Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Archive | November, 2016

BNP pleads guilty and faces $8.9bn fine

Posted on 30 June 2014 by

BNP Paribas agreed to pay a record $8.9bn penalty and pleaded guilty in a landmark settlement with US authorities for conspiring to violate sanctions that prohibit transactions with Sudan and other regimes.

It is the first time a major bank has pleaded guilty in a sanctions-busting case and represents a significant stiffening of penalties against global financial institutions, which have paid more than $100bn in fines in recent years.

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    US authorities – including the Department of Justice, Treasury, Federal Reserve, Internal Revenue Service, New York state’s Department of Financial Services and the Manhattan district attorney’s office – said France’s largest bank concealed billions of dollars in transactions on behalf of Sudan, Iran and Cuba from 2002 until 2012, well after the bank was warned it was under investigation and after multiple other banks were penalised for similar transactions.

    According to court filings citing an internal bank memo, BNP’s senior compliance personnel agreed to continue doing business with Sudan despite the sanctions and human rights violations in Darfur by stating that “the relationship with this body of counterparties is a historical one and the commercial stakes are significant. For these reasons, Compliance does not want to stand in the way.”

    “BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks and deceive US authorities,” said attorney-general Eric Holder.

    Benjamin Lawsky, superintendent of New York’s Department of Financial Services, said in a statement that BNP “employees – with the knowledge of multiple senior executives – engaged in a longstanding scheme that illegally funnelled money to countries involved in terrorism and genocide.”

    BNP executives caught up in sanctions case

    • Georges Chodron de Courcel, group chief operating officer

    • Vivien Levy-Garboua, current senior adviser to the BNP executive committee and former group head of compliance

    Christopher Marks, group head of debt capital markets

    Dominique Remy, group head of structured finance for the Corporate Investment Bank (CIB)

    Stephen Strombelline, head of ethics and compliance for North America ​

    The settlement is a costly setback for the bank that largely weathered the US and European financial crises. BNP said it would take a €5.8bn charge to cover the fine, on top of its past provisions.

    The French government, which feared a guilty plea would have ripple effects throughout the country’s economy and had lobbied US authorities fiercely to limit BNP’s punishment, gave the settlement a guarded welcome, saying it lifted the uncertainty that had been facing the bank.

    “In line with the demands of the French authorities, this agreement punishes the past, not the future,” said Michel Sapin, finance minister.

    But he added that the “extraterritorial” nature of the action and further threatened moves against other European banks meant Europe should “mobilise” to ensure more international transactions were conducted in euros, not dollars.

    BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks and deceive US authorities

    – Eric Holder, US attorney-general

    BNP will not lose its banking licence in New York as part of the settlement, but will be prohibited for one year from clearing dollar-denominated transactions related to its oil and gas business, where much of the alleged criminal activity took place, as well as from transacting on behalf of other banks. The suspension begins on January 1, giving clients six months to move their accounts.

    Thirteen BNP employees have left the bank at the request of the DFS – including Georges Chodron de Courcel, its former chief operating officer, whom the bank said would retire this year. Mr Chodron de Courcel has not been accused of any wrongdoing. In total 45 bank employees have been disciplined, including lowered pay, lost bonuses and demotions.

    French banking regulator ACPR said on Monday that BNP had “a solid solvency and liquidity position,” which would allow it to absorb the penalty.

    The bank said it would “adapt its dividend for 2014” to match its 2013 payout of €1.50 per share, less than the €2 traders once expected. Its common equity tier one ratio – a crucial measure of financial strength – would not fall below its target of 10 per cent, it added.

    Jean-Laurent Bonnafé, BNP’s chief executive, said the bank deeply regretted the past misconduct that led to the settlement and had designed “new robust compliance and control procedures”.

    He added, however: “Apart from the impact of the fine, BNP Paribas will once again post solid results this quarter and we want to thank our clients, employees, shareholders and investors for their support throughout this difficult time.”

    BNP pleaded guilty to state felonies of conspiracy and making false statements. It is scheduled to plead guilty to federal charges next week.

