UK regulatory system set to change

The UK government has unveiled a shake-up of the countries system that will consolidate power within the Bank of England and eliminate the Financial Services Authority, long the main overseer of the nation's financial center, the City of London.

The new Conservative-led coalition government plans to splinter the FSA into three new agencies, including a bank-regulating subsidiary inside the Bank of England. The new regulatory approach was unveiled in a speech last Wednesday night in London by the UK's Treasury chief, George Osborne, who trumpeted "a new system of regulation that learns the lessons of the greatest banking crisis in our lifetime."

In the House of Parliament in London on Wednesday, George Osborne, trumpeted the 'new system of regulation.'

While more ambitious than expected, the structural changes are more functional than specific, leaving for a later date thorny questions over the appropriate structures of banks. The US is debating a range of rule changes that would impact the finance sector in much more extensive ways than Mr. Osborne's proposals. The European Union is pushing its own policies, including new oversight for hedge funds.

Forced to forge a coalition with the Liberal Democrats after a tight election, the Conservatives were expected to move more deliberately on their pledges of financial-system regulatory changes. But the Lib Dems are backing the government's attempt to make a clean break with a regulatory system tarred by the financial crisis, meaning that the changes are almost certain to come into effect.

At the heart of the proposed overhaul—which requires approval by Parliament and would be implemented by the end of 2012—is an empowered Bank of England. In addition to its current responsibility for monetary policy, the central bank will take charge of preventing systemic risks and of day-to-day supervision of the UK financial sector, including foreign companies that operate in the City of London, through a newly formed subsidiary, tentatively dubbed the Prudential Regulatory Authority.

The Bank of England's governor, Mervyn King, will become chairman of the expanded authority. He welcomed the changes as "the right direction of reform." He didn't address his past comments, specifically his argument that big banks should be broken up to separate risk-taking from utility banking, something the City has fiercely resisted.

The revamp has big implications for giant banks around the world, not just those headquartered in the UK. The FSA already has been getting tougher regulating overseas banks' London subsidiaries. The growing clout of Mr. King, who has talked openly of breaking up big banks, could subject the U.K. and foreign banks alike to more draconian oversight.

In the UK, the new agency within the Bank of England will inherit some of the powers of the FSA, which never fully recovered from its legacy of "light touch" regulation of London's financial community in the wake of the financial crisis. Further tarnishing the FSA in the eyes of many Tories, the previous Labour government established the agency in 1998 shortly after taking power, removing bank-regulatory oversight from the Bank of England.

While the FSA will cease to exist on paper, much of its current structure is likely to live on in the new prudential authority. Its supervisory staff is expected to remain largely intact, as is its newly muscular approach to policing banks, traders and insurers.

Even the agency's leader will be the same. The FSA's chief executive, Hector Sants, had announced plans to retire this summer, but Mr. Osborne persuaded him to take the helm of the new agency for three years. Mr. Sants will become a deputy governor of the Bank of England.

A restructuring will eliminate the UK's Financial Services Authority. Two of the FSA's other duties—consumer protection and law enforcement—will be assumed by new independent entities, including an agency focused on white-collar crime.

In addition to fulfilling a Conservative campaign pledge, the revamp of the regulatory system is intended to bring bank supervision under one roof at the central bank. The Tories blame a disjointed approach, in which officials from different agencies didn't coordinate with each other, for allowing the banking system to grow bloated with debt and for impeding the government's response when the crisis hit.

"Because central banks are the lenders of last resort ... they need to be familiar with every aspect of the institutions that they may have to support," Mr. Osborne said in Wednesday's speech, at a black-tie dinner attended by London's financial elite.

The new structure doesn't include a spot for the FSA's well-regarded chairman, Adair Turner, who is expected to remain at the FSA during a two-year transition. Lord Turner endorsed the shake-up Wednesday, saying it resolves the uncertainty surrounding the agency.

The planned overhaul is the product of weeks of negotiations and horse-trading that highlights the delicate nature of the coalition government. In order to win over Vince Cable, the Liberal Democratic business secretary who had opposed abolishing the FSA, Mr. Osborne let him pick at least two of the five members of a high-profile committee charged with making recommendations about the structure of the UK banking industry, according to a person familiar with the matter.

