Royal Bank of Scotland set to report up to £8bn losses for 2013

Unscheduled trading statement to reveal bank, 81% owned by taxpayer, hit by extra £2.9bn over conduct and mis-selling issues

Royal Bank of Scotland is facing a row over its pay policies after a fresh hit for legal bills and mis-selling scandals put the bailed-out bank on track to report up to £8bn in losses for 2013.

Even though its nine-strong top management team said they would waive any bonuses, given the scale of the losses, the bank gave the strongest indication yet it would sidestep the EU bonus cap by asking shareholders' permission to pay bonuses worth 200% of salaries – double the size of the restriction imposed by Brussels.

Chairman Sir Philip Hampton insisted RBS had to keep paying competitively. He spoke at a hastily convened conference call caused byan unscheduled trading statement in which the 81% taxpayer-owned bank revealed it would incur an extra £3bn of losses for conduct-related matters over the US sub-prime mortgage crisis and mis-selling o fpayment protection insurance and interest rate swaps.

The additional costs come on top of £4.5bn losses from the creation of a mini-bad bank inside RBS and, according to estimates, could drive the bank to losses of around £8bn by the time it reports full-year results at the end of next month.

If the loss is on that scale it would mean RBS has incurred more than £40bn of losses since its 2008 bailout – almost as much as the £45bn taxpayers pumped in to rescue it.

The move appears to push back any prospect of chancellor George Osborne selling off any of the taxpayers' stake, even as he prepares to press ahead with the sale of Lloyds Banking Group as soon as next month.

The extra £3bn includes £1.9bn for various claims and past conduct issues facing the bank – most likely the potential cost of a settlement over sub-prime mortgages in the US – plus £465m for PPI mis-selling, another £500m for interest rate swap mis-selling, and another unspecified £200m. The latest costs bring the total PPI bill to £3.1bn and swaps mis-selling to £1.3bn.

Ross McEwan, who took over as RBS chief executive on 1 October from Stephen Hester, had already said he would not take a bonus for 2013 and now the rest of his eight-strong executive committee will also forgo their multimillion-pound payments.

The New Zealander, promoted from running the retail bank after Hester's sudden departure, said the scale of the costs incurred from past mistakes had not been expected at the time of the bailout.

"This is about leadership. I know this team is not responsible for the past mistakes but we are the leaders running the company now and have to show we take accountability seriously," he said, in reference to the move to block bonuses for the top management team.

But the bank may face hurdles in its plans – still being finalised – over pay in light of the EU bonus cap that comes into effect for bonuses paid this time next year. The cap restricts bonuses for the most senior staff to 100% of salary, but can be lifted to 200% of salary if shareholders approve.

Hampton said: "We obviously need to be sensitive to our shareholding structure and the political and media issues around that, but the ability to pay competitively we think is fundamental to the prospect of getting to where we need to be."

Labour has already called on Osborne to use the state shareholding to stop such a request if it is made and UK Financial Investments, which looks after the taxpayer stake, is thought to be considering abstaining if it is put to the annual meeting in May.

Lord Oakeshott, the Liberal Democrats' former Treasury spokesman in the Lords, called any such bonus proposals "preposterous" and called on the government to nationalise the Edinburgh-based bank.

"Taxpayers are having to sign a never ending stream of blank cheques to cover disastrous long-term management at RBS while the bank's still failing to lend," Oakeshott said.

Andrew Tyrie, chairman of the Treasury select committee, stressed the need for the bank to lend to small business customers. "RBS is still paying a heavy price for past misconduct. So too are its customers and taxpayers. It is crucial for the recovery that lending, particularly to SMEs, is not constrained as a result," Tyrie said.

Payments of as much as £5.6m promised to Hester will not be affected.

McEwan said the losses related to a period at the time of its bailout when RBS was the biggest bank in the world. "The scale of the bad decisions during that period means that some problems are still just emerging. The good news is we are now a much stronger bank and can manage these costs while still supporting our customers," he said.

The unexpected statement came at 4pm following a board meeting and 30 minutes before the market closed, leaving the shares closed 2% lower at 332p – representing a £15bn loss on the taxpayers' stake.

