"Charges by the U.S. Treasury Department that a small bank in Macau knowingly laundered counterfeit U.S. currency on behalf of North Korea have no basis in fact,..."
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Posted on Tue, Apr. 17, 2007
Report challenges U.S. allegations against Macau bank
BY KEVIN G. HALL
Charges by the U.S. Treasury Department that a small bank in Macau knowingly laundered counterfeit U.S. currency on behalf of North Korea have no basis in fact, according to a confidential audit ordered by the government of the Chinese enclave.
The audit, obtained by McClatchy News Service, also suggests that the Treasury overstated claims that the bank laundered ''hundreds of millions'' in ill-gotten gains through Banco Delta Asia.
On the basis of the allegations, the Treasury Department on March 14 blacklisted the tiny, family-controlled bank, which now is on the verge of being driven out of business.
The Bush administration now says it approves the release of $25 million originally frozen in Macau at Washington's behest, but portions of this Banco Delta Asia money tied to North Korea apparently have not been received by the regime's leaders. Consequently, they missed Saturday's deadline to begin dismantling a nuclear reactor as agreed to on Feb. 13 as part of an agreement with the United States and four other nations.
''From our investigations it is apparent that . . . the Bank did not introduce counterfeit U.S. currency notes into circulation,'' the Ernst & Young audit said, noting that large cash deposits from North Korea were routinely screened for counterfeits by the Hong Kong branch of an unidentified bank with U.S. operations.
CASTING DOUBT
The audit's conclusions about the laundering of counterfeit currency are significant because they cast doubt on Bush administration claims that North Korea has engaged in state-sponsored counterfeiting and introducing these fake bills via Banco Delta.
Moreover, the audit confirmed that the only time Banco Delta knowingly handled counterfeit U.S. notes was in 1994 when its inspectors discovered 100 counterfeit $100 bills and turned over $10,000 to local authorities. That $10,000 is far from the $15 million in counterfeit U.S. currency the Bush administration in 2005 said North Korea was manufacturing annually.
Ernst & Young presented the audit to Macanese banking regulators in December 2005 in response to concerns raised in Treasury's Sept. 20, 2005, proposed action against Banco Delta. The bank's lawyers offered to present the report to Treasury officials in October 2006 but insisted that it be excluded from access under the Freedom of Information Act -- in other words kept secret from the media. Treasury refused the offer.
The copy of the audit obtained by McClatchy News Service excises the names of North Korean entities and officials to protect their identities. The names of some banks with U.S. ties are also redacted.
Until now, the story of Banco Delta's travails has played out behind a wall of secrecy imposed by U.S., Chinese and Macanese regulators. But the audit, aspects of which were reported earlier by McClatchy News Service, for the first time spells out exactly what Treasury's concerns were and what international auditors discovered.
SMALL OPERATION
Banco Delta Asia is a private, family-run bank whose major shareholder is Stanley Au. Its deposits were only about $318 million before Treasury took action against it in 2005, and by last July its deposits had dwindled to $205 million. The audit reveals that Banco Delta handled North Korean accounts for decades.
For reasons not stipulated in the audit, Macanese monetary authorities in September 2004 asked Banco Delta to strengthen its internal controls over North Korea-related accounts or end the risky business of transferring North Korea's cash deposits and gold bullions. The bank apparently did not heed that advice.
The audit is hardly a clean bill of health for Banco Delta, finding the small enterprise lacked sufficient information about the underlying nature of the business for which North Korean companies or their partners in Macau were depositing large sums of cash.
© 2007 Miami Herald Media Company. All Rights Reserved.
http://www.miamiherald.com
Showing posts with label banks. Show all posts
Showing posts with label banks. Show all posts
Tuesday, April 17, 2007
Monday, April 16, 2007
Negotiators Say Sallie Mae to Be Sold for $25 Billion
Sallie Mae agreed late last night to be sold to JP Morgan Chase, Bank of America and two private equity firms for $25 billion, said people involved in the negotiations.
The deal would move the nation’s largest education lender, officially known as the SLM Corporation, into private control amid increasing turmoil for the company. The deal is expected to be announced today, these people said.
The other two private buyers are New York-based firms which have until now have kept a relatively low profile: J.C. Flowers & Company and Friedman Fleischer & Lowe. Together, the two firms will control 50.2 percent of the company, while the banks will own the rest.
Saturday, April 14, 2007
Lenders Sought Edge Against U.S. In Student Loans
Private banks and lenders have for years waged a successful campaign to limit a federal program that was intended to make borrowing less costly.
April 15, 2007
In a fierce contest to control the student loan market, the nation’s banks and lenders have for years waged a successful campaign to limit a federal program that was intended to make borrowing less costly by having the government provide loans directly to students.
The companies have offered money to universities to pull out of the federal direct loan program, which was championed by the Clinton administration. They went to court to keep the government program from becoming more competitive. And they benefited from oversight so lax that the Education Department’s assistant inspector general in 2003 called for tougher regulation of lender dealings with universities.
Saturday, April 7, 2007
U.S. court ruling lifts freeze on Palestinian bank authority funds
Last update - 18:43 07/04/2007
By Reuters
A New York court has ordered e30 million in Palestine Monetary Authority funds unfrozen and allowed it to resume operations in the United States after a court fight stemming from a 1996 Hamas attack.
At a press conference in the West Bank city of Ramallah, the Authority said on Saturday an April 2 ruling by the Supreme Court of the State of New York cleared the way for it to carry out functions as the Palestinian central bank.
It had been unable to access the funds or carry out U.S. dollar transactions since 2005 because of a years-old court case brought by the family of Yaron Ungar, an American who was killed along with his wife in the 1996 shooting in Israel.
The suit alleged that the Palestinian Authority was culpable because it failed to take steps to stop Hamas militants from carrying out such attacks.
The Supreme Court of the State of New York said the Palestine Monetary Authority "is a separate entity from the Palestinian Authority and the money in its name ... should be released."
"We're very, very pleased it's over," said George Abed, the Palestine Monetary Authority's governor.
"The PMA will now proceed to reengage in its full range of statutory responsibilities of safeguarding monetary and financial stability and promoting economic growth," he said.
Abed said the order would take effect within days.
"We are now free to operate in dollars in the U.S. and elsewhere," he said.
Abed said the lawsuit had prevented the authority from performing the normal functions of a central bank. Both the Palestinian Authority and the Palestine Monetary Authority were established by the 1994 Oslo Accords.
The court had ruled that the monetary authority performs many of the functions of a national central bank, such as insuring the soundness of the banking system, maintaining monetary stability and encouraging economic growth.