    HSBC less than two years ago paid $1.9bn and averted a guilty plea in a case involving money laundering and sanctions violations. Last month Credit Suisse became the first major bank in over a decade to plead guilty to criminal charges, stoking concerns in some quarters that foreign banks are being singled out by US authorities – a charge the US has denied. No individuals were charged in the matter.

    Spanish banking veteran resigns

    Posted on 30 June 2014 by


    Winning formula: CaixaBank has distanced itself from its weaker rivals

    Juan María Nin, one of Spain’s most experienced bankers, has resigned from his posts as chief executive and deputy chairman of Caixabank, the Barcelona-based financial group.

    Mr Nin served as the right-hand man to Isidro Fainé, Caixabank’s chairman, and played a key role in steering the lender through Spain’s recent financial crisis and pushing through Caixabank’s listing in 2011.

      His roles will now be split between two people, with Gonzalo Gortázar taking over as Caixabank chief executive and Antonio Massanell appointed as new deputy chairman. Both men previously served as director generals at Caixabank. Mr Gortázar spent 16 years at Morgan Stanley in London and Madrid before joining the Catalan bank.

      Mr Fainé praised the outgoing chief executive for his “hugely positive” contribution to the bank. Mr Nin will continue to represent his former employer’s interests as a board member of Gas Natural, Repsol and Erste Bank.

      Caixabank did not give a reason for the departure, or explain the timing of the switch. However, it said the change had been made by mutual accord with Mr Nin, and pointed out that it came after the completion of a sweeping reorganisation of Caixabank and the La Caixa foundation that controls the lender.

      The new structure is designed to create a clearer separation between the two entities, and formalises Caixabank’s transition from a regional savings bank to a normal commercial lender. The reorganisation was prompted by a change in the Spanish law, and followed the broader backlash against Spain’s regional savings bank model. Also known as cajas, regional lenders with deep political connections such as Bankia played a starring role in the 2012 financial meltdown that pushed Madrid into an EU-funded banking bailout.

      Caixabank itself did not require any public funds during the banking crisis, and instead went on to buy several troubled savings bank in an attempt to expand its network.

      US stocks and bonds enjoy strong gains

      Posted on 30 June 2014 by

      Investors can be forgiven for thinking they have the midas touch at the halfway stage of the year. Solid returns across many asset classes beg the question for the second half: how much longer can equity, commodity and bond prices keep rising in unison?

      Holders of long-term bonds are sitting on double digit gains, commodities are up some 7.1 per cent, while US equities have recorded their sixth straight quarterly gain – a run not seen since the boom era of 1998 – against a backdrop of slumbering market volatility.

      Some, such as the Bank for International Settlements, warn financial markets have become “euphoric” thanks to massive support from central banks, storing up big trouble ahead for overvalued asset prices.

      Notably, this year’s broad-based performance has occurred against a backdrop of political instability in Ukraine and the Middle East along with deeply disappointing US first quarter economic activity.

      For now, the rally in both US bond and equity prices is being sustained by investors taking diverging views on the prospects for the economy. Equity bulls see a strong second-half recovery that boosts company revenues, while the Treasury bond market is signalling sluggish growth prospects which is seen as preventing the Federal Reserve from raising interest rates towards its late 2015 and 2016 forecasts.

        Macro uncertainty only makes the job for portfolio managers that much harder as they assess what has worked so far this year and look to tweak their holdings for the rest of 2014. Particularly given the pronounced bull run in US equities since 2009 that has the S&P 500 sitting just shy of its recent record close of 1,962.87.

        One concern for investors is how the broad market has not experienced a major correction since the summer of 2012 and from November of that year, has remained in a strong bullish trend. Given the S&P’s year-to-date rise of 7 per cent including the reinvestment of dividends, a more defensive posture is being recommended by some investors.

        Jack Ablin, chief investment officer at Harris Private Bank, says the S&P 500 is close to achieving its 2014 target of a 7.5 per cent total return. “Upside is limited and this is not a market where I want to deploy new money.”

        He remains overweight large multinational US companies and also value stocks as these areas remain cheap relative to small-caps and stand to benefit from any rebound in the eurozone triggered by aggressive easing from the European Central Bank.

        Russ Koesterich, chief investment strategist at BlackRock, says stocks can rise, but that gains are likely to be muted and he worries about US valuations and low volatility.

