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Wednesday, 10 July 2013

NYSE body to run Libor as City attempts to put scandal behind it

Move follows decision to strip BBA of its association with benchmark rate, which will be run by a London-based subsidiary

Libor might stand for the London interbank offered rate, but from next year the scandal-hit benchmark rate will be set by the body that runs the New York Stock Exchange in the latest attempt to clean up the City.

Libor, which is used to price $300tn (£192tn) of financial products around the world, has been overseen until now by the British Bankers' Association (BBA). But its integrity has been questioned after banks and other financial firms were found to have rigged the rate.

The contract to run the process of setting the rate was put out to tender in April after Martin Wheatley, the boss of new City regulator the Financial Conduct Authority (FCA), concluded in a report that the BBA should be stripped of its long-running association with Libor. It is not clear if the Libor name will survive in the long term.

NYSE Euronext, which runs the New York Stock exchange and the London futures exchange and is itself in the throes of being taken over by a rival, is setting up a new London-based subsidiary to run Libor. NYSE Euronext Rate Administration Ltd will be regulated by the FCA, which is being given formal oversight of the rate amid the ongoing investigation into the way Libor was rigged in the past. It is thought to have paid £1 to take over the rate-setting function.

NYSE Euronext runs the New York Stock exchange and the London futures exchangeA year ago, Barclays became the first bank to be fined for Libor rigging by US and UK regulators, and forced to pay a total of £290m. Since then Swiss bank UBS and bailed-out Royal Bank of Scotland have been fined larger amounts. The FCA said it still had four other firms under investigation.

Wheatley said the selection of NYSE Euronext, which is thought to have seen off competition from data provider Thomson Reuters and the London Stock Exchange, was "an important step in enhancing the integrity of Libor".

NYSE Euronext runs stock market indices including the Cac 40 in France.

Certain changes to Libor have already been implemented. It was originally set by a panel of banks being asked the price at which they expect to borrow over 15 periods, from overnight to 12 months, in 10 currencies. The number of currencies has been reduced to five and rates published over seven borrowing periods. From this month the rates the banks submit are no longer published instantly but with a three-month delay. The data was collected by Thomson Reuters, which will no longer be involved, and published by the BBA.

The BBA will work with the new administrator, selected by a panel led by Lady Hogg, who chairs the Financial Reporting Council, until 2014 when the handover is expected to take place.

The government, which is under fire for watering down other aspects ofbanking reform, said the appointment of NYSE Euronext was part of its commitment to "developing a safer and strong banking sector".

"We want a financial sector that serves the interests of business and helps to drive economic growth. That is why since the Libor scandal last summer we have worked hard to reform this major international benchmark. For the first time it is under the scope of regulation and we have introduced a new criminal offence for the manipulation of Libor," said Greg Clark, financial secretary to the Treasury.

He was criticised on Monday by Andrew Tyrie, the Conservative MP who chaired the parliamentary commission on banking standards, also sparked by the Libor crisis, for introducing "virtually useless" reforms of the banking sector.

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

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Shell names Ben van Beurden as new chief executive

Dutch executive will replace Peter Voser, who is leaving to spend more time with his family and a 'change in lifestyle'

Royal Dutch Shell has named Ben van Beurden as its next chief executive from 1 January 2014.

He will succeed Peter Voser, who will leave at the end of March next year after 29 years with the Anglo-Dutch energy giant.

Van Beurden, 55, joined Shell in 1983 and has held a number of technical and commercial roles, working for the company in the Netherlands, Africa, Malaysia, the US and most recently the UK.

Since January the Dutch national has been downstream director, and has regional responsibility for Europe and Turkey.

Ben van Beurden joined Shell in 1983 and has held a number of technical and commercial rolesShell's chairman, Jorma Ollila, said: "Ben has deep knowledge of the industry and proven executive experience across a range of Shell businesses.

"Ben will continue to drive and further develop the strategic agenda that we have set out, to generate competitive returns for our shareholders."

Ollila added that the appointment had been made after a "comprehensive assessment" of both internal and external candidates.

