Banks

Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

Continue Reading

Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

Continue Reading

Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

Continue Reading

Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

Continue Reading

Property

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 […]

Continue Reading

Archive | November, 2016

RBC loses Delaware Supreme Court M&A case

Posted on 30 November 2015 by

©Getty

Royal Bank of Canada has been ordered by the Delaware Supreme Court to pay more than $75m for giving tainted advice on a 2011 buyout deal, a decision that is likely to have far reaching consequences for Wall Street’s dealmakers.

The court upheld a 2014 ruling that found RBC had “aided and abetted breaches of fiduciary duty by former directors”, who should have secured the best deal possible for shareholders of Rural/Metro Corporation, when it was sold to Warburg Pincus, the private equity firm.

    In last year’s ruling, Judge Travis Laster said that the Canadian investment bank had pushed to close a quick sale rather than advising the seller to seek a higher price. The trial uncovered evidence that RBC had slanted its analysis and advice to secure lucrative financing assignments. RBC failed to disclose that it was also trying to secure a role in providing debt finance to Warburg for its acquisition. Rural/Metro, an ambulance operator, was sold for $728m.

    RBC said in a statement: “We are disappointed with the court’s determination but respect its decision.”

    The RBC case had drawn particular interest because the size of judgment was more than 10 times the fee of about $5m that RBC earned on the transaction.

    The decision to uphold the ruling is likely to send shockwaves across Wall Street as dealmakers are concerned about Delaware judges’ zeal to come after them for giving bad advice on deals.

    While shareholder lawsuits against boards of selling companies have become commonplace in Delaware, the legal home of most US companies, deal advisers have generally escaped financial sanction. However, in recent years, lawsuits have increasingly targeted bankers over potential conflicts of interest.

    In last year’s ruling the court said that “the threat of liability” would add pressure on “gatekeepers” — a code for bankers — to give sound advice on transactions to boards. The Delaware Supreme Court rejected such characterisation in its ruling on Monday.

    Aberdeen’s effort to diversify falls short

    Posted on 30 November 2015 by

    You need JavaScript active on your browser in order to see this video.

    No video

    Little more than 18 months ago Aberdeen Asset Management bought the UK investment arm of Lloyds Banking Group transforming it into the biggest listed investment company in Europe. On Monday it suffered its 10th consecutive quarter of net fund outflows.

    The aim of the Scottish Widows Investment Partnership (Swip) deal with Lloyds was to diversify Aberdeen’s asset mix and reduce the threat of outflows in the event of an emerging market downturn. Doubts are now being raised, however, about the efficacy of that strategy.

      The Scottish-based investment group reported almost £13bn of outflows from its funds in the three months to the end of September as investors fret over the company’s exposure to turmoil in emerging markets.

      Net outflows for the full year ran close to £34bn and the concern for shareholders and for Martin Gilbert, the co-founder and chief executive of the 32-year-old fund company, is that next year will be worse.

      One large shareholder in the company says: “Aberdeen is in the middle of a storm. They are in the wrong place at a bad time and I have to assume 2016 will also be a rough year for them. We are planning for that.”

      Darius McDermott, managing director of Chelsea Financial Services, the fund research group, agrees: “Emerging markets have been very much out of favour and Aberdeen’s style [of value investing] is also out of favour. It’s been a perfect storm for them.

      “If emerging markets continue to be weak and unloved, there will continue to be outflows.”

      The consensus among analysts is another £13bn is likely to be wiped off the assets of Aberdeen’s funds in the next three months.

      Justin Bates, a financial sector analyst at London stockbroker Liberum, says: “Based on the latest outflows, we will have to downgrade the number we have for net redemptions at Aberdeen for the next quarter. They have a real battle on their hands in 2016.”

      Although Aberdeen has made a flurry of small bolt-on acquisitions with the aim of diversifying, it remains heavily reliant on its blockbuster products. Global equities, emerging market equities and Asia-Pacific equities make up more than half of group revenues.