        FactSet estimates the 12-month forward price to earnings ratio is 15.6 times, up from 15.3 times at the end of March and higher than the 10-year average of 13.8 times.

        A defining trend of the past few months has been historically low volatility across major markets. In June, the CBOE Vix volatility index, known as Wall Street’s “fear gauge,” fell below 11, indicating investor complacency. Heading into the back half of the year, some investors are less sanguine.

        “The takeaway is don’t get used to this low volatility period,” says Raymond Nolte, chief investment officer at SkyBridge Capital. “Geopolitical risk, US midterm elections and the completion of the taper all have the potential to introduce volatility into the markets.”

        The takeaway is don’t get used to this low volatility period. Geopolitical risk, US midterm elections and the completion of the taper all have the potential to introduce volatility into the markets

        – Raymond Nolte, SkyBridge Capital

        Some believe the message being sent from sharply lower bond yields should ring alarm bells for equity bulls as we enter the second half of the year.

        Oliver Pursche, president of Gary Goldberg Financial Services, worries about the US economy’s trajectory and says the prospect of prolonged subpar growth presents a bigger challenge to asset managers.

        “There’s always some excuse why the economy hasn’t expanded at a faster pace. The truth is this economy hasn’t managed to grow at a 3 per cent rate in spite of the extraordinary amount of stimulus in the past five years.”

        Mr Pursche still expects the S&P 500 to test the 2000 points level by the end of the year, but “the second-quarter earnings season needs to be very strong for that to happen”.

        Cost cutting may help companies surpass profit expectations, but a missing ingredient for helping consumer spending resides in higher wages that can offset rising commodity prices.

        “At this stage of the cycle, nearly five-and-a-half years after the recession ended, there should be, or needs to be a sustainable acceleration in wage growth,” says John Brady, a managing director at RJ O’Brien.

        It explains why some are closely watching oil prices and worry that the global economy could suffer a shock that ruptures across currently sanguine markets as the summer slips into autumn.

        “The recovery globally is still fragile. The last thing you need right now is significantly higher oil prices,” says Mr Koesterich.

        BBPI France invests €100m in China PE fund

        Posted on 30 June 2014 by

        President Xi Jinping's two-day visit to France©Reuters

        French state-backed investor BPI France and China Development Bank have committed €100m each to back a private equity fund targeting medium sized companies in France and China.

        The moves, which follow the state visit of President Xi Jinping in France in March, underscore Western governments’ courtship of China in an attempt to bolster jobs at home.

          The “Sino French Midcap Fund”, managed by Cathay Capital, a private equity group founded by Chinese national Mingpo Cai and Frenchman Edouard Moinet, has amassed a total of €460m so far, BPI France said on Monday. It has a final target of €500m.

          The fundraiser echoes recent initiatives in Europe. Russian Direct Investment Fund, the $10bn state-backed fund started by Russian president Vladimir Putin three years ago, set up a joint $2bn fund with China Investment Corp in 2012, and this year, it invested alongside the Chinese sovereign wealth fund in Sodrugestvo, a Russian oilseed processor.

          Two years ago, Belgian state-backed Federal Holding Company and CIC committed to a €200m fund managed by A Capital, a private equity group started by Frenchman Andre Loesekrug-Pietri, that aims to find European investment opportunities for Chinese investors. A Capital co-invested in Club Med alongside Chinese conglomerate Fosun.

          The French-Chinese fund “marks an important step forward in our ongoing collaboration with (Chinese Development Bank) and Cathay Capital in long-term development of French and Chinese companies,” Nicolas Dufourcq, Chairman of Bpifrance said in the statement.

          This is not the first fund Cathay is managing on behalf of the two investors. In 2012, they invested a €150m fund targeting small companies. The new fund would invest larger amounts in bigger companies through minority and majority stakes, it said.

          Cathay Capital, which mainly operates from Shanghai and Paris, was started in 2006 and targets French companies that want to expand in China, and vice versa. It has a mandate to spend about half its money in both countries. It will also look at deals in Germany after it opens an office in Frankfurt later this year. The team is among a handful of fund managers that have sought to exploit their political and business ties in Europe and China to raise money.

