Capital Markets, Financial

BGC Partners eyes new platform to trade US Treasuries

BGC Partners plans to launch a new platform to trade US Treasuries early next year, in a bid to return to a market in the middle of evolution, according to people familiar with the plans.  The company, spun out of Howard Lutnick’s Cantor Fitzgerald in 2004, sold eSpeed, the second-largest interdealer platform for trading Treasuries, […]

Continue Reading

Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

Continue Reading

Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

Continue Reading

Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

Continue Reading

Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

Continue Reading

Archive | November, 2016

PBoC shuffle leaves Party control intact

Posted on 10 February 2015 by

Two Chinese paramilitary police officers (R) patrol in front of the headquarters of the People's Bank of China in Beijing on December 9, 2011. China's decade-long membership of the WTO has helped power its blistering growth, but analysts say many barriers remain for foreign firms wanting to invest in the world's second-largest economy. AFP PHOTO / LIU JIN©AFP

Two of the four deputy governors at China’s central bank will be replaced in the coming months, local media have reported, in a reshuffle that highlights the People’s Bank of China’s lack of independence.

Hu Xiaolian and Li Dongrong will vacate their posts, leaving Pan Gongsheng and Yi Gang as the remaining deputies to Zhou Xiaochuan, PBoC governor, who is also expected to step down in the next few years after holding the post since 2003.

    Analysts say the move is unlikely to affect monetary policy in a system where senior Communist party officials outside the central bank approve key decisions such as changes to the benchmark interest rate, and adjustments of the overall monetary stance from “loose” to “steady” to “tight”, and nuanced variations in between.

    PBOC officials are thought to have greater latitude, however, to makes less impactful policy changes such as adjustments to required reserve ratio.

    Like senior positions at other government agencies, central bank deputies are selected by the Party’s powerful Organization Department, an organ of the Central Committee and its Secretariat.

    Financial magazine Caixin reported that Ms Hu, 56, who heads PBoC’s Shanghai branch as well as two divisions responsible for monetary policy, will become chairman of the China Export-Import Bank, replacing retiring chairman Li Ruogu, himself a former PBoC deputy governor. Ms Hu has served as deputy governor since 2005.

    Mr Li, 60, will retire and be replaced by Guo Qingping, who serves as a PBoC governor’s assistant, Caixin reported. Mr Li has served in his current role since 2012.

    That move would fit a pattern in which senior central bank roles are used as training grounds for important positions at state-owned banks.

    Liu Shiyu, who was appointed last year as chairman of Agricultural Bank of China, the country’s third-largest commercial bank, had served as a deputy PBoC governor since 2006. Wang Hongzhang, chairman of China Construction Bank, the second largest bank, also served at PBoC for 12 years.

    Apart from heading major banks, former central bank officials are also frequently posted to China UnionPay, the state-owned payments clearing network that has a near monopoly within China and increasingly competes with with Visa and Mastercard abroad.

    Rumours have also swirled around the timing of Mr Zhou’s retirement. At 67, he has already passed the usual retirement age of 65, a threshold that is codified in Party rules but that is not always binding.

    UBS warns on litigation and Swiss franc

    Posted on 10 February 2015 by

    A UBS logo sits outside a glass bridge as a man walks between office blocks at UBS AG's headquarters in Zurich, Switzerland, on Tuesday, May 6, 2014. UBS, Switzerland's largest bank, reported first-quarter profit that beat analysts' estimates and said it plans a special payout for investors. Photographer: Philipp Schmidli/Bloomberg©Bloomberg

    UBS has warned that the Swiss currency turmoil, quantitative easing in Europe and the continued threat of litigation are likely to weigh on earnings in 2015 after recording a 13 per cent profit increase in 2014.

    The Swiss bank said on Tuesday its profitability was likely to be affected by the Swiss National Bank’s surprise decision last month to remove the cap on the Swiss franc, which initially sent it soaring 30 per cent against the euro.