      Chart: Aberdeen outflows

      The asset manager’s attempt to broaden its expertise has also failed to impress some investors.

      Mr McDermott says: “[Aberdeen’s] flagship emerging market fund has had a difficult time. Other areas like global, UK and European equities are also not performing well. We have never [recommended] Aberdeen in [those asset classes].”

      One shareholder is particularly critical of Aberdeen’s efforts to push into multi-strategy funds following the Swip acquisition, where it already faces strong competition from rival asset managers Standard Life and Schroders.

      He is concerned that Aberdeen’s failure to attract assets towards other parts of its business could jeopardise its dividend payments next year.

      He says: “Aberdeen acquired a bunch of multi-strategy assets from Swip, but I think [the company] might be a bit late to the party. If there is another £15bn of outflows from equities, what would that mean in terms of the dividend?

      Chart: Hedge funds going short (funds and their Aberdeen holdings)

      “Unless multi-strategy picks up the slack — and I don’t think it will — [the company is] on a bit of a collision course in terms of its cash flow coverage.”

      A number of hedge fund companies, including Odey Asset Management and GLG, a division of Man Group, have begun shorting Aberdeen amid these difficulties.

      Mr Gilbert admits he would like to make another purchase similar to that of Swip.

      Those deals, however, are few and far between, he says.

      “I wish there was another Swip deal to do but there isn’t. We just have to do what we can in the meantime,” says Mr Gilbert, who has seen his company fall behind French rival Amundi and Schroders this year to become Europe’s third-largest listed fund house.

      Lex: Swips and chains

      Lex

      Asset management group has changed. The market has not noticed

      Full story

      For Mr Gilbert, a more achievable goal in the meantime is cutting costs. The company’s full results detailed a programme to “reduce annual operating costs by approximately £50m”.

      Questions have been raised about the chief executive’s ability to steer Aberdeen out of the current storm, although the consensus in the industry is that Mr Gilbert’s job remains safe for the time being.

      Mr McDermott of Chelsea Financial says: “Aberdeen is Martin Gilbert. He built it and led all these acquisitions. I’m very comfortable with him in charge.”

      But the Aberdeen shareholder strikes a more cautious note: “Martin is fine, for now.”

      Credit Suisse boosts US parental leave

      Posted on 30 November 2015 by

      Baby bottle and picture on desk©iStock

      BNP Paribas offers 12 weeks of paid parental leave to employees in the US; Morgan Stanley and Goldman Sachs offer 16. Now Credit Suisse has trumped them all, extending its package to 20 weeks, in a bid to attract and retain top staff in a world of long hours and flat or falling pay.

      On Monday the Zurich-headquartered bank said US employees would be eligible for an extra eight weeks of paid parental leave. The policy covers the bank’s 8,500 US workers and applies to both hourly and salaried employees who work at least 20 hours a week. Primary caregivers of either gender are covered by the policy and can take their leave at any time during the first 12 months after the baby is born.

        Elizabeth Donnelly, head of benefits for the Americas at Credit Suisse, said the move was prompted by a review of employees’ usage of the benefits system, which found that women were taking an average of 18 weeks’ leave — six of them unpaid.

        “We felt it was the right time to adjust our policies to be more competitive,” Ms Donnelly said, noting that she considered the bank’s competitors to be “tech firms and hedge funds”, in addition to financial-services firms.

        “I wouldn’t put it in terms of arms race; we just want to attract the best talent. We recognise that millennials are asking for more flexibility and a better integration between work and life,” she said.

        The improvements come as big banks look to hold on to their best people, at a time when some of the brightest of Wall Street are being lured away to Silicon Valley, where total pay can be higher and the hours less arduous.

        The big European banks, in particular, are feeling the squeeze, as some of the biggest overhaul their businesses under new leadership. John Cryan, the new head of Deutsche Bank, has signalled that bonuses may have to drop, if the bank is to boost profitability.

