January 20, 2011: Panel Begins to Set Rules to Govern Financial System [NEWSLETTER]

Conversation Starter

SIFMA this week released the following statement from president and CEO Tim Ryan in reaction to the release of the Financial Stability Oversight Council’s (FSOC) study and recommendations for implementing the Volcker Rule:

Today’s study and recommendations are the first step in a complicated process to write rules implementing a ban on proprietary trading by banking entities while ensuring permitted activities critical to well functioning markets continue unimpeded.

Regulators will need to strike the right balance between banning those activities deemed to be proprietary trading and those that are permitted activities under the Volcker Rule. The ability of financial institutions to make markets for different kinds of financial instruments is crucial to market liquidity and capital formation, which fuels economic growth and job creation.

While we will review the FSOC’s study in further detail in the days ahead, we appreciate the Council’s recognition that there cannot be a one-size-fits-all rule for all asset classes and that grey areas exist between permitted market-making activities, such as market making and hedging, and proprietary trading. As this process moves from recommendations to proposed rules, SIFMA and its members look forward to providing comment and recommendations on the most efficient and effective means to insure compliance with the ban on proprietary trading, while supporting market making and hedging activities of banking entities.

We also appreciate the FSOC’s recognition that it will be important for regulators to appropriately define terms used in the Dodd-Frank Act to address the restriction of banks’ investment in private equity and hedge funds. Without appropriate definition of terms used in this section of the Volcker Rule, SIFMA believes that a number of unintended consequences could arise that would adversely impact soundness of these entities rather than strengthening it.

It may sweep in entities and vehicles--mutual funds and traditional corporate lending vehicles--that Congress never intended to be treated as hedge funds or private equity funds. A principal goal of the Volcker Rule is to eliminate the temptation of banks to bail out investors in sponsored hedge funds and private equity funds, which might expand a banking entity’s losses during a financial crisis. However, if you define too broadly the terms ‘hedge fund’ and ‘private equity fund’, you risk eliminating activities which contribute to creating jobs and providing capital and credit to allow companies to innovate and prosper.


*CN: Trade association SIFMA hopes to make its mark on more than 250 new rules that will be written starting this year governing items including derivatives trading by Wall Street banks to fiduciary rules for investment advisers.



REGULATION

Panel Begins to Set Rules to Govern Financial System
By NY Times
The new regulatory board charged with overseeing the stability of the financial system took its first big steps on Tuesday to set out tentative guidelines to limit trading by banks for their own accounts and to restrict the growth of the biggest financial companies, Edward Wyatt reports in The New York Times.
http://jlne.ws/f0HKjL

Deadlines Missed on Financial-Overhaul Rules
By JEAN EAGLESHAM And VICTORIA MCGRANE, WSJ
Regulators have missed or postponed several deadlines to write rules needed to implement the financial overhaul triggered by the Dodd- Frank law.
http://jlne.ws/edk749
**Gensler to Congress "Show me the money!"

Basel hardens bank hybrid bond rules
By Jennifer Hughes and Brooke Masters in London, Financial Times
Global regulators have imposed tough requirements on the bonds that banks can count towards their regulatory capital in a bid to kill off a funding technique that has been blamed as a key contributor to banks' need for taxpayer bail-outs.
http://jlne.ws/eZX8Ba

Geithner doubts ability to spot vital banks
By Tom Braithwaite in Washington - Financial Times
Tim Geithner has questioned the feasibility of identifying financial institutions as "systemically important" in advance of a crisis, just as the regulatory council the Treasury secretary chairs is supposed to start doing precisely that.
http://jlne.ws/gBL5KT

Dodd-Frank: Comment by Feb. 1 on higher consumer lease exemption threshold
Press Release from the Federal Reserve Bank of St. Louis
The Board is requesting comments on proposed rules that amend Reg M coverage by increasing the threshold for exempt consumer leases to $50,000. This threshold must be adjusted annually on or after December 31, 2011, based on any annual percentage increase in the Consumer Price Index. Personal property leases for personal, family or household use would have to comply with Reg M unless the lessee's total contractual obligation under the lease exceeds $50,000. The new threshold amount is effective on July 21, 2011, under provisions of the Dodd-Frank Act.
http://bit.ly/e4yHL6


Lead Stories

Bipartisan debt control? Yes, it's possible
By Nina Easton, WSJ.com
Kent Conrad's announcement this week that he would step down in 2012 rather than seek re-election didn't draw much attention outside the Beltway. But it should -- because it could have a big impact on the nation's finances.
http://jlne.ws/gjZYPt

**CN: Conrad, a Democrat from North Dakota, is chair of the Senate Budget Committee. He was also one of four senators on the president's debt reduction panel to vote last month in favor of the dramatic proposals issued by co-chairs Erskine Bowles and Alan Simpson.