Ungar was a Brooklyn-born rabbinical student in Israel, where he lived with his wife and two young children.
His wife, Efrat, also was killed in the attack.
In 2005, a federal court in Rhode Island ordered a freeze of all U.S.-based assets of the Palestinian Authority after the Palestinian government failed to pay e116 million in damages imposed by the court in 2004, according to legal documents.
By Reuters
A New York court has ordered e30 million in Palestine Monetary Authority funds unfrozen and allowed it to resume operations in the United States after a court fight stemming from a 1996 Hamas attack.
At a press conference in the West Bank city of Ramallah, the Authority said on Saturday an April 2 ruling by the Supreme Court of the State of New York cleared the way for it to carry out functions as the Palestinian central bank.
It had been unable to access the funds or carry out U.S. dollar transactions since 2005 because of a years-old court case brought by the family of Yaron Ungar, an American who was killed along with his wife in the 1996 shooting in Israel.
The suit alleged that the Palestinian Authority was culpable because it failed to take steps to stop Hamas militants from carrying out such attacks.
The Supreme Court of the State of New York said the Palestine Monetary Authority "is a separate entity from the Palestinian Authority and the money in its name ... should be released."
"We're very, very pleased it's over," said George Abed, the Palestine Monetary Authority's governor.
"The PMA will now proceed to reengage in its full range of statutory responsibilities of safeguarding monetary and financial stability and promoting economic growth," he said.
Abed said the order would take effect within days.
"We are now free to operate in dollars in the U.S. and elsewhere," he said.
Abed said the lawsuit had prevented the authority from performing the normal functions of a central bank. Both the Palestinian Authority and the Palestine Monetary Authority were established by the 1994 Oslo Accords.
The court had ruled that the monetary authority performs many of the functions of a national central bank, such as insuring the soundness of the banking system, maintaining monetary stability and encouraging economic growth.
Ungar was a Brooklyn-born rabbinical student in Israel, where he lived with his wife and two young children.
His wife, Efrat, also was killed in the attack.
In 2005, a federal court in Rhode Island ordered a freeze of all U.S.-based assets of the Palestinian Authority after the Palestinian government failed to pay e116 million in damages imposed by the court in 2004, according to legal documents.
Wednesday, April 4, 2007
Banks traded heavily in CDS market on sub-prime contagion fears
Banks and financial services companies topped the list of most actively traded sectors in the US credit default swap market last month amid increasing concerns over the industry’s exposure to problems in the subprime mortgage market, GFI, the inter-dealer broker, said on Monday. A recent spike in late payments and defaults on home loans has prompted a flurry of CDS trading in banks and financial services companies with exposure to the troubled industry.
Wednesday, March 21, 2007
Asia must prepare for dollar collapse, says bank
'Asia must prepare for dollar collapse'
East Asian economies need to prepare for a possible collapse of the US dollar, the Asian Development Bank says.
ADB: Possibility of a dollar collapse small but fallout huge
The warning comes as the US trade deficit reaches a record high and global interest rates continue to rise.
Masahiro Kawai, the ADB's head of regional economic integration, said on Tuesday: "Any shock hitting the US economy or the global market may change investors' perceptions given the existing global current account imbalance.
"Our suggestion to Asian countries is: Don't take this continuous financing of the US current account deficit as given. If something happens then East Asian economies have to be prepared."
He said because of the highly interdependent nature of East Asian economies, if countries worked together to allow their currencies to collectively appreciate against a tumbling dollar then the cost of adjustment would be spread.
"The possibility of a US dollar collapse or sharp decline may be small at this point but it would generate very significant turmoil so East Asian economies ... ought to be ready for that."
The Manila-based ADB is working on several indices of Asian currencies that could be helpful to monitor exchange rate movements in the case of a sharp dollar decline, although its main intention is to help develop regional bond markets.
Political sensitivities
However, the ADB is still trying to decide which currencies to include in this Asian Currency Unit (ACU) amid political sensitivities about the inclusion of the Taiwan dollar given China's claim over the island.
The ADB had apparently been aiming to launch the ACU - a weighted basket of Asian currencies - before the bank's annual meeting in May, but Kawai said this would not be possible.
He said there was no specific launch date yet but hopefully it would be unveiled "in the next few months".
But Kawai played down suggestions that the ACU could foreshadow a single Asian currency like the European Currency Unit (ECU), which existed for two decades before the creation of the euro in 1999.
He said: "The ECU had an official status but the ACU has no such official status. We are not in the position to decide whether this should become a real currency or not."
East Asian economies need to prepare for a possible collapse of the US dollar, the Asian Development Bank says.
ADB: Possibility of a dollar collapse small but fallout huge
The warning comes as the US trade deficit reaches a record high and global interest rates continue to rise.
Masahiro Kawai, the ADB's head of regional economic integration, said on Tuesday: "Any shock hitting the US economy or the global market may change investors' perceptions given the existing global current account imbalance.
"Our suggestion to Asian countries is: Don't take this continuous financing of the US current account deficit as given. If something happens then East Asian economies have to be prepared."
He said because of the highly interdependent nature of East Asian economies, if countries worked together to allow their currencies to collectively appreciate against a tumbling dollar then the cost of adjustment would be spread.
"The possibility of a US dollar collapse or sharp decline may be small at this point but it would generate very significant turmoil so East Asian economies ... ought to be ready for that."
The Manila-based ADB is working on several indices of Asian currencies that could be helpful to monitor exchange rate movements in the case of a sharp dollar decline, although its main intention is to help develop regional bond markets.
Political sensitivities
However, the ADB is still trying to decide which currencies to include in this Asian Currency Unit (ACU) amid political sensitivities about the inclusion of the Taiwan dollar given China's claim over the island.
The ADB had apparently been aiming to launch the ACU - a weighted basket of Asian currencies - before the bank's annual meeting in May, but Kawai said this would not be possible.
He said there was no specific launch date yet but hopefully it would be unveiled "in the next few months".
But Kawai played down suggestions that the ACU could foreshadow a single Asian currency like the European Currency Unit (ECU), which existed for two decades before the creation of the euro in 1999.
He said: "The ECU had an official status but the ACU has no such official status. We are not in the position to decide whether this should become a real currency or not."
Thursday, February 8, 2007
HSBC warns over US mortgage bad debt
From
February 08, 2007
HSBC, Europe’s biggest bank, last night gave warning that bad debts in its troubled US mortgage lending business would be 20 per cent higher than forecast.
