria used to determine whether they regard an insurer as posing a potential threat to the financial system and global economy.

The International Association of Insurance Supervisors is targeting 48 international insurance groups for possible designation as systemically important, which could lead to higher capital requirements and limits on their business.

Banking supervisors have already deemed 29 institutions systemically important after examining more than 70, imposing capital surcharges on them.

The IAIS plans to consider five factors: size, global activity, interconnectedness, non-traditional activities and substitutability.

The mooted process will give greatest consideration – up to half the total – to the amount of non-traditional business, such as derivatives trading and variable annuities, the insurers conduct.

Still, the Geneva Association said on Tuesday: “The current inclusion of traditional insurance activities in ‘large exposures’ means that the considerable holdings of government bonds and bank-issued securities owned by insurers would be subject to this indicator.

“In order to manage their systemic risk ranking, insurers may seek to adjust their holdings in these important assets, making it harder for banks and governments to re-finance.”

The association, which calls itself a think tank, is wholly funded by the insurance industry.

Insurers have long maintained that they are fundamentally less risky than banks, with entirely different business models. Their investment decisions are keenly watched given that they are among the world’s biggest institutional investors.

In Europe alone, the sector’s total holdings come to about €7.4tn, according to the CEA, the industry body.

Insurers hold two-thirds of their assets in fixed income securities, with corporate bonds accounting for 38 per cent and government debt 28 per cent, according to a study by Blackrock earlier this year.

The move to determine whether institutions are too big to fail and impose additional regulations on them is part of an effort by the Group of 20 leading nations to prevent a repeat of the 2008 financial crisis.

As well as the collapse of several banks, the crisis also resulted in the US government rescue of AIG, previously considered one of the world’s strongest insurers.

The International Association of Insurance Supervisors has conducted a two-month consultation on its proposed methodology. The deadline for submissions was Tuesday. It declined to comment.

A 10 per cent rise in core profits at Finmeccanica has been presented by Italy’s troubled defence and industrial group as evidence that its restructuring and cost-cutting programme is on track to meet year-end targets.

Giuseppe Orsi, promoted as the new broom chief executive and chairman last year after a series of corruption investigations into the group amid heavy losses, said the second-quarter results were particularly encouraging.

“Despite a national and international environment characterised by considerable persistent uncertainty, Finmeccanica is confident that it will achieve the targets for 2012 announced in March,” Mr Orsi said. He noted that this was “a year of delicate transition within a relaunch process which is demanding and will last some time”.

The state-controlled group said earnings before interest, tax and amortisation rose 10 per cent to €459m in the second half and a third to €285m in the second quarter. New orders rose 13 per cent to €4.2bn in the second quarter and 7 per cent to €7.7bn in the second half.

Revenues were down 2 per cent to €8bn in the second half. Net debt rose 11 per cent to €4.6bn. The group’s level of indebtedness is causing concern in some quarters as it is equivalent to the value of its assets and has been called “alarming” by Il Sole 24 Ore, Italy’s leading business daily.

Analysts said the second-half results were slightly better than expected, and it was encouraging that progress from restructuring was more evident in the second quarter.

Finmeccanica reported a €2.3bn loss last year. It reaffirmed revenue targets for this year of €16.9bn-€17.3bn and core profits of about €1.1bn.

Shares in Finmeccanica closed down 2.3 per cent at €2.98 before the results were announced, representing a fall of 44 per cent over the past 12 months.

Mr Orsi said in a conference call that he was encouraged by interest shown in assets Finmeccanica plans to sell and that he was confident of making “further progress by the end of the year”.

The Italian group has said previously it hopes to reduce net debt by €1bn this year through asset disposals, including its energy and transport subsidiaries.

Finmeccanica noted military and security investment budget cuts in its core markets of Italy, the UK and the US, and a shift in demand to emerging markets where intense competition is pushing down prices.

“Finally, the persistent and worsening recession in the eurozone is making it more difficult – yet, at the same time, vital – to roll out the restructuring initiatives and even more important for companies to achieve a sound financial position,” it said.

Mr Orsi has removed more than 40 managers since taking the helm, several of whom are under investigation by state prosecutors for suspected corruption. His long-time predecessor, Pier Francesco Guarguaglini, resigned and denies corruption allegations.

Mr Orsi is also under investigation in connection with a helicopter deal with India. He denies wrongdoing while his supporters in Finmeccanica argue that he is the victim of false allegations made by people he dismissed.