Just Economic Info

(Reuters) - U.S. prosecutors and European regulators are close to arresting individual traders and charging them with colluding to manipulate global benchmark interest rates, according to people familiar with a sweeping investigation into the rate-rigging scandal.

Federal prosecutors in Washington, D.C., have recently contacted lawyers representing some of the individuals under suspicion to notify them that criminal charges and arrests could be imminent, said two of those sources who asked not to be identified because the investigation is ongoing.

Defense lawyers, some of whom represent individuals under suspicion, said prosecutors have indicated they plan to begin making arrests and filing criminal charges in the next few weeks. In long-running financial investigations it is not uncommon for prosecutors to contact defense lawyers for individuals before filing charges to offer them a chance to cooperate or take a plea, these lawyer said.

The prospect of charges and arrests of individuals means that prosecutors are getting a fuller picture of how traders at major banks allegedly sought to influence the London Interbank Offered Rate, or Libor, and other global rates that underpin hundreds of trillions of dollars in assets. The criminal charges would come alongside efforts by regulators to punish major banks with fines, and could show that the alleged activity was not rampant in the banks.

"The individual criminal charges have no impact on the regulatory moves against the banks," said a European source familiar with the matter. "But banks are hoping that at least regulators will see that the scandal was mainly due to individual misbehavior of a gang of traders."

In Europe, financial regulators are focusing on a ring of traders from several European banks who allegedly sought to rig benchmark interest rates such as Libor, said the European source familiar with the investigation in Europe.

The source, who did not want to be identified because the investigation is ongoing, said regulators are checking through emails among a group of traders and believe they are now close to piecing together a picture of how they allegedly conspired to make money by manipulating the rates. The rates are set daily based on an average of estimates supplied by a panel of banks.

"More than a handful of traders at different banks are involved," said the source familiar with the investigation by European regulators.

There are also probes in Europe concerning Euribor, the Euro Interbank Offered Rate.

It is not clear what individuals and banks federal prosecutors are most focused on. A top U.S. Department of Justice lawyer overseeing the investigation did not respond to a request for a comment.

Reuters previously reported that more than a dozen current and former employees of several large banks are under investigation, including Barclays Plc, UBS and Citigroup, and have hired defense lawyers over the past year as a federal grand jury in Washington, D.C., continues to gather evidence.

The activity in the Libor investigation, which has been going on for three years, has quickened since Barclays agreed last month to pay $453 million in fines and penalties to settle allegations with regulators and prosecutors that some of its employees tried to manipulate key interest rates from 2005 through 2009.

Barclays, which signed a non-prosecution agreement with U.S. prosecutors, is the first major bank to reach a settlement in the investigation, which also is looking at the activities of employees at HSBC, Deutsche Bank and other major banks.

The Barclays settlement sparked outrage and a series of public hearings in Britain, after which Barclays Chief Executive Bob Diamond announced his resignation from the big British bank.

The revelations have raised questions about the integrity of Libor, which is used as benchmark in setting prices for loans, mortgages and derivative contracts.

Adding to concerns are documents released by the New York Federal Reserve Bank this month that show bank regulators in the United States and England had some knowledge that bankers were submitting misleading Libor bids during the 2008 financial crisis to make their financial institutions appear stronger than they really were.

Among other details, the Fed documents included the transcript of an April 2008 phone call between a Barclays trader in New York and Fed official Fabiola Ravazzolo, in which the unidentified trader said: "So, we know that we're not posting um, an honest LIBOR."

The source familiar with the regulatory investigation in Europe said two traders who have been suspended from Deutsche Bank were among those being investigated. A Deutsche Bank spokesman declined to comment.

The Financial Times reported on Wednesday that regulators we're looking at suspected communication among four traders who had worked at Barclays, Credit Agricole, HSBC and Deutsche Bank.

Credit Agricole said it had not been accused of any wrongdoing related to the attempted manipulation of Libor by Barclays, but had responded to requests for information for various authorities related to the matter.

