Basel presses ahead with plans to limit bank borrowing (FT)
Global regulators pressed ahead on Wednesday with plans to limit overall bank borrowing and make it easier for investors to compare institutions, announcing that banks will have to calculate and disclose their “leverage ratios” according to a newly agreed global formula starting in 2015. The Basel Committee on Banking Supervision sees the leverage ratio as a crucial “backstop” that prevents banks from cheating on the main risk-based safety measure, the capital ratio. But banks argue it will unfairly penalise institutions that engage in high-volume, low-risk activities such as mortgage lending and trade finance.
Pension funds may see the silver lining on the interest rate cloud (Reuters)
As defined benefit pension fund liabilities to pensioners and prospective retirees are pre-determined and bond-like, the discount rate used to calculate them is the yield on top-rated corporate bonds - which have also risen about 80 basis points since early May. And so extraordinarily low yields have not only depressed returns on asset returns of bond-heavy funds, they also lead to a bigger liability calculation as the pension funds are deemed to need even more assets to pay retirees - leaving companies sponsoring the schemes to stump up more cash for the pot. So the bounceback in bond yields is a big relief.
Bond yields threaten recovery in global banks’ balance sheets (FT)
Banks have built giant portfolios of liquid securities, partly at the behest of regulators and also because they have not found better opportunities to lend a flood of deposits. Under new capital rules, unrealised losses in these “available for sale” portfolios hit banks’ equity capital. “I would think most institutions are going to have a fairly sizeable hit to their equity,” said a senior executive of a top US bank. “You’ve really had this concentrated one to two week period where all hell is breaking loose.”
Anthony Weiner Surges to Lead in Democratic Mayoral Race (NBC NY)
Weiner, who entered the race two years after resigning his congressional seat amid a sexting scandal, now leads City Council Speaker Christine Quinn 25 percent to 20 percent among registered Democrats, the poll by Marist found. That's a flip-flop from the last survey in May, when Quinn, the longtime front-runner, led Weiner 24 percent to 19 percent.
Wayward Pigeon Makes Trans-Pacific Journey (ABC)
Owner Hiroyasu Takasu tells ABC News the 1-year-old pigeon set off on his first race southeast of Sapporo May 10, along with 8,000 other birds. Only 20 percent of the fleet completed the 600- mile race, including the baby’s mother, who took the top prize, Takasu said. But the stout pigeon had bigger plans in mind, flying 5,000 miles across the Pacific. Canadian rescuers spotted Takasu’s phone number on a tag attached to the bird’s leg, and contacted him. “I was so relieved he was found alive,” Takasu said, adding that he’d assumed the pigeon was dead. “[Birds] usually reach their limit in a week, with no food or water. This is a superior pigeon.”
Fugitive financier Marc Rich dies (FT)
Marc Rich, the colourful and controversial commodities trader and founder of Glencore who fled the US to avoid federal indictments, has died in Switzerland aged 78. “Marc Rich died in Lucerne in a hospital as a result of a brain stroke,” said Christian König of the Marc Rich Group in a statement. ... Rich, born in Antwerp, Belgium, was an oil trader who fled to Switzerland in 1983 hours before being indicted on more than 50 charges of trading with Iran during an embargo, wire fraud, racketeering and evading more than $48m in income taxes – at the time the largest tax evasion case in US history. He remained one of the US’s most wanted fugitives until Bill Clinton pardoned him on his last day as US president in January 2001.
Weak Links Mar Investing in China (WSJ)
Analysts and investors say that for the rebound to gain any traction, China needs to revamp a system that gives state-owned enterprises preference when granting approval for initial public offerings. More-profitable companies often must wait years to tap the stock market, which is composed mostly of domestic investors, because of strict quotas on foreign ownership of stocks. ... More than half of the companies listed on the Shanghai Stock Exchange are state-owned, the direct result of the government's preference for them as IPO candidates. The State-owned Enterprises 100 Index on the Shanghai Stock Exchange has fallen 40% since it was launched in July 2009. The bourse's Private-owned Enterprises 50 Index has declined just 1.2% since its debut on the same day. In that period, the overall market has fallen 34%.