Derivatives trading platform bypasses banks
By Jeremy Grant in London - Financial Times
A new type of derivatives trading platform has emerged that would allow pension funds and industrial companies to transact off-exchange derivatives between themselves, cutting out banks that have long acted as intermediaries in such deals. TRL Exchange, based in London and operated by TradeRisks, a corporate finance group, is finalising the terms of a deal between a UK housing association and a pension fund that for the first time would not involve a bank as intermediary.
http://jlne.ws/dKaJz4

New York Fed ends AIG assistance with full repayment
Press Release
The Federal Reserve Bank of New York today announced the termination of its assistance to American International Group, Inc. (AIG) and the full repayment of its loans to AIG as a result of the closing of the recapitalization that was announced on September 30, 2010. As of today, AIG will no longer have any outstanding obligations to the New York Fed.
http://ht.ly/3E0ex

WSJ/NBC Poll: U.S. Losing Ground to China
By Patrick O'Connor, WSJ.com
Americans have something of an inferiority complex when it comes to China. More respondents to the latest Wall Street Journal/NBC News poll say China will be the world’s dominant power in 20 years while than think the U.S. will retain that mantle. But the 38% to 35% margin is close.
http://jlne.ws/h8IQKy

A Housing Rebound Won't Lift the Economy
By Kathleen M. Howley, Bloomberg Businessweek
The housing market may start crawling up from rock bottom this year. Even if it does, though, any rebound is likely to be anemic. "There's a good chance of a housing turnaround this year, but it's not going to be enough to give much help to the economy," says Karl Case, the co-creator of the S and P/Case-Shiller indexes that track U.S. home prices. "We're coming off 50-year lows, and we still have to deal with the foreclosure mess."
http://jlne.ws/gcbtQF


CHINA NEWS

China agrees to $45B trade investment, policy changes
By Howard Schneider, The Washington Post
China has agreed to $45 billion in trade and investment contracts with U.S. companies and has made a series of other trade-related concessions as part of Chinese President Hu Jintao's visit, a senior administration official said Wednesday.
http://jlne.ws/gMELRH

China Lowered Holdings of US Debt in November
By AP
China, the biggest buyer of U.S. Treasury securities, reduced its holdings in November after four months of gains.
http://jlne.ws/eutCB8

The People’s Republic of the U.S. Treasury
By Jon Hilsenrath, WSJ.com
Here’s an ominous image of the U.S. Treasury Department building today, decked out with flags of the People’s Republic of China, in honor of China’s visiting president, Hu Jintao.
http://jlne.ws/f2PStu


More LEAD STORIES

States warned of $2,500bn pensions shortfall
By Nicole Bullock in New York - Financial Times
US public pensions face a shortfall of $2,500bn that will force state and local governments to sell assets and make deep cuts to services, according to the former chairman of New Jersey's pension fund.
http://jlne.ws/eJiLRr

Banks' Underlying Problem Is Revenue
By ERIC DASH - NY Times
The nation's banks are posting runaway profits for 2010, in a drastic reversal from 2009, when the prospect of widespread loan defaults forced them to set aside billions of dollars to cover losses. The banks now say they set aside more money than they needed, and so they are withdrawing large sums from loss reserves. A big chunk of the newfound earnings, nearly a third, comes from those withdrawals. So bank earnings since the peak of the financial crisis in 2008 have been exaggerated to a large degree, in both directions, by the shuffling of money into and out of reserves.
http://jlne.ws/hS00PE

Kroll to challenge big three rating agencies
By Brooke Masters in London - Financial Times
A new credit rating agency, backed by entrepreneur Jules Kroll, opens for business today with plans to challenge the dominance of its three big rivals. Kroll Bond Ratings will focus on rating complex products, including asset-backed securities, seeking to capitalise on widespread criticism of the credit rating agencies during the financial crisis. They gave AAA ratings to many complex securities that turned out to be far more risky than they appeared.
http://jlne.ws/ePpzh3