Beyond regulatory penalties and criminal charges, banks face a growing number of civil lawsuits from cities, companies and financial institutions claiming they were harmed by rate manipulation. Morgan Stanley recently estimated that the 11 global banks linked to the Libor scandal may face $14 billion in regulatory and legal settlement costs through 2014.

In the United States, the regulatory investigation is being led by the Commodity Futures Trading Commission, which has made the Libor probe one of its top priorities.

The European Investment Bank (EIB) will provide 1.44 billion euros ($1.75 billion) in loans to struggling Greek firms, providing a stimulus to the debt-laden country's ailing economy, Greece's finance ministry said on Saturday.

With Greek banks dependent on ECB cash to survive and reluctant to finance any but the biggest companies, Athens and the European Union have been pushing the EIB, the EU's long-term investment arm, to step into the breach.

But the EIB hesitated for months, worried about getting too exposed to Greece -- which has not yet escaped the risk of a chaotic default that might force it to abandon the euro. EIB financing for Greek projects had dried up to a mere 10 million euros this year, Finance Minister Yannis Stournaras told reporters after meeting EIB chief Werner Hoyer.

"The EIB will re-activate its engagement in Greece as soon as possible," Stournaras said. "It seems there can also be good news in this country," said Greek Development Minister Costis Hatzidakis who also took part in the meeting.

Athens is desperately looking for ways to kick-start its stricken economy, now in its fifth year of recession. Austerity measures associated with two EU/IMF-led bailouts over the past two years have plunged the economy into its longest and deepest slump since World War Two.

Gross domestic product shrank by a postwar record 6.9 percent last year, with investment slumping by about 20 percent. The economy is expected to contract by a fifth in 2008-2012.

The EIB will disburse the loans over the next three years to small and medium-sized enterprises, using Greek banks as intermediaries. The EIB will also help Greece push ahead with road construction, foreign investment and privatization projects, Hatzidakis said without giving details.

The EIB gets top-notch terms when it taps capital markets to raise funds thanks to its triple-A rating. In recent years, it has provided more than 700 million euros in financing to large Greek energy companies.

As a way to help boost Greek growth, the European Union has already increased its share of financing in certain EU co-financed projects. It has also said it would help Athens cut red tape to make more efficient use of EU funds earmarked for it.

Greece is entitled to a total 20 billion euros in so-called EU structural funds for the period 2007-2013. But it has only used about 8 billion euros so far -- partly because of red tape and partly because it could not provide adequate funds to match EU grants for certain projects.

World Bank president Robert B. Zoellick has announced the appointment of Indonesian Finance Minister Sri Mulyani Indrawati as managing director of the World Bank Group.

“She has been an outstanding finance minister, with in-depth knowledge of both development issues and the role of the World Bank Group,” Zoellick stated in a press release.

“As a member of the senior team she will play a key role in helping to lead the bank as we move to strengthen client support, implement our reform program, and anticipate future challenges,” he said

Sri Mulyani will start June 1 as one of the Washington-based bank’s three managing directors, the highest rank under Zoellick.

Mulyani, according to the press release, accepted the appointment, saying: “It is a great honor for me and for my country to have this opportunity to contribute to the very important mission of the bank in changing the world".

The appointment follows an international search process. Mulyani, 47, will replace Juan Jose Daboub, who will complete his four-year term June 30, overseeing 74 nations in Latin America, the Caribbean, East Asia and the Pacific, the Middle East and North Africa, the bank said. Daboub is a former El Salvador finance minister.

Mulyani and Vice President Boediono have been the target of an opposition campaign accusing them of abusing their authority during the Rp 6.7 trillion ($740 million) bailout of Bank Century in 2008.

source: thejakatapost

Bank of America (BoA) has returned to profit, reporting a net income of $3.2bn (£2.1bn) in the first three months of 2010.

