GLOBAL REGULATORY BRIEFINGstatic.reuters.com/resources/media/editorial/... · GLOBAL REGULATORY BRIEFING JUNE 9, 2011 U.S. Treasury Secretary Timothy Geithner warned of the dangers

GLOBAL REGULATORY BRIEFING JUNE 9, 2011

U.S. Treasury Secretary Timothy Geithner warned of the dangers of regulatory arbitrage and criticized the U.K. FSA's former regulatory regime, drawing heated responses from across the Atlantic. The EU's Michel Barnier was in the U.S. to extract pledges of regulatory cooperation. The US Senate rejected a measure that would have delayed debit card fee caps, sending a strong message that Dodd-Frank implementation would remain on track. The CTFC prepared to handle derivatives market changes scheduled to kick in next week.

IN THIS ISSUE

TOP STORIES US's Geithner wants global rules on derivatives ............................................................... 6 Delay of debit fee cap fails in U.S. Senate .......................................................................... 6 EU, US pledge to bridge financial reform divide ................................................................ 7 U.S. CFTC meeting to discuss roadmap for Dodd-Frank rules ........................................ 7

FINANCIAL SERVICES

REGULATORY REFORM

Fed eyes steep capital for risky financial firms .................................................................. 9 U.S. bank regulators delay risk retention rule .................................................................... 9 Volcker to advise FDIC on new resolution powers .......................................................... 10 Bank of Canada says new rules could impact policy ...................................................... 10 U.S. tries to reduce more homeowners' mortgages ........................................................ 10 Split on money fund reforms driven by asset levels ....................................................... 11 Singapore not trying to attract banks via regulatory arbitrage -MAS ............................ 11 Italy insurers to get Solvency II boost -regulator ............................................................. 12

ENFORCEMENT

Ex-Primary Global executive pleads guilty ....................................................................... 12 US SEC, not SAC Capital, is target of Senate probe ........................................................ 12 At trial, ex-manager details SAC insider trades ............................................................... 13 NY jury weighs fate of ex-Galleon trader, 2 others .......................................................... 14 Consultant fed 'spot-on' tips to fund managers ............................................................... 14 Ex-presidential hopeful Edwards charged over affair ..................................................... 14 SEC scans Goldman, other firms' Libya dealings –report .............................................. 15 Egypt court sentences former finance minister to 30 years' jail .................................... 15 Judge signals OK of Wells Fargo gender bias accord .................................................... 16 Judge eyes racketeering claims in Madoff bank case ..................................................... 16 HSBC agrees $62.5 million Madoff lawsuit settlement .................................................... 16 Madoff trustee, SEC should be probed -US reps ............................................................. 17 Ex-Madoff worker set to plead guilty -court papers ......................................................... 17 EU to name countries that fail to fight corruption ............................................................ 18 Citi names new Indonesia country head after fraud ........................................................ 18 Goldman working to address reputational risks -CFO .................................................... 19 Former UBS banker facing fraud charges -paper ............................................................ 19 Tribune's former shareholders sued by retirees, Deutsche Bank .................................. 19 U.S. seeks forfeiture against digital-money firm .............................................................. 20 One of two plaintiffs withdraws AIB bond challenge ....................................................... 20

SUPERVISION

Fed official: Should tackle money fund risks now ........................................................... 21 German watchdog slams EU over bank stress tests ....................................................... 21 Barnier says EU bank test will pinpoint problems ........................................................... 22 China tightens capital rules for banks -sources .............................................................. 22

UK lawmakers want more externals on BoE regulation body ........................................ 22 Insurers seen solid as EU does stress test -watchdog ................................................... 23 Swedish central bank's Oberg: Riksbank, FSA should merge ....................................... 23 Bernanke prefers regulation to deal with asset bubbles ................................................. 23 UK government says banks can leave guarantee scheme early .................................... 23 Philippine central bank lifts bank branching ban in capital ............................................ 24

ACCOUNTING & FINANCIAL STANDARDS

U.S. watchdog might seek rule for companies to change audit ..................................... 24 China's cold shoulder paves way for more shady US listings ....................................... 24

GOVERNANCE

Gobbledygook stumps financial professionals too ......................................................... 25

DERIVATIVES

FSA sights set on compulsory derivative reporting ........................................................ 26 UK turns up heat on planned EU derivatives rules .......................................................... 26 Relief sought from US robo-derivative rules .................................................................... 26 Banks may need more cash to clear derivatives.............................................................. 27 CFTC: HFT shift to Asia to avoid regulation short-lived ................................................. 27 Tuscany starts derivatives proceedings ........................................................................... 28

EXCHANGES & TRADING PRACTICES

Prop traders form European lobby group -report ............................................................ 28 CME on the offensive in challenge to Liffe's rates ........................................................... 28 Hong Kong securities regulator to review IPO sponsorship process ........................... 29 Kenya regulator seeks operator for futures exchange .................................................... 29 Hungary plans to set up natural gas exchange -bill ........................................................ 29

FUNDS MANAGEMENT

UAE close to final proposals on fund regulations ........................................................... 30 China national pension fund seeks outside asset managers ......................................... 30

FINANCIAL CRISIS & ECONOMY

Concerns abound about U.S. debt default risk ................................................................ 30 Iceland capital controls plan 'appropriate' -IMF ............................................................... 31 Banks asked to roll over Greek debt, ECB's Wellink says .............................................. 31 Greece to ask banks to boost capital ratios -paper ......................................................... 31 IRS auditing Alabama's Jefferson County bonds -notice ............................................... 32 Group aims to steer dealers through U.S. muni market .................................................. 32 Norway central bank pumps extra liquidity to banks ...................................................... 32 Moody's may rethink UK rating if growth, austerity slip ................................................. 32 China unveils new incentives to spur lending to small firms -report ............................ 33

TAX

Minister warns UK banks on tax if lending stalls ............................................................. 33 Governments heap more pressure on offshore banks .................................................... 33 Tanzania says mulls "super tax" on minerals .................................................................. 34 Egypt drops tax, no other change to budget .................................................................... 34 New Malawi tax measures to hurt investment-industry .................................................. 34

CURRENCY

U.S. senators seek crackdown on "Bitcoin" currency .................................................... 34 China official warns risks in "excessive" holdings of US assets ................................... 35

TRADE & CROSS BORDER

ABN AMRO seeks India bank licence -report ................................................................... 35

STATE ENTERPRISES

Dutch state may keep stake in ABN AMRO after IPO -FinMin ........................................ 36 Vietnam government to step up state firm sales .............................................................. 36

COMMODITIES & ENERGY

Gaddafi sells oil on black market -defecting minister ..................................................... 36 China warms to ore index pricing - but on its terms........................................................ 37 French agricultural market proposals face resistance -minister .................................... 37 Governments should pop commodity bubbles -UN report ............................................. 38 EU offers solution to China in row over aviation CO2 ..................................................... 38 German cabinet backs nuclear exodus by 2022............................................................... 39 U.S. EPA seen delaying rules on greenhouse gases ....................................................... 39 NY assembly extends fracking ban for another year ....................................................... 39

ISLAMIC FINANCE

Iraq to start Islamic services at two state banks .............................................................. 40 Palestinian authority to issue $50 million sukuk .............................................................. 40 Bankers, regulators meet to put Islamic finance back on map ...................................... 40

TELECOMS & MEDIA

TELECOMS

Mexico regulator botches review, aids Telmex ................................................................ 42 Qatar Telecom ordered to end Virgin Mobile services .................................................... 42

INTERNET & MASS COMMUNICATIONS

Stigma puts many firms off reporting cyber attacks ....................................................... 43 Citi says hackers access bank card data .......................................................................... 43 RSA offers to replace SecurIDs after Lockheed hacking ................................................ 44 Canada's privacy watchdog satisfied with Google .......................................................... 44 French media can tweet -- but can't mention Twitter ....................................................... 44 US Senate panel backs auctions of TV airwaves ............................................................. 45

PEOPLE Obama Fed pick withdraws, slams partisan politics ....................................................... 46 White House adviser Goolsbee to step down ................................................................... 46 Obama considering Treasury aide Date for consumer finance job ................................ 46

QUOTES

"The United Kingdom's experiment in a strategy of 'light touch' regulation to attract business to London from New York and Frankfurt ended tragically. That should be a cautionary note for other countries deciding whether to try to take advantage of the rise in standards in the United States."

US Treasury Secretary Timothy Geithner on the dangers of regulatory arbitrage

"He was clearly not referring to derivatives regulation as there was not that much in America at the time."

Alexander Justham, director of markets at the Financial Services Authority, responding to Geithner's comments.

"I find it a little odd he is pointing fingers at this stage"

John Damgard, president of the U.S. Futures Industry Association, on US Treasury Secretary Timothy Geithner criticizing the UK's light-touch regime as one of the causes of the financial crisis

"Without any legal authority, not to mention legitimacy, the EBA knitted together a new definition of equity capital... and no one wants to guess at the consequences…How this decision came to pass is hidden from the public view. This makes you fear for the future. It would be a shame if European banking supervision were discredited right from the start."

Jochen Sanio, the president of German markets regulator BaFin, on the EBA's setting of its own definition of equity capital, taking no account of current or future agreed banking rules.

"This was a case of politics winning out over pragmatism."

Michael Gapen, former Fed economist on the resignation of Nobel Prize winner Peter Diamond as a nominee for Federal Reserve governor, after his nomination was repeatedly opposed by Republicans

"I have heard calls here in the United States that the Dodd-Frank implementation should be postponed or weakened. Delay is not the answer. Europe is committed. We will deliver. And I call on the United States to do the same."

Michel Barnier, European Commissioner for Internal Market and Services

"I believe that creating a ring-fence increases somewhat the systemic risk and decreases the ability of banks to withstand the risk."

Royal Bank of Scotland's chief executive Stephen Hester, criticising a proposal to split British lenders' retail divisions from their investment banking operations.

TOP STORIES

US | REUTERS, JUNE 6

U.S. Treasury Secretary Timothy Geithner called for new global rules to govern the $600-trillion derivatives market, warning that light regulation in some nations could fuel dangerous risk-taking. Speaking to a banking conference, Geithner urged other countries to follow the United States in tightening derivatives trading rules and insisting as many trades as possible move through central clearing houses where they can be monitored. The United States had taken an important leadership role in comprehensive reform of the over-the-counter derivatives market, he said, adding that alignment with Europe and Asia was essential. Geithner urged other nations to adopt similar requirements in order to set global minimum standards for margins on uncleared derivatives trade. Geithner said that it would be a mistake for other jurisdictions to try to benefit from U.S. efforts to tighten its regulations by reducing theirs to try to gain business. He cited the example of Britain, which has reversed course after pursuing a relatively easy regulatory policy in the hope of garnering banking business. Geithner said the UK's "experiment in a strategy of 'light touch' regulation to attract business to London from New York and Frankfurt" ended tragically, and should be a "cautionary note for other countries" who might consider taking advantage of the rise in standards in the US. He said the US wanted to avoid "another race to the bottom around the world" as efforts are made to impose regulations to lessen the risk of another financial crisis. He said this would require cooperation, and warned that risk in derivatives would become concentrated in those jurisdictions with the least oversight". "This is a recipe for another crisis."


Banks and card network companies suffered a major defeat when the Senate narrowly voted down a measure that would have delayed a multi-billion-dollar debit fee crackdown. The vote was a test of whether the financial industry can sell Congress on rolling back or at least slowing down elements of the 2010 Dodd-Frank financial oversight law. Banks of all sizes and retailers had been engaged in a fierce lobbying fight over a provision in Dodd-Frank that requires the Federal Reserve to set a cap on the fees banks can charge merchants when a customer uses a debit card. Oliver Wyman, a management consultancy, estimated the Fed rule could cost banks about $12 billion annually. The Senate measure would have delayed the fee cap for up to a year while its impact was studied. It attracted 54 votes in the 100-seat chamber, but Senate rules required 60 votes. Senator Richard Durbin, who authored the fee cap, reminded senators before the vote of the billions of dollars in taxpayer funds used to help banks at the height of the financial crisis. Some Democratic lawmakers, including Jon Tester who sponsored the delay measure, and Representative Barney Frank, have supported the delay because they said the Fed's strict cap was too harsh and could harm small banks. The battleground now focuses on the Fed, which is working on a final rule that could be released in June. Under the law, the cap is scheduled to go into effect on July 21. The banking industry has reason to hope the Fed might ease its proposal capping the fees at about 12 cents per transaction -- a 75 percent cut. Fed Chairman Ben Bernanke has said publicly he has

concerns about the workability of the proposal because it may not shield community banks as intended. The Fed also has flexibility to allow banks to include fraud prevention costs in their transaction fees. Some analysts have said they see the Fed raising the cap to about 20 cents per transaction.

