Azure Global : 10/29/13

Tuesday 29 October 2013

Rabobank faces £600m fine as Libor scandal resurfaces

Dutch mutual expected to become fifth financial institution to face huge penalty for attempting to rig benchmark interest rate

The Libor rigging scandal could be reignited on Tuesday when Dutch mutual Rabobank is expected to become the fifth financial institution to be hit with a huge fine for attempting to rig the benchmark interest rate.

The bank is thought to be facing fines of more than £600m from regulators on both sides of the Atlantic, who are continuing their investigations into alleged manipulation of the key interest rate.

London's Financial Conduct Authority (FCA) and regulators in the US are thought to be poised to levy larger than expected penalties on Rabobank, a co-operative-style institution whose roots lie in financing agriculture and which escaped the financial crisis without a taxpayer bailout.

The bank has been warning that it faced a fine for Libor rigging since the summer when it revealed it had made a provision of an undisclosed sum in preparation for the regulatory action.

The Libor scandal was first exposed in June 2012, when Barclays was fined £290m for its role in attempting to manipulate the rate; its top management was subsequently forced out. Since then Royal Bank of Scotland, Swiss bank UBS and the money broker Icap have been fined. UBS received the highest penalty of £940m.

Rabobank said last week that details of its punishment were getting closer to publication. "Various authorities have almost completed their investigation into Rabobank's role in the Libor and Euribor setting process," the bank said. "Rabobank expects to be able to enter into settlements with these authorities within the next two weeks. Rabobank is not yet in a position to comment on possible settlement amounts."

When it took a provision for Libor, it said it had been named as defendant in civil litigation in the US and that it would defend itself against any such claims.

At the time of the fine against Barclays City regulators said they were investigating seven other potential cases, which appears to indicate there are still three outstanding.

The regulator declined to comment on Monday night and Rabobank declined to elaborate on its previous statements.

Since the Libor scandal broke regulators have begun to scrutinise the way other benchmarks are set, such as those in the foreign exchange markets.

Earlier this month the FCA began an investigation that is expected to be on the scale of Libor after gathering information on the £3tn-a-day currency markets. The regulators are looking at the way traders may have been able to influence the way currency benchmarks are set and scrutinising the way energy markets operate.

Article Source : http://www.guardian.co.uk
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HMRC confirms Google investigation during committee hearing

Officials are examining whistleblower's evidence but what effect, if any, it will have on firm's tax structuring remains unclear

Top HMRC officials effectively confirmed they were investigating the UK tax affairs of Google on Monday, giving evidence to the indomitable Margaret Hodge and her public accounts committee. Away from the Palace of Westminster, meanwhile, Google privately confirmed to the Guardian that an HMRC review of its intra-company dealings between operations in the UK, where many sales staff are employed, and Ireland, where UK sales are booked, was ongoing. In fact, it has been ongoing since at least 2010, or 2009 according to the recollection of Google's northern European boss Matt Brittin.

Not only is the investigation still live, but HMRC bosses on Monday confirmed their inquiries had been assisted by piles of documents received, via Hodge and her committee, from an ex-Google staffer turned whistleblower. "We have taken evidence from him and we took it very seriously," said Jim Harra, HMRC head of business tax. Without referring directly to Google, he added: "We always act upon it if there is evidence of non-compliance."

Harra's tone was in contrast to previous commentary from HMRC chief executive Lin Homer, who was unable to appear before MPs. At a hearing in May, however, she had bristled at suggestions from Hodge that the MPs were better able to get to the truth of Google's tax affairs than HMRC. "We see – but sometimes understand more fully – some of the issues that to the general public can look surprising," she told MPs through gritted teeth in May. "That is probably why some of what appears in public, while being known to us, may not lead to the same results that you would expect it to."

On Monday night, Google was still insisting privately that there was nothing in the whistleblower's evidence to suggest the search firm had underpaid UK tax.

Meanwhile, HMRC have clearly decided they want to be seen to be using this new information – but it remains to be seen if it can really help torpedo Google's tax structuring. Don't hold your breath.

UK retailers suffer sharp slowdown in sales, says CBI

Retail sales ground to a halt at the start of October – coming in well below City forecasts

Retailers suffered a sharp slowdown in sales this month, according to an industry survey that has cast doubt on the pace of the wider UK economic recovery.

After a strong run of growth, sales ground to a halt at the start of October and came in well below City forecasts, the CBI business group said.

The main sales balance in its monthly survey came in at +2, down sharply from +34 recorded in September and much lower than +33 forecast by economists in a Reuters poll.

The balance, which is the difference between the percentage of retailers reporting an increase and those reporting a decrease in sales, was the weakest since June and breaks a three-month run of strong sales growth.

Some economists said the slowdown underlined the pressures on households as lacklustre pay growth fails to match rises in living costs. If consumer demand remains weak, economic growth in the final three months of the year may fail to match the 0.8% reported for the third quarter in official figures last week.

But the CBI and other analysts said there were signs sales would soon bounce back. In particular, the business group emphasised that a majority of retailers were placing bigger orders with their suppliers.

Barry Williams, from Asda and chair of the CBI's survey panel, said: "Although the high street recovery stalled this month, there is optimism that it was just a blip on the previous run of three months' growth. Retailers expect sales to pick up next month."

For October, most sub-sectors saw sales growth slow, the CBI said. In particular, grocers saw the first year-on-year fall in sales volumes in eight months but there were some areas that enjoyed stronger trade.

"Signs are pointing towards increased consumer confidence – backed up by continuing growth in certain areas such as furniture and carpets; recreational goods; footwear and leather – all did particularly well in October," added Williams.

James Knightley, economist at ING Financial Markets suggested the surprise collapse in this month's sales balance was weather related.

"October has been far warmer than usual and as such demand for autumn/winter clothing has been very weak. As temperatures drop we should see demand for these items strengthen. In any case consumer confidence continues to strengthen while the pickup in the housing market appears to be supporting furniture and carpet sales," he said.

Howard Archer, an economist at IHS Global Insight, said the survey underlined the pressure on consumers, who are "taking at least a temporary breather".

"The survey fuels suspicion that GDP growth is likely to moderate in the fourth quarter from the robust 0.8% quarter-on-quarter expansion seen in the third quarter.

"With purchasing power currently being limited by consumer price inflation running well above earnings growth, it is likely that many people are feeling the need to rein in their spending at least temporarily, particularly if they want to build up their funds for spending over the Christmas period."