The proposed revamp is likely to prove controversial.

Some experts have said it risks distracting the Bank of England from its paramount role of setting monetary policy and controlling inflation at a particularly crucial time for the UK's struggling economy.

Mr. Sants himself was critical of the Conservatives' proposal to fold the FSA into the Bank of England. "There remains the possibility of tougher times to come for those we regulate," he said in a speech in November. "Now is not the time, therefore, to be diverting resource to looking at structural questions."

Bringing the FSA's supervisory infrastructure under the Bank of England's roof is likely to be especially tricky because of the two organizations' cultural differences.

For example, past and present officials at both organizations say the FSA tends to pay employees up to 50% more than the Bank of England. Senior FSA bank supervisors can pocket more than £300,000 ($444,000) annually, and the agency sometimes doles out lucrative bonuses. Mr. Sants received total compensation of £742,011 last year, more than double the £305,764 that Mr. King took home.

The FSA has argued that to police banks effectively, it needs to lure talent from them, which requires competitive pay packages. A lesser-paid civil-service culture pervades at the Bank of England.

Arrests in “card cloning” raids

Police in 12 countries have arrested 178 people accused of involvement in an international credit card cloning ring that is believed to have netted crooks around €20 million.

According to the Spanish Interior ministry, the arrests come after a two-year investigation that culminated in 84 raids in Spain, Italy, Romania, France, Germany, Ireland, Sweden, Greece, Finland, Hungary, the US and Australia.

The raids turned up 11 cloning 'laboratories' with around 120,000 card numbers and 5,000 fake cards found in Spain alone.

Spanish authorities say the criminal organization split into country-specific sub-groups to carry out their fraud, each with a leader that was in contact with the overall head.

The cloned cards were used to make withdrawals at ATMs and purchases in stores, say officials but the gang is also accused of various other criminal activities, including robbery with force, fraud, extortion, sexual exploitation and money laundering.

Dubai Islamic Bank introduces Al Islami Mobile Banking

Dubai Islamic Bank has launched Al Islami Mobile Banking, which provides various secure and banking services round-the-clock, through a customized mobile-based website.

Customers will be able to check their account and card statements and details, including Murhaba accounts, investment accounts and funds. Customers can also open an investment account, request a chequebook, and issue or cancel a card through this service, said DIB.

Additionally, customers can make payments and fund transfers to any predefined beneficiary, while registering for additional eChannel services, such as SMS and phone banking and eStatements.

Musabbah Al Qaizi, head of electronic banking services department at Dubai Islamic Bank, said: "Al Islami Mobile Banking is leveraged on the existing Al Islami Online Banking service which has been a great success since its launch in November 2009. DIB customers can now conduct all their daily banking needs without worrying about branch opening hours or carrying a laptop with them. It all can be done using mobile

Jerome Kerviel: Societe Generale knew of fake trades in 2005

Jerome Kerviel, the former Societe Generale trader on trial for abuse of trust, computer hacking and faking documents, has told a French court that his firm was aware of what he was doing.

His actions eventually led to a €4.9 billion ($5.9 billion) loss for the bank, but Kerviel said he had "hid nothing" from Societe Generale when he first began fabricating hedging trades in 2005, reports Bloomberg.

He stated that he was also allowed to exceed daily trading limits "70 per cent of the time".

But Jean-Pierre Mustier, the former head of Societe Generale's corporate and investment banking division, stated that he did not know who Kerviel was until he was arrested and was unaware that the unauthorized trades were occurring.

"He can't say that management knew," Mr Mustier said. "Jerome Kerviel is the trader who lost the most money in the world."

Mr Kerviel's actions were discovered in early 2008 and later that year Societe Generale was fined €4 million for allowing the trading losses to occur.

Scotiabank launches ‘Scotia Mobile’ in Barbados

Scotiabank has launched Scotia Mobile Banking services to customers across the Caribbean including Barbados, the Bahamas and Trinidad & Tobago. Customers can now check their balances, transfer funds and pay bills from the convenience of their Internet-enabled mobile phone.