Credit Scores, Card Debt Both Fell In 2010, Report Shows
By Darren Waggoner, US Banker
U.S. consumers’ average credit scores slipped one point in the past year, and credit card debt fell by 8 percent to $7,404 during the same period, according to data released Jan. 12 by Credit Karma.
http://jlne.ws/gd1i8d

Jamie Dimon: More Municipal Bankruptcies
By Scott Rubin, Benzinga
J.P. Morgan's (NYSE: JPM) CEO Jamie Dimon said that he sees more trouble ahead for U.S. municipalities in 2011 and believes that more bankruptcies are on the horizon. Dimon urged investors to use caution when wading into the municipal debt market, echoing comments from noted banking analyst Meredith Whitney in recent months.
http://jlne.ws/e2ZXff


Events

Treasury Futures: Using International Fixed-Income and Money Market Spreads
When: January 21, 2011
Where: Chicago
Who: Institute for Financial Markets
Full Info: www.theifm.org
Details: This progressive course builds on the knowledge gained in two previous IFM courses: Introduction to Treasury Futures: Factoring the Risks, and Treasury Futures Basis: Beyond the Risks. The program provides a decidedly international perspective and explores the enormous spread trading opportunities in trading one sovereign yield curve against another sovereign yield curve, using just futures. We begin with a discussion of the price volatility of various libor-based contracts vs. their sovereign fixed-income sovereign future contract counterparts. We reconcile how many eurodollar futures to spread vs. the ten-year note futures, among many other examples. This discussion is extended to the international arena, initially by calculating how to weight money market spreads using futures, i.e. short sterling spread vs. euribor. Next, we consider trading one sovereign yield curve vs. another one, using just futures, on a duration neutral-basis and currency neutral-basis. These currency hedged yield spreads are now popular macro strategy tools.

Making Sense of Credit Default Swaps (CDS), New York
When: January 26, 2011
Where: New York
Who: Institute for Financial Markets
Full Info: www.theifm.org
Details: Credit risk has existed since the first loan. This may account for the incredible growth of the credit default swap or CDS market – estimated at $40-$70 trillion in notional value – and lets someone trade the 'pure' credit risk embedded in so many different securities as a separate contract. While CDS is the bedrock product of the credit derivatives market, the interrelated nature and lack of transparency of the CDS market also has been blamed for the global credit crisis. Recent events, as well as initiatives by clearing platforms, have focused on creating greater transparency and on lowering systemic risk by migrating CDS from an OTC to an Exchange-traded model – where many transactions would be cleared through clearinghouses.

The 36th Annual International Futures Industry Conference
When: March 15-18, 2011
Who: FIA
Where: Boca Raton Resort & Club
Full info: http://www.futuresindustry.org/boca-2011-program.asp
Details: As one of FIA's premier events, the 36th Annual International Futures Industry Conference is host to an influential audience of 800 senior-level futures industry professionals, brokerage executives, technology and operations officers, exchange officials, money managers, and public policy leaders. Delegates from more than 30 countries attend this annual event.

SIFMA 2nd Annual Private Client Conference
When: Apr. 7 and 8, 2011
Who: SIFMA
Where: New York City
Full info: http://www.sifma.org/events/event.aspx?id=22289
Details: On April 7 and 8, the SIFMA 2nd Annual Private Client Conference, "Client First: Delivering the Vision," will build on the success of the inaugural Private Client Conference during the spring. This two-day event combines the strengths of SIFMA's former Sales & Marketing, Small Firms and Independent Firms conferences, producing North America's premier conference for private client groups at all levels. This conference is designed for senior managers in private client groups at global, regional, independent contractor and small broker-dealers, including national sales managers, regional directors, branch managers, wealth-management specialists, marketing specialists, and individual financial advisers and investment consultants.