      “The recent moves by the Swiss National Bank to remove the [currency cap] and by the European Central Bank to increase its balance sheet expansion via quantitative easing have added additional challenges to financial markets and to Swiss-based financial services firms specifically,“ the bank said in its fourth-quarter earnings report.

      “The increased value of the Swiss franc relative to other currencies, especially the US dollar and the euro, and negative interest rates in the eurozone and Switzerland will put pressure on our profitability and, if they persist, on some of our targeted performance levels.”

      Despite these pressures, UBS doubled the size of its ordinary dividend for 2014 after net profits rose to SFr3.6bn ($3.9bn). It reported posted net profits of SFr963m in the fourth quarter, up from SFr917m in the same period a year ago, beating analyst expectations of SFr937m, according to a Reuters poll.

      Analysts had been expecting the Zurich-based lender to at least match 2013’s ordinary dividend of SFr0.25, on top of the special dividend of SFr0.25 it announced last year after revamping its corporate structure.

      UBS also set aside another SFr176m in legal provisions, adding to the SFr1.86bn it put aside in the third quarter. It warned that further litigation and regulatory penalties were likely.

      “At this point in time, we believe that the industry continues to operate in an environment where charges associated with litigation, regulatory and similar matters will remain elevated for the foreseeable future and we continue to be exposed to a number of significant claims and regulatory matters,” it said.

      Investors were particularly concerned by the fact that UBS is again being investigated for possibly helping clients evade US taxes, six years after the Swiss bank paid a $780m penalty for similar allegations.

      The US attorney’s office of the eastern district of New York and the FBI are looking into whether UBS used what are known as bearer securities to help clients evade US taxes.

      Guy de Blonay, fund manager at UK asset manager Jupiter, said: “Litigation issues are top of the agenda in terms of concerns. [The recent US allegation] is an important reminder to investors that further litigation issues are not fading as quickly as some may have been expecting.”

      Another fund manager, however, who requested anonymity, predicted further legal provisions would have little impact on investor sentiment towards the bank. “These things keep flowing on a daily basis, we have become immune to big numbers when it comes to legal redress. [BNP Paribas] got fined [a record $8.9bn last year] and the market hardly blinked,” he said.

      SFr963m

      UBS’s net profits for the fourth-quarter

      Sergio Ermotti, UBS chief executive, said: “I am pleased with what we have achieved in 2014. The results are strong, our capital is strong and we’ve completed our strategic transformation, preparing us well for the future. While it’s premature to draw a conclusion about the quarter, we’ve had a solid start to the year. This gives us additional confidence to propose a significant capital return to our shareholders.”

      Shares in UBS have fallen 16 per cent over the past 12 months, compared to a 26.5 per cent decline for its biggest rival Credit Suisse. Both banks have significantly underperformed the Stoxx Europe 600 banks index, which is down 3.85 per cent over the same period.

      UBS has significantly reduced the size of its investment bank in the last two years to less than 30 per cent of the group’s total assets, and instead focused on its less capital intensive wealth arm, the largest wealth business in the world by assets.

      The wealth arm recorded a 4 per cent year-on-year profit increase to SFr2.5bn, its highest level since 2008, after SFr34.4bn of client inflows. Investors were disappointed, however, by the fall in gross margins at the unit, which were down by 82 basis points in the fourth quarter.

      Matthew Beesley, global head of equities at fund manager Henderson, said: “The raising of the dividend, which has clearly been approved by the local regulator, is encouraging and a sign of confidence in the earnings base of the business.

      “Investors won’t be able to ignore the disappointing wealth management gross margin and the softer than expected net new money flow. For UBS and Credit Suisse to attract wealth management-like valuations, they need to deliver stronger flows and at a higher margin.”

      IEA says scope of US shale output fall to be limited

      Posted on 10 February 2015 by

      The dramatic fall in the oil price will lead to a swift pullback in US shale oil production, although the scale of the output decline will be “limited in scope”, the world’s leading energy forecaster said on Tuesday.

      The supply build-up hanging over the oil market will grind to a halt as early as July, the International Energy Agency said in its closely watched annual report setting out its five-year outlook. But while “the price correction will cause the North American supply ‘party’ to mark a pause; it will not bring it to an end,” it added.