        Overall, pay in investment banks has fallen by a fifth over the past five years, according to research by PwC, as banks have been hit by a combination of tougher regulation and sluggish markets in the wake of the financial crisis.

        Mark Zuckerberg to take 2-month paternity leave

        Facebook’s Mark Zuckerberg speaks to employees

        Facebook chief to leave social network in hands of other senior staff

        Read more

        Facebook, whose chief executive Mark Zuckerberg has just had his first child, offers employees four months of paid leave, regardless of where they are located. Netflix, the California-based streaming service, offers unlimited leave to US employees within the first year after a child is born or adopted.

        Morgan Stanley’s policy allows employees who are the primary caregiver to have up to 16 weeks paid time off following the birth, adoption or placement of a foster child, a spokesperson said.

        Goldman Sachs has a three-page list of services to support working parents among its 36,900 employees, including lactation rooms and back-up childcare facilities, both offered on-site in New York and New Jersey. In recent years it has put its surrogacy and adoption packages on a par with its maternity packages.

        In January, Credit Suisse will roll out a new programme allowing employees travelling on business trips with infants to have a nanny accompany them. The bank will pay the nanny’s travel and subsistence costs.

        Changes to Credit Suisse’s parental leave policy were first reported by the Wall Street Journal.

        Additional reporting by James Shotter in Frankfurt

        Greek banks hit by bitcoin ransom demand

        Posted on 30 November 2015 by

        Side view of hacker using multiple computers to steal data at table.©Dreamstime

        Hackers have targeted three Greek banks for a third time in five days, demanding a ransom from each lender of 20,000 bitcoin (€7m), according to Greek police and the country’s central bank.

        A group calling itself the Armada Collective demanded the bitcoin ransom after staging its first attacks last Thursday, and then threatened a full collapse of the unnamed banks’ websites if they refused to pay up.

          These initial attacks took the form of a distributed denial of service — flooding the banks’ websites with requests so that they crashed under the strain. On Thursday, they succeeded in disrupting electronic transactions at all three banks for a short period, but customer information was protected, a police official said.

          “No bank responded to this extortion, so the same hackers tried again at the weekend and today,” the official said on Monday. “But we had strengthened our defence in the meantime, so no disruptions took place.”

          Cyber experts from the Greek central bank and the police electronic crime unit were monitoring the banks’ computer systems, a central bank official added.

          Internet banking has grown rapidly in Greece following the government’s introduction of capital controls in June, to curb a bank run that threatened a to bring down the financial system and force Greece out of the euro. More than 200,000 new internet back accounts have been registered since then, to facilitate customers making domestic transactions.

          “These attacks are extremely serious but we were able to boost security and add capacity with the help of local internet service providers,” said one senior Greek banker.

          Paul Vlissidis, technical director at cyber security group NCC, said the Armada Collective, which has carried out several attacks in recent months, attempts to extort money from businesses that are vulnerable to attack.

          “In effect, they say: ‘Give us bitcoin or we will take you off the internet’,” he explained. “They claim to be able to do significant amounts of damage.” He added that the level of ransom demanded by the group — often the equivalent of only a few thousand pounds — was “targeted at a level where there’s a temptation just to pay it and make it go away”.

          Toymaker Vtech hit by cyber attack

          A shopper passes by a display of Pink Nitro Notebooks from VTech at a Toys "R" Us, Thursday, October 5, 2006, in New York. Photographer: Daniel Barry/Bloomberg News.

          Group’s Hong Kong-listed shares suspended after database of 5m customers and some children stolen

          Read more

          However, Mr Vlissidis said there was no way of proving that the new attackers are from the ‘Armada Collective’, or simply trying to imitate the group by using “a similar modus operandi”.

          On Thursday, they demanded a ransom of 20,000 bitcoin from each of the three Greek banks, according to the central bank.

          DDoS attacks are a rudimentary technique in internet terms, but can result in websites being offline for several hours — causing significant disruption to a bank or consumer business.