GLOBAL | REUTERS, JUNE 2-7

EU and U.S. regulators are guarding against a race to the bottom as governments around the globe finalize far-reaching financial reforms, amid industry concerns over regulatory disunity. EU Internal Market Commissioner Michel Barnier and U.S. Treasury Secretary Timothy Geithner met in Washington and pledge to work for an even playing field for global financial firms. Barnier told Reuters of the risk of entering a "negative game in which one tries to do less than the other." He said countries had no other choice than working closely together. Barnier said he came to the United States to assess the "overlap and underlap risks" between EU regulations and the U.S. Dodd-Frank financial oversight law. Big industry players fear governments are not doing enough to coordinate globally, which could force major financial firms to comply with multiple sets of rules and fuel regulatory arbitrage in which capital flees to the loosest regime. Futures and Options Association Chief Executive Anthony Belchambers said later debate among policymakers was "going in the wrong direction," and told a derivatives conference that officials should stop sniping across the Atlantic. He said significant differences, protectionism and regulatory overreach had emerged as the United States and EU sought to meet a global pledge to regulate derivatives. Coordination on Basel III capital levels is of particular concern in the financial industry. The G20 has agreed to force banks to hold top-quality capital equal to 7 percent of their risk-bearing assets, more than triple the current standard. Some areas, including the U.K. and Switzerland, are considering dramatically higher minimums.

Barnier said that the United States should not delay or weaken planned changes to the government oversight of financial markets. He said in Washington that scaling back or delaying new rules would be a mistake and that Europe and United States both need to aggressively implement changes, particularly in derivatives. Hannah Gurga, deputy director for securities and markets in Britain's finance ministry said global markets needed global solutions and tit-for-tat moves must be avoided.

US | REUTERS, JUNE 6-8

The U.S. futures regulator will meet next week to discuss how it will handle derivatives market changes scheduled to automatically kick in July 16 under Dodd-Frank financial reforms, amid rising pressure from the derivatives industry and lawmakers to avert legal complications. The meeting by the Commodity Futures Trading Commission could provide some clarity for industry players and politicians worried that the so-called self-executing provisions could throw billions of dollars in derivatives into legal limbo if U.S. regulators don't create a short-term fix. The problems have arisen, in part, because the CFTC and Securities and Exchange Commission are missing deadlines in rewriting regulations for the $600-trillion global over-the-counter derivatives market. The CFTC is expected to use the meeting on June 14 to discuss how it will deal with the self-executing rules, and could also provide a loose set of guidelines for the order it expects to implement dozens of Dodd-Frank rules. Commission member Scott O'Malia said the CFTC is

working on an interim solution that would create "certain safe harbours" for self-executing rules, delaying them until the new rules are in place. If the CFTC does not act, many derivatives contracts may lose the legal protection afforded them by a clause in the Commodity Futures Modernization Act of 2000. Republican Senators Pat Roberts, Richard Lugar and Saxby Chambliss asked the CFTC commissioners to provide a list of what provisions will become effective on July 16 and declare how they will deal with the issue.

FINANCIAL SERVICES


The largest and riskiest U.S. financial firms could be forced to hold up to twice as much capital as called for in the international Basel III accord, under one plan the Federal Reserve is considering. Fed Governor Daniel Tarullo said the additional buffer is needed to reduce the risk that the failure of a so-called "systemic" firm could wreak havoc in financial markets. The enhanced capital requirement implied under this methodology ranged between 20 percent to more than 100 percent over the Basel III requirements, Tarullo said at the Peterson Institute for International Economics. Tarullo, responding to questions, said under the method the Fed is considering, U.S. systemic firms could face a capital requirement of between 8.5 and 14 percent. Using this so-called "expected impact" methodology, the Fed would look at the amount of damage a firm's failure could impose on the financial system when deciding how much of a buffer to require. The Fed has not yet decided how exactly it will calculate the capital surcharge and is evaluating several approaches, including the "expected impact" methodology that so far has the most influence, Tarullo said. Tarullo also said the enhanced capital requirements should be met with high-quality capital, and rejected the use of hybrid debt-equity instruments to satisfy the requirement for extra capital.

US | REUTERS/INTERNATIONAL FINANCING REVIEW, JUNE 7

U.S. regulators are delaying by about two months the roll-out of a new proposal that would require financial institutions that package loans and sell them as securities to retain some of the risk on their books. Comments on a proposed rule implementing this provision of the Dodd-Frank financial oversight law were due by June 10. That deadline has been extended to Aug. 1 "to allow interested persons more time to analyze the issues and prepare their comments," the regulators said in a release. Regulators were heavily lobbied by banks, housing advocates and members of Congress to delay or scale back the rule because of concerns that a provision in the broader proposal would make it more difficult for Americans to afford a home. The overall rule, as directed by the Dodd-Frank law, takes aim at widespread criticism that lending standards became too lax in the run up to the 2007-2009 financial crisis because loans were bundled together and sold as securities. Critics argued that the originator of the loan or the firm creating the security had little stake in whether the loan performed because it was being sold to investors. In response, the law requires the securitizer to hold onto 5 percent of the loans being securitized so they have a stake in the loan's performance, or "skin in the game." A backlash against the requirements has united an unusual group, namely mortgage bankers, consumer advocates and politicians. Some market experts said the concerns were exaggerated or that the protesters were avoiding the larger issue of the future of U.S. housing finance. Learn More

http://1.usa.gov/m6F0gu


The Federal Deposit Insurance Corp has created a committee to advise the agency on its new powers to unwind large, failing financial firms. The 18-member committee will include former U.S. Federal Reserve Chairman Paul Volcker, former Fed Vice Chairman Donald Kohn and former Securities and Exchange Commission Chairman William Donaldson, the agency said. The resolution authority was a central part of the 2010 Dodd-Frank financial oversight law. It aims to avoid a repeat of massive government bailouts during the 2007-2009 financial crisis, such as the more than $80 billion in taxpayer support for insurer AIG, and destructive bankruptcies like Lehman Brothers. Under this new system, the government can seize large, failing financial firms and have the FDIC wind them down. The advisory committee, which is scheduled to meet for the first time on June 21, is designed to provide advice and guidance on "a wide range of issues regarding the resolution of large, systemically important institutions," the agency said, adding the committee will not have formal decision-making authority. Learn more

CANADA | REUTERS, JUNE 6

New global financial regulations may have implications for monetary policy due to the effects of new regulatory tools on inflation, the Bank of Canada said. Tiff Macklem, senior deputy governor of the Bank of Canada, said in a speech he was giving in Montreal that the fact that new macroprudential tools were being employed would have an impact on monetary policy. Using these tools would change the behavior of both the economy and the financial sector, and monetary policy-makers would have to understand these effects, he said. Macklem said new bank rules, known as Basel III, would make setting monetary policy easier because they are designed to ease the severity of financial crises and lean against the creation of excess credit. But he also said he could envisage situations where central banks may have to make trade-offs. For example, excess credit growth could trigger counter-cyclical capital buffers that put downward pressure on inflation at a time when inflation is already well contained. Monetary policy could either accommodate this restraint and let inflation return to target over a longer horizon, or it could lower the policy interest rate and risk undermining the effectiveness of the counter-cyclical buffer, he said. He also said there might be times when central banks should also play a role in leaning against excess credit buildup, but only when there are imbalances across multiple sectors of the economy as opposed to sector-specific problems. The Bank of Canada aims to clarify the role monetary policy should play in supporting financial stability when it renews its inflation target with the government at the end of this year.


The Obama administration wants to help more struggling Americans stay in their homes by reducing the amount they owe on their troubled mortgages, a top Treasury official said. Timothy Massad, Treasury's acting assistant secretary for financial stability, said the administration was trying to facilitate more principal reductions through taxpayer-funded programs to prevent homeowners from losing their homes. Massad told reporters on the sidelines of a foreclosure prevention event in Washington that the housing market was "very, very tough".

http://1.usa.gov/lOFlvi

http://1.usa.gov/lOFlvi

Nearly $50 billion has been set aside from the $700 billion bank bailout known as the Troubled Asset Relief Program, or TARP, to help distressed homeowners. One of the administration's programs helps distressed homeowners avoid foreclosure by providing permanent loan modifications. Another program, now ramping up, gives states that have been the hardest hit by falling home prices funding to help reduce the principal of a borrower's loan, among other things. Massad said those programs would make "a big difference in terms of the problems of unemployed homeowners and falling house prices", but added the process was tricky with regard to making sure it was fair and didn't create the wrong incentives.


In a rare split, the clubby mutual funds industry is divided over how to backstop the $2.6 trillion kept in money market funds. It is a hot issue after one of the largest funds struggled during the financial crisis and ultimately "broke the buck," failing to maintain the $1 per-share net asset value considered sacrosanct by many investors. Regulators have already put tighter rules in place and are considering more, perhaps even doing away with the $1 per share standard and allowing net asset values to "float." Fund companies fear that change would be so drastic it would drive hundreds of billions of dollars away from their products and into traditional bank accounts. Proponents included Fidelity Investments, the largest money fund operator, plus powerhouses Charles Schwab Corp and Wells Fargo. With each fund maintaining its own buffer, the plan would avoid subsidizing smaller competitors or eroding the appeal of the largest managers as the safest. Most of the industry favors a broader approach that would spread out the risks, however, a plan rolled out in January 2011 by trade group the Investment Company Institute and backed by big players like Federated Investors and Vanguard Group Inc, as well as by smaller firms. The plan would feature a "liquidity bank" to buy securities from troubled funds during a crisis, into which all fund families would pay. The central disagreement, said several fund specialists, is that Fidelity, Schwab and Wells would not want to help build up a facility that could be of more benefit to competitors with fewer assets to support troubled funds.

SINGAPORE | REUTERS, JUNE 9

Singapore's central bank said that its regulatory regime is in line with or exceeds international standards, rebutting suggestions it is trying to attract financial institutions by having weaker regulation. Its comments came in response to U.S. Treasury Secretary Timothy Geithner's allegation that the United States was leading the reform of derivatives regulation. He warned Europe and Asia that they needed to be aligned with the new American standards. Singapore has been cited as a possible location some banks in the United States and Europe might look to re-locate some of their operations in a bid to escape tougher regulation. However, MAS said that in areas such as bank capital, Singapore's requirements exceed international norms and that it is now working to ensure that its derivative regime is in line with other financial centres.

ITALY | REUTERS, JUNE 9

Italy's insurance regulator ISVAP sees incoming capital rules for the sector, so-called Solvency II, giving a significant boost to Italian players and the potential to free up resources for mergers and acquisitions. Solvency II, which is opposed by some European players, aims to better match an insurer's capital to its risks from 2013. In its annual report, ISVAP said simulations show the solvency surplus rising 52 percent to 38 billion euros ($55.68 billion) under Solvency II compared with existing rules. The report added Italian consumers' low use of insurance products encouraged foreign players to target the country for as a growth market, while domestic companies, apart from Generali, lacked overseas expansion.


A former employee of a so-called expert network firm pleaded guilty to charges of conspiring with others to leak corporate secrets to hedge funds in exchange for money, part of a broad U.S. crackdown on insider trading. Former Primary Global Research (PGR) executive Don Ching Trang Chu, also known as Don Chu, pleaded guilty to one count each of conspiracy to commit securities fraud and conspiracy to commit wire fraud at a hearing before U.S. District Judge Jed Rakoff in Manhattan. Chu, 57, had been arrested in November 2010 and pleaded not guilty in April 2011. The Somerset, New Jersey, resident told Rakoff he had hedge funds to receive inside tips on companies including chipmakers Atheros Communications Inc, Broadcom Corp and Canada's Sierra Wireless Inc. Chu said at the hearing that he occasionally was present for in-person meetings in Taiwan between PGR clients and PGR consultants, during which some of the PGR consultants disclosed to the PGR clients "material, non-public information relating to their employers' business". Rakoff is presiding over the trial of technology consultant Winifred Jiau in the same investigation. Chu is one of at least 13 people charged over the solicitation of illegal stock tips from consultants working for expert network firms, which match investment managers with public companies. Chu faces up to 25 years in prison, but prosecutors recommended a sentence of up to six months in his plea agreement.


U.S. Senate investigators digging into SAC Capital Advisors and its founder Steve Cohen have their sights on the U.S. Securities and Exchange Commission's handling of a probe, and are not themselves launching an independent investigation of the hedge fund. Republican Senator Charles Grassley is using SAC Capital as a case study of how the SEC handles insider trading investigations and referrals from other regulators who spot irregularities, according to his staff.