        But Maria van der Hoeven, executive director of the wealthy nations’ energy watchdog, said the US shale industry may emerge even “stronger” towards the end of the decade as prices recover.

        “Shale oil has changed the market,” said Ms van der Hoeven. “Opec’s move to let the market rebalance itself is a reflection of that fact. It may have effectively turned light tight oil into the new swing producer, but it will not drive it out of the market.”

        Jorge Montepeque, the global director of market reporting at Platts, echoed this sentiment at a London conference on Monday. The price at which US shale plays are profitable are a “moving target” as technological advances improve the longevity of wells and lower prices drive down costs. “The whole pricing structure is coming down . . .[there is a] need to have a rethink.”

        Oil prices have halved since June as relentless US production and sustained Opec output coincided with a demand slowdown in Asia and Europe. The rout gathered pace in November when the oil producers’ cartel announced it would maintain production at 30m barrels a day, rather than cut output to shore up prices.

        Opec — led by its largest producer and effective leader Saudi Arabia — has sought to maintain its market share amid growing supply from non-Opec rivals. A period of lower prices as dictated by the market, the cartel said, would put pressure on these higher-cost producers from the US, to Brazil and Russia.

        In recent weeks the world’s biggest oil companies have announced a series of investment cuts and data has shown a drop in drilling activity. The IEA predicts non-Opec oil supply will grow by 3.4m b/d to 60m b/d in 2020, at an annual average of 570,000 b/d. This is significantly lower than growth of 1m b/d over the past five years and record growth of 1.9m b/d in 2014.

        Total oil growth from the US and Canada will slow to about 500,000 b/d per year through to 2020 compared with average growth of 1.1m b/d in the last four years, but it will remain the backbone of US remaining the backbone of non-Opec supply growth.

        But as cuts in spending take a toll on non-Opec growth the IEA estimates that the “call on Opec and stock change” will rise in 2016, reaching 32.1 mb/d by 2020 — or 2.7m b/d above the call in 2014. On Monday, Opec said demand for its own oil will rise as soon as this year amid a slowdown in the US oil industry.

        “Opec’s battle for market share may only just be starting,” said the IEA. But “a bigger challenge for Opec will be to make room for an expanding Iraq [a major source of production growth after the US in 2014] and an Iran that — at some stage — becomes unshackled from rigorous international sanctions.”

        At the same time, lower oil prices will not “provide as strong a boon to oil demand growth as might be expected,” said the IEA, which revised lower its demand growth forecasts to an annual 1.2 per cent over the next six years to around 99.1m b/d by 2020. This compares to the pre-recession growth rate of 1.9 per cent a year between 2001-2007.

        “The fact that lacklustre demand was part of the reason for the recent price collapse suggests that the sell-off will only go so far in boosting economic growth and lifting oil demand,” the agency said. “Indeed, the recent price decline is expected to have only a marginal impact on global demand growth for the remainder of the decade.”

        Powell rejects calls to audit the Fed

        Posted on 09 February 2015 by

        Jerome Powell, governor of the U.S. Federal Reserve, listens during an open meeting of the Board of Governors of the Federal Reserve in Washington, D.C., U.S., on Tuesday, April 8, 2014. Federal Reserve Chairman Janet Yellen said today "considerable slack" in the labor market is evidence that the central bank's unprecedented accommodation will still be needed for "some time" to combat unemployment. Photographer: Andrew Harrer/Bloomberg *** Local Caption *** Jerome Powell©Bloomberg

        The Federal Reserve governor known as the “lone Republican” on the US central bank’s board has fired back at calls from within his party for the Fed’s monetary policy to be subjected to regular audits by Congress.

        In a speech in Washington on Monday, Fed governor Jerome Powell defended its unorthodox actions in response to the 2008 financial crisis, calling them “unprecedented in scale and scope” and crediting them with fuelling a US economic recovery stronger than those in other advanced economies.