Nathan Bostock, who has quit as finance director to join Santander, said there would be a "substantial loss" but would not be precise.

The announcement was made to coincide with a deadline by US regulators to file the results of one of its US arms.

Standard & Poor's said the bank's credit rating was unaffected but the key capital ratio will be among the lowest of its peers.

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Loans to business getting cheaper and more readily available, Bank says

Availability of credit to corporate sector increased significantly in fourth quarter of 2013, according to Bank of England

Hopes of an end to the prolonged fall in business lending were boosted on Wednesday when the Bank of England announced that loans were becoming cheaper and more readily available to the UK corporate sector.

In a regular update, Threadneedle Street said there were signs that credit conditions had eased for companies towards the end of last year.

"The overall availability of credit to the corporate sector increased significantly in the fourth quarter of 2013, according to lenders, and a further increase was expected in the first quarter of 2014," the Bank said. "Lenders reported that the availability of credit had increased for small businesses and large private non-financial corporations."

It added that the final three months of last year had also seen more credit become available for mortgages, particularly on homes with high loan-to-value ratios. A "significant" further increase in availability is expected in the first quarter of 2014.

The Bank said demand for credit remained patchy. Households and medium-sized businesses were taking advantage of the easier conditions, but demand from small businesses was flat and there was a slight increase in demand from big companies.

Threadneedle Street also reported lower interest rates for borrowers as measured by the spread between the official bank rate of 0.5% and the loan rates charged to individuals and businesses.

"Spreads on corporate lending fell in the fourth quarter, with significant reductions reported for medium-sized companies and large private non-financial corporations (PNFCs), and a slight reduction reported for small businesses. Over the next three months, lenders expected spreads to tighten further for medium-sized companies and large PNFCs, and to be little changed for small businesses."

Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "Steady improvements in credit conditions are continuing and the Bank's survey brings further signs that finance providers are making more credit available and risk appetite is increasing. However, the issue of cost is still lingering for smaller businesses. With a turnaround in investment on the cards for this year we will also need to see a real pick-up in net lending to businesses and fewer companies saying they have been discouraged from accessing external finance."

Howard Archer, economist at IHS Global Insight, said the pick-up in credit availability to companies was encouraging but had yet to translate into increased corporate lending.

"Indeed, latest data from the Bank of England shows that net lending to non-financial companies fell by £4.7bn in November. This was the sharpest drop since the series started in April 2011. Net lending had previously fallen by £1.1bn on October following a rare rise of £714m in September."

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UK government could sell off Lloyds bank stake in 2014 - Telegraph

 The British government could sell off all of its 18.4 billion pound stake in the Lloyds banking group in 2014, the Daily Telegraph reported, citing unnamed sources.

The newspaper reported that the entire government holding could be sold off in the next 12 months in a combination of retail and institutional offerings.

"Post-results is when a further institutional offering would make most sense. After that, the thinking is an autumn sale, combining an institutional and a retail segment, is a realistic prospect," a source was quoted as saying by the newspaper.

The UK government has already sold off 6 percent of its stake in the partly nationalised bank, raising over 3.2 billion pounds in September this year.

The government currently holds around 33 percent of the bank, five years after Lloyds and rival Royal Bank of Scotland were bailed out by the government at the height of the credit crunch.

Shares in Lloyds closed at 78.84 pence on the London Stock Exchange on Friday, valuing the group at 56.5 billion pounds.

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Standard Chartered forced by Bank to strip top exec of risk role

The Bank of England has forced Standard Chartered to strip its finance director, Richard Meddings, of his responsibility for risk at the emerging markets focused lender

The Bank of England has taken unprecedented action to strip a senior banker of key responsibilities due to concerns over potential conflicts.

Richard Meddings, group finance director of Standard Chartered, has been forced to give up oversight of the lender’s risk department under pressure from officials at the Prudential Regulation Authority (PRA), which is run by the Bank of England.

Mr Meddings is one of the most respected finance directors in the FTSE 100, and the PRA’s action is a sign of the tough approach being taken by regulators to ensure direct lines of accountability at the top of Britain’s largest banks.

The PRA is understood to have told Standard Chartered, the emerging markets focused bank, that it was “not happy” with Mr Meddings’s role, leading the lender last month to confirm it would hand responsibility for risk to its chief executive, Peter Sands.