The bank blamed the impact of slowing house price growth, which it said is being reflected in accelerated delinquency trends across the US sub-prime mortgage market. It said that the level of loan impairment provisions for 2006 for its mortgage services operations will be higher than is reflected in current market estimates. Analysts had previously expected HSBC to report a bad debt charge of $8.8 billion (£4.5 billion).
The warning comes less than four weeks before HSBC’s full-year results, and follows its caution at its pre-close trading update in December that bad debt trends among US mortgage borrowers were deteriorating at a faster than expected rate.
City analysts had expressed alarm at the time that customers were defaulting less than six months after taking out their loans, a situation viewed as virtually unprecedented.
Last night’s alert will deepen concerns over the ability of HSBC’s US mortgage operations to model accurately default trends. When HSBC bought the operation, then called Household International, for $15 billion in 2003, it placed much emphasis on the strength of its computerintensive techniques to model consumer behaviour. Before the acquisition, HSBC had no experience of lending in the US sub-prime market.
In its statement, HSBC also cited the effect of higher payment obligations on borrowers as adjustable mortgage rates reset to higher interest rates from the level at which the loans were taken out.
HSBC said last night that Michael Geoghegan, group chief executive, is continuing to co-ordinate the necessary actions to manage the bank’s response. It also said that, apart from the mortgage services operations, the performance of the rest of its businesses was in line with its expectations.
Sunday, February 4, 2007
U.K.: Banks living on borrowed time
Banks living on borrowed time
As insolvencies climb, Heather Connon questions lenders' optimism on bad debts
Sunday February 4, 2007
The Observer
When the high-street banks report their results over the next month or so, virtually all are expected to announce a drop in bad debt provisions. Yet, according to last week's statistics, the number of people becoming insolvent rose by almost 60 per cent last year - and experts are predicting a further 20 per cent increase this year - while house repossessions are also rising sharply.
There is little doubt that a growing number of people (107,000 last year) are having difficulty repaying credit cards and other unsecured loans, but far more of us are still increasing our borrowings. However, instead of splurging on credit cards we are adding our debts to our mortgages. Mortgage borrowing rose by a fifth last year, to more than £360bn, and the Council of Mortgage Lenders expects a further rise this year; credit card borrowing, by contrast, fell 2 per cent to £120bn. Unsecured lending on cards and other personal loans represents just 17 per cent of the £1.3 trillion personal debt total.
Article continues
And that means rising house prices - up 9.3 per cent last year - continue to bail out most borrowers and their banks. While repossessions are high - 17,000 in 2006 - they are still less than a quarter of their 1991 peak, and the number of borrowers in arrears is actually falling. 'The UK consumer has been fairly sensible in what he is doing, looking at secured, not unsecured, lending,' says Ian Poulter, banking analyst at brokerage Teather & Greenwood. By remortgaging, consumers can transfer their credit card debts to secured loans, buying not only time but also lower interest rates.
Of course, that helps only if you own a house and can carry on paying the mortgage. For the minority not in that lucky position, the insolvency statistics suggest that life could well be getting tougher.
The increasingly acrimonious disputes between banks and the debt management companies that have sprung up to help us deal with our borrowings is already having an impact. Individual voluntary arrangements, under which borrowers agree to repay some of their debts over five years, all but stagnated in the last quarter of 2006. That reflects the fact that some lenders are taking an increasingly hard line on approving IVAs. Northern Rock and HSBC, for example, say they will not approve deals that give back less than 40p for every £1 they are owed (a substantially higher threshold than the industry norm of 25p); credit card company MBNA is taking a similarly hard line, while some lenders refuse to consider such arrangements.
Judging by statistics from The Insolvency Exchange (TIX), set up in November to advise lenders on negotiations with insolvency practitioners, there is good reason for banks to be suspicious. TIX has already signed up HBOS and HSBC, which means it sees about 70 per cent of all IVA proposals, and it found that fees vary from £1,500 to £15,000. TIX rejects a quarter of all proposals, and asks for modifications on a further 65 per cent of them. Chief executive Mark Onyett says he expects the firm to have an impact: 'It could weed out the good and the not so good - who is giving good advice to debtors and who is managing the IVA through the life cycle.'
TIX's research also highlights the perils of those seeking an IVA: the majority of people whose cases it sees have annual incomes of £12,000-£15,000, and, says Onyett, 'quite a lot have debts of more than three times their income'. That, says John Hall, chief executive of debt management company Invocas, underlines the fact that the banks have only themselves to blame. 'They brought on their own problems: the UK economy has been kept going on consumer spending.'
For the moment, they are being bailed out by a buoyant housing market and low unemployment. Even with the recent interest rate rises, few are expecting repossessions to reach the levels of the last housing downturn. But if the economic climate cools, banks could be stuck with a painful bad debt headache.
At debt's door
Two of the largest providers of IVAs, Debt Free Direct and Accuma, issued surprise profit warnings last month.
While Accuma said approval rates had climbed back from 78 to 85 per cent, its shares remain less than half their price two weeks ago. The problem is not just the hard line being taken by some banks; rather it is that the sector's rapid growth and generous fees have attracted too much competition. Some customers, too, may be deterred by recent bad press.
As insolvencies climb, Heather Connon questions lenders' optimism on bad debts
Sunday February 4, 2007
The Observer
When the high-street banks report their results over the next month or so, virtually all are expected to announce a drop in bad debt provisions. Yet, according to last week's statistics, the number of people becoming insolvent rose by almost 60 per cent last year - and experts are predicting a further 20 per cent increase this year - while house repossessions are also rising sharply.
There is little doubt that a growing number of people (107,000 last year) are having difficulty repaying credit cards and other unsecured loans, but far more of us are still increasing our borrowings. However, instead of splurging on credit cards we are adding our debts to our mortgages. Mortgage borrowing rose by a fifth last year, to more than £360bn, and the Council of Mortgage Lenders expects a further rise this year; credit card borrowing, by contrast, fell 2 per cent to £120bn. Unsecured lending on cards and other personal loans represents just 17 per cent of the £1.3 trillion personal debt total.
Article continues
And that means rising house prices - up 9.3 per cent last year - continue to bail out most borrowers and their banks. While repossessions are high - 17,000 in 2006 - they are still less than a quarter of their 1991 peak, and the number of borrowers in arrears is actually falling. 'The UK consumer has been fairly sensible in what he is doing, looking at secured, not unsecured, lending,' says Ian Poulter, banking analyst at brokerage Teather & Greenwood. By remortgaging, consumers can transfer their credit card debts to secured loans, buying not only time but also lower interest rates.