          “While these actions were extraordinary and in some respects unprecedented, they were taken because the threats posed by the crisis were also without precedent, even in the events that led to the Great Depression,” said Mr Powell.

          He added, however, that imposing regular policy audits on the central bank — a proposal pushed by Republican senator and presidential hopeful Rand Paul and conservatives within the party — would threaten the central bank’s ability to respond nimbly to crises.

          “Audit the Fed also risks inserting the Congress directly into monetary policy decision-making, reversing decades of deliberate effort by the Congress to insulate the Fed from political pressure in carrying out its day-to-day duties,” he told an audience at Catholic University in Washington.

          “Long experience, in the United States and in other advanced economies, has demonstrated that monetary policy is most successful when decisions are rendered independent of influence by elected officials,” said Mr Powell, who was appointed to the Fed board in 2012.

          The experience of the 1970s when political pressure influenced the Fed to keep monetary policy loose and allow inflation to run higher had shown the cost of allowing elected officials to push for policies in their “short-term political interests”, he said. It also led in 1977 to a decision to exempt monetary policy from reviews by Congress’ General Accounting Office, which was often subject to political pressure.

          “This independence has served the nation well,” Mr Powell said. “Over the 20 years or so prior to the crisis, the Federal Reserve was able to maintain low and stable inflation, and recessions were brief and mild.”

          “That is not to say that the Fed got everything just right during this period. But it seems to me that any pre-crisis shortcomings were in regulation and supervision by the Fed and other agencies, rather than in monetary policy.”

          Mr Powell’s intervention in the debate is not the first from the Fed. Janet Yellen, the Fed’s chairwoman, has said she would fight any bid by Congress to impose audits of monetary policy. President Barack Obama has also indicated he would veto any such bill that passed Congress.

          A centrist Republican who served in the Treasury during the presidency of George H.W. Bush, Mr Powell is unlikely to hold much sway with the right of the party. But Monday’s speech comes as the campaign to impose audits on the Fed is gaining backers in Congress and Mr Paul has been using it as a rallying cry in heartland campaign speeches.

          “Anybody here want to audit the Fed? Anybody feel that the Fed’s out to get us?” the Kentucky senator asked a rally in Iowa on Friday.

          The US central bank was leveraged three times more highly than Lehman Brothers was when it went bust at the height of the 2008 crisis and in dire need of greater oversight, Mr Paul told the audience in Des Moines.

          Rising economic inequality in the US and swings in the dollar were the result of the central bank’s actions in recent years, Mr Paul said.

          “Once upon a time they said your dollar is good as gold,” he told the crowd. “You know what it’s backed by now? Used car loans, bad home loans, distressed assets and derivatives.”

          Rome foresees economic benefit in euro’s fall

          Posted on 09 February 2015 by

          Italy has welcomed the euro’s fall against the dollar, highlighting Rome’s hope that a weaker currency would help boost the eurozone’s economic prospects.

          Pier Carlo Padoan, Italy’s finance minister, argued that the decline in the euro — which traded at $1.13 on Monday compared with $1.39 in May — was taking the currency to a level more consistent with economic fundamentals.

            Speaking at an Institute of International Finance event in Istanbul ahead of a meeting of the G20 group of finance ministers and central bank governors in the city, Mr Padoan claimed: “The macro picture in Europe . . . is now a little bit more encouraging than it was a few months ago”.

            He said the euro was “approaching . . . a more fundamental, consistent exchange rate”, and also referred to the “expected impact of [European Central Bank] quantitative easing in the next 18 months — and maybe more if need be.”

            Mr Padoan’s comments come as Italy is expected to generate economic growth this year after three years of recession. The Bank of Italy, the European Commission and many private forecasters are expecting growth of at least 0.5 per cent in 2015 in the eurozone’s third-largest economy, which has struggled to cope with high unemployment, weak consumer demand and structural problems.

            The ECB’s QE programme is regarded as having contributed to the euro’s recent decline against the dollar. Italy’s economy benefits disproportionately from a weaker currency because some of its most competitive industries — from manufacturing to food and wine — depend on exports.