The move is likely to cause shockwaves in the City as Standard Chartered got through the financial crisis without any taxpayer support and Mr Meddings was one of the main architects, along with Mr Sands, of the 2008 rescue of the British banking system.

One source with knowledge of the talks between the PRA and Standard Chartered said the regulator decided to act as it was concerned about the potential conflict between Mr Meddings’s finance responsibility and his duty to oversee the risk operations.

A spokesman for Standard Chartered stressed the risk unit would continue to be run by Richard Goulding on a day-to-day basis, adding: “This governance change ensures we are well placed to meet future regulatory requirements.”

Earlier this month, Standard Chartered warned its profits were unlikely to meet market expectations as it signalled the end of a decade-long run of record profits.

The profit warning followed a difficult 12 months for the bank in which it was fined $667m (£409m) in the US after an investigation into money-laundering found it had broken sanctions with Iran and other rogue states. More recently the lender took a $1bn writedown on its struggling Korean business, which has been hit by a series of labour disputes.

The interventionist approach taken by the PRA comes as regulators look to ensure important areas such as risk management are properly accounted for in the wake of several reports into the financial crisis that have recommended changes to the way senior bankers are overseen.

The final report of the Parliamentary Commission on Banking Standards called for a new approval regime for senior bankers that would see executives regularly reviewed if they took on additional responsibilities.

Andrew Tyrie MP, who chaired the Commission, said the PRA’s action against Standard Chartered was a welcome development.

“The risk function is crucial in banks and it’s equally crucial the job should be done at a senior level, in that a person should know they are personally responsible. It looks as if the regulator is pushing in the right direction,” he said.

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Margaret Hodge attacks 'voluntary' tax policies for rich

Hodge has led the cross-party committee through a wide-ranging investigation into how multinational firms pay UK tax

The chair of parliament's public accounts committee, Margaret Hodge, has delivered her most outspoken attack to date on the coalition's tax policies, describing the tax system for corporations and the super-rich as "increasingly voluntary".

She also criticised the "growing gap between rhetoric and reality" coming from David Cameron on tax reform.

Speaking at an event organised by tax campaigning charities in London, Hodge said: "They [ministers] believe we should engage fully in the global race to the bottom … I now believe David Cameron doesn't mean what he says when he says multinational companies should 'wake up and smell the coffee'."

Despite tough language on combating tax avoidance, the coalition government has been acknowledged among tax professionals as accelerating the pace of tax competition in a drive to lure in foreign investment. Measures such as new rules for overseas finance subsidiaries, tax breaks for groups owning patents in the UK, and the plunging corporation tax rate, have been cited by critics of Cameron's approach to tax reform.

Hodge's attack on Cameron harked back to a speech he gave at the World Economic Forum in Davos in January, shortly after the use of aggressive tax avoidance strategies at Starbucks' UK operations had been exposed by a Reuters investigation. The coffee chain had taken £3bn of sales in the UK over 14 years, but paid only £8.6m in tax.

Cameron told the audience of business leaders in the luxury Swiss resort: "When some businesses aren't seen to pay their taxes, that's corrosive to the public trust … Some forms of avoidance have become so aggressive that I think it is right to say these are ethical issues and it is time to call for more responsibility."

In a blunt jibe at Starbucks, he urged multinationals to "wake up and smell the coffee".

Hodge has spent the last two years leading the cross-party committee of MPs through a wide-ranging investigation into how multinational firms pay UK tax. Her tough questioning of company executives, big-four accountancy partners and HMRC bosses has played a major role in keeping tax reform high on the political agenda.

After firms such as Google and Amazon were subjected to a barrage of angry questioning from Hodge's committee, George Osborne responded a year ago by issuing a joint statement with his German counterpart Wolfgang Schäuble, calling for urgent reform of the international tax rules. "Some multinational businesses are able to shift the taxation of their profits away from the jurisdictions where they are being generated, thus minimising their tax payments compared to smaller, less international companies," they said. "We want global companies to pay those taxes."