This compares with a $194m loss in the previous quarter, but is 24% lower than profits of the same period a year ago.

The giant US bank said record sales and trading activity at its capital markets arm - including acquisition Merrill Lynch - had driven the latest results.

BoA said it was having to put aside less money for losses on bad loans.

Markets took the news well, and European banks with major capital markets businesses rallied, with Barclays jumping 1.35% and Credit Suisse up 1.3%.

Bonanza

BoA's strong results follow impressive first quarter numbers from JP Morgan, released on Wednesday.

Like JP Morgan, BoA earned the bulk of its income - some $3.2bn - from its business on the global capital markets, which includes former investment bank Merrill Lynch that BoA bought in a rescue acquisition at the height of the crisis.

This has offset losses the US firm made on its more traditional banking businesses of deposit taking and lending.

Record home repossessions

Traditional lending in the US mortgage market has proven to be a growing thorn in the side of all the American banks, including BoA.

Losses at the bank's home loan division increased to $2.1bn, up from only $0.4bn a year earlier, as Americans continued to struggle to repay their mortgages.

Hopes that the US housing market might be on the mend were dealt a blow as home repossessions jumped to the highest monthly rate on record in March, according to online property broker RealtyTrac.

With many banks now seeking to dump a large backlog of repossessed houses on the market, the outlook for house prices remains highly uncertain.

'Improving economy'

However, BoA believes their lending business has turned the corner.

"With each day that passes, the 2010 story appears to be one of continuing credit recovery, and our results reflect a gradually improving economy," said Chief Executive Brian Moynihan.

The bank's credit card business has swung back into profit, making early $1bn, compared with a loss of $1.8bn a year ago.

And although losses in its home loan division continue to rise, the bank decided to reduce the amount of cash it sets aside against future loan losses across the entire bank by some $3.6bn.

source: BBC

Lending by Chinese banks fell sharply in the first three months of the year after the government's efforts to clamp down on new loans proved successful.

Banks lent 2.6 trillion yuan ($381bn; £247bn) between January and March, a 43% drop on the 4.6tn yuan they lent a year earlier, the central bank said.

The state is trying to curb lending to prevent the economy from overheating and prices from rising too fast.

It has set a limit for lending for the whole of 2010 of 7.5tn yuan.

This is well below the 9.6tn yuan lent last year. Much of this lending boom was sparked by government stimulus measures.

At the end of 2008, the government announced a 4tn-yuan stimulus plan to boost the domestic economy.

Partly as a result of the stimulus measures, the economy grew by an impressive 8.7% in 2009.

Trade deficit

The government is now keen to rein in spending to cool growth.

It is also concerned about inflation, which hit a 16-month high of 2.7% in February.

In January, the government ordered banks to hold more cash in reserve, while state media reported that it had ordered banks to stop lending altogether for the last 10 days of the month.

The central bank also said on Monday that China's foreign exchange reserves hit a record $2.5tn (£1.6tn) at the end of March.

This was despite the fact that the country recorded its first monthly trade deficit in nearly six years.

Rising volumes and prices of raw materials left China with a deficit of $7.2bn in March, the bank said.

source : BBC

Greece won a major pledge of financial support from the other countries that use the euro and the International Monetary Fund in a deal that aims to halt a government debt crisis undermining confidence in Europe's currency union.

The joint eurozone and IMF bailout program comes with strict conditions and makes no money available right now.

It could be tapped only if Greece or other financially troubled eurozone members cannot raise funds from financial markets. It would require the unanimous agreement of the 16 eurozone countries to release the loan funds.

The deal at a summit meeting Thursday night in Brussels was a clear victory for German Chancellor Angela Merkel, who had taken a tough line on any bailout. She demanded that a rescue for Greece only come when the country runs out of other options and said it must include the IMF.

It was also a comedown for the French and the European Central Bank, which had opposed turning to the IMF out of fear it would damage the euro's prestige and show that Europe was unable to solve its own financial woes.