            Mr Padoan also cited the beneficial economic effect of lower oil prices and called for more infrastructure investment. “We need to be bolder in Europe in terms of risk-taking,” he said.

            The finance minister added that structural reforms “were very much needed at the European and national level”, both in terms of intensity and implementation.

            But Going for Growth, an OECD report issued on Monday, said such reforms had lost impetus among the body’s members since the post-financial crisis peak, “with OECD countries showing signs of reform slowdown in almost all areas”.

            In an interview with the Financial Times, Angel Gurría, OECD secretary-general, described the slowdown as his “single most important concern”.

            He argued that countries that had implemented wide-ranging reforms under market pressure, such as Spain, had “moved faster and are going to be . . . better prepared as we move out of the crisis zone”.

            Mr Gurría said: “Part of our role is to document those transformations in order to tell the rest of the world: ‘Reform works. Get it right, but give it time’.”

            Matteo Renzi, Italian prime minister, has set out an ambitious reform agenda since taking office a year ago, but much of those plans have yet to be approved by parliament or implemented.

            Ali Babacan, Turkey’s deputy prime minister, added that Ankara, which holds the G20 presidency, favoured specific investment targets but was unsure that other G20 countries would sign up to such a proposal.

            Deutsche sells 10-year debt at 2.75%

            Posted on 09 February 2015 by

            Deutsche Bank has issued its lowest yielding loss-absorbing bond to date, underlining how record low government borrowing costs are trickling down to the financial sector.

            The coupon on the €1.25bn bond, which matures in February 2025, was 2.75 per cent, one of the lowest Germany’s largest lender has achieved on a subordinated euro-denominated bond. The issue was four times subscribed, according to the bank.

              The sale underlines investors’ willingness to shoulder increasing risks in their hunt for yield as banks seek to take advantage of favourable market conditions to bolster their regulatory capital buffers.

              German government borrowing costs have plumbed lows ever since the European Central Bank announced it would begin a €60bn per month asset purchase programme next month. A 10-year Bund presently yields 0.35 per cent while five-year Bund yields have descended into negative territory, in effect meaning investors pay to hold them.

              The move is the latest in a string of efforts by Deutsche to improve its capital position, which has long been a source of concern for investors.

              Last spring, the bank launched an €8bn capital-raising as the financial strength of Europe’s largest lenders came into focus ahead of a series of stress tests carried out by the European Central Bank.

              In 2013, the lender raised nearly €3bn through an institutional placing of 90m shares, just short of 10 per cent of its then market value.

              The bulk of demand for the latest bond came from institutional investors, Deutsche said.

              The issue comes at a time when banks around the world have dramatically increased the amount of debt they issue, with global financial institutions more than doubling their debt issuance to $274.5bn last year, according to Dealogic,

              The surge was driven by a combination of ultra-low interest rates, and incoming Basel III rules stipulating that banks must hold capital, a mix of equity and debt that can potentially incur losses, equivalent to a minimum of 8 per cent of risk-weighted assets.

              Analysts expect debt capital volumes to remain robust for at least the next few years, as global regulators consider increasing minimum loss-absorbing capital levels for the biggest global institutions.

              Raiffeisen to scale back operations abroad

              Posted on 09 February 2015 by

              Raiffeisen Bank International AG Branches As Company Looks To Scale Down©Bloomberg

              Raiffeisen is to sell its Polish and Slovenian businesses and scale back its international operations after announcing a €493m profit loss for 2014 and scrapping its dividend.

              The Austrian bank, which has struggled with the sudden appreciation of the Swiss franc and Ukraine crisis, said these measures would help it to achieve a core capital ratio of 12 per cent by 2017.

                The lender said in an announcement on Monday night that it would also scale back or exit its smaller operations in Asia and the US, significantly reduce its exposure to Russia and Ukraine and sell its Slovakian online bank, Zuno.

                The structural overhaul, which is intended to reduce the bank’s risk weighted assets by €16bn by the end of 2017, is subject to approval by the bank’s supervisory board.