Grassley and his investigators see it as a follow up to their 2006 probe of the SEC's handling of Pequot Capital Management, a now-defunct hedge fund that was eventually charged in May 2010 by the SEC with insider trading in Microsoft Corp securities. Grassley asked the SEC to respond with a written explanation for how the agency has responded to past referrals about SAC trading and whether any "Wells Notices" were ever drafted. A Wells Notice is a notification from a regulator that it plans to recommend enforcement action. Grassley's staff said they began probing the SEC's handling of the SAC Capital matter after receiving some tips suggesting the agency had received a large number of referrals from the Financial Industry Regulatory Authority about the hedge fund's trading. Grassley's staff said they chose SAC Capital as their case study because the SEC had also been flagged quite a few times about Pequot's trades. With SAC, some of the referrals are much more substantive because they contain some additional investigative legwork by FINRA, much like how police officers on the scene of a crime do some preliminary reporting before handing over a case to detectives, the staffers said.


A former portfolio manager at billionaire Steven Cohen's hedge fund said he engaged in insider trading "a number of times" at that firm and one other, as he testified at the trial of a technology consultant. Noah Freeman, who worked at Cohen's SAC Capital Advisors from June 2008 to January 2010, also testified that he told federal agents "more than a dozen" people he had worked with over the years were involved in criminal conduct. He did not elaborate. Freeman, who has pleaded guilty to insider trading-related charges, testified in Manhattan federal court at the trial of Winifred Jiau, a former consultant at Primary Global Research LLC. Jiau, 43, is accused of illegally leaking tips including confidential details of corporate results. In his testimony, Freeman estimated he made $20 million to $30 million of insider trading profit while at Sonar Capital Management, a Boston-based hedge fund he worked at from 2005 to 2008, before he left to join SAC. He said this sum included as much as $10 million based on tips from Jiau, who has been charged with securities fraud and conspiracy. He was not asked how much in illicit profit he reaped while at SAC. Freeman's guilty plea to insider trading in February 2011 was the first by a former employee analyst or trader at Cohen's $12 billion, Stamford, Connecticut-based fund. Cohen has not been charged with wrongdoing, but the famous trader's fund has been the focus of regulatory and federal probes for several years. Freeman, 35, admitted to charges of securities fraud and conspiracy. He faces as much as 25 years in prison, but he is cooperating with prosecutors under a plea agreement, in hopes of receiving a lighter sentence. In response to questions by Assistant U.S. Attorney Avi Weitzman, Freeman said he engaged in insider trading "a number of times" at both SAC and Sonar. The Harvard University graduate said he worked from roughly March 2005 to March 2008 at Sonar, a Boston-based fund run by money manager Neil Druker. Insider trading "was a regularly employed part of our business model" at Sonar, Freeman testified. Mark Hyland, Druker's lawyer, in a statement said "any statement that Sonar Capital used insider trading as a business model is categorically false." It was at Sonar that Freeman said he talked "regularly" with Jiau, and met her eight times, in a nearly two-year period ending in the winter of 2008. He called the information she provided "extremely" helpful.


Jurors began weighing whether three former traders schemed to trade on leaks about pending mergers and then cover their tracks, in the U.S. government's second major insider trading trial of the year. A Manhattan federal jury began deliberations to decide whether one-time Galleon Group hedge fund employee Zvi Goffer and two other defendants conspired to trade on tips about pending mergers from lawyers then working at the law firm Ropes & Gray. Galleon Group founder Raj Rajaratnam was found guilty on all counts in May in the biggest insider trading probe in decades. The former tycoon could face at least 15 years in prison when he is sentenced in New York in July. Prosecutors say Goffer was the ringleader of a scheme to improperly benefit his firm Incremental Capital LLC, which he started with the other defendants, his brother Emanuel Goffer and Michael Kimelman, after he was fired from Galleon in August 2008. The government based its case heavily on evidence from wiretapped phone calls, and has said the Goffers communicated on prepaid cellphones that they later destroyed. Prosecutors said the alleged scheme involved tips on Bain Capital Partners LP's and Huawei Technologies Co Ltd's failed takeover of computer network equipment maker 3Com Corp, and private equity firm TPG Capital LP's takeover of Canadian drug company Axcan Pharma Inc. Zvi Goffer, 34, pleaded not guilty to 12 counts of securities fraud and two counts of conspiracy. Emanuel Goffer, 32, and Kimelman, 40, each pleaded not guilty to two counts of securities fraud and one count of conspiracy. The defendants face as much as 25 years in prison if convicted.

US| REUTERS, JUNE 2

A technology consultant violated insider-trading laws by funneling "spot-on," nonpublic information about two chipmakers' results to hedge fund managers, a prosecutor said at the start of her trial. Winifred Jiau, a former consultant at Primary Global Research LLC, was the first person to go to trial in a portion of a broad-based insider trading probe that focuses on so-called expert networking firms. Such firms use consultants to match industry experts with money managers. Taiwanese-born Jiau, known as Wini, faces charges of securities fraud and conspiracy to commit securities and wire fraud. She has been jailed since her arrest in late December 2010. She was denied bail after a judge said she was a flight risk. Prosecutors said Jiau passed inside tips about upcoming results of chipmakers Marvell Technology Group Ltd and Nvidia Corp to clients including former hedge fund managers Samir Barai and Noah Freeman in exchange for more than $200,000. These clients then traded on the information or passed it to others, prosecutors said.


John Edwards, a Democratic hopeful for U.S. president in 2008, was indicted for using nearly $1 million in illegal campaign funds to help cover up an extramarital affair during his run for the White House. In a fall from grace for a man once expected to go far in American politics, Edwards, 57, was charged with six counts, including conspiracy, taking illegal campaign contributions and making false statements, according to the federal indictment. Lanny Breuer, assistant attorney general for the Justice Department's criminal division, said in a statement that Edwards was alleged to have accepted more than $900,000 in an effort to conceal from the public facts that he believed would harm his candidacy.

Flanked by five lawyers, Edwards pleaded not guilty during a 30-minute hearing in U.S. District Court in Winston-Salem hours after the indictment was filed. The judge set a tentative trial date of July 11. After the hearing, Edwards told reporters he was innocent. If Edwards is convicted, each count carries a sentence of up to five years in prison and a $250,000 fine. The indictment accused Edwards of secretly getting the money to help cover up his affair with a campaign worker, Rielle Hunter, knowing that revelations of the liaison and her pregnancy would destroy his 2008 presidential bid. Edwards, a trial lawyer and former U.S. senator from North Carolina, at first denied on national television that he had the affair or paid Hunter any money. He finally admitted to the relationship, which ran from February 2006 until August 2008, and to fathering the child, which lead his wife Elizabeth to leave him. She died of cancer last year.


The U.S. Securities and Exchange Commission is examining whether Goldman Sachs Group Inc and some other financial companies violated bribery laws in dealings with Libya's sovereign-wealth fund, the Wall Street Journal reported, citing people familiar with the matter. Enforcement lawyers at SEC are reviewing documents that detail the firms' relationships with the Libyan Investment Authority controlled by the nation's leader, Muammar Gaddafi, the paper said. The regulators are interested in a $50 million fee that Goldman initially agreed to pay the fund, but the payment was never made as discussions were halted before violence erupted in Libya early this year, the paper said. The absence of a transaction does not exempt the bank from the federal Foreign Corrupt Practices Act, which bans U.S. companies from offering or paying bribes to foreign government officials or employees of state-owned companies, the paper said. The Journal added that Carlyle Group, Och-Ziff Capital Management Group, JPMorgan Chase and several other companies had significant dealings with the Libyan Investment Authority.

EGYPT | REUTERS, JUNE 4

An Egyptian court convicted former finance minister Youssef Boutros-Ghali in absentia and sentenced him to 30 years in prison for profiteering and abusing state and private assets, a court source said. Boutros-Ghali, widely viewed in Egypt as a public face of a government that enriched the wealthy at the expense of the poor, quit his post in late January 2011 then fled abroad, only days after the eruption of the mass uprising that later ousted Hosni Mubarak. Boutros-Ghali also resigned in early February as head of the International Monetary Fund's main policy steering panel. Egyptian media reports have said Boutros-Ghali is in the Lebanese capital Beirut. Many investors and businessmen highly regarded Boutros-Ghali for spearheading free-market reforms that helped boost Egypt's economic growth to around an annual 7 percent in the three years before the 2008 global economic crisis. The Cairo court ruled that Boutros-Ghali took private vehicles held at the customs authority and allowed others to use them without the permission of their owners. He took six of the vehicles, including three Mercedes and a BMW, for his private use and delivered another 96 to other parties, the court said. The vehicles had a total value of 35.8 million pounds ($6 million). The court also ruled that he used a Finance Ministry printing centre to produce a large amount of materials for his personal election campaign for a seat in parliament in 2010, the court source said. He transferred ministry computers and printers for use at his campaign headquarters for more than six months.

The court sentenced Boutros-Ghali to 15 years in jail with hard labour in the vehicles case and another 15 years in the printers case. It also ordered him to return the 35.8 million pounds as the value of the vehicles and to pay a similar amount as a fine, the court source said.


A federal judge signaled that she would approve a settlement calling for Wells Fargo & Co to pay $32 million to about 1,200 female brokers who claimed they were paid less than men and denied promotions because of their gender. At a hearing in the federal court in Washington, D.C., U.S. District Judge Colleen Kollar-Kotelly indicated she was satisfied with material terms of the accord but wants to review technical details, according to Cyrus Mehri, a lawyer for the brokers. The settlement also requires Wells Fargo to implement a four-year program to strengthen training and efforts to promote female brokers, and help ensure that more lucrative customer accounts were allocated fairly, court records showed. Wells Fargo also agreed to oversight by an outside monitor. Tony Mattera, a spokesman for the San Francisco-based bank, said that while it has consistently denied the allegations of discrimination, the firm believes resolving the matter was in the best interests of the company.


A U.S. judge will consider racketeering claims in a massive lawsuit against Italian bank UniCredit seeking money for Bernard Madoff's victims. The lawsuit is the biggest brought by bankruptcy trustee Irving Picard against defendants that allegedly benefited from Madoff's Ponzi scheme. Picard is seeking $19.6 billion in damages in the lawsuit, which could be tripled if he prevails and federal racketeering laws are applied. UniCredit has denied the allegations in the lawsuit. U.S. District Judge Jed Rakoff said he would determine whether racketeering claims can be used as part of the trustee's case, according to an order filed in Manhattan federal court on June 6. The judge had earlier moved the lawsuit out of U.S. bankruptcy court in Manhattan to U.S. district court. The UniCredit lawsuit, filed in December 2010, accuses the bank, its Bank Austria unit and several other defendants of funneling billions of dollars to Madoff. Also named as a defendant is Sonja Kohn, the founder and operator of several of the banks. The trustee dubbed her Madoff's "criminal soul mate," according to the lawsuit.


HSBC said it agreed to pay $62.5 million to settle a class action brought against it in the United States over its role in providing administrative services to a fund which placed cash with Wall Street swindler Bernard Madoff. The action was brought by investors in Thema International Fund, which transferred a net $312 million to Madoff, Europe's biggest bank said. Madoff is serving a 150-year prison sentence after pleading guilty in March 2009 to orchestrating what is considered to be the biggest Ponzi scheme in history. HSBC said it continued to "vigorously" defend itself in other Madoff-related proceedings brought against it and its subsidiaries.


The chairman of a House capital markets subcommittee called for a comprehensive probe into whether the liquidation of Bernard Madoff's investment firm treats Ponzi scheme victims fairly and costs too much. Scott Garrett and three other representatives called on the Government Accountability Office to examine the work of Irving Picard, the court-appointed trustee seeking money for former investors in Bernard L. Madoff Investment Securities LLC. Garrett, who chairs the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, wants an examination on whether Picard and his law firm Baker & Hostetler are overcharging for their work, and on the trustee's "net equity method" to distribute funds. A federal appeals court in New York is expected to rule on the distribution issue. Garrett also asked the GAO to examine the U.S. Securities and Exchange Commission's role in the process, and the Securities Investor Protection Corp's oversight. A thorough probe was needed given that the many defrauded investors had still not received any compensation from SIPC or have the threat of a lawsuit from the Trustee hanging over their heads, Garrett wrote to Comptroller General Gene Dodaro in the GAO office. Others members of Congress signing the letter are Rep. Peter King, Rep. Carolyn McCarthy, and Rep. Ileana Ros-Lehtinen.