Since then, however, Schäuble has dramatically switched his view of Britain's commitment to shoring up the integrity of international tax regimes, attacking Osborne's "patent box" tax break. "That's no European spirit," he said. "You could get the idea they are doing it just to attract companies."

Behind the scenes, a growing number of fellow G8 nations have also become increasingly irritated at the apparent gap between Cameron's use, on the one hand, of a language of ethics on tax reform, and, on the other, what some see as begger-thy-neighbour measures to poach business activity from rival economies.

Article Source : http://www.guardian.co.uk
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Ikea France executives under investigation amid spying accusations

Head of Ikea France among those accused of employing private detectives to snoop on employees, particularly union activists, and even unhappy clients

Three senior Ikea executives in France were put under investigation on Wednesday over allegations they spied on disgruntled customers and former staff.

The head of Ikea France is among those accused of employing a firm of private detectives to snoop on individual employees, particularly union activists, job applicants and even unhappy customers, and of fraudulently obtaining personal information from police files.

A judge decided there was enough evidence to formally mis en examen(the equivalent of being charged) Stefan Vanoverbeke, the chief executive of Ikea France, his predecessor Jean-Louis Baillo and chief financial officer Dariusz Rychert, who were arrested on Monday and held for questioning.

Under French law, the men had to be formally put under investigation within 24 hours or freed.

Since January, a total of 10 people have been arrested and put under investigation for "fraudulent use of personal information", including four police officers and Ikea's former head of security.

The case is hugely damaging to the reputation of the flagship Swedish company famed for its family-friendly but infuriatingly difficult to assemble flat-pack furniture.

The accused are said to have requested a range of personal data, including criminal records and confidential details about the targets' dealings with the police or courts, even as witnesses or victims. Scores of people were alleged to have been snooped on, including a union official.

Last year, the satirical magazine Le Canard Enchainé obtained and published emails allegedly between Ikea's management in France and Sûreté International suggesting the security company was obtaining information from the national police information system on behalf of Ikea. The magazine said Ikea agreed to pay Sûreté International €80 (£66) for each request for information and that up to 200 demands were made at the same time.

Two unions have filed legal complaints against Ikea, accusing it of snooping on hundreds of people over a period of at least five years.

Among the claims is that Ikea asked investigators to find out if a customer, who was suing the company for €4,000 (£3,350), owned her own property or was known to the police. Other accusations centre on the tracing of car registration numbers.

Vanoverbek's lawyer, Alexis Gulbin, said his client denied involvement. "It was he who took corrective measures as soon as the problems were detected," Gulbin said.

Ikea France suspended and later fired the head of its risk management department last year along with three top-level executives, before publishing a new code of conduct.

In a statement in 2012, Christophe Naudin, head of Sûreté International, told journalists last year it had "consultancy and security contracts" with Ikea, but flatly denied snooping for the firm.

If found guilty of fraudulently using personal information, the accused face up to five years in prison and €300,000 in fines.Article Source : http://www.guardian.co.uk

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Blockbuster and Barratts enter administration, threatening 3,000 jobs

 Film rental chain's brief revival under Gordon Brothers withers, while shoe retailer failed to attract £5m investment needed

More than 3,000 retail jobs are at risk just weeks before Christmas as the film rental chain Blockbuster and shoe shop Barratts announced they were going into administration.

Both retailers have failed before. Blockbuster was among a string of well-known high-street brands to go bust at the beginning of the year, while it is the third time Barratts has fallen into administration in less than five years.

There were also further job losses at regional airline Flybe, which said it was cutting 500 jobs in an attempt to save £26m a year, having struggled in a downturn that disproportionately affected economies outside London.

The retail collapses reflect ongoing troubles in the economy as inflation has continued to outstrip low wage increases, whittling down consumers' spare cash. This year has seen the failure of a string of retail casualties, including music retailer HMV, Jessops camera shops and bed specialist Dreams, all of which were later rescued by buyers who took on at least some of the stores and employees.

But both Barratts and Blockbuster face an uphill struggle to survive after falling out of step with the fast-changing habits of shoppers.

"Consumers and the retail market have moved on," said Maureen Hinton, research director at retail analysis firm Verdict. "The economic downturn has only speeded up the exit of weaker players that would have found it difficult anyway."