 

“We are thrilled that this week’s mobile banking launch allows Barbadians to manage one part of their busy lives with the touch of a button, at any time, from wherever they are,” said Kevin Teslyk, Managing Director, Scotiabank – Caribbean East. “With Scotia Mobile Banking, our customers will be able to perform their day-to-day banking quickly, efficiently and securely”.

 

Scotiabank’s introduction of mobile banking further demonstrates its commitment to offer innovative, convenient and secure banking solutions for customers. All mobile banking transactions are safe and secure, given that Scotia Mobile Banking operates on the same advanced security platform as Scotia OnLine Banking.

 

Scotia Mobile Banking customers with will be able to:

 

• Check account balances and transaction details
• View credit card and line of credit balances and payment information
• Pay bills
• Transfer funds between accounts

 

EU Parliament bids to stifle derivatives trading

The EU Economic and Monetary Affairs Committee has called for an outright ban on speculative trading in certain derivatives contracts and the imposition of higher capital requirements for firms handling contracts that are not cleared centrally.

In a resolution approved last week, the Committee says proposed EU rules on derivatives trading must be made clearer and tougher, so as to reduce speculative trading and ensure that as many derivatives as possible are traded through open channels that are subject to standards.

The Committee resolution advocates "abandoning the misjudgment that derivatives need no further regulation because they are only used by expert financial professions". Instead, it calls for strict rules to prevent inexperienced users and speculators from building up dangerous levels of risk and a total ban on speculative credit default swap (CDS) trading,

The resolution calls on the Commission to study ways to significantly reduce the overall volume of derivatives traded. It also backs proposed rules that would impose higher capital requirements on financial institutions involved in bilateral derivative contracts which are not cleared centrally, but suggests that such requirements may be waived if the clearing system used is deemed strong. It also proposes granting regulators the power to impose trading position limits, so as to counter "unsustainable levels of speculation".

The Committee urges that future EU legislation should include rules banning purely speculative trading in commodities and agricultural products. Upper risk limits should be considered for trade in agricultural products and in each specific commodity, including greenhouse gas emission allowances, so as to reduce speculation and help these markets to function transparently, adds the resolution.

On central clearing, the resolution stresses that CCPs must not be organised wholly by users and that their risk management systems must not be in competition with each other. Neither should market players have a controlling influence on CCP governance and risk management.

Namibian central bank limits value on cheques to N$500,000

The Bank of Namibia has announced a new limit on the value of cheques, as part of an initiative to reduce payment risk. The new N$500,000 limit on cheques within the National Payment System (NPS) became effective on 10 June. The central bank said that in line with this decision, no person will be allowed to split cheque payments into units of N$500,000 or less, if such multiple cheques are issued for the settlement of the same transaction. Businesses and the general public have been urged to consult with their banking institutions to determine how payments exceeding N$500,000 should be settled. Cheques that are issued for more than N$500,000 will also not be accepted from a Namibian account in payment of a Namibian account.

The Bankers Association of Namibia (BAN), which includes the four commercial banks, has advised customers as well as businesses to ask their bank to rather effect an electronic funds transfer or a bank credit transfer on their behalf.

BAN also emphasised the fact that the Bills for Collection service has additional costs attached to it and is subject to possible delays in final payment. “Special arrangements could be made to manually present the bill (cheque) for payment to the drawee bank; however such arrangements are also subject to the payee bank’s willingness to accept high value (bills) cheques for collection manually. It is therefore recommended that this collection process be availed on an exceptional basis only,” said BAN president, Ian Leyenaar. He added that the changes to the NPS required significant system changes in the banking industry as the country move towards clearing funds under a “real-time” system for amounts in excess of N$500,000. “We encourage individuals and clients to review their particular position without delay and discuss any concerns or questions they may have with their banking institution. It is also recommended that, if possible, the new procedures, if any, be implemented as soon as possible,” said Leyenaar. The BAN president said the banking industry hope to reduce some of the risks that both clients and the banks face with regard to the process of making payments.