          This fund “heralds a significant new phase for Franco-Chinese co-operation in the area of private equity investment, especially in mid-cap companies, which we feel is a particularly promising segment presenting numerous opportunities”, Haibin Fan, president of China Development Bank said on Monday.

          Italy undermined by ‘crony capitalism’

          Posted on 30 June 2014 by

          Italy’s economy has been undermined by “crony capitalism” and parts of the country’s public spending is directed to satisfying lobby groups and rent-seekers, the Italian competition authority warned on Monday.

          “Crony capitalism is based on privileges, rather than merit, and aggravates inequality,” Giovanni Pitruzzella, competition authority chairman, said as he presented the group’s annual report. “It makes society static and not open to competition and innovation.”

            He continued: “Countries like Italy have favoured the expansion of public spending . . . directed to satisfying particular interests of lobbies and rent seekers”.

            The comments from the competition authority chairman could be seen as a sign of a growing awareness inside Italy that its entrenched and inward-looking business culture can be counter-productive.

            The country is often shunned by international companies, being mainly dominated by small-to-medium family-run businesses with strong ties to local and central government politics and frequent cross-holding among the bigger companies.

            Mr Pitruzzella also said that “unproductive and inefficient” government largesse was a key reason for the country’s “enormous public debt that represent the biggest obstacle to economic growth”.

            While Italy’s borrowing costs are falling, the country’s national debt has continued to rise; it currently stands at €2.15tr. The government of Matteo Renzi has set itself a goal of shrinking debt to 133.3 per cent of gross domestic product in 2015, from 134.9 per cent this year.

            However, hope of reducing the debt-to-GDP ratio, the second highest in the eurozone after Greece, will depend on an economic recovery that still eludes Italy.

            “A state like ours, that needs some €400bn each year to service its debt, has significant limits in the use of fiscal policy,” said Mr Pitruzzella, as he urged Mr Renzi to pass structural reforms and push ahead with liberalisations, forgotten in the past year due to a greater focus on political legislation.

            Even though the prime minister’s centre-left Democrats won the most votes in May’s European parliament elections, there is growing concern that his coalition is not strong enough to approve difficult legislation and kick-start growth.

            In a further criticism of Italy’s corporate landscape, the competition authority noted that former monopolists in the country “continued to have privileges established by law, thus distorting competition”. It cited as examples Poste Italiane, the state-owned postal service, and Telecom Italia, now a listed company but which was formed in the early 1990s from the state monopoly phone carrier

            The watchdog has in the past few years ruled against Poste Italiane over VAT exemptions on certain postal services and against Telecom Italia for preventing competitors from entering the market. In the past 18 months, the competition authority has imposed sanctions totalling €314m. One of the most recent actions has been a €180m fine to Roche and Novartis, after ruling the two pharmaceutical companies colluded to protect one of their best-selling drugs against a cheaper alternative.

            BNP fine cheers human rights campaigners

            Posted on 30 June 2014 by

            Sudan's President Omar al-Bashir©Reuters

            Omar al-Bashir at the African Union summit

            On the day the International Criminal Court issued a warrant for Sudan president Omar al-Bashir’s arrest for genocide in 2009, human rights lawyer Ali Agab fled the country. Security forces first closed down his organisation; then they came looking for him.

            Today, as BNP Paribas pays a record $8.9bn penalty for conducting business with Sudan and other countries subject to sanctions, he is celebrating.

              “I am so happy to know about this fine,” says Mr Agab, now living in asylum in the UK.

              “It’s very harmful and sad to know that those people who are enjoying democracy are using all means to support a regime like this and commit international crime,” he adds: “I think it will have an impact on Sudan because it plays a deterrent to other governments in Europe that are still supporting Sudan.”

              Mr Bashir was indicted by the International Criminal Court for war crimes and crimes against humanity dating back to 2003, but he first came to power in Khartoum in an Islamist-backed coup in 1989.

              The US levied sanctions in 1997 over Sudan’s support for terrorism and human rights abuses, initiating a trade embargo and freeze on government assets. Sudan hosted Osama bin Laden in the early 1990s before it expelled him, and has since co-operated with the US from time to time by sharing intelligence about subsequent Islamist jihadi threats in the wake of September 11.

