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Globescan: More Respite

The Federal Reserve said that bigger US banks would have an extra year to calculate a capital requirement known as the supplementary leverage ratio.

The Federal Reserve said that bigger US banks would have an extra year to calculate a capital requirement known as the supplementary leverage ratio. Institutions subjected to the leverage ratio requirement will have to show regulators what the ratio would be in a stressed scenario beginning in 2017. The extension applies to banks with more than $50 billion of assets, of which there were 39 at the end of the third quarter, according to data from the Federal Deposit Insurance Corp. The supplementary leverage ratio creates hard limits on how much debt banks can borrow relative to their assets, without giving banks credit for having relatively low-risk assets.

No Vacancy
Applications for unemployment benefits fell more than forecast last week as claims moved closer to a four-decade low that shows a resilient labour market. First-time jobless claims dropped by 12,000 in the week ended 21 November to 260,000, the fewest in a month, a Labour Department report showed. The number of claims reached 255,000 in mid-July, the lowest since December 1973. Companies are limiting dismissals as a tighter labour market has made it more difficult to attract and keep skilled labourers. Payrolls increased in October by the most in 10 months, while the unemployment rate fell to a seven-year low, indicating robust employment that may persuade the Federal Reserve to raise its benchmark interest rate next month.

Cash Counter
Pacific Investment Management and other investors have sued Citigroup over the bank’s alleged failure to properly monitor toxic securities backed by more than $13.8 billion of mortgage loans, resulting in $2.3 billion of losses. According to a complaint filed in a New York state court in Manhattan, Citigroup breached its duties as trustee for the 25 private-label trusts dating 2004 to 2007 by ignoring “pervasive and systemic deficiencies” in how the underlying loans were underwritten or being serviced. The investors said Citigroup looked askance at the loans’ “abysmal performance” out of fear it might “jeopardise its close business relationships” with loan servicers, including Wells Fargo & Co and JPMorgan Chase & Co, or prompt them to retaliate over its own problem loans.

Big Bet
US private equity firms Warburg Pincus and General Atlantic have bought a 49 per cent stake in United Arab Emirates-based payments processor Network International from The Abraaj Group, the companies announced in a statement. The investment is a rare example of Western private equity capital being injected into the Middle East, with Warburg and General Atlantic attracted by the gradual transition from cash to electronic transactions in the Middle East and Africa. Neither Warburg nor General Atlantic indicated how much they paid for their stake in the largest payment processor in the Middle East and Africa, which has a presence in more than 40 countries and is 51 per cent owned by Dubai’s largest bank, Emirates NBD.

Brakes On
France’s decision to secure double voting rights at carmaker Renault should not result in any changes to the structure of Renault’s partnership with Japan’s Nissan, French economy minister Emmanuel Macron said. Macron told France’s lower house of parliament the government would not accept any changes to the current partnership structure between the two companies. “Under no circumstances shall we accept that the balance be revisited,” Macron said.

Revival Mode
Britain will make £12 billion of savings annually from government departments’ day-to-day spending by the end of the decade as it seeks to return to a budget surplus, finance minister George Osborne said. Osborne said the cuts would be less steep than over the last five years, which saw funding for many government departments fall sharply. They were also less steep than Osborne had flagged earlier this year. Day-to-day spending will fall by an average of 0.8 per cent a year in real terms, compared to 2 per cent between 2010 and 2015, he said.

Wheels Of Trouble
Volkswagen’s luxury flagship Audi has suspended two engineers after its larger diesel engines were found evading emissions limits in the US, Audi CEO Rupert Stadler said. Volkswagen and Audi notified US authorities that about 85,000 vehicles with 3.0 liter V6 diesel engines were fitted with emissions-control equipment that was not disclosed to US regulators. The news widened a scandal at parent VW, which has led to the ouster of its long-time chief executive and wiped more than €20 billion off the group’s market value.

Green Boost
Japanese Prime Minister Shinzo Abe promised to give $10.6 billion to developing nations by 2020 to help them implement policies against global warming, ahead of the UN climate talks in Paris. The decision to offer $ 10.6 billion came after Japan gave a roughly combined YEN2.0 trillion for the same purpose in 2013 and 2014. “We attach great importance to the notion that all nations will participate in agreeing to a new international framework,” Abe said in a meeting on global warming with members of his cabinet.

Helping Hand
China announced a number of policies to encourage foreign trade and help exporters as the world’s second-largest economy struggles with persistent weakness in demand at home and abroad. China’s exports and imports were down for the first 10 months of 2015, with the picture for foreign trade “complicated and grim”, the customs’ site shows. The new policies include lowering various costs for importers and exporters, streamlining the clearance of goods at customs and gathering more accurate statistics at customs.

Online Curve
Pakistan is set to invite global online payment giants PayPal and Alibaba to offer their services in the country, the IT ministry has said, after easing its e-commerce rules. The move follows a decision by the global Financial Action Task Force to remove Pakistan from its list of high-risk and non-cooperative jurisdictions linked to money laundering.

(This story was published in BW | Businessworld Issue Dated 14-12-2015)

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