          Several email providers have seen their services hit by hackers claiming to be from the Armada Collective group. In September, the Swiss government warned that the group was blackmailing local email providers.

          ProtonMail, an encrypted email start-up set up by CERN researchers in Geneva, was hit earlier this month, while similar groups HushMail, VFEMail and RunBox were also targeted within days of the attacks.

          Additional reporting by Ralph Atkins in Zurich

          BATS gearing up for second try at IPO

          Posted on 30 November 2015 by

          A trader looks at his screen as he works on the floor of the New York Stock Exchange shortly after the opening bell, in the Manhattan borough of New York January 24, 2014©Reuters/Lucas Jackson

          BATS Global Markets, the second-biggest US stock exchange operator, is gearing up for another attempted flotation, nearly four years after technical glitches on its own bourse forced it to withdraw its initial public offering.

          A listing is likely to take place as soon as next year, according to several people familiar with the matter. It could value the company at more than $2bn including debt, analysts said.

            Morgan Stanley and Citigroup, which led the failed 2012 listing are investors in BATS and working with the company again this time around. Other banks with stakes in BATS also are expected to participate, one person familiar with the deal said. Credit Suisse, Goldman Sachs, Bank of America, JPMorgan and Deutsche Bank are investors.

            BATS had to withdraw its first IPO after a “software bug” caused its share price to plunge after it started trading.

            The botched IPO came after the 2010 Flash Crash when US stocks see-sawed dramatically in a matter of minutes, and served to reinforce concerns about the proliferation of electronic trading and its effect on the safety of the market.

            A few months later in May of 2012, technical problems also ensnared Facebook’s listing on Nasdaq although that listing proceeded.

            BATS’ renewed plans to go public, which were first reported by the Wall Street Journal, come after it poached Chris Concannon, a former Nasdaq executive from high-frequency trading firm Virtu Financial in 2014. After initially serving as president, he replaced BATS co-founder Joe Ratterman as chief executive this year.

            In 2012, BATS was valued at $760m while it is now expected to garner a valuation of more than $2bn, including debt.

            Founded as an alternative trading venue in 2005, BATS has grown to be the second largest stock exchange by trading volumes after the New York Stock Exchange.

            In 2013, BATS merged with Direct Edge, another upstart competitor in what was the most high-profile consolidation of the crop of new trading venues that arose after US regulators tried to foster competition.

            BATS, Morgan Stanley and Citigroup declined to comment.

            Global defaults climb to six-year peak

            Posted on 30 November 2015 by

            Companies have defaulted on $78bn worth of debt so far this year, according to Standard & Poor’s, with 2015 set to finish with the highest number of worldwide defaults since 2009.

            The figures are the latest sign financial stress is beginning to rise for corporate borrowers, led by US oil and gas companies. The rising tide of defaults comes as investors reassess their exposure to companies, who have borrowed heavily in recent years against the backdrop of central bank policy suppressing interest rates.

              Without a rebound in oil and commodity prices, and the Federal Reserve seen lifting its policy rate higher for the first time in nine years, strategists predict a further rise in corporate defaults for 2016.

              The amount of debt owed by US companies relative to the size of their profits has been increasing, according to Alberto Gallo, macro credit strategist for RBS, with the proportion of the most indebted borrowers rising since mid- 2014.

              “This tail of highly-levered borrowers is likely to be vulnerable to rising rates,” he said in a note to clients.

              Corporate defaults occur when a borrower misses the payment on a bond, or files for bankruptcy protection from creditors, and the number of borrowers with a credit rating to do so in 2015 passed the century mark on Monday, according to S&P.

              Bank Uralsib was forced to cancel four outstanding subordinated debts worth Rbs21bn ($0.3bn) after receiving a package of Rbs81bn from Russia’s Deposit Insurance Authority.

              China Fishery Group, which failed to repay a $31m instalment of a $650m loan facility due earlier this month, took the total for defaults to 101.