                Investors had been fretting about the impact of the decline of the rouble on Raiffeisen’s Russian business – by far its biggest source of profits – since the conflict in Ukraine escalated last year. Its share price has fallen 61 per cent over the past 12 months.

                As the Swiss franc has soared in the wake of the Swiss National Bank’s unexpected decision to stop capping it against the euro last month, investors have also begun to worry that some of Raiffeisen’s central European customers who took out loans in Swiss francs will have difficulty repaying their debts.

                Analysts at Berenberg have forecast that Raiffeisen may need to take a further €4bn of writedowns on its exposure to Russia, which at €22bn is greater than any other foreign bank.

                Last year, the Austrian bank completed a €2.8bn rights issue to bolster its capital levels ahead of the European Central Bank’s stress tests. But its shares have lost more than half their value since then and the bank is constrained from doing a further share issue by its co-operative ownership structure.

                Raiffeisen is 60 per cent owned by a co-operative group that is ultimately owned by 1.7m Austrian private individuals, adding to the political sensitivity around the fortunes of the group.

                Hungary deepens control of banking sector

                Posted on 09 February 2015 by

                Austria’s Erste Group is poised to sell up to 30 per cent of its Hungarian operations to Hungarian government and the European Bank for Reconstruction and Development in a deal that deepens Budapest’s control of its banking sector.

                Although Hungarian bank OTP is the largest lender in the sector, most of its competitors are foreign-owned subsidiaries, notably Austria’s Erste and Raiffeisen, Italy’s UniCredit and Banca Intesa SanPaolo, and Belgium’s KBC.

                  The move tightens the Hungarian government’s grip on the banking sector which has suffered crippling losses since the 2008 financial crisis. The government introduced a tax on the banking sector following the financial crisis to help it reduce fiscal deficits and meet EU budget targets.

                  Speaking at a press conference in Hungary’s parliament with Erste chief executive Andreas Treichl, prime minister Viktor Orban said he had agreed a plan with the EBRD to cut Europe’s highest banking tax and increase regulatory certainty for lenders saying he had achieved his aim of ending foreign domination of the sector.

                  Ending “foreign influence” in the banking sector has been a priority for Mr Orban’s government, which bought GE Capital’s Budapest Bank and Bayerische Landesbank’s MKB Bank in 2014 thus achieving majority Hungarian ownership of the sector.

                  “When we made the decision to introduce the banking tax, we promised to reduce its rate to the European average as soon as the Hungarian economic situation allows for it,” he told reporters, adding: “After long struggles and many efforts we have now arrived to the moment of opening a new chapter in the history of the banking sector.”

                  Under the terms of a memorandum, Mr Orban has committed to reducing Europe’s highest banking tax over the next three years and also to “refrain from implementing new laws or measures that may have a negative impact on the profitability of the banking sector”. Budapest has also agreed to ensure fair treatment of all financial institutions and to divest itself of majority stakes in other banks by 2019.

                  Hungary’s bank tax has generated 843bn forints ($3.1bn) since it was introduced as a temporary measure in September 2010. In the same year the government effectively nationalised more than $12bn of private pension funds and applied sectoral taxes to energy, telecommunications and retail companies. Soon afterwards, foreign banks cut borrowing as defaults on foreign currency loans spiralled during the financial crisis.

                  On the foot of the memorandum, Andreas Treichl, chief executive of Erste Group, said that he had invited the EBRD and the Hungarian government to acquire minority stakes of up to 15 per cent each in Erste Bank Hungary Zrt. Erste Bank Hungary has said that banking charges — which totalled €94m in 2014 — had been a drag on profitability since 2010. The bank has a loan book of just under €4bn in Hungary.

                  Mr Treichl told reporters that a price had not yet been agreed for the proposed sale of a minority stake to the government and declined to specify what Erste Group planned to do with the capital raised. He added the bank was interested in Citibank’s Hungarian and Czech operations, which have been put up for sale.