She said the Barratts brand and its products were not strong enough to compete with clothing retailers such as Primark, New Look and the supermarkets, which now sell footwear as well as clothing. Blockbuster, meanwhile, is based on an "outdated concept" that has been overtaken by downloads and TV subscription services.

Philip Duffy and David Whitehouse of Duff & Phelps, joint administrators for Barratts, said they hoped to sell the business as a going concern but that store closures and redundancies could not be ruled out.

Barratts, which employs 1,035 people at 75 stores and 23 concessions in the UK and Ireland, had sought additional investment after a period of difficult trading but the offer of a £5m cash injection was withdrawn on 7 November.

"In view of the financial position of the company and withdrawal of that equity offer the directors were left with no choice but to appoint administators," said Duffy.

The appointment of administrators at Blockbuster comes just a month after the retailer's owner, Gordon Brothers, admitted that its turnaround strategy had not worked because of a rapid switch to renting films online or via TV subscription services.

The restructuring specialist bought about half of Blockbuster's original UK chain in March and promised to invest substantial sums in a revival plan to protect around 2,000 jobs. But Gordon Brothers was unable to secure a licensing deal with Blockbuster's parent company in the US, which also recently filed for bankruptcy, to launch an online business.

Nick O'Reilly, a joint administrator, said: "Gordon Brothers found the marketplace had changed quite dramatically. A lot of people want to rent online, while the price of DVDs on places like Amazon is so cheap – why rent for £3?"

Blockbuster's 264 stores will remain open while the administrator, Moorfields Corporate Recovery, looks for a buyer. But O'Reilly admitted it would be a tough job to find a new owner for Blockbuster in its current form given that Gordon Brothers had already spent weeks seeking a buyer.

Joint administrator Simon Thomas said: "This is obviously a difficult and upsetting time for everyone involved at Blockbuster, in particular employees, who have endured a stressful period since January this year."

"We appreciate that staff and customers will want a speedy resolution, however, we must ask people to be patient over the coming weeks."

Flybe had already cut 490 jobs under its previous boss. Its new chief executive, Saad Hammad, said it had been clear the cost savings were necessary, but the company needed to do more and do it immediately.

He said jobs would go "across the ranks: pilots, cabin crew, engineers management. It's unfortunate it needs to be done to be relevant and viable. We've got to secure the business – it's the lesser of two evils."

The Unite union said it would scrutinise the business plan to limit job cuts. National officer Oliver Richardson said: "Cabin crew have already been through one major reorganisation at Flybe only recently and they will be angry that once again they are on the front line of more cuts.

"Over the coming weeks, the union will scrutinise every inch of the company's business plans in order to protect as many jobs as possible and to avoid compulsory redundancies."

Article Source : http://www.guardian.co.uk
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University economics teaching to be overhauled

Move follows criticism over 'limited and outdated' curriculum and failure to include how financial markets can undermine stability

An overhaul of university economics teaching will begin next year in answer to critics who argue that economists failed to spot the 2008 crash because they ignored the impact of financial markets and relied on outdated theories.

A new first year curriculum will be available from the start of the 2014 academic year which will include an in-depth review of economic history and a look at the way financial markets can undermine economic stability.

Wendy Carlin, an economics professor at University College London, who heads the project, said several universities had expressed an interest in adopting the new curriculum, including Sydney, Warwick and UCL.

Speaking at a conference hosted by the Treasury, Carlin said students needed to debate conflicting theories of how economies work and understand that while markets often are successful, they sometimes fail.

She said some academics argued that reforms should take the form of "nicer, smarter, cooler examples of the real world", but a more fiundamental overhaul was needed to give students a deeper and broader understanding of the subject.

Much of the syllabus is being written by academics and economic consultants on a voluntary basis with technical support from Azim Premji University in Bangalore. The course materials, plus supporting teaching materials, will be available at "no cost to participating institutions".

The project, which was launched last month, is backed by the New York-based Institute for New Economic Thinking, which was created in 2009 with financial backing from the financier George Soros.

Some academics have argued that economics has become locked in a time warp, teaching theories that ignore the advent of the internet, the end of the Cold War and the threat of climate change.