Economic News

Latest Labor Department numbers show jobless claims fell
Press Release
In the week ending Jan. 15, the advance figure for seasonally adjusted initial claims was 404,000, a decrease of 37,000 from the previous week's revised figure of 441,000. The 4-week moving average was 411,750, a decrease of 4,000 from the previous week's revised average of 415,750.
http://jlne.ws/hZ6xaa

Single-family housing starts took a substantial dip in December
Press Release
The December report for existing single-family home sales was very positive, for the most part, with sales jumping up 11.8 percent to an annualized pace of 4.64 million units and beating the upper limit of analysts’ consensus range. Strength was shared across all four regions of the U.S., and year-over-year sales growth climbed all the way up from −27.3 percent to −2.5 percent. Months’ supply of existing homes at the current sales pace is its lowest since May, easing down from 9.3 months to 7.8 in December and further off July’s high of 11.9 months. Although sales ended the year on a high note, the average sales pace held for 2010 was the poorest since 1997. The median home price slipped down 0.9 percent over the month to $169,300 but was virtually flat with the year-ago median price in December 2009.
http://ow.ly/3Gxkz

Housing Remains Embattled Sector
By Kathleen Madigan, WSJ.com
Housing may no longer be in the basement, but it is barely crawling up the cellar steps. December saw housing starts slip a greater-than-expected 4.3% to an annual rate of 529,000. Over the past two years, starts have been averaging below a 600,000 pace–well below the mark of nearly 2 million hit regularly during the housing boom.
http://jlne.ws/gK7oBV

Consumer Confidence Slips Surprisingly on Jobs, Fuel Costs
By Shobhana Chandra, Bloomberg
Confidence among U.S. consumers unexpectedly declined in January, reflecting higher gasoline prices and an elevated unemployment rate.
http://jlne.ws/hOKDM6


Exchanges, Clearing Houses & MTFs

ABN AMRO Clearing joins LCH.Clearnet's SwapClear
Press Release
ABN AMRO Clearing (ABN AMRO Clearing Bank N.V.) has successfully commenced clearing its interbank interest rate swap (IRS) trades through SwapClear, LCH.Clearnet Ltd’s (LCH.Clearnet) market leading over-the-counter (OTC) IRS clearing service, thereby significantly reducing counterparty, credit and operational risk. The total number of SwapClear clearing members now stands at 37. ABN AMRO Clearing is a leading global securities services provider, covering 85 of the world’s leading exchanges across Europe, the Americas and Asia-Pacific. It has 12 offices across the globe and consistently ranks among the top 3 clearers in every time zone, based on the amount of turnover and market share.

LCH.Clearnet named clearing house of the year: Risk Awards 2011
London, 17 January 2010
LCH.Clearnet Group (LCH.Clearnet) has been named “clearing house of the year” by Risk Magazine, in recognition of its pivotal role in reducing systemic risk and for its development of market leading clearing solutions.
http://jlne.ws/g3XDXU


Firms & Banks

Wells, U.S. Bancorp profits up, margins squeezed
By Joe Rauch, Reuters
Wells Fargo and Co (WFC.N) and U.S. Bancorp (USB.N) said low interest rates were squeezing lending profits, but improving credit quality helped both banks post higher fourth-quarter earnings.
http://jlne.ws/hPyCG5

Citigroup to Name a New President
BY RANDALL SMITH, WSJ
NEW YORK-Citigroup Inc.'s chief executive officer, Vikram Pandit, plans to name John Havens as president and chief operating officer. The move is part of a structural overhaul meant to address the bank's efforts to expand as it tries to put the lingering effects of the financial crisis behind it.
http://jlne.ws/hH22e6

Citigroup 46% Gain Masks Flawed Mortgages
BusinessWeek
Three years after bad home loans helped trigger the recession, the New York-based bank is still selling mortgages that violate quality standards, according to an internal Freddie Mac review
http://jlne.ws/gJg3Gj

Citigroup Warrants Will Be Auctioned as Treasury Sells Last of TARP Stake
Bloomberg
The U.S. Treasury Department will sell warrants this quarter in Citigroup Inc. that were given to taxpayers in return for rescuing the lender during the financial crisis.
http://jlne.ws/e8AIeg

Citigroup Profit Misses Analysts' Estimates on Credit Spreads
By Donal Griffin and Bradley Keoun, Bloomberg
Citigroup Inc., the third-largest U.S. bank, posted a profit of $1.31 billion that missed analysts’ estimates as revenue from stock and bond trading fell more than at JPMorgan Chase.
http://jlne.ws/eDkoOT

Citigroup Remains 'Too Big to Fail': Report
TheStreet.com
Citigroup remains "too big to fail" and federal regulators still do not have a comprehensive system in place to prevent another bailout from being needed, according to a report issued today by a government watchdog. "While the year-plus of Government dependence left Citigroup a stronger institution than it had been, it remained, and arguably still remains, an institution ...
http://jlne.ws/eGZUkV