Hong Kong’s I.P.O. Market Cools (DealBook)
Hong Kong— the world’s biggest market for new share listings from 2009 to 2011 — had looked to be recovering from a 2012 slump as recently as last month, when two large I.P.O.s of more than $1 billion each were completed. But since then, the market has come under a double chill brought on by a cash crunch in China and the U.S. Federal Reserve’s plans to reduce quantitative easing. The benchmark Hang Seng Index has declined 11.5 percent in the past month. "The combination of concerns on the stability of the Chinese financial system and investor re-positioning in the wake of last week’s comments on potential Q.E. tapering has negatively impacted markets," Andrew Swan, head of Asian fundamental equities at BlackRock, an asset manager, said in an emailed statement.
Standard Chartered ‘Comfortable’ With Full-Year Estimates (Bloomberg)
Standard Chartered Plc, the U.K. bank that generates more than three-quarters of its earnings in Asia, reiterated its forecast for profit in 2013 amid a rout in emerging markets. The bank said in a statement today it’s “comfortable” with analyst estimates for full-year operating profit. That’s about $8 billion for 2013 compared with about $6.88 billion in the year-earlier-period, Finance Director Richard Meddings told reporters on a call today. Revenue growth in the first half will be in the “low single-digit” range compared with the year-earlier period, the firm said in a statement.
Royal Bank of Canada Gains by Putting the Brakes on Traders (DealBook)
One of the first things that Mr. Katsuyama’s team noticed, members said, was that his traders were having trouble getting their trades done at exchanges that were geographically closer. They discovered that in the time that it took for a trade from R.B.C. to travel through fiber optic cables from a slightly closer exchange to a slightly farther exchange, a high-speed trading firm could spot the trade, cancel its order on one exchange and raise the price on another to take advantage of the R.B.C. client. The discovery led to the invention of the bank’s trading program, named Thor, which was approved last month for a patent. The program factors in the distance between exchanges and slows signals to the closer location so that the orders reach all of the exchanges at exactly the same moment.
Italy faces restructured derivatives hit (FT)
Italy risks potential losses of billions of euros on derivatives contracts it restructured at the height of the eurozone crisis, according to a confidential report by the Rome Treasury that sheds more light on the financial tactics that enabled the debt-laden country to enter the euro in 1999. ... While the report leaves out crucial details and appears intended not to give a full picture of Italy’s potential losses, experts who examined it told the Financial Times the restructuring allowed the cash-strapped Treasury to stagger payments owed to foreign banks over a longer period but, in some cases, at more disadvantageous terms for Italy.
States Put Heat on Bitcoin (WSJ)
State regulators are warning virtual-currency exchanges and other companies that deal with bitcoin that they could be closed down if their activities run afoul of state money-transmission laws, according to people familiar with the matter. ... The money-transmission rules vary among states, but most require detailed financial data, business strategy and information about the company's management. States also typically require companies to put up a bond that could run as high as several million dollars.
IRS workers bought porn, wine using agency credit cards: watchdog (NYDN)
Poor oversight by the Internal Revenue Service allowed workers to use agency credit cards to buy wine for an expensive luncheon, dorky swag for managers’ meetings and, for one employee, romance novels and diet pills, an agency watchdog said Tuesday. Two IRS credit cards were used to buy online pornography, though the employees said the cards were stolen. One of the workers reported five agency credit cards lost or stolen.
Michigan Family Allowed to Keep Pet Deer Rescued After Mother's Death (Gawker)
The family rescued and adopted the deer shortly after its mother was hit by a car outside the family's home. ... The rehabilitation worked, and the deer, which they named Lilly, became part of their family. Lilly reportedly enjoys playing frisbee and watching Animal Planet, and she sleeps on a futon inside the house next to the family's cats.