Of course, that helps only if you own a house and can carry on paying the mortgage. For the minority not in that lucky position, the insolvency statistics suggest that life could well be getting tougher.
The increasingly acrimonious disputes between banks and the debt management companies that have sprung up to help us deal with our borrowings is already having an impact. Individual voluntary arrangements, under which borrowers agree to repay some of their debts over five years, all but stagnated in the last quarter of 2006. That reflects the fact that some lenders are taking an increasingly hard line on approving IVAs. Northern Rock and HSBC, for example, say they will not approve deals that give back less than 40p for every £1 they are owed (a substantially higher threshold than the industry norm of 25p); credit card company MBNA is taking a similarly hard line, while some lenders refuse to consider such arrangements.
Judging by statistics from The Insolvency Exchange (TIX), set up in November to advise lenders on negotiations with insolvency practitioners, there is good reason for banks to be suspicious. TIX has already signed up HBOS and HSBC, which means it sees about 70 per cent of all IVA proposals, and it found that fees vary from £1,500 to £15,000. TIX rejects a quarter of all proposals, and asks for modifications on a further 65 per cent of them. Chief executive Mark Onyett says he expects the firm to have an impact: 'It could weed out the good and the not so good - who is giving good advice to debtors and who is managing the IVA through the life cycle.'
TIX's research also highlights the perils of those seeking an IVA: the majority of people whose cases it sees have annual incomes of £12,000-£15,000, and, says Onyett, 'quite a lot have debts of more than three times their income'. That, says John Hall, chief executive of debt management company Invocas, underlines the fact that the banks have only themselves to blame. 'They brought on their own problems: the UK economy has been kept going on consumer spending.'
For the moment, they are being bailed out by a buoyant housing market and low unemployment. Even with the recent interest rate rises, few are expecting repossessions to reach the levels of the last housing downturn. But if the economic climate cools, banks could be stuck with a painful bad debt headache.
At debt's door
Two of the largest providers of IVAs, Debt Free Direct and Accuma, issued surprise profit warnings last month.
While Accuma said approval rates had climbed back from 78 to 85 per cent, its shares remain less than half their price two weeks ago. The problem is not just the hard line being taken by some banks; rather it is that the sector's rapid growth and generous fees have attracted too much competition. Some customers, too, may be deterred by recent bad press.
Friday, February 2, 2007
Watchdog attacks US swoop for bank secrets
Europe's main privacy watchdog says rights of millions of people and businesses are being abused.
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Ian Traynor in Brussels
Friday February 2, 2007
The Guardian
Europe's main privacy watchdog yesterday said that the banking secrets and rights of millions of people and businesses were being abused on a massive scale by a clandestine programme giving US agencies access to the information. It accused the EU's banks and financial authorities of doing nothing to stop the breaches.
In a damning report on the covert transfer to US agencies of the details of millions of financial transactions by EU citizens, Peter Hustinx, the European Data Protection supervisor, accused the European Central Bank of complicity in the system that has been used since 9/11 and which was deemed illegal by European data protection agencies two months ago.
Article continues
The Belgium-based company Swift (Society for Worldwide Interbank Financial Telecommunication) has been supplying the US Treasury and the CIA with details - such as names, account numbers and sums involved - allegedly as part of George Bush's "war on terror".
After 9/11, Swift agreed to cooperate with the US Treasury by creating a system where personal data is transferred to a "black box" owned by the US authorities, enabling "massive transfers of data" and the "focused searching" of the information by US agencies.
The Brussels-based company says it is obliged to cooperate with the US authorities because it is subject to US subpoenas and could be fined for ignoring the requests. The system, which is estimated to include the bank details of more than 4m Britons, was operated secretly for years until it was disclosed last summer.
A Belgian investigation into the scheme found that Swift was operating in uncertain legal territory. Privacy watchdogs across Europe concluded in November that the company was breaching data protection laws and privacy rights.
Mr Hustinx said yesterday that the Swift operation "has breached the trust and private lives of many millions of people". He accused the Frankfurt-based European Central Bank of failing to demand a halt to the operation and of keeping quiet for years on the controversy.
The ECB denied responsibility and called instead for the European and US governments to "clarify" the dilemmas thrown up by a clash between privacy rights and combating terrorism.
In the European parliament, MEPs demanded new rules to bring an end to the mass abuse of people's privacy and data protection rights. Mr Hustinx also warned that the US snooping on European bank transfers could expose European companies to economic espionage and jeopardise commercial transactions.
"What is at stake here is nothing less than the protection of fundamental rights of our citizens," said Jean-Marie Cavada, the French MEP heading the parliament's civil liberties committee.
Questions are also being asked as to whether the Swift case is the only instance of private data being trawled by the US agencies or if telephone, email and insurance data is also being made available.
---
Ian Traynor in Brussels
Friday February 2, 2007
The Guardian
Europe's main privacy watchdog yesterday said that the banking secrets and rights of millions of people and businesses were being abused on a massive scale by a clandestine programme giving US agencies access to the information. It accused the EU's banks and financial authorities of doing nothing to stop the breaches.
In a damning report on the covert transfer to US agencies of the details of millions of financial transactions by EU citizens, Peter Hustinx, the European Data Protection supervisor, accused the European Central Bank of complicity in the system that has been used since 9/11 and which was deemed illegal by European data protection agencies two months ago.
Article continues
The Belgium-based company Swift (Society for Worldwide Interbank Financial Telecommunication) has been supplying the US Treasury and the CIA with details - such as names, account numbers and sums involved - allegedly as part of George Bush's "war on terror".
After 9/11, Swift agreed to cooperate with the US Treasury by creating a system where personal data is transferred to a "black box" owned by the US authorities, enabling "massive transfers of data" and the "focused searching" of the information by US agencies.
The Brussels-based company says it is obliged to cooperate with the US authorities because it is subject to US subpoenas and could be fined for ignoring the requests. The system, which is estimated to include the bank details of more than 4m Britons, was operated secretly for years until it was disclosed last summer.
A Belgian investigation into the scheme found that Swift was operating in uncertain legal territory. Privacy watchdogs across Europe concluded in November that the company was breaching data protection laws and privacy rights.
Mr Hustinx said yesterday that the Swift operation "has breached the trust and private lives of many millions of people". He accused the Frankfurt-based European Central Bank of failing to demand a halt to the operation and of keeping quiet for years on the controversy.
The ECB denied responsibility and called instead for the European and US governments to "clarify" the dilemmas thrown up by a clash between privacy rights and combating terrorism.