Four banks to manage AIG share sale
AsiaOne
AIG chose Bank of America, Deutsche Bank AG, Goldman Sachs Group Inc and JPMorgan Chase & Co to manage the sale of the government's 92 percent stake in the insurer, a person familiar with the situation said on Tuesday.
http://jlne.ws/ee2tOt

FSA hits Barclays with record L7.7m fine
By Brooke Masters and Sharlene Goff in London
Barclays will pay a record L7.7m fine and up to L59m in compensation for failing to provide adequate investment advice to more than 12,000 of its customers, many of whom were retirees who suffered losses in the financial crisis.
http://jlne.ws/gBOaiO

JPMorgan's EMC Mortgage Sued Over Home Loan Documents
By Sophia Pearson, Bloomberg
JPMorgan Chase and Co.’s EMC Mortgage, facing homeowner lawsuits over foreclosures, was sued by the trustee of a mortgage portfolio for refusing to turn over documents detailing the quality of loans bought by the trust.
http://jlne.ws/flRw00

Swiss bank UBS to change much-mocked dress code
By FRANK JORDANS, Associated Press
Good news for Swiss bankers: They may soon be allowed to wear red underwear, black nail polish — and even eat garlic. Swiss banking giant UBS AG said Monday it is revising its 44-page dress code telling its Swiss staff how to present themselves, which generated worldwide ridicule for its micromanagement of their dressing and dining habits.
http://jlne.ws/h3DK1U

**CN: If only John (Lothian) would ease up on our dress code...


Goldman Sachs Declares Preferred Stock Dividends
Press Release
New York, January 14, 2011 - The Goldman Sachs Group, Inc. (NYSE: GS) (Goldman Sachs) has declared dividends on the following series of its non-cumulative preferred stock (represented by depositary shares, each representing a 1/1,000th interest in a share of preferred stock):
http://jlne.ws/gy6Fz9

Goldman Sachs in the firing line over predicted $15.4bn wage bill
Guardian Unlimited
Latest round of bank results expected to further inflame debate over level of pay in sector The Wall Street bank Goldman Sachs will move centre stage in the ongoing furore over bankers' bonuses this week by setting aside an estimated $15.4bn (L9.7bn) to pay its staff for 2010, amounting to a possible average of $435,000 per employee. Goldman, a perennial lightning rod for fury over banking ...
http://jlne.ws/hqO7nv

Goldman Sachs CEO Blankfein Is Said to Visit Groupon About IPO
BusinessWeek
Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein visited the Chicago headquarters of Groupon Inc. yesterday to pitch executives on hiring his firm for a possible share sale, a person familiar with the matter said.
http://jlne.ws/dW1mcT

Goldman Sachs won't sell Facebook shares in U.S.
San Francisco Chronicle
Goldman Sachs Group Inc. will offer a private investment in Facebook Inc. only to customers outside of the United States due to concerns that "intense media attention" could trigger violations of U.S. financial...
http://jlne.ws/ezwkiT

Goldman's Facebook retreat reflects new normal
The Edge
NEW YORK: Goldman Sachs Group Inc's decision to scale back a heavily publicized sale of shares in social network site Facebook shows how the bank risks losing its edge as financial regulation intensifies, according to Reuters on Tuesday, Jan 18.
http://jlne.ws/gZKIXE

Goldman reveals fresh crisis losses
By Francesco Guerrera in New York and Kara Scannell in London - Financial Times
Goldman Sachs has revealed details of about $5bn in investment losses suffered during the crisis for the first time this week, in a move that will deepen the debate over companies' financial disclosures.
http://jlne.ws/gzHrBV

Goldman Seeks Redemption: Here's Everything You Need to Know
The Motley Fool
A rundown of Goldman's new rules in plain English.
http://jlne.ws/gyVxsY

UBS hires ex-JP Morgan credit sales head
eFinancial News
A senior member of JP Morgan's credit sales staff, who followed former boss Tony Best out of the US firm, has emerged at UBS as the Swiss bank nears the completion of its rebuild in fixed income, commodities and currencies.
http://jlne.ws/gxaVxT

Bank lending targets are sticking point in bonus talks with government
Daily Telegraph
High street bank talks to diffuse government pressure over bumper bonus payouts are stumbling over the size of formal lending targets.
http://jlne.ws/ebvF3g