Greece's financial difficulties have weighed on the shared currency, driving its exchange rate down to $1.33 from $1.51 in November. It has also illustrated a basic weakness in the euro: the budget and deficit rules adopted to support it were not strong enough to prevent governments from spending their way into trouble.

A default — if Greece cannot raise money to pay off debt coming due this year — would be a further serious blow to the euro, and most economists and market analysts expected that the European Union would find a way to stop it. But pledges of support had been vague until now.

"We hope that it will not have to be activated," said the European Union's president Herman Van Rompuy. "This would be triggered as a last resort." He said the program should tell markets to "have confidence that the eurozone will never abandon Greece."

Luxembourg's prime minister Jean-Claude Juncker, who heads the group of eurozone finance ministers, said "speculators will be discouraged because they know from now on we have this instrument."

Greek government officials say they believe the existence of a eurozone safety net will help them borrow at lower costs. They expect the spreads to fall significantly in coming weeks.

"We hope and believe that we won't ever use it," a Greek source said under condition of anonymity because he was not authorized to be quoted in the news media.

French President Nicolas Sarkozy said eurozone nations would offer loans totaling some two-thirds of the package with the IMF offering the last third. "We didn't count up to the last euro," he said. "It can be adjusted."

Juncker said they did not agree an amount of a possible bailout for Greece. Two diplomats earlier said the total loans would be some €22 billion. All eurozone nations are pledging to help — although any contribution would be voluntary.

Eurozone nations also want to take steps to prevent debt and deficits getting out of control again, calling for tougher rules and sanctions. Van Rompuy said they "want all necessary measures to be taken to ensure that this does not recur."

He has been tasked with drawing up possible options to toughen EU oversight of member's budgets and economic performance.

The bailout program could be used to help other vulnerable eurozone nations such as Portugal and Spain who have seen debt soar after the global economic turmoil of the past several years saw their economies sink into recession.

The Washington D.C.-based lender has already joined the EU in bailing out and demanding budget cuts from three EU members that don't use the euro: Hungary, Latvia and Romania.

European and U.S. stock markets rose earlier Thursday on news that a financial rescue package for Greece was taking shape. Market worries over Europe's weeks-long hesitation to set up a safety net for eurozone members who can't pay their bills has sent the euro sliding to a 10-month low.

Greece needs to borrow some €54 billion this year and must refinance some €20 billion in April and May. It has been able to sell bonds but says it cannot keep paying the high interest rates investors have been demanding to compensate them for the perceived risk that Greece might not pay.

Germany's Merkel was not sympathetic, saying financial rescue could only come in an "exceptional emergency."

Germany sees itself as a fierce defender of prudent budget spending and is unwilling to use its taxpayer money to help Greece, which overspent and faked budget figures for years. Merkel also faces a key regional election May 9 which could damage her center-right government by overturning its majority in Germany's upper house of parliament.

Source: MSNBC

JP Morgan Chase, UBS, Deutsche Bank and Germany's Depfa bank have been told they will be tried for aggravated fraud, along with 13 other people.

The charges relate to the sale of derivates to the city of Milan.

JP Morgan denied employees involved had acted inappropriately, while Deutsche and UBS also denied any wrongdoing. Depfa was not available for comment.

Interest payments

Prosecutors say the trial, which is due to begin in May, is an important test case for hundreds of Italian cities who have lost money through similar deals.

The arrangements between banks and cities, including Milan, were designed to reduce interest payments on their loans.

In the case of Milan, the four banks are accused of misleading the city authorities when they agreed a derivatives deal on a 1.68bn euro ($2.31bn; £1.51bn) loan in 2005.

The deal adjusted the interest payments on the loan - a move which Milan says leaves it facing a 100m euros loss.

Two former Milan city officials have also been ordered to stand trial, along with 11 bank employees.

Source : BBC