In the European parliament, MEPs demanded new rules to bring an end to the mass abuse of people's privacy and data protection rights. Mr Hustinx also warned that the US snooping on European bank transfers could expose European companies to economic espionage and jeopardise commercial transactions.
"What is at stake here is nothing less than the protection of fundamental rights of our citizens," said Jean-Marie Cavada, the French MEP heading the parliament's civil liberties committee.
Questions are also being asked as to whether the Swift case is the only instance of private data being trawled by the US agencies or if telephone, email and insurance data is also being made available.
Monday, January 22, 2007
Gambling Subpoenas on Wall St.
The Justice Department has issued subpoenas to at least four Wall Street investment banks as part of a widening investigation into the multibillion-dollar online gambling industry, according to people briefed on the investigation.
The subpoenas were issued to firms that had underwritten the initial public offerings of some of the most popular online gambling sites that operate abroad. The banks involved in the inquiry include HSBC, Credit Suisse, Deutsche Bank and Dresdner Kleinwort, these people said.
While online gaming sites like PartyGaming and 888 Holdings operate from Gibraltar and their initial public offerings were held on the London Stock Exchange, companies that do business with them and have large bases in United States have come under scrutiny by regulators in Washington.
By ANDREW ROSS SORKIN and STEPHANIE SAUL
Monday, December 11, 2006
Lenders feeling pain as more homeowners default in U.S.
'Sky may be falling'
Peter Morton
Financial Post
Thursday, December 07, 2006
WASHINGTON - HSBC Holdings PLC, the world's third-largest bank, said yesterday it will be hurt by its exposure to controversial mortgages that helped spark the U.S. housing boom, but which are now coming up for renewal.
The London-based bank is expected to be the first in a long list of major residential mortgage lenders in the United States forced to take a hit from the increasing number of defaults by homeowners who cannot afford to pay sharply higher interest rates.
About US$2-trillion in the popular adjustable-rate mortgages (ARMs) used to finance the housing boom come due in the next two years. That represents about one-third of the US$6-trillion U.S. mortgage market.
Analysts said other lenders such as Citibank Corp. and Bank of America should soon be telling markets they are in the same boat as HSBC.
"We think the sky may be falling," said Mark Fitzgibbon, director of research at New York investment firm Sandler O'Neill & Partners LP. "Credit quality has been deteriorating for two quarters and we think the pace of deterioration will accelerate this quarter."
At least one Canadian bank with U.S. operations said it does not have a large exposure to these types of controversial mortgages. A spokesman for TD Banknorth Inc., which operates in the U.S. Northeast, said only 11% of its loan portfolio is residential, while more than 60% is commercial. It is owned by Toronto-Dominion Bank.
HSBC underestimated borrowers' ability to repay mortgage loans in the U.S., Douglas Flint, its finance director, said yesterday in a conference call with analysts.
In the United States, loan delinquencies and writedowns increased from the first part of the year because of more bankruptcies and a weaker housing market, he added. HSBC did not put any number to those delinquencies, but said the hit is expected to be felt in the bank's fourth quarter.
However, much of it is linked to its US$14.8-billion purchase in 2003 of Household International Inc., now called HSBC Finance Corp. Widely seen as a lender for high-risk borrowers, HSBC Finance generated 31% of HSBC's North American profit but 65% of its non-performing loans.
Economists have warned that ARMs, the popular finance vehicle used four years ago to finance the housing boom, would come back to haunt homeowners with interest rates up sharply from the time they took out the mortgage.
One-third of U.S. homes were financed with the unusual mortgages, which offered teaser interest rates as low as 1% for between two and five years. But after that the rate would be based mostly on prevailing rates.
U.S. short-term rates have risen by 4.25 percentage points since 2004, while oil prices have more than doubled over three years, putting huge stress on homeowners' wallets.
Benjamin Tal, a senior economist at CIBC World Markets in Toronto, said many of the adjustable mortgages were offered to people with bad credit and who had little or no downpayment. The refinancings have led to higher mortgages and now an increasing number of defaults.
Mr. Tal said he had expected to see the earnings of major mortgage lenders, which were quick to lend the money, get hit as the number of defaults began to increase.
"It's payback time," he said.
Stock markets have widely anticipated the downturn. The Philadelphia KBW bank index was up only 1% this quarter, compared with the 5% increase in the Standard & Poor's 500 index.
Non-conventional lenders are also getting hit by defaults and bankruptcies linked to the housing downturn.
H&R Block's Option One unit, which the tax preparer is trying to sell, posted a US$39-million fiscal second-quarter pre-tax loss, compared with a year-earlier profit of US$48.8-million.
© National Post 2006
Peter Morton
Financial Post
Thursday, December 07, 2006
WASHINGTON - HSBC Holdings PLC, the world's third-largest bank, said yesterday it will be hurt by its exposure to controversial mortgages that helped spark the U.S. housing boom, but which are now coming up for renewal.
The London-based bank is expected to be the first in a long list of major residential mortgage lenders in the United States forced to take a hit from the increasing number of defaults by homeowners who cannot afford to pay sharply higher interest rates.
About US$2-trillion in the popular adjustable-rate mortgages (ARMs) used to finance the housing boom come due in the next two years. That represents about one-third of the US$6-trillion U.S. mortgage market.
Analysts said other lenders such as Citibank Corp. and Bank of America should soon be telling markets they are in the same boat as HSBC.
"We think the sky may be falling," said Mark Fitzgibbon, director of research at New York investment firm Sandler O'Neill & Partners LP. "Credit quality has been deteriorating for two quarters and we think the pace of deterioration will accelerate this quarter."
At least one Canadian bank with U.S. operations said it does not have a large exposure to these types of controversial mortgages. A spokesman for TD Banknorth Inc., which operates in the U.S. Northeast, said only 11% of its loan portfolio is residential, while more than 60% is commercial. It is owned by Toronto-Dominion Bank.
HSBC underestimated borrowers' ability to repay mortgage loans in the U.S., Douglas Flint, its finance director, said yesterday in a conference call with analysts.
In the United States, loan delinquencies and writedowns increased from the first part of the year because of more bankruptcies and a weaker housing market, he added. HSBC did not put any number to those delinquencies, but said the hit is expected to be felt in the bank's fourth quarter.
However, much of it is linked to its US$14.8-billion purchase in 2003 of Household International Inc., now called HSBC Finance Corp. Widely seen as a lender for high-risk borrowers, HSBC Finance generated 31% of HSBC's North American profit but 65% of its non-performing loans.