Morgan Stanley's Chief U.S. Economist Berner Leaving Firm
Bloomberg
Berner will remain at the sixth-largest U.S. bank by assets in the "near term" as an adviser, New York-based Morgan Stanley said today in an internal memo obtained by Bloomberg News and confirmed by Sandra Hernandez, a spokeswoman for the firm.
http://jlne.ws/gcsVMh

Morgan Stanley's Greg Fleming to Head Brokerage; DiMaio Leaves
BusinessWeek
Morgan Stanley shook up its top management ranks, naming Greg Fleming to replace Charles Johnston as president of the retail brokerage and picking Ken deRegt to take over for Jack DiMaio in attempting to turn around its fixed-income trading unit.
http://jlne.ws/hMWDaV

MPs fail to land a punch on Diamond Bob
Guardian Unlimited
Barclays' boss parries Treasury select committee, but what do you expect when you question a banker's pursuit of riches? With a glossy grin, a dry wit and bags of affable Irish-American charm, Barclays' chief executive, Bob Diamond, is a difficult man to discombobulate. His stratospheric career is built on a mastery of canny negotiation - and the man from Massachusetts was never going to be ...
http://jlne.ws/huAWF2

RBS sells Priory Group in L925 million deal
Reuters Finance News (EU) via Yahoo! UK and Ireland Finance
Royal Bank of Scotland announced the long-awaited sale of the Priory Group, the care homes operator famous for its celebrity clientele, to buyout firm Advent International in a deal ...
http://jlne.ws/gI1a2V

Pimco Cuts U.S. Holdings, Sees Outflows
By Min Zeng, WSJ.com
Pacific Investment Management Co. cut the U.S. government-related holdings in its flagship bond fund in December to the lowest level in nearly two years.
http://jlne.ws/fqp9SY

J.P. Morgan Profit Jumps 47%
By David Benoit and Matt Jarzemsky, WSJ.com
J.P. Morgan Chase & Co.'s fourth-quarter profit jumped 47%, as the banking giant's asset quality improved further and it said consumers and businesses were looking for more loans and funding.
http://jlne.ws/eQMdig

Lehman sees $US60bn bankruptcy payout
Business Spectator
Permitted creditor claims likely to reach $US322bn.
http://jlne.ws/fMefFj

Newedge Hires Duo to Head London Fixed-Income Group
IDD Asset Securitization Report
Newedge hired Bill Blain and James St Johnston as co-heads of its new special situations group (SSG) in the credit and fixed income markets.
http://jlne.ws/gzmepW


Auctions & Statistics

Fed buys $7.716B in Treasurys, of $39.06B offered by dealers, in a POMO
The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system. Such transactions are arranged on a routine basis to offset other changes in the Federal Reserve’s balance sheet in conjunction with efforts to maintain conditions in the market for reserves consistent with the federal funds target rate set by the Federal Open Market Committee (FOMC).
http://jlne.ws/dcRpcM

Fed Bank of New York - Inflation protection in POMO, buying $1.74bln in TIPS of $4.939bln offered by dealers
The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system.
http://jlne.ws/dcRpcM

Treasury to Offer $25B 56-Day Cash Management Bills
By Gary Siegel, The Bond Buyer
The Treasury Department said it will auction $25 billion 56-day cash management bills on Wednesday, January 19.
http://jlne.ws/hyY2Y4


Regulators

Fed Says Banks Eased Credit to Hedge Funds, Private Equity
BusinessWeek
Wall Street's largest dealers during the fourth quarter eased credit terms to hedge funds and private-equity firms that borrow against securities while provisions for private derivatives trades were little-changed, according to the Federal Reserve.
http://jlne.ws/hAlcDP

ECB has emerged from the financial crisis as one of the few institutions with its reputation intact
FT.com
The European Central Bank has emerged from the financial crisis as one of the few institutions with its reputation intact – and its powers greatly enhanced – so a job on its governing council is a pretty good gig by any measure.
http://jlne.ws/eTdIkD

ECB: Crisis Had Lasting Effect on Growth Potential
By Brian Blackstone, WSJ.com
In its latest monthly bulletin, the European Central Bank warns that the financial crisis could have a lasting effect on the euro bloc’s potential output, and warned that potential economic growth is unlikely to return to its pre-crisis path for many years.
http://jlne.ws/igyjq8

Trichet comments at new ESRB watchdog meeting
Reuters
Following are comments by European Central Bank President Jean-Claude Trichet and Bank of England Governor Mervyn King after the inaugural meeting of the European Systemic Risk Board.
http://jlne.ws/e6bFiW