              But in the course of Sudan’s 10-year oil boom throughout the first decade of this century, experts estimate its petrodollars amounted to $80bn for the country and its backers. Much of this was directed to Khartoum’s fearsome security apparatus, which today sucks up as much as 80 per cent of spending.

              “This oil money, gained illegally, allowed the regime to stay in power and to commit more crimes against its own people, to kill its own people,” says Mr Agab.

              Mr Bashir today fights a war on three fronts and human rights group Waging Peace says he continues to prosecute the world’s longest-running genocide, in Darfur.

              “There is extraordinary bombing with complete impunity, there’s no other country that is indiscriminately killing its own civilians with air power [for so long and without intervention],” says Olivia Warham, director of Waging Peace, adding that a Darfur hospital was bombed only this year.

              “The level of torture and intimidation, lack of freedom of expression, lack of political space has been consistently high throughout the last decade. [Mr Bashir] has been doing all of this with the world turning a blind eye; financed by people who are breaking sanctions. The oil money helped to sustain his regime throughout all that time.”

              Ms Warham congratulated the US for following through on its commitment to sanctions with political will, saying many other countries including the UK rely only on the occasional tough word to little effect.

              Campaigners say the US, UK and others should also ban exports from Sudan of both gold and gum Arabic, which continue to help keep afloat the ailing economy – and a regime facing political, diplomatic and economic pressure.

              Still in power, Mr Bashir is one of Africa’s longest ruling leaders. Last year, his forces shot dead more than 200 people on the streets of Khartoum, the first time the state’s brutality was exposed so explicitly to a shocked capital more used to hearing of wars in the margins.

              But his ability to mete out heavy food and fuel subsidies and keep patronage networks in cash, funded mostly by crude oil exports, helps him avert economic catastrophe and further cracks to his regime.

              BNP bankers face personal penalties

              Posted on 30 June 2014 by

              Several dozen BNP Paribas bankers will face demotions and cuts to their pay and bonuses as part of its expected record $8.9bn settlement with US authorities, people familiar with the talks said.

              The French bank’s punishment for conducting business with countries subject to sanctions, which will include a guilty plea and a one-year suspension from clearing certain dollar transactions, is expected to be announced on Monday in New York after US equity markets close.

                BNP’s settlement is a setback for the bank that largely weathered the US and European financial crises. It comes after failed attempts by French politicians to avert a guilty plea, which they feared would have ripple effects through the country’s economy.

                The settlement sets a record for a US sanctions case and marks the first time a bank has pleaded guilty to violating laws governing economic sanctions. The fine – for transmitting $30bn in transactions for Sudan, Iran and other countries – is more than four times the $1.9bn paid in 2012 by HSBC for violating sanctions and transmitting money belonging to drug cartels.

                The fine will be split evenly between federal agencies, including the Department of Justice and Office of Foreign Assets Control in the Treasury Department, and state authorities, with at least $2bn going to New York’s Department of Financial Services and the rest to the Manhattan district attorney’s office.

                About a dozen BNP employees will lose their jobs, including several who have already left the bank, these people say. The most senior executive caught in the case is Georges Chodron de Courcel, chief operating officer, people familiar with the matter have said. The 64-year-old has announced plans to retire.

                DFS had also sought the removal of Vivien Levy-Garboua, a one-time head of compliance for BNP in the US, this person said. Neither executive has been accused of wrongdoing. Both were unavailable for comment.

                BNP adopted a clawback regime in 2009, which applied to its 2010 pay rounds. While the bank told employees to stop dealing with Sudan, Iran and Cuba in 2007, it later found evidence that some transactions in breach of US sanctions had continued until 2011.

                BNP planned to hold a conference call for analysts on Tuesday to discuss the impact of the settlement. The French bank is expected to say that it will finance the $8.9bn fine from retained profits, without needing to cut its dividend or issue bonds, according to a person close to the bank.

                The French bank made €4.8bn of net profit last year, which analysts expected to rise to about €5.6bn this year. However, the bank is likely to say that it is reviewing a plan to increase its dividend payout ratio to 45 per cent by 2016, reflecting its need to restrain dividends to retain more profits.