Economists have warned that ARMs, the popular finance vehicle used four years ago to finance the housing boom, would come back to haunt homeowners with interest rates up sharply from the time they took out the mortgage.
One-third of U.S. homes were financed with the unusual mortgages, which offered teaser interest rates as low as 1% for between two and five years. But after that the rate would be based mostly on prevailing rates.
U.S. short-term rates have risen by 4.25 percentage points since 2004, while oil prices have more than doubled over three years, putting huge stress on homeowners' wallets.
Benjamin Tal, a senior economist at CIBC World Markets in Toronto, said many of the adjustable mortgages were offered to people with bad credit and who had little or no downpayment. The refinancings have led to higher mortgages and now an increasing number of defaults.
Mr. Tal said he had expected to see the earnings of major mortgage lenders, which were quick to lend the money, get hit as the number of defaults began to increase.
"It's payback time," he said.
Stock markets have widely anticipated the downturn. The Philadelphia KBW bank index was up only 1% this quarter, compared with the 5% increase in the Standard & Poor's 500 index.
Non-conventional lenders are also getting hit by defaults and bankruptcies linked to the housing downturn.
H&R Block's Option One unit, which the tax preparer is trying to sell, posted a US$39-million fiscal second-quarter pre-tax loss, compared with a year-earlier profit of US$48.8-million.
© National Post 2006
Tuesday, December 5, 2006
Somewhere a Banker Smiles
December 5, 2006
By Joe Bageant
It's hard as hell to keep conspiracy theories out of one's mind these days. And I'm not talking about "Who really brought down the Twin Towers? or the "Are Zionists behind the Iraq War?" kind of stuff. Both camps are pretty clearly dug in into their hardened bunkers on those issues. But the booger stalking my ragged old mind these days puts both of those in the shade because of its sheer scale. And it runs like this:
Is the consumerist totalization of this country and the world really a conscious plot by a handful of powerful corporate and financial masters? If we answer "yes" we find ourselves trundled off toward the babbling ranks of the paranoid. Still though, it's easy enough to name those who would piss themselves with joy over the prospect of a One World corporate state, with billions of people begging to work for their 1,500 calories a day and an xBox chip in their necks. It's too bad our news media quit hunting with live ammo decades ago, leaving us with no one to track the activities and progress of what sure as hell seem to be global elites, judging from the financial spoor we find along every pathway of modern life.
In our saner moments we can also see that it does not take dark super-centralized plotting to pull off what appears to have been accomplished. Even without working in overt concert, a few thousands of dedicated individual corporate and financial interests can constitute a unified pathogenic whole, much the same as individual cells create a viable dominant colony of malignant organisms -- malignant simply by their anti-human, anti-societal nature. We don't see GM, Halliburton, Burger King and CitiBank lobbying the state for universal health or clean rivers, do we? But mention unions or living wages, and the financial colony within our national Petri dish shape shifts into a Gila monster and squirts venom on the idea and shits money all over Capitol Hill. I looked at all this as coincidence for years until the proposition finally strained credulity so much that I threw in the towel and said, "Fuck it. There is only so much coincidence to go around in this world."
Put another way, the global decision makers, international planners, financial institutions, political parties, media conglomerates, corporations, banks, a hegemonic, accumulative bloc working in concert to coordinate the extraction of wealth from first and third world alike. A series of privately held international institutions to which and from which money can be moved to leverage nations and populations according to their needs is probably gonna do just that because they can. National territory doesn't mean shit to such people, and those who govern said territory mean even less, except to the extent they can obstruct or incite resistance. People like Castro and Chavez. But even they are they are just the thorn in the lion's paw.
Consider this: The war in Iraq has been immensely profitable for the people who make weapons and for the contractors who supposedly rebuild what the weapons destroy. They profit in either case. And the longer war goes on the more they will make.
Meanwhile, the money for both is obtained through extraction practiced upon the world's laboring poor. But the big money, the "juice" as street people used to say, comes from squeezing the orange of American society for more work, more production and tax money. Some of us older oranges are feeling pretty wrung out these days and are getting hard as hell to get along with. Yet, the squeeze doesn't seem to bother most Americans at all. The pressure has been so great and so constant that no one any longer feels it. It has become so pervasive as to be incomprehensible to ordinary people. For example, seventy cents of every income-tax dollar goes to pay for past, present, and future wars. Education gets two cents. As Michael Parenti has pointed out, the cost of military aircraft parts and ammunition kept in storage by the Pentagon is greater than the combined federal spending on pollution control, conservation, community development, housing, occupational safety, and mass transportation all put together. And the US Navy spends more money in its never ending development of a submarine rescue vehicle than is spent for public libraries, occupational safety, and daycare centers combined.
Collectively, these financial super-elites, who either do or do not exist, must be at least somewhat aware that they are managing the world. Otherwise, why would we have Davos conferences and such? Global financial conferences where the likes of Bill Clinton and Al Gore and John Kerry are merely the entertainment, mere proof of the attendants' prestige? Can it be true that the world's real players practically yawned at Alan Greenspan's cryptic little speeches while waiting for the backstage action with the real movers and shakers from Goldman, Citibank and others, none of whom we have ever heard of but never the less are said to account for the drop in gas prices in the U.S. just prior to the 2006 mid-term elections? Word has it that they changed the index last July so oil futures holders would be forced to dump in October and November, creating a mild glut during the elections. If that is true, then we can probably thank them for that Dow 12,000 last month too.
Meanwhile, back in Camp Davos, the lustful, pathologically approval seeking, bright student teddy bear from Hope, Arkansas expounds and entertains the new global elites. And everyone has Beluga caviar and chopped hardboiled quail eggs afterward, even as more than one billion people live on less than one dollar a day. "And have you tried the unborn calf veal poached in Peruvian sheep's milk at the Swisse Bank suite? It's to die for!" Nobody is remotely worried about blowback from that billion people eating moldy cassava or rat urine polluted rice, because poverty, well, poverty is not threat, is it? Just a source of cheaper labor. "Now, about the oil crude taps and NYMEX . . . "
Personally, I've decided they are real and that they constitute an unseen class, and that they are mid-stage in becoming the most powerful class the earth has ever seen. One that American politicians not only refuse to publicly acknowledge, but when pressed, flatly swear does not exist. Show me the Republican or Democratic leader who says, "Politics is economics by other means, and our own Federal Reserve Bank is a privately held institution, not a governmental one, and is an interlocking part of the global financial network which owes allegiance to no country or ordinary citizens, regardless of nationality." Or, "My corporate campaign contributions come from people whose every action is directed at extracting two things from you, my dear voter: Your money and the cheapest possible labor you can be driven to provide. The absolute cheapest possible payment to you for the hours of your life consumed by work, which, depending upon the degree of your delusion, is called either a job or an exciting career."