Juliet Schor, a professor from Boston College said economics teaching needed to illustrate how a rise in fossil fuel consumption can cause damage to others thousands of miles away. "Humans share a biosphere and it is possible for people to cause huge harm to others on the other side of the world, she said, adding: "We should include environmental and carbon footprint accounting alongside GDP."

An element of environmental economics is included in the new curriculum.

But Carlin refused to answer concerns that the project will be of limited use unless some of the largest universities adopt the new scheme.

There are fears that the dominance of mathematical modelling in the current economics syllabus will be defended by senior figures in academia because it supports candidates who want to make a career in banking and finance.

Students at Manchester University, who formed the post crash economics society earlier this year, have complained that their course is dominated by mathematical modelling based on out-dated theories.

Professor Michael Joffe, an economist at Imperial College, said space could be made in the curriculum if academics could admit that many theories were "plain wrong" and should not be taught.

Article Source : http://www.guardian.co.uk
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Serious Fraud Office launches inquiry into G4S and Serco overcharging claims

Investigation follows justice secretary's claims that firms overcharged on electronic tagging contracts for offenders

The Serious Fraud Office has launched a formal criminal investigation into two of the government's biggest suppliers, G4S and Serco, following claims by the justice secretary, Chris Grayling, of tens of millions of pounds of overcharging on electronic tagging contracts for offenders.

Grayling asked the SFO to look into the billing allegations in July when he told MPs that an external audit had revealed that the overcharging included billing for tracking the movements of criminals who had moved abroad, who were back in prison, who had had their tags removed and even, in a few cases, those who had died.

The justice secretary said that in some cases the bills had continued to be presented years after active monitoring had stopped.

Whitehall sources have confirmed that the central allegation in the case revolves around charges for 3,000 phantom offenders. The justice ministry was being billed by the two companies for the tagging of 18,000 offenders a day under the £700m contract when only 15,000 were actually being monitored.

G4S said it would co-operate with the investigation and had been notified by the SFO director, David Green, that it would cover "the contract for the provision of electronic monitoring services which commenced in 2005 as amended and extended until the present day".

In July Grayling asked the SFO to look into the situation after G4S refused to co-operate with a justice ministry internal forensic audit to establish whether any dishonesty had taken place. The decision to refer Serco, which did co-operate with the MoJ audit, to the SFO was taken in September.

In July Serco said senior management had not been aware of the discrepancies but they did not believe anything dishonest had taken place. The company agreed with the MoJ that if the forensic audit showed dishonesty had taken place they would jointly call in the SFO.

The pattern of overcharging was revealed by a PricewaterhouseCoopers external audit commissioned by Grayling in May after billing discrepancies were discovered during the re-tendering process.

Under the contracts, more than 20,000 offenders are monitored on electronic tags at any one time. They are a key element in the criminal justice system's menu of community punishments as they are used to enforce curfews for prisoners on early release as well as some court orders.

In a small number of cases they have been used to track the movements of terror suspects and paedophiles. Last week prosecutions were halted against three terror suspects accused of tampering with their G4S-supplied GPS tags amid claims of faults with the tags and their straps.

The two companies are among the government's biggest suppliers. Both have already agreed to withdraw from bidding for the £3bn next-generation tagging contract.

The Cabinet Office has also been reviewing the 28 contracts that the two companies currently hold with the government worth a total of £9bn, including the management of the atomic weapons establishment at Aldermaston. Grayling has said that both companies can bid for contracts to run 70% of the probation service but will not be awarded them unless the SFO give them a clean bill of health.

Sadiq Khan, the shadow justice secretary, said the SFO decision was a major development. "In July I wrote to the SFO calling on them to investigate claims against G4S and to act swiftly to secure any possible evidence that might be needed. I hope that the time taken to launch this investigation hasn't resulted in the loss of important evidence," he said.

"With future Ministry of Justice contracts up for grabs, including more than £600m of probation contracts, the government must act swiftly and bar G4S from bidding for any more until the SFO has concluded its investigation. By failing to do so, David Cameron risks undermining public confidence in our justice system."