A former payroll manager for Bernard Madoff's investment firm was expected to plead guilty to charges he helped his former boss conduct fraud, court papers showed. Eric Lipkin was expected to plead guilty to six criminal charges including bank fraud, making false statements, two counts of falsifying books and records, and two counts of conspiracy, according to a letter from prosecutors filed in U.S. District Court in Manhattan. The bank fraud charge, the most serious count, carries a maximum 30 years in prison plus fines and forfeitures. Lipkin agreed to cooperate with prosecutors in connection with his plea, the letter shows. The letter was dated Wednesday, June 1. Lipkin would become the ninth former employee at Bernard L. Madoff Investment Securities LLC to be criminally charged over Madoff's Ponzi scheme. Madoff, his long-time lieutenant Frank DiPascali, and an outside accountant have pleaded guilty. Five others -- Daniel Bonventre, Annette Bongiorno, Joann Crupi, Jerome O'Hara and George Perez -- have pleaded not guilty. Lipkin and other family members were sued last year by Irving Picard, the court-appointed trustee seeking money for Madoff's victims, seeking to recover $9.2 million they allegedly reaped improperly from Madoff's Ponzi scheme. Among those sued was Eric Lipkin's father, Irwin Lipkin, described by Picard as one of the first workers hired by Madoff, as early as 1964. Picard said Eric Lipkin joined Madoff's firm in 1992, eventually becoming its payroll manager, and "played an active role" in helping him deceive regulators. Separately, the Securities and Exchange Commission announced it had charged Eric Lipkin with fraud. Learn more

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EU | REUTERS, JUNE 6

The European Union executive announced plans for a crackdown on corruption, warning it would name member countries that failed to tackle abuse that costs EU taxpayers an estimated 120 billion euros a year. The European Commission accused some EU governments of not taking corruption seriously enough and said a report evaluating each nation's response to graft should force them to act. Cecilia Malmstrom, the commission's chief for home affairs, said there was not enough determination amongst politicians and decision-makers to fight corruption, adding that "with the naming and shaming ... we can achieve a lot." Under the proposal, the Commission will issue reports every two years starting from 2013, drawing on information from international watchdogs and independent experts. However, it will not propose punitive measures for member states that lag in their anti-graft efforts. It will also propose legislation in the coming months to improve rules on confiscation of criminal assets and a strategy to bolster criminal financial investigations. Several EU countries are considered to be among the least corrupt in the world. Some, however, lag behind and graft scandals have fuelled public anger over fiscal austerity measures taken around Europe to cut debts and cope with an economic crisis. In Greece, thousands blame graft in public administation for bringing the economy to the brink of collapse. Transparency International sharply downgraded Athens' ranking last year to a level below that of China, Cuba and Colombia. Estimates by the European Commission show that public procurement contracts in the EU on average end up costing 20-25 percent more than they should because of decision-makers taking bribes.

INDONESIA | REUTERS, JUNE 9

Citigroup has appointed a new country head for Indonesia following a torrid three months when a relationship manager was arrested for allegedly embezzling clients' money and a card client died after he was questioned by debt collectors. Tigor M Siahaan will become Citi's new chief country officer for Indonesia effective June 30, replacing Shariq Mukhtar who will take on a new regional role in based in Singapore, according to a memo seen by Reuters. A Citi spokesman confirmed the contents of the memo. Indonesia in May slapped lengthy bans on Citi's credit card and wealth management businesses over the alleged embezzlement and the death of its client following questioning by debt collectors acting for the American lender. Indonesian police have taken into custody Melinda Dee, a 47-year-old former wealth manager at Citi, for allegedly embezzling about $2 million of client money. Mukhtar, who has served as Citi's chief country officer for Indonesia since 2008, has been credited with doubling the bank's revenue and profit over the past six years. He has worked for Citi for over 25 years and his previous appointments include CFO at Citi Taiwan and country business manager for the American bank in Thailand. Siahaan, whose appointment is subject to regulatory approval, is an investment banker who played a leading role in Indonesian state carrier Garuda's initial public offering and state oil company's Pertamina recent bond issues.


Goldman Sachs Group Inc is keenly aware of the risks to its reputation caused by investigations into its behavior and is doing all it can to address them, its finance chief said. "We're doing everything we can," Chief Financial Officer David Viniar told an investor conference at Stanford University. Viniar spoke just a day after the Wall Street bank was hit with a subpoena from New York prosecutors to explain some of its actions in the run-up to the financial crisis. Goldman is also the target of probes by the Justice Department, the New York Attorney General and the Securities and Exchange Commission. "We never at least intentionally take reputational risk," Viniar said. Separately, Goldman and other banks disclosed estimates of potential losses from legal issues after pressure from U.S. Securities and Exchange Commission staff. Goldman responded to the SEC's request that it disclose more information by estimating its "reasonably possible losses" for legal matters to be approximately $3.4 billion in its annual report for 2010 filed on March 1, 2011. That figure was adjusted to $2.7 billion in Goldman's first-quarter report. The bank was also considering releasing documents to counter a Senate subcommittee report that said the bank misled clients about mortgage-linked securities, the Wall Street Journal reported, citing people familiar with the matter.

SWITZERLAND | REUTERS, JUNE 5

A former client advisor for Spanish customers at Swiss bank UBS is facing criminal charges after allegedly cheating wealthy clients out of around 20 million Swiss francs ($23.99 million), a Swiss newspaper said. Switzerland's SonntagsZeitung quoted Markus Fasano, a prosecutor of the Zurich-Sihl Public Attorney's Office, as saying it had started investigations into the client advisor at the start of April 2010. "The process against the involved party is still in the stages of police investigation," Fasano was quoted as saying. According to the newspaper, the client advisor was working with ultra-high net worth clients in Spain. A spokesman for the bank declined to comment on the figure but said that the bank had discovered inconsistencies in its business with Spanish clients in early 2010. He said the bank filed criminal charges and laid off the involved client advisor without notice. All affected clients were reimbursed by UBS, he said.


A group of creditors including a unit of Deutsche Bank AG and retirees, sued former shareholders of Tribune Co, the bankrupt owner of the Chicago Tribune and Los Angeles Times, alleging the company's 2007 buyout was a "fraud" which forced the media owner to file for bankruptcy. Deutsche Bank Trust Company Americas, one of the plaintiffs, said that the buyout — one of the industry's most highly leveraged — "lined the pockets of Tribune's former shareholders with $8.5 billion in cash at the expense of Tribune's creditors" and precipitated its careen into bankruptcy. The Deutsche Bank unit filed the lawsuit in federal courts in Philadelphia and Texas in its capacity as trustee for some series of senior notes. The plaintiffs sought to recover money paid to the shareholders of Tribune, which filed for bankruptcy in December 2008, in the buyout from what it termed "fraudulent" transfers. While the cashed-out shareholders received the principal benefit in the buyout, the target company received

no benefit to offset the greater risk of running a highly-leverage firm, Deutsche Bank said in the court filing. Retirees of the Times Mirror Co and Tribune, in a lawsuit filed in a Los Angeles county court, are seeking claims of more than $109 million in retirement benefits that they lost when the company went bankrupt. Tribune bought Times Mirror Co, which owned Los Angeles Times and the Baltimore Sun, for $8 billion in 2000.

US | THOMSON REUTERS ACCELUS, JUNE 7

The U.S. Justice Department is seeking the forfeiture of nearly $9 million in accounts at e-gold Ltd, a pioneering online digital currency company which pleaded guilty in 2008 to money laundering charges. The department's action is its latest step in trying to rein in abuses by digital-currency businesses, some of which are proving a headache for authorities due to their ability to hide user identities. As part of a process for winding down e-gold, account holders who want to retrieve their money will have to disclose their identities and face government scrutiny. The Justice Department's plea deal with e-gold and a subsequent agreement signed in 2010 required the firm to identify any customer accounts that contained funds traceable to criminal activity. The department said that e-gold had fully cooperated and identified a long list of e-metal accounts containing funds traceable to criminal offenses, including child pornography, credit card fraud, identity theft, investment fraud and the sale of stolen or nonexistent goods on the Internet. The e-gold funds which prosecutors have sought to forfeit are held in 609 accounts, estimated to be worth $8.6 million. Roughly $19 million held in e-gold accounts was forfeited in the 2008 case. In those proceedings, e-gold founder Douglas Jackson also pleaded guilty to charges of money laundering. Senior executives Barry Downey and Reid Jackson pleaded guilty to operating an unlicensed money-transfer business, as did Douglas Jackson. Attorney Carol Van Cleef of Patton Boggs LLP, who was retained by e-gold after the criminal cases, said the firm was a "classic example" of an emerging payments system that was well ahead of its time and not fully prepared for what was to come: criminal abuse. She said e-gold was pleased that the government was moving forward with its forfeiture action, and described it as the beginning of a two-part process that would allow funds to be returned to legitimate e-gold customers. About $80 million would remain for distribution to legitimate customers once the Justice Department had taken the illicit proceeds, she said.

IRELAND | REUTERS, JUNE 3

One of two plaintiffs opposing Irish government plans to impose losses of up to 90 percent on junior bondholders in Allied Irish Banks withdrew its challenge from the Irish High Court. Lawyers for New York-based Abadi Co, one of two bondholders opposing the government's plans, said it had agreed to withdraw its challenge after the government said it would cover legal costs.


Regulators should waste no time addressing money market mutual funds' vulnerabilities to unanticipated credit shocks given potential risks from Europe, a top Federal Reserve official said. Eric Rosengren, president of the Boston Fed, told the Stanford University Graduate School of Business the issue was timely, as many money market funds have "sizeable" exposures to European banks and would be at risk if Europe's sovereign debt troubles disrupt the banking system. European banks are also reliant on money market funds as a big source of dollar funding, he added. The Securities and Exchange Commission has already taken steps to tighten oversight of money market funds. It now requires the funds to publicly disclose the net asset value, or value of each share of a money fund, on a 60-day lag basis. But Rosengren said money funds remain vulnerable despite the rule changes. Any solution must address the potential impact of unexpected credit losses and the risk of a run on the funds, he said. Rosengren spent most of his remarks defining what he understands financial instability to mean, namely problems in the financial system, impairment of intermediation and a substantial impact on the economy. Asset bubbles were not always systemic risks, Rosengren said, as not all of them disrupt financial intermediation. He said the rapid increase in silver prices from July 2010 to April 2011 was price volatility, rather than financial instability. The dot-com bubble of the late 1990s and the savings and loan crisis in the 1980s and early 1990s would also not rise to the level of financial instability, he said.

GERMANY | REUTERS, JUNE 6

Germany's financial regulator took a swipe at European Union rule makers over the way they ignored Basel III bank capital definitions when they designed new pan-European bank stress tests. Jochen Sanio, the president of markets regulator BaFin, criticised the new European Banking Authority (EBA) for setting its own definition of equity capital that took no account of current or future agreed banking rules. In an introduction to Bafin's annual report, Sanio said the EBA had "knitted together" a new definition of equity capital without any legal authority or legitimacy. How this decision came to pass was hidden from the public view, he said. The EBA is testing the resilience of 90 European banks to recession in a hypothetical exercise whose results are due to be published in the coming weeks. Sanio said the public would be astonished at the lack of clearly defined corporate governance structures, which are needed to ensure the legitimacy of procedures. Sanio also said it remained unclear whether new bank capital and liquidity standards agreed by international regulators in December would be applied in all major banking countries. The European Union member states were willing to go ahead with the Basel III rules, despite the heavy regulatory costs for banks, but they might not accept it if foreign competitor countries opt out, he said. Sanio also criticised plans to impose extra capital charges on banks considered "too-big-to fail," though he said they clearly did need to be subjected to stricter supervision.


This year's pan-European Union health check of banks will go beyond signalling a pass or fail and will point out problems at specific lenders, Michel Barnier, the bloc's financial services chief said. Barnier, European Commissioner for Internal Market and Services, said he saw no problem in the European Banking Authority (EBA) requesting more data from banks and that a delay in the publication of the results from June to July would not be a problem. Barnier told Reuters that it was important to be sure the figures were valid for comparison between banks and member states. The EBA said on Wednesday, June 1 that it has to go back to some of the 90 banks it is testing due to errors and unrealistic assumptions in the data it has received from them. Publication of the results is now expected in early July.

CHINA | REUTERS, JUNE 3

Chinese authorities have tightened capital requirements for banks by instructing them to put aside more provisions for some loans, two sources with knowledge of the matter told Reuters. Under the new rules, Chinese banks have to set aside 150 percent and 1,250 percent risk-weighted provisions for certain loans, which would restrict banks' ability to lend. It was not clear which type of loans, or how many, will be subjected to the new provisions. But the sources said the new rules will apply to village banks, automobile financing firms and financial leasing firms. The new rules come on top of China's tough new capital requirements as part of efforts to implement Basel III guidelines. According to the requirements, China's big banks, or systematically important financial institutions, will be subjected to a minimum capital adequacy ratio of 11.5 percent under "normal conditions". Liquidity and leverage ratios will also be introduced in a broader regulatory framework for controlling bank lending and financial risks.