                Last year it paid a €1.50 dividend, equivalent to a 40 per cent payout ratio. Derivative contracts show the markets pricing in a dividend of €0.35 per share, down from expectations of €2 per share in late April, according to Bloomberg data.

                The biggest hit to BNP’s business will be the suspension of dollar clearing for clients of its oil and gas unit where US authorities believe the bulk of the illegal transactions with Sudan occurred. Bank officials feared far worse – that the suspension would apply across the board to all of its businesses, in effect shutting it out of global dollar-based transactions.

                The bank will also not be allowed to clear transactions for other banks. The suspension is expected to go into effect in January, allowing the bank’s clients time to move their accounts, people familiar with the matter say.

                US authorities sought tougher penalties because of the scale of the sanctions-busting activity – $30bn in transactions between 2002 and 2009 – and their findings that some of this activity had continued even after BNP was told to stop and investigations had started, these people say.

                DFS alleges that more than $100bn in illegal transactions are at issue in the case, which includes instances of bank employees seeking to to evade detection in New York by stripping information identifying Sudanese or Iranian entities that were subject to sanction.

                Fears of Bulgarian bank crisis ease

                Posted on 30 June 2014 by

                Bulgarian President Rosen Plevneliev (C) speaks to Bulgarian Prime Minister Plamen Oresharski (centre R), political party leaders, the finance minister and central bank chiefs in this handout image released by the Bulgarian Presidency Press Office on June 29, 2014. Bulgaria's state institutions and political parties fully support efforts to stabilize the banking system and Bulgarians have no reason to fear for their savings, President Rosen Plevneliev said on Sunday. REUTERS/Bulgarian Presidency Press Office/Handout via Reuters (BULGARIA - Tags: POLITICS BUSINESS) ATTENTION EDITORS - THIS PICTURE WAS PROVIDED BY A THIRD PARTY. REUTERS IS UNABLE TO INDEPENDENTLY VERIFY THE AUTHENTICITY, CONTENT, LOCATION OR DATE OF THIS IMAGE. THIS PICTURE IS DISTRIBUTED EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS. NO SALES. NO ARCHIVES. FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS©Reuters

                Bulgarian President Rosen Plevneliev , centre, hosts talks on June 29, 2014

                Bulgaria’s banking system appeared to be stabilising late on Monday after the EU approved a Lev3.3bn (€1.7bn) emergency credit line from the central bank, following runs on two of the country’s biggest lenders in a week.

                The liquidity move followed assurances from political leaders over the weekend that Bulgarians’ savings were safe and the banking system was stable and well capitalised, in spite of a speculative attack involving anonymous text messages and emails.

                  The Bulgarian National Bank had warned on Friday of an “attempt to destabilise the state through an organised attack against Bulgarian banks”, as Bulgarians withdrew Lev800m from branches of First Investment Bank, the country’s third-biggest lender.

                  Those withdrawals came just days after a run on Corporate Commercial Bank, the country’s fourth largest bank.

                  Six people were arrested over the weekend, accused of sending electronic warnings that FIB was about to collapse; two were indicted on Monday for spreading false information on banks.

                  Rosen Plevneliev, Bulgaria’s president, also announced late on Sunday that after talks with party leaders he would dissolve parliament by July 25 and then name a caretaker administration, ahead of early elections called for October 5. That move helped ease political uncertainty that had fuelled the crisis.

                  Bank shares recovered sharply on Monday after news of the central bank credit line. The European Commission also noted that the country’s bank sector was “well capitalised and has high levels of liquidity compared to its peers in other member states”.

                  “The situation has stabilised over the course of the day,” said Alex Bebov, managing director at Balkan Advisory Company, a Sofia-based brokerage.

                  “This was a very different style of banking crisis than, for example, in Slovenia, where you had a lot of fundamentals. Here it was much more an issue of cyber attacks, via SMS [text messages] and the internet.”

                  Two senior Bulgarian bankers said the BNB had on Monday raised Lev1.3bn through a special bond issue covered by 10 Sofia banks – mainly foreign institutions – to provide emergency liquidity support to FIB and any other Bulgarian banks that might need it. The bond has a maturity of five months and was priced to yield around 2 per cent.