No American politician is going to admit that. You must go to Venezuela or the smoldering dumps of Manilla or fields of Chiapas to hear that sort of truth.
Admittedly, there is at least some reason for fear among these elites. The US economy, the real material economy, is dreadfully weak, having been so gutted by parasitic speculation. The only source of strength left here is the military, which is currently at play in an effort to gain control over the world's energy supply, and make damned sure no one gets any funny ideas about using anything but dollars in trading oil. But the real players say, "Well then, let the Americans keep it if they can! If the U.S. loses, then someone else wins. No matter. We can leverage our position form any emerging market point on the globe. And doesn't China look like a real comer, old boy! History is long. The Chinese understand that." Thus we find the Chinese creating joint American holding companies to buy up commercial US real estate at bottom dollar after the crash. At some future point it could neatly offset their current loans to US for more consumption of Chinese goods. And if the Americans get too pissy, the Chinese can always turn off the money spigot.
On the other hand, this monstrous class of parasites has not yet won over the entire world. America seems to be their only complete victory, and that one will hold only as long as superheated consumption can be sustained. They have only been at it for maybe forty years, and are still pouring the foundation for the global gulag, setting the rules as they go. And they are hitting at least a few speed bumps: "Why is Castro still stinking up the joint, fer godzsake? And now we've got that friggin mexi-nigger dwarf Evo Morales in his goddamned stinky little dime store sweater strutting around like he was president or something. And why inna hell hasn't somebody smoked these bastards? Doesn't the CIA do anything for their paychecks anymore?"
Probably not. Last we heard the CIA was sidelined, sent to the benches until they come up with those goddamned weapons of mass destruction.
Meanwhile, a Chinese economist calculates the US trade deficit. A Swisse Bank exec orders another bottle of wine, and a Shia youth receives instruction in how to blow up an oil pipeline.
Only the Chinaman and the bank exec are smiling.
By Joe Bageant
It's hard as hell to keep conspiracy theories out of one's mind these days. And I'm not talking about "Who really brought down the Twin Towers? or the "Are Zionists behind the Iraq War?" kind of stuff. Both camps are pretty clearly dug in into their hardened bunkers on those issues. But the booger stalking my ragged old mind these days puts both of those in the shade because of its sheer scale. And it runs like this:
Is the consumerist totalization of this country and the world really a conscious plot by a handful of powerful corporate and financial masters? If we answer "yes" we find ourselves trundled off toward the babbling ranks of the paranoid. Still though, it's easy enough to name those who would piss themselves with joy over the prospect of a One World corporate state, with billions of people begging to work for their 1,500 calories a day and an xBox chip in their necks. It's too bad our news media quit hunting with live ammo decades ago, leaving us with no one to track the activities and progress of what sure as hell seem to be global elites, judging from the financial spoor we find along every pathway of modern life.
In our saner moments we can also see that it does not take dark super-centralized plotting to pull off what appears to have been accomplished. Even without working in overt concert, a few thousands of dedicated individual corporate and financial interests can constitute a unified pathogenic whole, much the same as individual cells create a viable dominant colony of malignant organisms -- malignant simply by their anti-human, anti-societal nature. We don't see GM, Halliburton, Burger King and CitiBank lobbying the state for universal health or clean rivers, do we? But mention unions or living wages, and the financial colony within our national Petri dish shape shifts into a Gila monster and squirts venom on the idea and shits money all over Capitol Hill. I looked at all this as coincidence for years until the proposition finally strained credulity so much that I threw in the towel and said, "Fuck it. There is only so much coincidence to go around in this world."
Put another way, the global decision makers, international planners, financial institutions, political parties, media conglomerates, corporations, banks, a hegemonic, accumulative bloc working in concert to coordinate the extraction of wealth from first and third world alike. A series of privately held international institutions to which and from which money can be moved to leverage nations and populations according to their needs is probably gonna do just that because they can. National territory doesn't mean shit to such people, and those who govern said territory mean even less, except to the extent they can obstruct or incite resistance. People like Castro and Chavez. But even they are they are just the thorn in the lion's paw.
Consider this: The war in Iraq has been immensely profitable for the people who make weapons and for the contractors who supposedly rebuild what the weapons destroy. They profit in either case. And the longer war goes on the more they will make.
Meanwhile, the money for both is obtained through extraction practiced upon the world's laboring poor. But the big money, the "juice" as street people used to say, comes from squeezing the orange of American society for more work, more production and tax money. Some of us older oranges are feeling pretty wrung out these days and are getting hard as hell to get along with. Yet, the squeeze doesn't seem to bother most Americans at all. The pressure has been so great and so constant that no one any longer feels it. It has become so pervasive as to be incomprehensible to ordinary people. For example, seventy cents of every income-tax dollar goes to pay for past, present, and future wars. Education gets two cents. As Michael Parenti has pointed out, the cost of military aircraft parts and ammunition kept in storage by the Pentagon is greater than the combined federal spending on pollution control, conservation, community development, housing, occupational safety, and mass transportation all put together. And the US Navy spends more money in its never ending development of a submarine rescue vehicle than is spent for public libraries, occupational safety, and daycare centers combined.
Collectively, these financial super-elites, who either do or do not exist, must be at least somewhat aware that they are managing the world. Otherwise, why would we have Davos conferences and such? Global financial conferences where the likes of Bill Clinton and Al Gore and John Kerry are merely the entertainment, mere proof of the attendants' prestige? Can it be true that the world's real players practically yawned at Alan Greenspan's cryptic little speeches while waiting for the backstage action with the real movers and shakers from Goldman, Citibank and others, none of whom we have ever heard of but never the less are said to account for the drop in gas prices in the U.S. just prior to the 2006 mid-term elections? Word has it that they changed the index last July so oil futures holders would be forced to dump in October and November, creating a mild glut during the elections. If that is true, then we can probably thank them for that Dow 12,000 last month too.