UK | REUTERS, JUNE 7

The Bank of England's new regulation body should have more external members, UK lawmakers said, questioning the independence of former BoE executive director Alastair Clark in a hearing. Clark has been appointed as one of four externals to the interim Financial Policy Committee (FPC), headed by BoE governor Mervyn King. The parliament's Treasury Committee said after quizzing Clark in a hearing that he should be appointed to the interim FPC based on his large professional competence but that there were doubts he could act as an external member. His long experience at the Bank of England and then at the Treasury meant that it was difficult not to regard him as an insider, the committee said in a statement. The committee said the government should appoint a fifth external member to ensure that the interim FPC had the intended representation of wider views. The committee approved of the appointment of former Deutsche Bank head of Global Banking, Michael Cohrs, as external member. Learn more

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The European Union's powerful new insurance watchdog sees European insurers as well-capitalised as it prepares to evaluate stress tests for the sector. Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority (EIOPA), said the solidity of the insurance industry in Europe was "very comfortable". Insurers overall demonstrated good solvency, despite having been hit hard by the financial crisis, Bernardino told the Frankfurt business journalist club ICFW. However, he said some firms might still need to raise capital. National regulators have received data on how well their insurers perform in hypothetical testing of market risk, natural catastrophes and other insurance-specific risks, and are now conducting analyses of their results. EIOPA wants the tests, which will cover 221 companies from 31 countries including some outside the EU, such as Switzerland, to cover at least 50 percent of the market based on gross written premiums in each country. Later in June, these regulators will hand over the data to Bernardino's team at EIOPA for further analysis. Final stress test results are due to be published on a yet-unspecified date in July.

SWEDEN | REUTERS, JUNE 7

Sweden should merge its banking watchdog and its central bank to help authorities prevent financial system crises, Swedish central bank First Deputy Governor Svante Oberg said. A merger of the Riksbank and Finansinspektionen would result in an authority capable of acting more forcefully to safeguard the stability of the financial system, he said in the text of a prepared speech. Oberg also said the role of the central bank governor in Sweden should be strengthened and that the central bank needed large foreign reserves should another international crisis make it hard for domestic banks to obtain foreign currency funding.


Federal Reserve Chairman Ben Bernanke said that good supervision and regulation were the first line of defense against asset price distortions, rather than adjusting interest rates. He said such problems could be addressed through regulatory or supervisory means and that this would be "far preferable to using the interest rate tool, which is a very blunt tool and better directed at macroeconomic stability than at financial stability".


British banks that benefited from the government's Credit Guarantee Scheme at the height of the credit crunch will be able to buy back their debt before maturity, the government said. Royal Bank of Scotland and Lloyds Banking Group were the main beneficiaries of the scheme, which was closed to new entrants more than a year ago. The Treasury said the move demonstrated the growing health of the banking sector. Finance minister George Osborne said in a statement that it was in everyone's interest that banks return to stability, and that they are able to lessen the amount that they depend upon taxpayers.

PHILIPPINES | REUTERS, JUNE 6

The Philippine central bank said it has lifted the last remaining restriction on bank branching by allowing banks to open new branches in eight key cities in the capital, a move aimed at promoting competition and improving financial services. The eight cities of Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon, San Juan, and the financial district Makati were not included in a 2005 branching liberalisation measure because they were considered adequately served by banks at that time. Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said in a statement that the central bank expected the liberalisation to further improve the competitive environment and translate into better financial services for the public. Commercial and thrift banks with less than 200 branches as of December 2010 may open new branches in the eight cities up to until June 30, 2014 under the first phase of the last liberalisation measure, the BSP said.


The top U.S audit watchdog might consider forcing public companies to switch their audit firms after several years, besides requiring the engagement partner to sign the audit, the New York Times reported. The Public Company Accounting Oversight Board (PCAOB) might also consider forcing the audit firms to disclose input on audits from other firms, including foreign affiliates, the paper said, citing remarks made by PCAOB Chairman James Doty. Doty has not decided whether a mandatory change of auditors was necessary, but said the board was prepared to take any step to tackle the problem of audit quality, the Times reported, citing remarks made by the chairman at a conference at the University of Southern California.


A spate of accounting scandals involving U.S.-listed Chinese companies has hit New York exchanges as calls for China to punish those responsible go unheeded. China's reluctance to respond to U.S. regulatory or political pressure, the apparent complicity of some mainland banks and the relative ease of listing in the United States ensure that the accounting shenanigans will continue to thrive. U.S. investors are experiencing first-hand the challenge their Chinese counterparts have faced for years: how to tell a fraud from a gem in a domestic market long plagued by fast and loose accounting practices. China Electric Motor Inc on June 6 joined a growing list of companies, headed by Longtop Financial Technologies, which have revealed potential accounting frauds. It said auditor

MaloneBailey had resigned, citing discrepancies in the company's bank records. Scandals like this have forced U.S. regulators to press their counterparts in China for help in tackling financial crime. But if they are banking on taking Sino-U.S. regulatory co-operation to the next level, industry experts say they are mistaken. Paul Gillis, a visiting professor at Peking University and author of the China Accounting Blog, said there was no evidence that Chinese regulators had been "paying much attention to this stuff at all". The frauds involving U.S.-listed Chinese companies put U.S. regulators in a difficult spot: they can suspend or delist companies' shares and penalise the U.S.-based auditors who signed off on their accounts, but cannot easily punish Chinese executives. To do so, they need their counterparts in Beijing to play ball and help with investigations. That remains tough given the politics involved. America hopes one way to improve accounting standards and detect potential fraud earlier will be if China allows U.S. audit watchdog, the Public Company Accounting Oversight Board, to inspect auditors working for U.S.-listed companies on the mainland. PCAOB chairman James Doty told Reuters he was hopeful there may be an agreement later in 2011.


Baffled by the language of corporate financial reports? You have company. Sometimes the people who get paid the big bucks to plow through them can't make much sense of them either. Researchers at the University of Michigan analyzed tens of thousands of 10-K reports filed by companies over a 12-year period to assess their level of readability. The reports, yearly filings required by U.S. securities regulators, are supposed to provide a clear-eyed look at a company's performance. They tend to be drier and more technical than the glitzy illustrated annual reports that companies give their shareholders. Feng Li, an accounting professor who worked on the study, said that the less readable these documents are, the more pressure it creates from clients for analysts to provide commentary and forecasts. In other words, when ordinary investors can't make heads or tails of a report, they lean on the professionals to explain what it means. To gauge the reports' readability, Li and two university colleagues, Reuven Lehavy and Kenneth Merkley, applied something called the Fog Index to some 33,000 10-K filings. The Fog Index aims to measure the complexity of a piece of writing as a function of sentence length and the number of "complex" words of three or more syllables. The index provides an estimate of the number of years of formal education required for a person of average intelligence to read a passage once and understand it. The higher the number, the harder the writing is to understand. The mean score for the 10-Ks the researchers looked at was 19.53. Someone who spent that many years in the classroom should have at least a master's degree. Healthcare and insurance companies had the highest scores (20.22 and 20.16), so it's not just their policies that are hard to understand. Precious metals had the lowest score at 18.43. Berkshire Hathaway, known for the chatty shareholder letters of its Chief Executive Warren Buffett, came in at 17.23, making it one of the companies with the highest readability. Still, that level is well above what most people would consider plain English. Reader's Digest magazine is said to have a Fog score of 8, while the Wall Street Journal's is 12.


Financial markets watchdogs will make reporting of derivatives trades compulsory within 18 months in an attempt to improve their chances of spotting market bubbles, a senior UK regulator said. Alexander Justham, director of markets at the Financial Services Authority (FSA) told a conference in London that the FSA expected compulsory reporting to be enforced in late 2012 or early 2013. Justham said trade reporting will help regulators to spot systemic risks and, later on, could play a role in supervising individual banks and help combat market manipulation by giving a clear picture on positions held. The other pledges include standardising contracts so they can be cleared and, where appropriate, traded on an exchange or electronic platform. This has raised fears in an industry dominated by just 14 dealers -- the big banks like Goldman Sachs, Morgan Stanley and Deutsche Bank -- that if the new rules are too strict it could be harder and more expensive for companies to use derivatives. The FSA's Justham, who regulates Europe's top derivatives centre, sought to reassure the industry that a "one size fits all" approach would be avoided.


New European Union rules to crack down on derivatives must not stifle choice on where to clear transactions, a UK government official said. Hannah Gurga, deputy director for securities and markets at Britain's finance ministry, told the annual London "derivatives week" conference that it wanted to guard against regulation that "stifles competition, introduces barriers to entry or create or reinforce monopoly positions". Britain has been pushing to broaden the EU's crackdown on derivatives trading to try to enhance competition. Britain wants to ensure that "open access" safeguards on clearing choice keep a lid on tariffs. EU states are trying to thrash out a consensus on the scope of the new derivatives rules. Britain is facing opposition from countries like Germany. EU diplomats said the draft EU derivatives rules are being blocked by a minority of states due to disagreement over scope, the power of the new EU securities watchdog, and whether clearing houses should be based in the euro zone if they clear euro-denominated securities.


The main trade group for the U.S. securities industry plans to formally ask the Securities and Exchange Commission to delay implementing most derivatives provisions in the Dodd-Frank law that are due to go into effect automatically on July 16. A draft letter to the SEC from the Securities Industry and Financial Markets Association, seen by Reuters, raises concerns about at least 50 provisions that would technically become effective even though regulators are still finalizing the rules. These automatic provisions are creating confusion within the industry, with banks unsure of how to comply with them and fearful of what may happen if they are in violation. Without further guidance from regulators, the new rules could chill the market for security-based swaps used by the world's biggest banks. SIFMA is trying to help the industry get greater clarity

from the SEC as well as the Commodity Futures Trading Commission, which like the SEC is also exploring how to deal with these so-called "self-operative" provisions in the Dodd-Frank Wall Street oversight law. SEC officials are busy drafting guidance for the industry that could be released in a matter of weeks. They have been anticipating a more formal request for exemptive relief from the industry, but still had not received it as of Monday, June 6. SIFMA's draft letter discusses a self-executing provision in the law that would subject security-based swaps to decades-old securities laws, potentially imposing numerous additional compliance requirements, such as requiring banks to file registration statements for certain credit-default swaps.

GLOBAL | REUTERS, JUNE 5

The world's top 14 derivatives dealers may need extra cash to handle a surge in transaction clearing, especially in choppy markets, the Bank for International Settlements (BIS) said. Researchers at the BIS, a global forum for central bankers, looked at whether the "Group of 14" dealers (G14) that dominate derivatives trading would have enough capital to handle the anticipated surge in trades that will have to be cleared. BIS concluded in a paper that it seemed "unlikely" that G14 dealers would have difficulty finding sufficient collateral to post as initial margin. "By contrast, dealers may need to increase the liquidity of their assets as central clearing is extended," BIS said. The G14 dealers comprise Bank of America-Merrill Lynch, Barclays Capital, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, RBS, Societe Generale, UBS and Wells Fargo Bank. BIS said they could face a cash shortfall in very volatile markets when daily margins are increased, triggering demands for several billions of dollars to be paid within a day. These margin calls could represent as much as 13 percent of a G14 dealer's current holdings of cash and cash equivalents in the case of interest rate swaps, BIS said.


Any shift in high-frequency trading to Asia to skirt new regulations in the United States and European Union is likely to be short-lived and insignificant in size, a senior U.S. regulator said. Asian exchanges are opening up to computer-driven trading, encouraging increasing numbers of algorithmic and high-frequency traders to set up in the region's financial centres. That trend has attracted the attention of regulators, said Bart Chilton, a commissioner of the U.S. Commodity and Futures Trading Commission (CFTC), in an interview with Reuters on the sidelines of a conference in Amsterdam. People would want to trade in New York, Chicago and London, he said. He did not expect much market migration to happen as long as regulators in the U.S. and EU remained sensible and didn't over-react. Chilton said he expected new regulations for derivatives markets to be agreed by the end of 2011.

ITALY | REUTERS, JUNE 6

Tuscany has launched proceedings to cancel derivative contracts with international banks, in one of a series of derivatives disputes involving Italy's local authorities. The region said that while it had started an internal procedure to cancel the contracts it would, in the meantime, continue to make payments on the contracts. The derivative contracts are linked to the so-called Galileo bond issued by the region in 2002. The banks involved in the contacts are Deutsche Bank, Merrill Lynch and Societe Generale. At the end of 2010, the Tuscan region had debt of about 1.1 billion euro ($1.6 billion). Of this, 267 million euros is variable rate exposure from the Galileo bond. Italy's financial police said last December it was investigating derivative deals involving the Tuscan region, the Florence City council and other authorities.


Fifteen of the biggest trading firms that use their own money to bet on financial markets are setting up a European lobby group in the face of intensifying scrutiny from regulators, the Financial Times reported. The FIA European Principal Traders Association, similar to a U.S.-based group set up last year, plans to open an office in Brussels, the paper said. Members include U.S.-based Getco, along with Netherlands-based Optiver, IMC and Flow Traders. The move is a sign that proprietary trading firms, which often use high frequency trading technology to make tens of thousands of lightning-fast trades a day, are becoming less secretive about their activities, the paper added. The group had yet to agree agree what rules should govern prop traders, a key issue facing a sector caught in the cross-hairs of regulators. Mark Spanbroek, vice chairman of the European lobby group, said its members disagreed over what obligations should be required of ultra-fast market-makers.