Shell said in May that Voser would retire in the first half of 2014. Voser, 54, said that he was leaving to spend more time with his family, and for a "change in lifestyle".

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

UK Coal's long-anticipated entry into administration hits pension scheme

Pension Protection Fund, the government-sponsored pensions lifeboat scheme, takes over responsibility for partially honouring pension promises

The retirement savings of 7,000 past and present mine workers at UK Coal, Britain's largest coal mining business, took a hit on Tuesday as the pit operating group responsible for repairing the pension scheme's deficit of at least £450m sank into a long-anticipated administration.

But in a complex deal between the government, the Pension Protection Fund (PPF) and two sets of administrators, some 2,000 jobs have been saved, largely at two of the mining group's three deep pits.

The third pit, Daw Mill, the site of a devastating fire in February, is to be permanently closed, the company confirmed, with 350 workers made redundant. Before the fire, a restructuring deal at Daw Mill had been expected to generate £100m in cashflows by the middle of next year for the group's struggling pension scheme.

Despite years of financial woes, UK Coal still generates 6% of the nation's electricity by supplying Drax in North Yorkshire and three other power stations in Nottingham shire. Accounting for more than half the coal mined in the UK, the mines are still seen by many in Westminster as fulfilling an important role in near-term energy security requirements for Britain.

One source involved in the restructuring said the company had been "overwhelmed at how helpful government had been at every turn". However, early plans to involve the Shareholder Executive investment quango in a rescue of UK Coal were ultimately ditched. The quango is already responsible for taxpayer holdings in such businesses as Royal Mail, Channel 4, Eurostar and the Royal Mint.

Meanwhile, the PPF, the government-sponsored pensions lifeboat scheme, has taken over responsibility for partially honouring the pension promises made by UK Coal before its demise.

After taking into account the value of brownfield development land, the likely hit to the PPF is estimated to be between £450m and £500m, according to independent pensions expert John Ralfe. That makes it the biggest ever deficit taken on by the lifeboat scheme, more than the £333m hit from the UK administration of telecoms equipment maker Nortel in 2009.

A coalface at Daw Mill, a UK Coal owned pit that suffered a devastating fire in February and is to be closed, with 350 workers made redundantUK Coal pension scheme members who have not yet reached retirement will now have 10% wiped off the retirement value of the pension they have accrued. Meanwhile, weak inflation protection within the PPF means all scheme members can expect to see the value of their retirement savings further eroded over time.

In a highly unusual arrangement, the continuing operations of UK Coal will rapidly pass through the hands of administrators, re-emerging under a new company called UK Coal Production.

Although the new business will not technically be owned by the PPF, administrators from Price water house Coopers said the lifeboat scheme would "retain economic benefit through substitute debt instruments". The size and maturity of these new obligations are not disclosed.

Among the assets in the UK Coal pension schemes – inherited now by the PPF – is a 75% interest in Harworth Estates, which owns brownfield land previously used for mining operations. The minority interest is held by stock market listed company, Coalfield Resources. This was, until a complex restructuring deal last year, an enlarged operation encompassing the mining operations of UK Coal as well as these property interests. At that time it went by the name UK Coal.

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

Co-operative Bank rescue deal 'could result in nationalisation'

Bondholders accuse the City regulator of taking a punitive and arbitrary approach to firm's capital requirements

The Co-operative Bank's £1.5bn rescue package faced sharp criticism on Tuesday from bondholders who are accusing the City regulator of taking a punitive and arbitrary approach to the Manchester-based bank's capital requirements.

Bondholders facing losses have written to Andrew Bailey, the chief executive of the Prudential Regulation Authority (PRA), to warn that the bank could face nationalisation as result of the demands to raise fresh capital. They are also concerned about the damage being caused to the wider Co-operative Group, which includes pharmacies, funeral homes and grocers, and allege that a false market was created in the bank's bonds by the failure to disclose that the bank has needed to find extra capital since 2011.

Mark Taber, who fought a campaign against Bank of Ireland on behalf on bondholders, said 1,300 holders of Co-op bonds had contacted him after learning they were required to take losses to help find the extra capital. "Not only are the PRA's actions causing great distress, they also threaten to cause an avoidable standoff which could result in unnecessary nationalisation of the bank and massive damage to the Co-operative Group and mutual sector," Taber said in the letter copied to the new Bank of England governor Mark Carney and chancellor George Osborne.