              Abengoa began insolvency proceedings this week after investors lost patience with the heavily indebted renewable energy company in a process which could represent the largest ever Spanish corporate default.

              Based on the number of defaults in the first three quarters of the year, S&P expects 109 defaults by year-end, the largest total since 268 borrowers ran into problems in 2009. There were only 60 defaults worldwide in 2014.

              The greatest source of financial problems has been the collapse in the oil price, particularly among small oil and gas companies in the US which have accounted for more than half of defaults. Emerging market borrowers are responsible for a fifth of the total.

              While the proportion of outstanding bonds judged to be in default remains below long term averages, indicators of distress point to further problems ahead. For instance in the US, almost three-quarters of high yield bonds issued by oil and gas companies trade at a more than 10 percentage point spread over the yield on US Treasuries.

              S&P said: “While default rates across all rating categories over the last four quarters are substantially lower than their long-term averages, some stress is beginning to appear.”

              The rating agency added that the double B rating category’s trailing four-quarter default rate is at its highest point since the end of 2011.

              IMF gives strong backing to renminbi

              Posted on 30 November 2015 by

              Chinese one-hundred yuan banknotes are stacked for a photograph at the Korea Exchange Bank headquarters in Seoul, South Korea, on Thursday, Feb. 27, 2014. Photographer: SeongJoon Cho/Bloomberg©Bloomberg

              The IMF on Monday gave a major vote of confidence to China and its reform efforts, giving the renminbi greater weighting than the yen or pound as it included the RMB in its elite basket of reserve currencies.

              The vote by the board to make the RMB the fifth currency in the basket used to value the IMF’s own de facto currency followed months of deliberation at the fund and years of lobbying by a Beijing eager for the recognition.

                “The RMB’s elevation to the club of elite global reserve currencies is a big step for China and a significant one for the international monetary system,” said Eswar Prasad, professor of economics at Cornell University and a former IMF China mission chief.

                The renminbi will become the third biggest currency in the “special drawing rights” basket when it takes effect on October 1. The move is largely symbolic but Christine Lagarde, the IMF’s managing director, called it a major “milestone” in China’s economic reform “journey” and its integration into the global financial system.

                For China, the move is a validation of efforts over the past few years to liberalise financial markets and free up flows of funds into and out of China’s capital markets. In this regard, the IMF’s decision could strengthen the credibility of Beijing’s economic reformers against more conservative elements in the Xi Jinping administration.

                “It is a historic moment in international finance for an emerging market economy, with a per capita income barely a quarter that of other reserve currency economies, to be anointed as the issuer of one of the world’s major reserve currencies,” said Prof Prasad.

                But for the world’s financial system, the integration of China into the elite club of SDR currencies represents a significant challenge. The pre-existing SDR members are all western democracies with fully convertible currencies and open capital markets that are governed by the rule of law.

                China is different in every aspect; a developing nation ruled by a Communist party that has striven to limit the convertibility of its currency and shelter its domestic capital markets from foreign capital and influence.

                But the US, the IMF’s largest shareholder, said it had supported the decision to include the RMB.

                It marks the most significant change in the IMF’s basket since the euro replaced the Deutsche Mark and the French Franc in 1999.

                The US dollar will remain the biggest currency with a 41.73 per cent weighting followed by the euro with 30.93 per cent. But with a 10.92 per cent share the RMB will trump both the yen (8.33 per cent) and the pound sterling (8.09 per cent).

                US tries to boost access to 25m ‘unbanked’

                Posted on 30 November 2015 by

                epa04011170 US Secretary of Treasury Jack Lew holds a press conference with French Finance Minister Pierre Moscovici (not pictured) following their meeting at the Bercy Ministry in Paris, France, 07 January 2014. EPA/YOAN VALAT©EPA

                Jack Lew, US Treasury secretary

                The Obama administration is launching a new push to boost access to financial services for the millions of Americans without bank accounts in a bid to close the gap with other OECD countries.