Article Source : http://www.guardian.co.uk
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JP Morgan close to agreeing $13bn settlement with US authorities

Settlement is greater than the expected $11bn and does not release the JP Morgan from any criminal liabilities

America's largest bank, JP Morgan, is close to finalising a $13bn (£8bn) record settlement with the US authorities over a number of issues related to the subprime mortgage crisis.

The settlement, described as tentative in some reports, is even greater than the $11bn that had been expected and is said not to release the bank from any criminal liability. It would also be the largest ever between the US government and a single company.

The bank's chairman and chief executive Jamie Dimon had been involved personally in the discussions with the US Department of Justice and this month JP Morgan admitted it had incurred legal expenses of $9.2bn from regulatory investigations and lawsuits.

In total the bank has put aside $23bn for potential litigation since 2010 – and has warned this could rise by a further $6.8bn – in moves that illustrate the stunning reversal in fortunes of a bank that had survived the banking crisis relatively unscathed.

JP Morgan now faces more than a dozen investigations globally – from alleged bribery in China to a possible role in manipulating benchmark interest rates set in London known as Libor.

Dimon had steered the bank through the financial crisis without ever reporting a quarterly loss, but that record ended this month when he had to admit that legal expenses drove the firm to a loss of $400m.

The latest settlement relating to mortgage-backed securities follows a fine of more than $900m from a number of authorities over last year's London Whale trading incident, which Dimon had originally attempted to brush aside as "tempest in a teapot".

The Whale episode also lost the bank $6.2bn and Dimon's bonus was halved as a consequence.

At issue in the latest settlement is whether the bank sold mortgages that it knew were riskier than they appeared. Investors, including government-owned mortgage agencies Fannie Mae and Freddie Mac, said that the bank told them loans were safer than they were, or that the bank was negligent in not verifying information from borrowers relating to their income and their ability to repay the debt.

A sizeable chunk of the $13bn relates to customer redress. According to Bloomberg the settlement includes $4bn to the Federal Housing Finance Agency – which incorporates Fannie Mae and Freddie Mac.

Dimon secured the tentative deal in a meeting with the justice department's attorney general, Eric Holder, according to CNBC. Steve Cutler, the bank's general counsel, and Tony West, Holder's deputy, were said to be involved.

Dimon and Holder had met face-to-face in Washington last month. A well-connected figure in financial and political circles, Dimon took the helm of JP Morgan in December 2005. He is now running the biggest US bank in terms of assets.

As well as surviving the financial crisis, the banker has also resisted calls to split his joint roles at the bank.

The settlement is partly the result of JP Morgan saving two firms – Bear Stearns and Washington Mutual – which account for about 80% of the securities involved in the $13bn fine. The US government encouraged JP Morgan to rescue both institutions as they were collapsing during the financial crisis.

This month the bank said Dimon was no longer chairman of JP Morgan's main US retail banking subsidiary.

JP Morgan did not comment, and the US department of justice could not be reached.

Ongoing tempest

For all his smooth talking, it is likely that the most memorable line to emerge from the career of JP Morgan boss Jamie Dimon will be his crack about a "tempest in a teapot". That was his attempt to dismiss reports of problems in the bank's London office, where it turned out that his traders had lost $6bn.

The comment was perhaps the result of confidence gleaned from years of uninterrupted success, which included being one of the few bankers to emerge from the financial crisis with an enhanced reputation. However, the pressure is now increasing on Dimon as he wrestles with a string of legal complaints.

This was not how it was all meant to be, as Dimon has long appeared to have led a blessed life.

A protege of former Citigroup boss Sandy Weill, who is often described as a "Wall Street legend", he graduated as a Baker scholar from Harvard Business School, an honour given only to the top 5% of the graduating MBA class. His classmates included GE boss Jeff Immelt, and Dimon's future wife, Judy.

Article Source : http://www.guardian.co.uk

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Bank of England holds interest rates and quantitative easing

Governor Mark Carney believes much of the current 2.7% inflation rate can be blamed on one-off shocks

The Bank of England has rejected calls for a rise in interest rates despite a strong run of surveys showing the economy is recovering at its fastest pace since 2010.

In a widely expected decision, the central bank's interest rate setters kept the base rate at 0.5% and the level of its monetary stimulus to the economy, known as quantitative easing, at £375bn.