£1bn is being put up by the Co-op group to prop up its bank after demands were made to raise fresh capital.The Co-op needs the support of bondholders for its plan to raise the extra capital. Co-op group is putting up £1bn to prop up the bank and bondholders will receive shares. The bank, currently a plc wholly-owned by the mutual group, will be listed on the stock exchange for the first time.

The Co-op took issue with an assertion by Tabor that the traditional hierarchy of capital structures was being ignored by requiring bondholders to take a loss before the shareholders were wiped out. The Co-op group insisted that its shareholding in the bank was being wiped out. "The group is therefore fully respecting the current capital hierarchy," Co-op said.

Many of the Co-op's bad loan losses stem from its takeover of Britannia Building Society in 2009 and Taber said the PRA's predecessor, the Financial Services Authority, had approved this deal.

Taber noted that Bailey had told the Treasury select committee that there gulators had known of the Co-op's capital position since 2011 but that this was never disclosed. He took issue with the government endorsing the now aborted deal to take over 631 Lloyds Banking Group group branches as a "virtuous model" for banks.

Taber also accused the PRA, which would not comment beyond acknowledging receipt the letter, of setting an "arbitrary" capital ratio, although the additional capital is thought to be needed to cover yet-to-be-revealed losses on loans. The Co-op Bank will reveal more about the terms of the so-called "bail-in" of bondholders after its results next month.

In a speech to the insurance industry on Tuesday, Bailey warned that insurers could be required to hold additional "add ons" of capital. The PRA is using what Bailey described as an early warning system to establish if the insurers will need to hold extra capital.

Article Source : http://www.guardian.co.uk
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Tuesday, 9 July 2013

RBS sell-off investigation ruled out

Government admits prospect of selling off bank remains distant, despite speculation over potential sale of rival group Lloyds

The government has ruled out a broad investigation into whether Royal Bank of Scotland should be broken up and sold off in smaller component parts to foster more competition in the banking sector.

As shares in rival bailed-out bank Lloyds Banking Group hit their highest levels in more than two and a half years, of 67p, amid speculation that a sale of the government stake was imminent, the coalition admitted that the sell-off of the 81%-owned RBS was a more distant prospect.

The parliamentary commission on banking standards called for a wide-ranging review of the structure of RBS, but the government said splitting RBS into smaller parts "would generate significant additional costs". It added that it would "cause uncertainty and disruption for customers, creditors and staff. This would risk undoing much of the good work that RBS has done in strengthening the bank in recent years. As the majority shareholder, the taxpayer would ultimately bear the majority of the costs."

Splitting RBS into smaller parts 'would generate significant additional costs', according to the governmentThe Archbishop of Canterbury, Justin Welby, a member of the commission, raised the idea of regional banks to bolster competition in lending.

Chancellor George Osborne has already asked investment bank Rothschild to look at splitting off a "bad" bank from RBS in a move that is delaying any plans to start selling off the government stake, but does not go as far as the commission wanted.

While he has ruled out splitting up RBS into "multiple entities", George Osborne has already asked the competition authorities to look at whether it should hive off more branches than the 316 it is selling to meet EU rules. RBS has to sell the branches because of European rules on state aid – which also require Lloyds to sell 631 branches.

The government reiterated Osborne's previous assertion that it would not close down UK Financial Investments (UKFI), which looks after the taxpayer's stakes in the bailed-out banks, as recommended by the commission.

UKFI is currently deciding which banks will be appointed to sell off Lloyds and RBS and also strengthened its management team yesterday by naming a former banker to run its "bad bank".

Christopher Fox has joined from UBS to run UK Asset Resolution, the arm of UKFI which looks after the nationalised mortgage books of Northern Rock and Bradford & Bingley, which are being run down.

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

Warmer weather helps boost retail sales

British Retail Consortium says retail sales for June were up 1.4% following a rise of 1.8% in May

A washout spring for retailers has given way to a sun-assisted summer revival, with an outbreak of hot weather leading to a second consecutive monthly sales increase.