Meanwhile, back in Camp Davos, the lustful, pathologically approval seeking, bright student teddy bear from Hope, Arkansas expounds and entertains the new global elites. And everyone has Beluga caviar and chopped hardboiled quail eggs afterward, even as more than one billion people live on less than one dollar a day. "And have you tried the unborn calf veal poached in Peruvian sheep's milk at the Swisse Bank suite? It's to die for!" Nobody is remotely worried about blowback from that billion people eating moldy cassava or rat urine polluted rice, because poverty, well, poverty is not threat, is it? Just a source of cheaper labor. "Now, about the oil crude taps and NYMEX . . . "
Personally, I've decided they are real and that they constitute an unseen class, and that they are mid-stage in becoming the most powerful class the earth has ever seen. One that American politicians not only refuse to publicly acknowledge, but when pressed, flatly swear does not exist. Show me the Republican or Democratic leader who says, "Politics is economics by other means, and our own Federal Reserve Bank is a privately held institution, not a governmental one, and is an interlocking part of the global financial network which owes allegiance to no country or ordinary citizens, regardless of nationality." Or, "My corporate campaign contributions come from people whose every action is directed at extracting two things from you, my dear voter: Your money and the cheapest possible labor you can be driven to provide. The absolute cheapest possible payment to you for the hours of your life consumed by work, which, depending upon the degree of your delusion, is called either a job or an exciting career."
No American politician is going to admit that. You must go to Venezuela or the smoldering dumps of Manilla or fields of Chiapas to hear that sort of truth.
Admittedly, there is at least some reason for fear among these elites. The US economy, the real material economy, is dreadfully weak, having been so gutted by parasitic speculation. The only source of strength left here is the military, which is currently at play in an effort to gain control over the world's energy supply, and make damned sure no one gets any funny ideas about using anything but dollars in trading oil. But the real players say, "Well then, let the Americans keep it if they can! If the U.S. loses, then someone else wins. No matter. We can leverage our position form any emerging market point on the globe. And doesn't China look like a real comer, old boy! History is long. The Chinese understand that." Thus we find the Chinese creating joint American holding companies to buy up commercial US real estate at bottom dollar after the crash. At some future point it could neatly offset their current loans to US for more consumption of Chinese goods. And if the Americans get too pissy, the Chinese can always turn off the money spigot.
On the other hand, this monstrous class of parasites has not yet won over the entire world. America seems to be their only complete victory, and that one will hold only as long as superheated consumption can be sustained. They have only been at it for maybe forty years, and are still pouring the foundation for the global gulag, setting the rules as they go. And they are hitting at least a few speed bumps: "Why is Castro still stinking up the joint, fer godzsake? And now we've got that friggin mexi-nigger dwarf Evo Morales in his goddamned stinky little dime store sweater strutting around like he was president or something. And why inna hell hasn't somebody smoked these bastards? Doesn't the CIA do anything for their paychecks anymore?"
Probably not. Last we heard the CIA was sidelined, sent to the benches until they come up with those goddamned weapons of mass destruction.
Meanwhile, a Chinese economist calculates the US trade deficit. A Swisse Bank exec orders another bottle of wine, and a Shia youth receives instruction in how to blow up an oil pipeline.
Only the Chinaman and the bank exec are smiling.
Thursday, November 16, 2006
U.K. banks told to predict effects of a 40% crash in house prices
The Times November 16, 2006
Banks told to predict effects of a 40% crash in house prices
By Patrick Hosking, Banking and Finance Editor
BANKS in the UK have been ordered by financial regulators to assess how they would cope in the event of house prices crashing by 40 per cent.
The instruction to include a housing slump scenario in their stress-testing models comes after the Financial Services Authority found that some banks were failing to include gloomy enough assumptions in their modelling.
The FSA said yesterday that an “appropriate” benchmark was to assume property prices fell by 40 per cent and that 35 per cent of mortgages in default ended with homes being re-possessed. It stressed that this was not a forecast but a “severe but plausible scenario” and one that banks should examine when deciding how robust their balance sheets were.
In a speech to the British Bankers’ Association yesterday, Clive Briault, the FSA’s managing director for retail markets, remarked on banks’ differing views over the size and impact of a house market downturn, hence the need for reference points.
He also warned bankers to ensure that they have properly stress-tested their mortgage portfolios in the wake of decisions by some to lend people greater multiples of their incomes.
In a letter to bank chief executives last month the FSA accused some of failing to consider scenarios in which they might be forced into losses, dividend cuts or capital shortfalls.
“We were struck by how mild the firm-wide stress events were at some of the firms we visited,” wrote the FSA’s director of major retail groups, David Strachan.
A few banks were “weak in all respects” in stress-testing.
House prices fell about 15 per cent nationwide in 1989-1992, and in parts of East Anglia by 40 per cent, leading to repossessions, write-downs and bank losses.
Banks are obliged to stress-test hypothetical adverse movements in asset prices, interest rates and exchange rates to ensure that they have a sufficient capital cushion. But stress-testing is only as robust as the assumptions made.
The FSA move came as UK house prices grew at their fastest for four years, according to new figures from RICS.
http://business.timesonline.co.uk/article/0,,9063-2455507,00.html
Banks told to predict effects of a 40% crash in house prices
By Patrick Hosking, Banking and Finance Editor
BANKS in the UK have been ordered by financial regulators to assess how they would cope in the event of house prices crashing by 40 per cent.
The instruction to include a housing slump scenario in their stress-testing models comes after the Financial Services Authority found that some banks were failing to include gloomy enough assumptions in their modelling.
The FSA said yesterday that an “appropriate” benchmark was to assume property prices fell by 40 per cent and that 35 per cent of mortgages in default ended with homes being re-possessed. It stressed that this was not a forecast but a “severe but plausible scenario” and one that banks should examine when deciding how robust their balance sheets were.
In a speech to the British Bankers’ Association yesterday, Clive Briault, the FSA’s managing director for retail markets, remarked on banks’ differing views over the size and impact of a house market downturn, hence the need for reference points.
He also warned bankers to ensure that they have properly stress-tested their mortgage portfolios in the wake of decisions by some to lend people greater multiples of their incomes.
In a letter to bank chief executives last month the FSA accused some of failing to consider scenarios in which they might be forced into losses, dividend cuts or capital shortfalls.
“We were struck by how mild the firm-wide stress events were at some of the firms we visited,” wrote the FSA’s director of major retail groups, David Strachan.
A few banks were “weak in all respects” in stress-testing.
House prices fell about 15 per cent nationwide in 1989-1992, and in parts of East Anglia by 40 per cent, leading to repossessions, write-downs and bank losses.
Banks are obliged to stress-test hypothetical adverse movements in asset prices, interest rates and exchange rates to ensure that they have a sufficient capital cushion. But stress-testing is only as robust as the assumptions made.
The FSA move came as UK house prices grew at their fastest for four years, according to new figures from RICS.
http://business.timesonline.co.uk/article/0,,9063-2455507,00.html
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