                  Analysts responded to the announcements with scepticism, noting that a reduction of Hungary’s onerous banking tax had long been promised and numerous other sectoral taxes penalised foreign investors in Hungary.

                  “This is not a retreat from unconventional measures at all,” said Peter Attard Montalto, an analyst at Nomura. “If anything it’s the bedding in of these measures as the government reacts to its new position where it now owns or has some involvement in a very substantial chunk of Hungarian bank assets.”

                  In addition to reducing the bank tax, Mr Orban’s government has also committed to reforming its controversial media advertising tax, which applies almost exclusively to Bertelsmann-owned RTL group. Mihaly Varga, economy minister, last week said a flat rate 5 per cent tax on advertising income would be introduced, relieving RTL of charges of 50 per cent on its ad revenue.

                  Although the banking and media taxes are among the most controversial measures in the so-called “Orbanomics” toolkit, numerous other sectoral taxes remain in place. Mr Orban noted that even following reductions in 2016 and 2017, the tax would remain the highest of its kind in Europe.

                  Politicians press for HSBC clampdown

                  Posted on 09 February 2015 by

                  The HSBC Holdings Plc headquarters is seen in Canary Wharf, London, U.K., on Monday, March 7, 2011. HSBC Holdings Plc, Europe's biggest bank, said it prefers to keep its headquarters in London, amid speculation the lender is preparing to quit the U.K. Photographer: Jason Alden/Bloomberg©Bloomberg

                  US and UK politicians called for a regulatory clampdown on HSBC after Europe’s biggest bank by assets was hit by detailed allegations that it colluded in tax-dodging by clients of its Swiss operation.

                  The biggest London-listed lender has been forced to admit that its Swiss private bank may have held accounts for tax-dodging customers after account details of more than 100,000 of its clients were leaked to news organisations.

                    The revelations, including claims that HSBC’s Swiss unit handed large, untraceable bricks of cash in foreign currencies to clients and colluded with them to conceal “black” accounts from tax authorities, provoked a political storm in several countries.

                    In the UK, a Treasury minister said the law might need to be changed to allow the authorities to prosecute senior bankers who “colluded” in tax evasion.

                    Danny Alexander, Treasury chief secretary, suggested there was a gap in the law: “Financial institutions who are proven to have colluded with tax evaders should face the full force of the law. If that means a change in the law, or new powers for regulators, that is what we will do.”

                    HSBC is one of about a dozen banks being investigated by the US Department of Justice as part of a broad probe into banks in Switzerland that allegedly helped their clients avoid US taxes. It is also among the banks being investigated for alleged manipulation of foreign exchange markets.

                    In 2012, HSBC agreed to pay $1.9bn and entered into a deferred prosecution agreement over money laundering allegations related to countries under US sanctions, such as Iran, and Latin American drug cartels.

                    The latest disclosures could put additional pressure on the DoJ to be tough on HSBC in the pending probes. “The recent revelations about HSBC’s efforts to shield individuals from the laws of the US and other nations are just the latest in a long list of troubling misdeeds by the bank,” said Congresswoman Maxine Waters, the senior Democrat on the House Financial Services Committee.

                    “While HSBC has paid billions in fines to the United States and other nations, it outrages me that not a single individual has been prosecuted or held accountable.”

                    FT View: HSBC revelations an invitation to prosecute

                    A logo sits on a sign outside a HSBC Holdings Plc bank branch in London

                    Criminal prosecutions not bargains are the way to deter tax evasion

                    Continue reading

                    British ministers were under pressure on Monday to explain why the country’s authorities had not taken legal action against HSBC when the bank was facing criminal investigations and charges in France, Belgium, the US and Argentina.

                    Vince Cable, business secretary, seized on HSBC’s recent dismissal of Sue Shelley, the private bank’s head of compliance in Luxembourg who flagged up tax-dodging problems, as evidence that it may still not have cleaned up its act despite claiming to have done so.

                    “I have been particularly troubled at suggestions that some elements of these practices may have continued much more recently, notably the allegations of your private bank’s former head of compliance in Luxembourg,” said Mr Cable.