ECB flexes muscles in Brussels clearing reform
By Jeremy Grant and Philip Stafford, Financial Times
The European Central Bank has warned that it must have greater involvement in reform of how clearing houses operate and are overseen in Europe, in a sign it is starting to flex its muscles in the shaping of landmark over-the-counter (OTC) derivatives and clearing regulations.
http://jlne.ws/gcwqNx

**CN: I thought Jean-Claude Van Damme was the Muscles from Brussels.

One of Two Sets of SEC Proposed ABS Rules Would Apply to Munis
By Andrew Ackerman, The Bond Buyer
The Securities and Exchange Commission plans to vote on two sets of rules for asset-backed securities Thursday morning, including one that would apply to certain municipal securities.
http://jlne.ws/eGTHKe

Myners denies giving bank auditors comfort
Reuters Finance News (EU) via Yahoo! UK and Ireland Finance
Auditors were not given specific government reassurances so they could hand banks a clean bill of health at the height of the financial crisis, a former minister said on Tuesday. Paul ...
http://jlne.ws/f33h0h

Bair Urged Citigroup Changes 'At the Top' in 2009
BusinessWeek
Federal Deposit Insurance Corp. Chairman Sheila Bair told regulators in early 2009 that Citigroup Inc. executives lacked sufficient experience and management changes were needed, a U.S. bailout watchdog said.
http://jlne.ws/gEiwUN


OTC

Latest US Rule: Swaps Dealers Would Provide Trade Details
Dow Jones
In its latest effort to make swaps trades more transparent, the main U.S. financial regulator Friday proposed a rule requiring swaps dealers to provide prompt information to counterparties following a trade.
http://jlne.ws/eYprhs


Global News

Banco de Chile $500 mln capital increase approved
Reuters
Shareholders of Chile's No. 2 bank, Banco de Chile CHI.SN, on Thursday approved a capital increase of around $500 million aimed at shoring up its balance sheet, the bank said.
http://jlne.ws/eKhHYk

Brazil's Heaviest Rainfall in Four Decades Adds to Inflationary Pressures
By Iuri Dantas and Gabrielle Coppola, Bloomberg
The heaviest rainfall in Brazil since 1967, already a disaster that has killed 741 people, is adding to the fastest inflation in two years.
http://jlne.ws/e8UtkN

Swiss banker who claims to have given WikiLeaks details of rich tax evaders has been found guilty of coercion
by Matthew Allen, Swiss Info
Whistle-blower Rudolf Elmer has appeared before a Zurich court to face charges of breaking Swiss banking secrecy laws.
http://jlne.ws/gt8RRW

European banks warned to curb bonuses
By Nikki Tait and Megan Murphy, Financial Times
Europe's top regulator has urged banks to "show moderation and responsibility" as they announce their annual bonus pools in coming weeks - and issued a thinly veiled threat of restrictions if they step out of line with current rules.
http://jlne.ws/ezpXz2

Fleeing first lady said to have taken central bank gold
Adrian Blomfield, The Sydney Morning Herald
Tunisians have been outraged to be told that the former president's wife, Leila Trabelsi, took 1.5 tonnes of gold from the central bank when she and her family fled to Dubai.
http://jlne.ws/gmhzAw

Canada Keeps Rates Steady
BY NIRMALA MENON, WSJ.com
The Bank of Canada held its benchmark overnight rate steady at 1% for the third successive time, raised growth forecasts slightly and said net exports will likely contribute more to growth.
http://jlne.ws/fN4eGw

Trichet Bonds Echoing Brady Plan Offer Fix for EU Debt Crisis: Euro Credit
Bloomberg
Two decades after Citigroup Inc.'s William Rhodes helped Latin American nations restructure their debts, investors are telling him a similar solution may fix the euro area's borrowing crisis.
http://jlne.ws/f0yisW

Spain passes debt test, in eurozone respite
Eu Business
Spain passed a pivotal test in its first bond auction of 2011 on Thursday, spurring hope it can avoid an emergency bailout that would rock the entire eurozone.
http://jlne.ws/f7fKj6

New Round of Bank Stress Tests Planned in Europe
New York Times
In addition, international regulators said that they were going to require a broader range of securities holders to assume some of the cost if a bank failed.
http://jlne.ws/hXBvot