CME Group Inc, the giant U.S.-based exchange operator, will ramp up trading of European-focused interest rate products in a direct challenge to NYSE Euronext's Liffe business, and a shift to offense after years on the defense. The Chicago Mercantile Exchange parent company said it will launch electronic trading of Euribor futures and options beginning in the second half of 2011, expanding its footprint beyond Eurodollars in the massive derivatives market. CME's move marks a partial shift from defending its home turf in the United States, and drives the company deeper into Europe just as London-based Liffe, which handles Euribor, is about to be acquired by Deutsche Boerse AG. The group also announced plans to expand its clearing service to over-the-counter base metals products in the United Kingdom, becoming the latest entrant in a developing race for a market that seems to be growing due to regulation. At present members of the London Metal Exchange,

the world's leading industrial metals futures exchange, pay for the task to be done by Europe's largest independent clearing house, LCH.Clearnet.

HONG KONG | REUTERS, JUNE 8

Hong Kong's securities regulator said that it is soliciting feedback from banks to review its initial public offering sponsorship process in the third quarter. Martin Wheatley, chief executive of the Securities and Futures Commission, made the comments at a news conference on his last day in the role. He will take up the post of Britain's Financial Conduct Authority in September. Wheatley's remarks were similar to his comments in May 2011, when he said the regulator would launch a consultation in the summer on whether IPO sponsors should be legally liable for what investors are told in a listing prospectus.

KENYA | REUTERS, JUNE 8

Kenya's capital markets regulator invited local and international firms to submit applications to set up and operate a futures exchange for trading in currency, mineral and energy derivatives. The Capital Markets Authority (CMA) did not say when it expected the planned exchange to go live in east Africa's biggest economy. The proposed Futures Exchange would be incorporated as a demutualized corporate entity to create a new class of investment opportunities, CMA Chief Executive Officer Stella Kilonzo said in a statement. Learn more

HUNGARY | REUTERS, JUNE 6

Hungary's ruling Fidesz party has proposed establishing a natural gas exchange, which would start trade by Jan. 1, 2013, draft legislation showed. The bill, signed by Fidesz lawmaker Istvan Balsai, chairman of parliament's justice committee, says the exchange would be run by a company that has a licence to operate a power exchange and is owned by a power transmission system operator. The power exchange owned by the Hungarian transmission system operator Mavir -- part of state-owned energy group MVM -- is HUPX, which competes with Prague-based Power Exchange Central Europe.

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DUBAI | REUTERS, JUNE 6

The United Arab Emirates is close to issuing a final draft of proposals to regulate the country's nascent asset management industry, seen as an important step in protecting investors' interests and boosting market confidence. The Securities and Commodities Authority (SCA) issued an initial draft for regulating investment funds earlier in 2011 and a final circular is expected by mid-July after consultations with asset management firms, a fund management source familiar with the discussions said. The proposals, intended to boost transparency among funds, will also apply to distributors, with the ultimate aim of developing a market for the creation of and distribution of very liquid products. The proposed regulations would also mean the SCA would be responsible for oversight of licensed entities, freeing up resources of the Central Bank -- which currently regulates funds in the UAE -- to monitor other institutions such as commercial banks. Companies planning to set up a local investment fund will be required to be established as a joint stock company, have their permanent headquarters in the UAE and have a paid-up capital of no less than 10 million dirhams. They will also be required to invest a minimum of 10 percent of the capital for each local investment fund they set up. Funds are also domiciled out of financial free zones like the Dubai International Financial Center (DIFC) and under the proposals, DIFC-domiciled funds would be considered as foreign funds by the regulator. The proposal will require foreign funds to get approval of the regulator and the central bank to market the funds in the country.


China's National Social Security Fund, the country's $130 billion pension fund, is opening four new mandates to outside asset managers, it said in an emailed statement. They include multi-asset allocation products, emerging market (ex-China) local currency debt products, global natural resources equity products and global real estate equity products. The welfare fund, projected to hit 1.5 trillion yuan by 2015, can invest 20 percent of its total assets overseas, including in stocks and bonds. The actual ratio remained at about 7 percent in 2009. The most recent allocation proportions are not yet available.


Countries around the world voiced their concerns over the potential impact of a technical default in the United States. Oman's central bank said it had started to actively discuss a potential U.S. debt default and fears such a move would, at least briefly, destabilise Gulf Arab foreign asset reserves, a senior official at the bank said. Gulf states like Oman, which mostly peg their

currencies to the U.S. dollar, are major holders of Treasuries and other U.S. assets, with oil -- priced in dollars -- their main source of revenue. Li Daokui, an adviser to China's central bank, said U.S. Republican lawmakers are "playing with fire" by contemplating even a brief debt default as a means to force deeper cuts. China is the biggest holder of U.S. assets. John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh said the Saudi government would share China's concern. At the same time, St. Louis Federal Reserve Bank President James Bullard said the US fiscal situation, if not handled correctly, could turn into a "global macro shock".

ICELAND | REUTERS, JUNE 6

Iceland's new plan to lift capital controls in two phases is a "difficult challenge" and will depend on the country returning to global capital markets, a senior International Monetary Fund official said. IMF mission chief to Iceland Julie Kozack told a conference call with reporters the authorities' commitment to strong policies should enable the economy to stay on the course of recovery. The IMF approved a $225 million loan disbursement for Iceland on Friday, June 3 as it nears the end of a $2.1 billion IMF program agreed in 2008 after its top banks collapsed, forcing it to seek financial aid from the IMF and Nordic partners. Kozack said it was important that Iceland return to the markets as quickly as possible, although the fund does not have a specific timeline in mind for when that should happen.


Banks are being asked to roll over their loans to Greece and Europe may give the heavily indebted country more money, European Central Bank Governing Council member Nout Wellink said. Wellink told Dutch current affairs television programme Buitenhof that the ECB was trying to persuade banks to stay in those countries after 2012, and to keep active in those countries when debt matures.


The Bank of Greece, the country's central bank, plans to ask banks to boost their capital adequacy ratio to ease market fears over the impact of a haircut on Greek government bonds they hold, a Greek newspaper said. The Kathimerini newspaper said the head of the Bank of Greece would ask banks to strengthen their Core Tier 1 ratios after the results of stress tests at the end of June. The paper cited banking sources. The minimum ratio of Core Tier 1 equity and reserves capital to risk-weighted assets the central bank will require will depend on the haircut assumption it will make as regards bank's holdings of Greek government bonds. The paper said this did not mean that the Bank of Greece accepts that there will be a haircut. "On the contrary, as a member of the European Central Bank it is against any type of debt restructuring," Kathimerini said. It said the central bank believed a stronger equity base may make banks' return to wholesale funding markets easier and limit their recourse to eurosystem facilities as Athens implements a fiscal plan agreed with its international lenders.


The Internal Revenue Service is examining sewer bonds issued by Alabama's beleaguered Jefferson County in 2003 to make sure they are compliant with tax laws, according to documents the county posted on June 3. If the IRS uncovers that the county violated the law, it could declare the debt taxable, forcing those who bought it to pay taxes on its interest. The county said it would put a third of its workers on administrative leave without pay because of a shortfall in its operating fund, the latest challenge in its fight to avoid what would be the largest municipal bankruptcy in U.S. history. The county, home to Birmingham -- the largest city in the state -- has been saddled with $3.2 billion in sewer debt.


The Bond Dealers of America is seeking to help U.S. dealers handle the tightening regulation of the $2.9 trillion municipal bond market by offering guidelines on continuing disclosures, fair dealing rules and trading practices. The association suggested that dealers put in writing how they will uphold the rules on investor information and how they will ensure they trade at fair and reasonable prices. Mike Nicholas, chief executive officer of the BDA, said the group believed the practices and procedures would help dealers meet all appropriate disclosure, suitability and pricing regulations without imposing burdensome and unnecessary requirements upon them.

NORWAY | REUTERS, JUNE 3

Norway's central bank is offering extra liquidity to the banking sector next week to combat rising money market rates and alleviate poor flows between banks, it told Reuters. Kristine Falkgaard, Norges Bank's head of Market Operations and Analysis, said the short-term deposit rate was "somewhat higher" than targeted. She said liquidity was not distributed as efficiently between banks as expected. Falkgaard reiterated that June holds a series of special events in the Norwegian money market, including tax payments and renewal of long-term financing that the government has provided for banks.


The outlook for Britain's prized triple-A credit rating remains stable but weaker growth and any slippage in the government's fiscal plans could lead to a reassessment, credit ratings agency Moody's said. The government aims to virtually eliminate a budget deficit of around 10 percent of GDP over the next four years, but lacklustre growth has caused some people to doubt whether it will meet this target. A Moody's spokesman told Reuters that in a situation of lower growth, combined with weaker than expected fiscal consolidation, the agency would reconsider its stance.


China has unveiled fresh incentives to encourage commercial banks to lend more to cash-strapped small businesses, the official Financial News reported. It cited the China Banking Regulatory Commission as saying that the regulator would tolerate higher bad loan ratios at banks when they lend to small firms, which create 80 percent of jobs and generate 60 percent of industrial output in China. The banking regulator would exclude loans below 5 million yuan when calculating banks' loan-to-deposit ratios and regard them as retail instead of corporate lending, lowering the provisions banks need to put aside, the report said. The CBRC also plans to give preferential treatment to banks viewed as helping fund small firms in approving bank bond issuances.


A British minister threatened the country's banks with punitive taxes if they fail to meet lending goals set by the government to help boost a stuttering economy. Business minister Vince Cable, a consistently fierce critic of the banking industry, said the government could consider new sanctions if the banks missed their lending targets. He said the government could approach "the taxation of profits or bonuses or balance sheets in a more forceful way". Earlier this year, the banks struck a deal with the government called "Project Merlin", in which they pledged to moderate excessive salaries to staff and in return lend out more money to small businesses to boost the UK's flagging economy. In May, the Bank of England said top banks had fallen short of those targets in the first quarter.


Tax authorities have been stepping up pressure on the offshore banking industry, with the United States promising a summer crackdown and Britain pursuing thousands of people with money in Swiss accounts. Deputy Commissioner for Services and Enforcement Steven Miller at the U.S. Internal Revenue Service (IRS) figure said the authority was about to probe at least one bank within the next month. Meanwhile, a source close to British tax authority the HMRC said it was aware of approximately 500,000 offshore account holders. Among these, it has details of 7,000 HSBC customers with Swiss accounts, holding assets of approximately 7 billion pounds, the source said. A significant proportion of these are suspected of tax evasion and will receive letters warning they are under investigation. The source said around 500 people were being investigated and this would increase to "thousands".

TANZANIA | REUTERS, JUNE 8

Tanzania, one of Africa's top gold producers, is considering a "super profit" tax on earnings from minerals as one of the ways to fund its five-year development plan, according to documents seen by Reuters. The move follows similar steps in other producer countries that have sought to increase fiscal revenue from the mining industry and to take advantage of rising prices. The plan, launched by President Jakaya Kikwete, said revenue from mineral resources would be one of the important sources of financing for the medium-term plan. Noting increasing mineral prices, the plan said it was optimal to introduce a super profit tax on the windfall earnings from the mineral sector.

EGYPT | REUTERS, JUNE 9

Egypt dropped plans to levy a tax on share dividends, will not revive it this year and is looking for ways to reduce planned expenditure as a result, the Finance Minister said. He ruled out reviving the idea of a dividend tax later this year said there were no other changes in the government's budget. The government dropped the planned tax after strong opposition from investors.

MALAWI | REUTERS, JUNE 4

Malawi's new tax measures are likely to impact foreign direct investment in the southern African nation, the Malawi Confederation of Chambers and Commerce (MCCCI) said. Finance Minister Ken Kandodo said in his 2011/12 budget speech that previous tax breaks for industrial buildings, plants and machinery granted to companies under a free trade zone would be reduced to 40 percent from 100 percent. Companies will also be subject to the standard corporate tax of 30 percent, he said. Chancellor Kaferapanjira, chief executive officer of the MCCCI, told Reuters that the new tax measures would in the long run worsen the investment climate, which was already on a decline "because of unreliable power outages, water shortages and the high cost of service".

US | THOMSON REUTERS ACCELUS, JUNE 8

Two U.S. senators are pressing federal authorities to crack down on an online black market and "untraceable" digital currency known as Bitcoins after reports that they are used to buy illegal drugs anonymously. Democratic Senators Charles Schumer of New York and Joe Manchin of West Virginia wrote to U.S. Attorney General Eric Holder and Drug Enforcement Administration head Michele Leonhart in a letter that expressed concerns about the underground Web site "Silk Road" and the use of Bitcoins to make purchases there.