                  The BNB was said to believe this would be enough to cover any Bulgarian bank’s needs, as the situation began to calm, and that normal banking conditions would resume in the coming days. Bankers said the Lev3.3bn credit line agreed with the commission was the maximum acceptable amount, but was seen as unlikely to be necessary.

                  Queues were seen outside some FIB branches on Monday morning, and while these were much smaller than on Friday, the situation in the financial sector was still “edgy”, a Sofia-based banker said.

                  “There are no signs of panic but some companies are transferring funds out of lev and into euros, and others are moving deposits to foreign banks operating in Sofia,” this banker said.

                  Other banking insiders confirmed that Bulgarians had been taking deposits out of domestic institutions and depositing them with foreign-owned ones, which account for about 70 per cent of Bulgaria’s banking system by assets.

                  The biggest Bulgarian bank by assets is owned by Italy’s UniCredit, which expanded in the country with the takeover of Bulbank in 2000 and now has a 15 per cent market share. It has €6.6bn of assets, 230 branches and 4,000 employees in the country.

                  “UniCredit Bulbank is operating in normal mode,” the Italian-owned bank said in a statement on Monday.

                  Bulgaria’s second-biggest bank, DSK, is also foreign-owned, acquired by Hungary’s OTP when it was privatised in 2003. Austria’s Raiffeisen Bank is the sixth-biggest bank by assets, with €3.2bn of assets and 168 branches. Other foreign banks with Bulgarian operations include France’s Société Générale, and Greece’s Alpha Bank and Eurobank.

                  Despite strong fiscal management and a stable exchange rate backed by a currency board arrangement pegging the lev to the euro, Bulgaria is criticised by EU partners for weak governance resulting from close ties between business, politicians and the judiciary.

                  Gillian Edgeworth, a senior economist at UniCredit, said in a note on Monday: “Repeated freezing of EU funds provides evidence of underlying issues with corruption at a time when the economy lacks investment.

                  Additional reporting by Theodor Troev in Sofia


                  Risk seen to economy but not peg

                  The regime that pegs the Bulgarian lev at a fixed rate against the euro – set up after the devastating hyperinflation and currency crisis of 1996 – is often credited with providing the basis for the economy’s subsequent stability, writes Delphine Strauss.

                  Supported by fiscal policy and a large pool of foreign exchange reserves, it proved more resilient than similar regimes in the Balkan states during the turmoil of the global financial crisis.

                  Analysts see no immediate threat to the peg from the recent rumour-fuelled bout of instability, as foreign exchange reserves of €13.8bn more than cover the value of lev in circulation. The lev is currently pegged at 1.9558 to the euro, the rate it has been since the creation of the currency board nearly two decades ago.

                  Bulgaria’s president described the currency arrangement on Monday as “unshakeable” in a bid to calm fears about the country’s banks. The bigger risk, economists say, is of further damage to an already stuttering economy.

                  One peculiarity of the Bulgarian currency board is that it allows the central bank to act as a temporary lender of last resort to solvent banks.

                  Simon Quijano-Evans, economist at Commerzbank, thinks the government’s decision to recapitalise banks through the Bulgarian Development Bank and Deposit Guarantee Fund is designed “to avoid any confusion about the currency board set-up” and to bolster its credibility.

                  US Supreme Court rebuffs Madoff trustee

                  Posted on 30 June 2014 by

                  Financier Bernard Madoff passes the gathered press as he arrives at Manhattan Federal court on March 12 2009 in New York City. Madoff was expected to plead guilty to all 11 felony charges brought by prosecutors on financial misdoings, and could end up with a sentence of 150 years in prison. (Photo by Chris Hondros/Getty Images)©Getty

                  Bernard Madoff arriving at Manhattan Federal court in March 2009

                  The US Supreme Court has sheltered HSBC, UniCredit and UBS from facing more than $10bn in legal claims stemming from the Bernard Madoff Ponzi scheme.

                  The court rejected without comment an appeal from Irving Picard, the trustee liquidating Madoff’s securities firm, in the latest twist of the lengthy legal proceedings aimed at recovering billions of dollars in customer losses.