The British Retail Consortium said total sales for June were up 1.4% on a like-for-like basis, following a rise of 1.8% in May. .

Helen Dickinson, the director general of the BRC, said: "Despite challenging economic conditions continuing, June saw another strong performance from the UK's retailers. At this halfway point in the year we are able to see that sales are well ahead of the previous six-month period."

Sales growth of 2.3% since the start of the year is ahead of last year's annual growth of 1.5%. The strong figures are a further boost for a UK economy that is heading for growth of around 0.5% in the second quarter and is dominated by service industries such as retail.

Clothing was the best-performing category, according to the BRC, although this was mainly due to poor spring weather leaving clothes rails packed with unsold summer outfits that were then sold at a discount in a bid to shift stock.

Better weather lifted sales of clothing and footwear in JuneDavid McCorquodale, head of retail for KPMG, which compiled the data, said: "It's difficult to say at this stage how much discounting went on, but we know that the cold weather meant retailers were forced to try and shift the extra stock they had."

Several clothing retailers have issued profit warnings or delivered lower-than-expected results this year because of the weather. On Tuesday Marks & Spencer is expected to blame the weather for a fall in clothes and general merchandise sales over the past three months.

McCorquodale added: "Periods of sunshine helped to lift the gloom on the high street and retailers celebrated another month of rising sales. These figures certainly underline the impact that weather can have on a retailer's performance."

DIY and gardening centres also got a well-needed boost in sales after suffering a washout over Easter, a period seen as more important to the chains such of B&Q and Homebase than Christmas. Food sales also rose by 1.4% in June, despite tough comparisons with the diamond jubilee last year, with sales of drinks and ice creams increasing as the weather improved. The earlier timing of Ramadan also helped stimulate sales, the BRC added.

Online sales were up 14.1% on a year earlier, strongly ahead of the 10.5% long-term average. However, house textiles and home accessories were the worst-performing categories as they struggled against last year's jubilee boost and shoppers spending more on fashion.

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

Monday, 8 July 2013

Gulf Keystone Petroleum shareholder hits out at bosses

M&G Recovery Fund criticised corporate governance at oil explorer days after former Glencore chief became chairman

One of the largest shareholders in Gulf Keystone Petroleum (GKP) has slammed the oil firm for its poor corporate governance and "excessive" executive pay.

The move by M&G Recovery Fund, which owns 5.1% of the company, comes days after the Kurdistan oil explorer attempted to quell criticisms by splitting the roles of chairman and chief executive for the first time, with Simon Murray, the colourful former chairman of commodity group Glencore, appointed as chairman.

However, M&G said: "The £7.4bn M&G Recovery Fund wishes to improve corporate governance at GKP by effecting the appointment of independent directors to its board. The fund also expects a strengthened board to review the current level of directors' remuneration, which we consider excessive – for example, we note the payment to the chief executive [Todd Kozel] of $13.6m (£9.1m), plus $9.1m deferred cash, in respect of 2012 when the company [lost] $80m."

M&G is supported by another top backer, Capital Group, which told the Sunday Times: "Kozel needs adult supervision. This company needs to be run for the shareholders, not the management."

Simon Murray was recently appointed as chairman of GKPA spokesman for Gulf Keystone said: "This is a business that has not missed a beat operationally: 18 wells drilled, 18 discoveries … The company is looking for best-in-class independent non-executive directors in the immediate term and possibly another thereafter."

The comment about independence is thought to be a reference to Jeremy Asher, one of four potential non-executives proposed by M&G who has previously been GKP's deputy chairman. When asked about the firm's objections to the three other names – two of whom have worked at BP – a company insider said: "I think we can do better."

Shareholders will have the opportunity to vote on the new directors at the annual meeting on 25 July, when they also have a chance to oust two existing non-executives.

Gulf Keystone's prize asset is an oil field in the Kurdistan region of northern Iraq. A long-running dispute over payments for oil and a legal challenge to ownership of its oilfields have weighed on the shares, which have fallen 24% over the past 12 months.

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