The letter prompted a discussion among Bitcoin enthusiasts about whether the U.S. government was capable of closing related bank accounts and thereby stifling the currency. The senators released a copy of their letter on Monday, June 6. It cites recent media reports that some tech-savvy individuals were using an "anonymizing network" known as Tor to gain clandestine access to Silk Road and buy illegal drugs. Silk Road buyers pay with Bitcoins and sellers mail the drugs, the Gawker blog reported. The transactions leave no traditional money trail for investigators to follow, and leave it hard to prove a package recipient knew in advance what was in a shipment. The DEA was "absolutely" concerned about Bitcoins and other anonymous digital currencies, agency spokeswoman Dawn Dearden said when asked for a response to the senators' concerns. Silk Road may be hard to close. It could easily move from server to server around the globe and change its Web address and name at will, while remaining accessible through Tor. However, Bitcoins must be purchased with real money; of late, they have been selling for roughly $10 each. Therefore, there are exchanges with bank accounts, such as the Mt. Gox Bitcoin Exchange, that the Justice Department and other law enforcement agencies may be able to target. It is this weak link that worries the currency's enthusiasts.


China should guard against risks from "excessive" holdings of U.S. assets as Washington could pursue a policy to weaken the dollar, a senior official at the State Administration of Foreign Exchange said. Guan Tao, head of the international payment department at the foreign exchange regulator, said in an article that the United States had taken an expansionary fiscal and monetary policy to stimulate economic growth, and that it may find it hard to resist the policy temptation of weakening the dollar abroad and pushing up inflation at home. China has never published its holdings of U.S. Treasuries, but some economists have said as much as 70 percent of the country's foreign exchange reserves, which hit a record $3.05 trillion at the end of March, are parked in dollar assets.

INDIA | REUTERS, JUNE 3

Dutch state-owned bank ABN AMRO has applied to the Reserve Bank of India for a licence to open a branch in the country, the Mint reported, citing four people familiar with the development. ABN AMRO, which is being readied for a stock market listing in 2014, plans to re-enter India to revive its core diamond financing business and also to tap fast-growing loan demand, a former executive with the bank in India told the Mint.

NETHERLANDS | REUTERS, JUNE 8

The Dutch state may retain a stake in ABN AMRO to block "unwanted buyers" when the bank is eventually listed in an IPO, and may not recoup all the money it spent on its bailout, the finance minister said. The Dutch government spent nearly 40 billion euros when it was forced to either nationalise or bail out several financial institutions during the 2008 crisis, including the giants of Dutch banking -- ABN AMRO and ING -- as well as insurer Aegon and SNS Reaal. Dutch finance minister Jan Kees De Jager told parliament that he could not guarantee the state would be repaid in full for the amount it invested in ABN AMRO, which is estimated at more than 26 billion euros. He also said the state may keep a 5 to 10 percent stake in an initial public offering (IPO), as this would allow it to defend the bank against "unwanted buyers". The government has said an IPO of ABN AMRO will not take place before 2014, but De Jager cautioned that 2014 was not a deadline. Several conditions must met before ABN AMRO is privatised, including ensuring the stability of the financial system and fetching as much from the sale as possible, De Jager said, adding this did not mean ABN would fetch more "just by waiting".

VIETNAM | REUTERS, JUNE 9

The Vietnamese government will accelerate privatisation of state-owned companies and will not rescue failing banks, Deputy Prime Minister Nguyen Sinh Hung said, signalling plans to loosen the state's grip on key parts of the economy. Hung said that the "equitisation", or privatisation, of state-owned enterprises had been slow in recent years because of the economic downturn and sluggish stock markets, but he said the government would speed up the pace and even sell stakes in its biggest firms, known as economic groups. The International Monetary Fund has said the government needs to address concerns about vulnerabilities in the financial system as it seeks to stabilise the economy. The Fund recommended tighter supervision of the banking sector and improving governance and financial discipline in corporations.


Libya's defecting labour minister was reported as saying the Libyan government is selling oil on the black market as Muammar Gaddafi struggles to hold onto power. Swiss media said Ali al-Amin Manfur told delegates at an International Labour Organization (ILO) conference that he was joining the Libyan rebels. He told the Geneva daily Le Temps in an interview that Gaddafi's remaining support came from people who had a financial interest in his survival. He said the regime controlled the businesses and oil, which it was selling on the black market. It also has access to the state treasury, added Manfur, who was the only delegate from Tripoli at the United Nations agency's two-week gathering.

He told Le Temps that Gaddafi had the backing of a maximum of 20 percent of the population, including the leader's own tribe. "But they are all armed, and most important of all they have the money," Manfur said.


China's plan to create its own iron ore index points to a shift in approach as the world moves to a more flexible pricing system, but it also shows it remains determined to boost its price-setting power in a market dominated by giant suppliers. Li Xinchuang, deputy-secretary general of the China Iron and Steel Association (CISA), told Reuters in May that research was now underway into a domestic index that could match those provided by overseas firms and used as the basis for quarterly contract prices set by Rio Tinto, BHP Billiton and Vale. Platts, whose index is used by both Vale and Rio Tinto, welcomed the plan, saying it showed that China was finally ready to move with the times. CISA struggled to recover from the 2009 collapse of an annual iron ore pricing system known as the "benchmark", in which buyers negotiated annual contract prices with suppliers rather than leaving them to the mercy of the market. Events have forced the association to give up on the old mechanism, which was abandoned by all the big miners last year, and CISA is looking for alternative ways to boost China's clout. One reason why the old benchmark came to a sticky end was CISA's insistence that the miners accept a "China price", a large discount that reflected the role played by the world's biggest steel sector in propping up ore demand even during a global recession. CISA's veteran officials, brought up during China's command economy era, took an active role in the final benchmark negotiations, and angrily criticised the big miners when they refused to yield. CISA's efforts ended in humiliation, and the replacement of the old system by quarterly prices based on index averages saw China's pricing power wane further, though it continued to import around two-thirds of total seaborne iron ore. As CISA tries to reposition itself, it is still determined to find a "China price" to rival those compiled by foreign indexes, which it believes are manipulated by banks, speculators or the miners themselves. China hopes to create an index that will better reflect the true situation on the market and eliminate external influences -- but rivals are sceptical that CISA could do a better job. A highly political group like CISA could be subject to a different kind of manipulation because it is more focused on serving the interests of its members, said Christopher Ellis, index analyst with Metal Bulletin in London.

FRANCE | REUTERS, JUNE 7

Proposals by France to tackle speculation in agricultural markets are facing resistance from multiple countries on issues including transparency and market regulation, the French agriculture minister said. Speaking at the International Grains Council conference, Minister Bruno Le Maire said China "is faced with some difficulties on transparency," referring to the challenge of obtaining accurate data on stocks in one of the world's largest grain producers and consumer. He noted that Brazil and Argentina "have a certain reluctance to regulate in one way or another agricultural prices", adding that the U.K. had concerns over the market regulation plans. The U.S. has also needed reassurance on the proposal for a global food reserve, Le Maire said. Past proposals for a global food reserve have failed, because the United States and some European nations object that they keep farm prices artificially low and can discourage production.


Direct government intervention may be needed to burst bubbles in commodity markets inflated by a new herd of financial investors, a U.N. study found. Excessive speculation has added around 20 percent to international oil prices, sending false signals to policy makers, said the report. One of the report's authors, Heiner Flassbeck, a director at the United Nations Conference on Trade and Development, said the changing role of commodity markets had enormous repercussions for the economy. Reforms suggested by the report - Price Formation in Financialised Commodity Markets - included improving transparency on commodity exchanges and over-the-counter physical markets, better inventory data and action through the use of government reserves. The study concluded that the possibility of allowing governments' direct intervention in the physical and financial markets needed to be considered. The report quoted data compiled by Barclays Capital that commodity-related assets under management reached a historic high in March 2011 of around $410 billion, almost double the pre-crisis level of 2007. The authors of the new report, which focused on six commodities -- oil, barley, cocoa, maize, sugar and wheat, said price distortion is a problem even if it does not last. The U.N. report's authors cited the risk of a permanent shift, turning markets that used to lag into ones that anticipate just like other asset classes. For those seeking a portfolio diversifier, commodities lose much of their worth.

EU | REUTERS, JUNE 5-8

The European Union has told Chinese airlines they can win an exemption from the EU's carbon market if they follow Europe's lead in cutting greenhouse gas emissions from aviation, according to a letter seen by Reuters. From Jan. 1, 2012, the EU will require all airlines flying to Europe to be included in the Emissions Trading Scheme (ETS), a system that forces polluters to buy permits for each tonne of carbon dioxide they emit above a certain cap. But China's aviation authority opposes the measure, saying it will cost Chinese airlines 800 million yuan ($123 million) in the first year and more than triple that by 2020. China says that Europe should adjust the ETS to reflect the differences between rich and poor countries. Also, a group of U.S. airlines is challenging their inclusion in the ETS in European courts. The European Commission, which manages the ETS, wrote a letter to the China Air Transport Association offering a solution -- using provisions in the ETS rules to exempt the airlines of any country that can prove it is taking equivalent steps to cut emissions from aviation. The letter to CATA, sent on May 31, said the legislation contains provisions which enables the removal of all arriving flights from the scope of the EU ETS "in the event the third countries implement measures of their own to limit the climate change impact of these flights." However, EU climate commissioner Connie Hedegaard later said the EU has a right to impose legislation to cut emissions from aviation, and warned that showing weakness would encourage further challenges. The Association of European Airlines (AEA) and aircraft maker Airbus wrote to EU climate commissioner Connie Hedegaard in May, saying they were worried the dispute would result in trade conflict and retaliatory measures. Hedegaard replied that to back down on agreed legislation would in itself send out a dangerous signal of weakness.

GERMANY | REUTERS, JUNE 6

Germany's planned exit from nuclear power received backing from the cabinet, the economy and environment ministers said in Berlin. The far-reaching energy strategy, spurred by the crisis in Japan, reverses longer life cycles granted to nuclear power stations only last autumn. It will entail changes to power grid expansion plans and the subsidy system for renewable energy such as solar and wind. The ruling Christian Democrats and their coalition partner the Free Democrats are to discuss details separately, such as the schedule of the nuclear power station phase-out and whether some capacity will remain on stand-by to safeguard supply. Chancellor Angela Merkel on Friday, June 3 agreed with state premiers on a phased exodus of nuclear which supplied 23 percent of German power last year and to stick to plans to more than double the share of renewables to 35 percent by 2020. This came after a decision on May 30 to phase out nuclear by 2022 and leave eight suspended plants shut for good.


The U.S. Environmental Protection Agency, under the gun from Republicans and struggling with an ambitious agenda, will likely delay by a month proposing rules to cut greenhouse gas emissions from the country's major utilities, sources said. The EPA said late last year it would propose rules on constraining greenhouse gas emissions from power plants -- known as performance standards -- in July. It plans to propose similar rules on oil refineries in December 2011. The rules will likely give polluters flexibility to cut emissions by participating in existing or planned regional cap-and-trade markets, for example, or by switching from coal to cleaner-burning natural gas. The timing of the EPA rules is important because President Barack Obama has pledged to reduce U.S. emissions by about 17 percent by 2020 compared to 2005 levels. Because Congress failed in 2010 to pass a climate bill, the Obama administration has been relying on the EPA to spur reductions in carbon emissions. The EPA began rolling out its rules on the biggest polluters at the start of the year. As a result, the EPA has taken on its heaviest load in years and is struggling with a number of delays. A rule on ozone pollution, which is hazardous to health, has already been delayed several times. In May 2011 the EPA delayed indefinitely the finalization of rules on pollutants, such as mercury and soot, from industrial boilers that were supposed to be implemented in coming years. In the fall, the EPA plans to issue rules on greater efficiency for vehicles.


The New York State Assembly passed a one-year moratorium on hydraulic fracturing, a method of natural gas drilling already under a temporary ban in the state due to concerns that it might pollute drinking water. The moratorium on new drilling permits would run through June 1, 2012, replacing the current ban set to expire later this summer, when state environmental officials are expected to release a report on potential hazards of "hydrofracking." The measure must also pass the Republican-controlled state Senate to become law.

IRAQ | REUTERS, JUNE 5

Iraq is to offer Islamic banking services at its two main state-owned banks under a $42 million plan that will start being implemented this month, the finance ministry and the central bank said. In a website posting, the finance ministry said the work to introduce banking services compliant with Islamic Sharia law at the Rafidain and Rashid banks would begin in the next two weeks. Senior central bank advisor Mudher Kasim told Reuters that there was demand for such services in the country. The share of Islamic banking activity in Iraq's private banking sector represented 20 to 25 percent of the country's total banking activity and with the state banks now starting Islamic services this could reach 40 percent, Kasim said. The central bank had drawn up a draft law to regulate Islamic banking activity and this would be sent to the cabinet in a few days for approval, then on to parliament.