                    The decision upholds a lower US court ruling that rejected Mr Picard’s right to sue the banks for allegedly helping to facilitate the fraud on the grounds that the trustee lacked the standing to assert the common law claims.

                    Mr Picard had argued that the fraud could not have persisted for so long without “a network of financial institutions, feeder funds and individuals who participated in his fraud or acquiesced in it – just like any large-scale financial fraud.”

                    Amanda Remus, spokeswoman for the liquidators, said Mr Picard respected Monday’s ruling and is still pursuing $3.5bn in bankruptcy claims against these financial institutions.

                    The trustee is also appealing a separate court case in hopes of resurrecting racketeering claims potentially worth tens of billions of dollars against UniCredit.

                    HSBC declined to comment while UniCredit did not immediately respond to requests for comment. “We are pleased that the Supreme Court allowed the decision of the Second Circuit to stand,” UBS said.

                    Investors lost $17bn when Madoff’s scheme unravelled at the height of the financial crisis. The former chairman of the Nasdaq stock market, his clients ranged from individuals to big hedge funds. He pleaded guilty to fraud in 2009 and was sentenced to 150 years in prison and in March, five former lieutenants were found guilty of helping carry out and cover up the largest investment fraud in US history.

                    Mr Picard, who is acting as trustee on behalf of the Securities Investor Protection Corporation, has recovered $9.8bn in settlements and distributed $4.3bn to customers as part of the liquidation process so far.

                    Separately, the court on Monday also rejected a request to hear an appeal from victims of the $7bn Ponzi scheme of financier and cricket mogul Allen Stanford.

                    Fidelity doubles Quindell stake

                    Posted on 30 June 2014 by

                    Occupy Wall Street Starts May Day Protests Amid Rain in New York©Bloomberg

                    Fidelity, one of the world’s largest asset managers, has doubled its stake in Quindell, in a vote of confidence for the embattled claims management company.

                    The move comes as investors and short sellers debate whether Quindell represents a revolutionary new model for the insurance industry, or an overhyped start-up that exposes the risks of London’s junior stock market.

                      Fidelity disclosed in stock market filings on Monday that it now owns 10 per cent of Quindell’s shares, making it the company’s second-biggest investor after founder Robert Terry.

                      The fund manager started building a stake this year, shortly before a dossier of allegations from a US shortseller triggered a two-thirds fall in the company’s market value.

                      Quindell’s shares rose about 10 per cent in Monday trading, valuing Fidelity’s stake at around £90m.

                      Short-sellers including Gotham City Research have argued that Quindell’s profit margins cannot be reconciled with those of industry peers or of companies it has acquired.

                      However, retail investors have taken to online message boards to defend the company’s prospects vociferously, while Prudential and UBS each own more than 5 per cent of its shares.

                      Fidelity’s investment comes from its US-based arm, FMR LLC. Fidelity Worldwide Investment, which manages $275bn in funds from investors outside the US and Canada, said it does not own Quindell shares.

                      An increase in US-based investors may come as a relief to Mr Terry, who had to revise plans for a New York investor roadshow and remove details of Quindell’s New York office following Gotham City’s allegations.

                      Quindell has substantial operations in North America, employing about 1,500 people in Canada where it acquired a telematics business.

                      Fidelity’s stake building in Quindell comes as the company this month heralded a dramatic shift from car insurance to industrial deafness claims.

                      “Quindell have migrated our customer base from primarily [road traffic accident] led (80/20) to a mix of [road traffic/employer’s liability/public liability] led by hearing loss claims,” it said in an investor presentation.

                      The shift is likely to reduce the company’s cash flow, given that hearing loss claims take longer to process.

                      Quindell recently promoted the head of its services business as group chief executive, although it is unclear whether this will reduce the influence of Mr Terry, who owns 10.9 per cent of the company and who continues to have executive responsibilities as chairman.

                      The company implemented a 15-to-one share consolidation this month, after issuing billions of shares in part to finance acquisitions of legal, medical and telematics companies. It abandoned an attempt to move to the main London market, following objections from the UK Listing Authority.

                      Additional reporting by David Oakley.