                Like many advanced economies, the US has been a cheerleader for efforts to expand access to financial services in places like Africa that have yielded major results. The World Bank estimates that more than 700m people left the ranks of the “unbanked” globally over the past three years, although some 2bn people around the world still remain without bank accounts.

                  But in an interview with the Financial Times, Treasury secretary Jack Lew said that the US was also facing challenges at home where surveys show that more than 7 per cent of households — representing some 25m adults — do not have access to traditional bank accounts.

                  “We would like to have more of the millions of people who don’t have bank accounts part of the formal financial system,” said Mr Lew. “Part of the challenge is that old, traditional bank products started to become too expensive for people of limited means.”

                  While 93 per cent of adults in the US do have access to traditional bank accounts, that figure lags behind OECD countries such as Canada and the UK where 99 per cent of adults have bank accounts.

                  Mr Lew said that although the 2008 financial crisis had led to new financial stresses for many people, the problem of access to banking predated the crisis. He said poorer people were deterred from opening back accounts because of high minimum balance requirements and fees that were too expensive, which drove people to use high-fee options like cheque-cashing outlets instead.

                  In an effort to address that gap Mr Lew is hosting a conference beginning Tuesday in Washington that will produce recommendations on how to overcome the three obstacles to financial inclusion, which Mr Lew said were affordability, simplicity and safety. The Treasury secretary is expected to unveil specific measures in January.

                  “Why is it that millions of Americans aren’t saving when clearly it is in their best interests to start early? You look at the structures of the services and the products that are available. If you are going to put $5 a week away, it is pretty hard to find a commercial IRA that is really available to you.”

                  Among the possible solutions for the US, Mr Lew said, was looking at better ways to employ technology to offer banking services. Many of the gains in access to banking in developing countries, for example, have come as a result of the growing use of mobile phones and mobile payments.

                  “Finance has some similarities to telecoms where countries that were behind skipped a generation of technology and went right to either smartphones or smart cards,” said Mr Lew. “What we are seeing in the US now is that some of our more innovative and then some of our more traditional players in the financial community are adopting some of these practices.”

                  Part of the challenge is that old, traditional bank products started to become too expensive for people of limited means

                  – Jack Lew, Treasury secretary

                  Mr Lew said these practices included things like exploring how to better use technologies such as smart cards, or pre-paid debit cards, to expand access to financial services.

                  But a big part of the problem came down to fees, Mr Lew said, and the administration was working with the financial services industry to find ways to address that. Surveys have shown that those without access to bank accounts are among the most vulnerable in the US.

                  An FDIC survey last year found that the unbanked were concentrated in non-Asian minority and lower income households. Almost 58 per cent of unbanked households reported not having enough money to keep in an account to meet a minimum balance requirement while almost a third said high or unpredictable fees were the main reason not having an account.

                  Martin Gilbert’s Viennese whirl

                  Posted on 30 November 2015 by

                  Martin Gilbert of Aberdeen Asset Management.©Charlie Bibby/FT

                  Aberdeen’s Martin Gilbert

                  Vienna gave birth to the waltz, a gentler dance than the elbow-jabbing jig that Martin Gilbert has been dragged into by Opec meetings in the city. A depressed oil price has put sovereign wealth funds in a spin, and led them to withdraw capital from fund managers — leaving the boss of Aberdeen Asset Management to preside over a dispiriting drop in assets.

                  Oil has spiralled down in price by 42 per cent in a year, as Saudi Arabia has sought to squeeze out marginal US shale operations. This has left the country, which we should describe as “oil-long” rather than “oil-rich”, with a burgeoning deficit. Saudi sovereign funds, like others worldwide, have thus been draining their money from emerging market investment funds of the kind run by Aberdeen.

