Basle III – Almost ready to roll?

From current reports it looks like the details of the Basel III package could finalized early next week – by the 15th September in fact.

It is believed that that banks will have to hold Tier 1 capital of 9 percent (currently in Basel II this is pitched at 4%), including a 3% "conservation buffer".

At least 5 percent of Tier 1 will be pure equity or retained earnings. If Tier 1 capital is less than 9%, banks will not be allowed to pay out dividends to shareholders.

In good times, banks have to allocate another 3%, the "anti-cyclical buffer". It simply means that in good times banks need Tier 1 capital of 12% in order to be able to pay dividends.

If one adds 4% Tier 2 capital, we reach an interesting number: 16% (6 percent Tier 1, plus 4 percent Tier 2, plus 3 percent conservation buffer, plus 3 percent anti-cyclical buffer).

Hedge funds are already shorting certain banks while investors try to understand how much capital banks may need to raise in order to be able to pay dividends.

The next step? Possibly the G20 summit in November, where the group’s leadersthey will give their seal of approval.

Remittances – New money transfer service for Nepalese immigrant workers in the UK

UK based international remittance company Mobile Union has joined forces with Nepalese financial services provider Laxmi Bank and Nepal-based retail remittance operator United Remit, a business unit of the Chaudhary Group, to launch remittance service “mtxpress” in the UK.

With the new service, non-resident Nepalese people can deliver money home without having to visit a retail location. After completing the online registration process, consumers can send money to the desired recipient via a debit card. The recipient will be notified through an SMS that their cash is available for collection at any of Lamix Bank's or United Remits locations across Nepal. Customers who own an account at Laxmi bank can choose to directly credit that account, in which case the funds are available to draw down the next banking morning.

“mtxpress” is a service that offers peer-to-peer remittances via the internet. “mtxpress” will be rolled out globally during 2010, focusing on the South East Asia and African corridors.

EU agrees financial supervision overhaul

EU regulators have reached a landmark accord that will change the way financial supervision takes place in the bloc.

Starting in 2011, new supervisory authorities will oversee the banking, insurance and securities industries, with regulators granted the power to investigate financial products and activities and temporarily ban them if necessary.

The new systemic risk watchdog will also be created to issue government warnings on potential economic risks. It will be headed by the president of the European Central Bank, who is currently Jean-Claude Trichet.

Meanwhile, credit ratings agencies will come under scrutiny from the European Securities and Markets Authority.

Michel Barnier, financial services commissioner for the EU, said: "We have reached a crucial milestone.

"We will have the control tower and the radar screens needed to identify risks."

In July, Mr Trichet called for the rest of the international community to follow Europe's lead in embarking on deficit reduction programs that cut public spending and raise taxes.

SEC charges investment adviser with $11m fraud

Sandra Venetis, an investment adviser from New Jersey, has been accused of leading a Ponzi scheme which saw $11 million stolen from clients.

According to the Securities and Exchange Commission (SEC), the accused misled investors through fake promissory notes issued via three associated firms. She is also alleged to have promised investors that their capital would be used to fund loans to doctors.

Instead, the money was given to relatives of Ms Venetis as well as being used to pay off a range of debts gained from travelling and gambling.

Bruce Karpati, co-chief of the SEC's Asset Management Unit, said: “Venetis abused her position of trust to target older investors who were the most vulnerable to her egregious lies and misrepresentations.

“The SEC's enforcement action and the settlement reached ensure that she will never work in the securities industry again."

Ms Venetis agreed to settle by way of a court order from the SEC which will freeze her assets as well as ensuring fines are imposed at a later date.

The order also means the accused is banned from future interactions with brokers, dealers or investment advisers.

Payment systems and the role of the Eurosystem

The European Central Bank (ECB) has just published a new book entitled “The payment system – payments, securities and derivatives, and the role of the Eurosystem”. The book provides a comprehensive insight into the handling of financial transactions and the functioning of the related financial market infrastructure – a core component of the financial system. It also explains the role and policies of the Eurosystem – which comprises the ECB and the 16 national central banks of the euro area – in this field.

The book is in three parts.

1. Providing an insight into the market infrastructure of modern economies with a view to examining key concepts which have general validity and are thus applicable around the world. Emphasis is placed on the principles governing the functioning of the relevant systems and processes and the presentation of the underlying economic, business, legal, institutional, organizational and policy issues. 
2. Focusing on issues concerning the market infrastructure for the handling of euro-denominated payments, securities and derivatives, as well as the most important EU legislation. 
3. Explaining the operational, oversight and catalyst roles of the Eurosystem and the policies established by the Governing Council of the ECB in this field. It also considers the legal basis for the Eurosystem’s involvement and describes the transparent and cooperative approach adopted by the Eurosystem with a view to pursuing its public policy objectives while acting within a modern market economy environment.

The book can be downloaded free in PDF fromat from the ECB’s website – CLICK HERE.

New Namibian bank for mobiles only

The central Bank of Namibia has authorized the establishment of a new mobile-only bank to be operated by local m-payments operation MobiCash.

The new “MobiCash” bank will target the rural unbanked population. Users of the service will have to open an account and deposit a cash balance at a network of local agents and stores. The cash account is registered on the user's phone and can be used to make person-to-person, utility and merchant payments.

In granting the license, the Bank of Namibia says the extensive costs of establishing branch networks obstructs the penetration and reach of conventional banks into remote areas.

"In view of these challenges, the Bank of Namibia regards this initiative as a truly innovative solution towards promoting financial inclusion to cover the unbanked and under banked population in Namibia," says the bank in a statement.

Enhancing financial stability

The sweeping overhaul of the US’s financial regulatory system that was signed into law in July last, will touch virtually every aspect of American financial markets. The October issue of the “Chicago Fed Letter” focuses on the various provisions in the “Dodd–Frank Wall Street Reform and Consumer Protection Act” that affect “financial market utilities,” critical behind-the-scenes institutions and arrangements that will ensure the smooth functioning of financial markets. Anna L. Paulson, vice president and senior financial economist, and Kirstin E. Wells, lead technical expert both from theat the Chicago Fed have authored this informative article.

Download this article HERE.