                    Treasury officials said the UK was not prosecuting HSBC because the information was given to HM Revenue & Customs by the French authorities under a double taxation treaty, which forbids the data being passed to other agencies such as the Crown Prosecution Service. They said the data could only be used for tax collection purposes.

                    While HSBC has paid billions in fines to the US and other nations, it outrages me that not a single individual has been prosecuted or held accountable

                    – US Congresswoman Maxine Waters

                    The Labour opposition focused its attack on the appointment by David Cameron of Lord Green, former HSBC chief executive and chairman, as a trade minister in 2011 — after details of the Swiss tax evasion scandal became known.

                    HSBC said in a statement: “We acknowledge and are accountable for past compliance and control failures.” It added: “We have taken significant steps over the past several years to implement reforms and exit clients who do not meet strict new HSBC standards.”

                    An international group of news outlets received leaked client bank account files that were stolen in 2007 by Hervé Falciani, an IT expert at HSBC’s Swiss operation, who later fled to France and handed the files to the French government.

                    HSBC revelations are invite to prosecute

                    Posted on 09 February 2015 by

                    Revelations of large scale tax evasion facilitated by banking group HSBC should embarrass more than just the bank and individuals concerned. The Swiss authorities ought to blush at their decision to prosecute whistleblower Hervé Falciani rather than ask questions of their banking culture. Many may also question the UK government’s appointment of former HSBC boss Stephen Green as trade minister in 2011.

                    But the toughest grilling should be saved for Britain’s HM Revenue & Customs. Like other EU tax authorities, they have long known the identity of thousands of Swiss bank account holders. Their first reaction was to maximise the funds to be recouped from any newly revealed tax evaders — understandably, since raising tax is the department’s raison d’être. But in the light of what is now known the question is whether HMRC were too lenient, and should have relied more heavily on criminal prosecutions of what appears to be blatant criminal activity.

                      It is not new for HMRC to be accused of leniency. Margaret Hodge, the feisty chair of the Public Accounts Committee, has charged it with losing its nerve in battles against corporate tax avoidance. She also accuses the government of being too willing to bargain with secret account holders, contrasting this with the harsh treatment meted out to those claiming too much benefit.

                      The initial reaction of HMRC to the Falciani revelations was indeed pragmatic. Faced with a potential 6,000 tax evaders they offered a 30-day window to confess in return for reduced penalties. They had good reasons for an unwillingness to prosecute immediately. While this week’s revelations make tax evasion appear almost comically blatant — brick-sized wads of foreign currency, clients disguised by code-names — criminal prosecutions are difficult, rare and expensive. Establishing a fair line between honest mistakes and deliberate fraud is hard. HMRC’s record is not good. As a result, just one prosecution of suspects on the Falciani list has taken place, with 13 investigations ongoing.

                      If prosecutions cost more than they raise it is understandable that HMRC prefers one bird in the hand over two in the bush. And despite the regular virulence of Ms Hodge’s criticisms, it is unfair to accuse HMRC of failing to do its job. The National Audit Office praised HMRC’s management for maximising revenue and cutting costs.
                      Nor are they persistently shy of going to court: the number of prosecutions for tax evasion rose by a third in the 2013/14 tax year.

                      But Britain has raised just £130m from individuals on the Falciani list — less than France despite UK citizens holding almost twice as much money. Two years ago the government anticipated raising £3bn from a deal with Switzerland to let secret account holders regularise their affairs. This now looks like being a large overestimate. In the time since, governments everywhere have agreed to greater exchange of information on international bank accounts, to make identifying tell-tale gaps and inconsistencies much easier.

                      All of these factors — alongside the scale of the evasion revealed this week — swing the balance towards HMRC taking a more aggressive approach. Moreover, the value of a successful prosecution lies as much in the chill it casts over other would-be offenders, and may be much greater than the money directly raised. No one who commits a crime should be able to bargain for a pardon. For a long time British tax evaders felt they could relax once they reached the Alps. To puncture this illusion, more should face time in a criminal court for bilking other taxpayers.