                    Aberdeen suffered net outflows of £34bn in the year to September — which represented the lion’s share of an overall £41bn fall in assets under management to £283bn. This Friday’s Viennese meeting of Opec is thought unlikely to foreshadow production cuts. That explains Mr Gilbert’s downbeat demeanour on Monday. He expects emerging market funds to go on shrinking, as long as oil remains depressed by maintained output and weakening Asian growth.

                    The gravel-voiced investment veteran has managed to keep underlying profits before tax pegging along at £490m by cutting costs, notably at the Scottish Widows Investment Products division that he bought for £650m in 2013. But sales there have been constrained by jitters over regulation.

                    Investors feel nervousness of their own about the dividend, which Aberdeen has increased 8.3 per cent this year. The group is left with net cash of £567m, but some £250m is required as regulatory capital, limiting scope for big new acquisitions. It could be “Goodnight Vienna” — as oldies term a wipeout — for progressive payouts unless oil prices recover.

                    jonathan.guthrie@ft.com

                    Standard Bank to pay $25m in bribery case

                    Posted on 30 November 2015 by

                    The headquarters of the Serious Fraud Office in Westminster.©Charlie Bibby

                    The British arm of South Africa’s Standard Bank will pay a $25.2m fine to settle accusations of bribery as part of the Serious Fraud Office’s first deferred prosecution agreement.

                    Sir Brian Leveson, sitting at the High Court, said he would approve the agreement involving Standard Bank which had failed to prevent bribery in a Tanzanian subsidiary between June 2012 and March 2013. The case is also the first prosecution for the SFO of a company under the 2010 Bribery Act.

                      As well as the fine, the bank will pay $6m to the Tanzanian government, plus interest of just over $1m, and £330,000 in costs to the SFO.

                      The deal marks a UK milestone: it is the first of its kind to strike a new form of plea deal in order to avoid prosecution, a tool that is commonly used in the US. A DPA is a court-approved deal where a company admits wrongdoing, pays a fine and agrees to various other compliance measures. The tool was introduced to the UK last year.

                      Jonny Cotton, a partner at law firm Slaughter and May, said: “This provides a much needed real world precedent, in a major case, that should assist corporates in assessing whether to self-report and to co-operate with the SFO.”

                      The High Court heard that Stanbic Bank Tanzania Limited (ST) was the lead manager in a $600m private placement to raise funds for the Tanzanian government so it could invest in infrastructure.

                      The court was told that by the end of August 2012, the structure of the deal had changed and two executives from ST Bank brought on board a local partner — EGMA — that had close connections with the government of the African state.

                      The bank raised fees on the deal mandate by 1 per cent to 2.4 per cent with 1 per cent going to EGMA, a Tanzanian company, even though Harry Kitilya, its chairman, was then head of the Tanzanian tax authority.

                      Sir Edward Garnier QC, representing the SFO which was requesting the DPA, said there was no record of any detailed inquiry being made inside the bank about EGMA under the “know your customer” rules.

                      He singled out Bashir Awale, former chief executive of ST, and Shose Sinare, former head of investment banking who brought in EGMA. Mr Awale was later fired and Ms Sinare resigned from the bank in 2013.

                      Sir Edward said if the two had been based in this country they would have been liable for the offence of bribery itself. However the bank was being fined for its failure to prevent these individuals committing bribery.

                      In a statement Standard Bank said it took the issue of corruption “very seriously” and “deeply regrets that this issue arose on a transaction with which it was involved”. It noted the SFO does not allege that anyone in the bank knew of the intentions of the two ST employees.

                      Sir Edward said the bank had co-operated and conducted its own internal investigation using Jones Day, the law firm. Four of ST’s own staff had flagged suspicious payments to EGMA in 2013 when the private placement was completed.

                      The Tanzanian anti-corruption agency is now investigating the EGMA deal and the US Securities and Exchange Commission will also announce a resolution soon, taking into account the SFO’s findings, Sir Edward said.

                      Standard Bank’s UK division is now controlled by Industrial and Commercial Bank of China, although the alleged wrongdoing predates ICBC’s acquisition.

                      I