MIDDLE EAST | REUTERS, JUNE 5

The Palestine Monetary Authority hopes to issue to banks its first ever Islamic bond worth $50 million by the end of June, its governor Jihad al-Wazir said. The authority originally aimed to issue the bonds, or sukuk, in the first quarter, but obtaining the approval of the issue being in line with sharia, or Islamic law, delayed the plan. He said that the sukuk was relatively small but could be useful as a measure to test the market. The Palestinians do not have their own currency and the Israeli shekel is used for most day-to-day cash transactions. The monetary authority governs part of the West Bank and Gaza strip. The sukuk issue will be denominated in U.S. dollars and based on the ijara concept, he said.


Top Islamic banking officials met in Singapore this week to discuss ways to revive an industry which has stalled as interest in new markets cool and legal uncertainties cloud the role of sukuk as funding tools. Once touted as a viable alternative to traditional banking, Islamic finance has failed to make a mark outside its core markets as countries from Britain to Hong Kong and Australia put on hold sukuk issuance plans and proposed regulatory changes to accommodate sharia banking. Its reputation stained by Dubai's $26 billion debt crisis in 2009, Islamic finance is struggling to attract investors' attention with emerging markets flush with funds, in contrast to 2008 when the global crisis shut down credit markets and prompted a search for alternative sources of finance. Anuwar Idris, head of marketing and business development at Affin Fund Management in Kuala Lumpur, said Islamic financing had been impacted by the sovereign debt issues in Europe and noted that quantitative easing had resulted in funds from the U.S. moving into various emerging markets. Dwarfed by the size and financial muscle of its conventional banking rival, the $1 trillion Islamic finance industry needs to find new markets beyond the Middle East and Southeast Asia for growth. Several high-profile sukuk defaults have recently thrown up legal uncertainties, such as the extent to which sukuk holders own assets underpinning the issue when the instrument sours.

Kuwait's International Investment Group defaulted on two sukuk payments in 2010, and The Investment Dar, which owns half of British carmaker Aston Martin, defaulted on sukuk in May 2009. U.S. energy firm East Cameron defaulted on its sukuk issue in 2008.

TELECOMS & MEDIA

MEXICO | REUTERS, JUNE 7

Mexico's anti-corruption watchdog is investigating a botched ruling by regulators which handed telephone company Telmex a legal advantage in its bid to enter the television market, according to sources and documents obtained by Reuters. The documents show that former officials considered the Telmex bid three years ago, swapped memos on the subject and even drafted a "no" decision, but failed to respond as a regulatory stopwatch ticked down. Telmex, controlled by the world's richest man, Carlos Slim, has taken its battle to the courts. A Mexican court found in May that Cofetel, the telecom regulator, did not rule on Telmex's television bid in time and, under industry rules, this led to a tacit approval of the company's request. The win for Telmex was short-lived, with Mexico's Communications and Transport Ministry (SCT), the final arbiter of telecom disputes, rejecting the Telmex TV bid two weeks later. But Telmex, which provides roughly 80 percent of Mexico's home phone lines, said it will keep fighting in court, arguing that regulators must grant the television license on the narrow grounds of the three-year-old filing. For Telmex, the decision is critical. HSBC estimates that winning a television concession would open a profitable new line of business and increase revenue 6 percent in the first year as its telephone service sheds customers. A Reuters investigation, which involved a review of Cofetel internal documents and interviews with current and former regulators and industry sources, also found evidence of other mismanaged cases by Cofetel, handing similar legal victories to Telmex and television company TV Azteca. The SCT and Mexico's anti-corruption and public service organization, the Ministry of Public Administration, are investigating how the Telmex decision was so mishandled, industry and regulatory sources said.

MIDDLE EAST | REUTERS, JNE 7

Qatar Telecom (Qtel) will close its Virgin Mobile Services following an order from the country's regulator, a decision which marks a victory for its rival operator Vodafone Qatar. Vodafone Qatar had long argued Qtel's launch of Virgin-branded pre-paid services constituted a third service provider in Qatar and so violated the terms of Vodafone's license. ictQATAR "has instructed Qtel to close all Qtel Virgin Mobile-branded services in Qatar," the regulator, also known as The Supreme Council of Information and Communication Technology, said in a statement. In a separate statement, Qtel said it would comply with the ruling and will transfer its existing Virgin Mobile customers to Qtel-branded services. These customers will retain their existing balances and phone numbers, but will require a new Qtel SIM card. Virgin accounts must be deactivated by August 4.


Wary of alarming customers, many firms never report the kind of cyber-attacks suffered by Sony, Google and others -- and as long as the stigma holds, tackling the growing problem may prove impossible. Data theft is a menace that looms especially large, given companies' increasing reliance on online storage. At risk can be cutting-edge copyrights, privileged commercial information such as tips on takeover bids and -- perhaps most crucially for a business's reputation -- customers' personal details. Computer security and corporate intelligence specialists say they are often sworn to secrecy by firms scared of the potential reaction of corporate partners and investors. Some companies, said experts gathered at a cyber-security conference in London organised by the EastWest Spell Institute, may not know the extent of their own exposure. BT Chairman Sir Michael Rake said in a speech at the event that one of the reasons not much is known about the scale of this was that organisations were embarrassed to reveal the impact. Speakers called for greater transparency, but few were willing to discuss attacks on their own systems in detail publicly. Sometimes, experts said, that extends to simply not looking for problems. While some accused IT security experts of talking up the threat to boost business, most agreed the problem was on the rise. Hackers -- whether criminals, state-linked spies or those in between -- are all seen increasing in sophistication. Most specialists said cases such as Google or Lockheed Martin were only the tip of the iceberg, with little consensus on tackling the problem. Firms often understand so little about the threat facing them that they do not even know how much money they are losing, they noted. Vartan Sarkissian, CEO of security firm Knightsbridge Cybersystems, called for a way to share information on attacks anonymously, in order to better help firms prevent them. Some argue the answer may be some form of regulation in which companies are required to divulge much more about security breaches. But in the short term, experts said the importance of good electronic defences was finally getting through.


Citigroup Inc said computer hackers breached the bank's network and accessed the data of about 200,000 bank card holders in North America, the latest of a string of cyber-attacks on high-profile companies. Citi said the names of customers, account numbers and contact information, including email addresses, were viewed in the breach, which the Financial Times said was discovered by the bank in early May. However, Citi said other information such as birth dates, social security numbers, card expiration dates and card security codes (CVV) were not compromised. Separately, Securities and Exchange Commission Chairman Mary Schapiro said she will "seriously consider" issuing additional guidance outlining when public companies should disclose cybersecurity breaches. Schapiro said in a letter to Senator John Rockefeller that although investors had not asked for more disclosure in this area, she had asked commission staff to provide a briefing on current disclosure practices.


Data storage firm EMC Ltd has offered to replace millions of potentially compromised "SecurID" electronic keys after hackers used data stolen from its RSA security division to break into Lockheed Martin's network. Lockheed Martin, the Pentagon's No. 1 arms supplier and the U.S. government's top information technology provider, was attacked in May by hackers, underscoring a growing threat to U.S. national security. RSA, which makes the SecurID keys, said in a letter published on its website that it had confirmed information taken from it in March 2011 was used in the attack on Lockheed Martin. EMC had previously warned that information stolen from RSA related to its SecurIDs and has now offered to replace the SecurID keys of any customers who ask, a spokesman told Reuters. Other big corporations have suffered from major hacking attacks recently, including Sony Corp and Google.

CANADA | REUTERS, JUNE 6

Canada's privacy watchdog is satisfied that Google is taking steps to ensure it does not breach privacy laws, after inadvertently collecting personal information while taking photographs of Canadian streets. Privacy Commissioner Jennifer Stoddart said the company seemed "well on its way" to resolving shortcomings in the way in which it addressed privacy issues. But the case is not closed for the Internet search company, which must hire independent auditors and report back in a year. Google has agreed to improve privacy training, assess and track projects that collect, use or store personal information, hold engineers and managers responsible for breaches and assign internal auditors. Stoddart said that, as an innovative company that pushes the limits of social standards, Google has "an added responsibility to ensure that privacy protection gets the attention it deserves." The commissioner said in October 2010 that Google had collected complete e-mails, e-mail addresses, user names and passwords, names, home telephone numbers and addresses, and even the names of people suffering from certain medical conditions. The investigation concluded the breach was largely due to Google's lack of proper privacy policies and procedures.

FRANCE | REUTERS, JUNE 7

French TV and radio stations can tweet as much as they like but must stop telling people to consult them on Twitter and Facebook, which amounts to advertising for those sites, France's CSA media regulator said. In a world where global communication has taken yet another leap via social networks, the media regulator's response fuelled a debate that quickly painted France as stuck in a time-warp. "What we advise people to say is: 'Look us up on the social networks' -- because Facebook and Twitter are commercial brands," CSA spokeswoman Christine Kelly told Reuters. Kelly, a former journalist, explained that covert advertising, visible or audible references to branded products outside of dedicated advertising periods, has been banned in France since 1992. She said radio and TV stations which refer their audiences to Twitter and Facebook by name are breaching that law and risk fines if they fail to comply. They should stick to telling people to check their social networking pages, without referring by name to the two giants in that domain, she said.


A Senate committee backed giving U.S. communications regulators authority to auction some airwaves currently used by broadcast television and to shift their use to mobile broadband. The auction authority is seen as key to a Federal Communications Commission plan to free up additional airwaves to meet the booming demand for wireless services. Incentive auctions, where some of the proceeds would go to the broadcasters giving up spectrum, are part of a bill to build a nationwide public safety network that was approved in a 21-4 vote by the Senate Commerce Committee. The FCC hopes to repurpose 120 megahertz of spectrum through voluntary auctions of television airwaves. Broadcasters have been wary of the FCC plan, worried about the unintended consequences it could have on their TV signals and the 46 million viewers that still rely on over-the-air TV.

PEOPLE


Nobel Prize winner Peter Diamond said he planned to withdraw as a nominee for Federal Reserve governor, after his nomination was repeatedly opposed by Republicans. Diamond, an economics professor at the Massachusetts Institute of Technology, resigned in an opinion piece published in the New York Times titled "When a Nobel Prize isn't enough." The top Republican on the Senate Banking Committee, Richard Shelby, has criticized Diamond, saying he lacks monetary policy experience. Diamond's withdrawal, a recognition that Republican objections could not be overcome despite three committee votes approving him, leaves the White House with two vacancies to fill on the seven-seat Fed board as the central bank debates what to do about a weak economy recovery after its $600 billion bond buying program ends in June. Diamond's nomination fell victim to Republican score settling -- under Democratic control, the Senate in 2008 blocked a nominee of Republican President George W. Bush. Another factor was a newly invigorated opposition to government and monetary intervention to stimulate economic growth during recessions. The failure of the nomination of the MIT professor, an expert on pensions and behavioral economics, is also an indication of deep partisan divides over economic issues on Capitol Hill. Disagreement over spending cuts has stalemated efforts to raise the U.S. debt ceiling, raising the possibility, however remote, of a U.S. debt default. In his article, Diamond bemoaned the rise of political pressures on central bank decision-making.


Top White House economist Austan Goolsbee said he was stepping down, marking the exit of one of President Barack Obama's top aides at a time when new signs of weakness have emerged in the U.S. economy. Less than a year after he was named chairman of the White House Council of Economic Advisers, Goolsbee plans to return to his teaching job at the University of Chicago, the Obama administration said in a statement. He will be back in Chicago in time for the start of the next school year. Goolsbee's departure leaves Treasury Secretary Timothy Geithner as the sole remaining senior member of Obama's original economic team, as the president is under pressure to persuade Americans that he has a plan to boost growth. Goolsbee has been one of the administration's more visible spokesmen on the economy. He also advised Obama's campaign for the U.S. Senate in 2004 and his 2008 presidential campaign, and was seen as one of the administration's best communicators. His sudden departure will clearly be a loss for the White House.


U.S. President Barack Obama is considering nominating Treasury aide and former banker Raj Date as head of the new consumer financial watchdog agency, a source familiar with the decision-making said. Date is a close associate of Elizabeth Warren, the outspoken consumer

advocate who championed the creation of the agency that will seek to prevent fraud and abuses in an array of financial products from credit cards to mortgage loans. A person familiar with the administration's thinking said that within the White House, interest has grown in the idea of picking someone close to Warren as a way of sending a signal that she would continue to help shape the consumer agency. Date spent more than a decade in the financial industry and has worked at Capital One Financial and Deutsche Bank. He later left to found Cambridge Winter Associates, a research organization. While at Cambridge Winter Associates, Date helped to push for the creation of the consumer bureau as part of the sweeping legislation overhauling the U.S. financial regulatory system. The consumer bureau will open its doors on July 21 and the new director, once confirmed, will serve a five-year term.

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