Some analysts have called for a rise in interest rates in response to the improving economic picture and a recent jump in housing market activity.

However, the bank's monetary policy committee has agreed to maintain its current policy stance until the unemployment rate falls to 7%. It expects to reach this milestone in 2016 after 750,000 jobs have been created.

Governor Mark Carney believes the economy remains weak and much of the current 2.7% inflation rate can be blamed on one-off shocks.

The bank is known to be extremely concerned at the level of business investment, which has continued to fall this year despite the pace of recovery picking up since the spring and many commentators describing it as a well-advanced and sustainable expansion of economic activity. Without a return to healthy rates of business investment, senior Bank staff fear the economy will be forced to rely on consumer spending to maintain growth.

Philip Shaw, UK economist at Investec, said the positive momentum of the economy made more QE unlikely.

"The key question surrounds the possible timing of the first interest rate hike. This is some way off and the likelihood is that the UK faces a long period of steady policy. Nonetheless markets and ourselves are sceptical that this move will occur as far in the future as the second half of 2016, as the Bank of England's guidance implies," he said, adding that the debt markets expect a rise in early 2015.

Peter Dixon, UK economist at Commerzbank, said: "As far as the immediate future is concerned, the BoE is expected to remain on the sidelines.

"Although the economy can be expected to lose momentum relative to recent trends, we look for a self-sustaining recovery with GDP growth in the region of 2% next year. This is not an environment in which additional policy activism is required, implying no more QE as well as no rate moves."

Howard Archer, chief UK economist at IHS Global Insight, said: "The already limited likelihood of any further QE appears to have waned further as the good news on the UK economy has been largely sustained – notwithstanding a few blips such as the surprise marked drop in industrial production in August. Meanwhile, any change in interest rates is clearly a long way off whether or not unemployment ends up falling more rapidly than the Bank of England currently expects."

Article Source : http://www.guardian.co.uk

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RBS releases documents over alleged currency manipulation

FCA scrutinising allegations of large banks' abuse of currency benchmark potentially involving a former RBS trader

Royal Bank of Scotland has handed the City regulator messages sent by one of its former traders in the latest twist in an investigation into potential manipulation of currency rates.

The Financial Conduct Authority (FCA) began an investigation into the £3tn-a-day foreign exchange market in June following allegations that traders at major banks had found ways to manipulate a closely followed currency benchmark.

Swiss regulators have also begun to scrutinise the foreign exchange markets, regarded as among the most liquid in the world, sparking speculation that a number of major banks are facing questions about the way they traded leading currencies.

"It's a fact that foreign exchange manipulation was committed," Swiss finance minister Eveline Widmer-Schlumpf said.

The investigations are the latest attempts to clamp down on potential abuses of financial benchmarks, first highlighted by the Libor rigging scandal in June 2012 when Barclays was fined £290m for manipulating the key interest rate. RBS has also been fined for Libor rigging, as has Swiss bank UBS and more recently the broking firm Icap run by former Conservative party treasurer Michael Spencer.

The potential involvement of a former RBS trader in currency manipulation was reported by the Bloomberg news agency, which had first reported the potential for abuse of a currency benchmark operated by WM/Reuters and used by fund managers to value their investments. Traders at major banks were said to be putting in client orders ahead of a 60-second window when the rate is set by the benchmark. The benchmark rates are published hourly for 160 currencies and half-hourly for the 21 biggest currencies, including sterling, which are set by calculating the median price of trades taking place during the 60 seconds.

RBS would not comment on the Bloomberg report that it had handed the regulator instant messages sent to and from a currency trader who no longer works for the bank. The trader had left before any questions were raised about potential manipulation of benchmarks.

The FCA, which also would not comment, is said to be asking for information from Deutsche Bank, Citigroup and other banks in relation to the currency markets. The regulator is gathering information but has not begun a formal investigation; it is not yet clear if any firms are under any investigation that could lead to fines or other sanctions.

As well as interest rates and currencies, energy markets are also being investigated. The FCA began to look at gas prices after the Guardian reported that the £300bn wholesale gas price was potentially being manipulated while the European commission has also raided the offices of major energy companies amid allegations that oil prices were rigged for a decade.

Article Source : http://www.guardian.co.uk

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