Risk diversification and stock investment: why, the general public does not know what happened

Juergen Stark, former chief economist and executive board member at the European Central Bank, said the ECB is putting “incalculable” risks on its balance sheet through the asset-backed securities purchase programme.

Seniority complex

ECB may find that senior risk can be dangerous

07 October 2014 Neil Unmack

The European Central Bank’s asset-backed debt scheme echoes the 2008 crisis. It hopes to avoid losses by buying bonds least exposed to defaults. That didn’t save U.S. insurer AIG. The ECB needs to manage the tension between two goals: revive securitisation or increase its balance sheet.

The asset-backed securities (ABS) programme is generating protests in Germany. Juergen Stark, a former ECB executive board member, argues the programme will leave “incalculable” risks on the central bank’s balance sheet. Those risks are academic and reputational: the ECB can’t be declared insolvent like an ordinary entity.

Even then, the fears look excessive at first glance. The plan is to buy senior-ranking tranches of bonds backed by corporate loans or mortgages, thus making it easier for banks to sell the lower-ranking layers, and release capital. Buying just the senior bonds should insulate the ECB from all but extreme losses: even Greece’s crisis didn’t push senior Greek ABS into default.

But the ECB faces other risks. One is adverse selection: banks may repackage their worst credits into new deals, causing higher-than-normal levels of losses. And, if they know they can transfer risks through securitisation, banks may make bad loans. The sub-prime mortgages that sank AIG are an example, but moral hazard is not the preserve of U.S. institutions: examples in Europe came from bonds backed by German corporate debt.

History needn’t repeat itself. European regulations impose tougher rules on securitisation: banks have to retain some of the loans they securitise. Deals that meet the ECB purchase programme will need to have data available on each loan, and abide by its collateral framework. Yet these defences aren’t perfect. The “skin in the game” rules aren’t very tough; the ECB’s collateral rules aren’t overly rigorous.

The ECB has its own tensions. It wants to revive securitisation to create new sources of funding. It also wants to grow its balance sheet to keep monetary policy loose. Yet buying a lot of assets could cause risk to be mispriced. The ECB has signalled it could be comfortable buying up to 70 percent of each deal – making it potentially the dominant investor. If private purchases don’t work, pressure will grow for the ECB to buy the more controversial sovereign bonds. Even central bankers aren’t immune to moral hazard.

However, the loss of 240 billion yen of Sumitomo Corporation, why, the general public does not know what happened. High-risk, high return, the probability of a large oil field discovery is 5% or less petroleum exploration and development. Therefore, the major Western is managed by the same portfolio risk diversification and stock investment. Japanese companies in the lack of information, to participate in the project of one or two, at the left the other company, to succeed it is rare. Therefore, there is a joke that oil is cheaper in NY, can be found in low-risk. In other words, is the acquisition of the oil company in the NY stock market. Of one third of the crude oil price of $ 92 for $ 30 before and after the acquisition of the company to obtain the oil reserves of the other company, people in the dismissal restructuring is unnecessary, my Exxon Mobil, Chevron Twice experienced in U, Inc. Thank you. Is that it is a high risk, you could well understood. Also loss of Sumitomo Corporation, wonder that also seems to events without the oil and gas industry severe. I was looking forward greatly to the shale gas at that time, and the Japanese government, had been showing cooperation attitude to exports the United States. In the neighborhood? Something . Exports reverse three-month slide Tankers loading on Iraq's southern export terminals in the Basra Gulf, the country's only export route. (ALI ABU IRAQ/Iraq Oil Report) By Ali Abu Iraq and Staff of Iraq Oil Report Published Friday, October 3rd, 2014 Iraq's oil exports edged upward in September, to 2.542 million barrels per day (bpd), as infrastructure bottlenecks eased slightly and production in Iraq's southern fields continued to increase.Rising production and exports in Basra have partially compensated for major losses in the north. Since March, Iraq's export pipeline to Turkey has been offline due to constant sabotage and violence; and since June, militants led by the so-called Islamic State (IS) group have conquered territory throug... Sunni tribes turning on ISIS and Peshmerga A Peshmerga fighter holds a rocket propelled-grenade (RPG) near an ISIS flag hoisted on the other side of a bridge in Rashad, on the road between Kirkuk and Tikrit, on Sept. 11, 2014. [JM LOPEZ/AFP/Getty Images] By Mohammed Hussein, Patrick Osgood, Rawaz Tahir, CHRISTINE VAN DEN TOORN and Staff of Iraq Oil Report Published Tuesday, September 16th, 2014 Iraq's newest initiative to convince Sunnis to fight alongside the government has combusted into a volatile, multi-sided conflict in northern Diyala province – a strong indication of how difficult it will be to build and maintain a national coalition against extremist militants.The biggest flashpoint has been around Jalula, a town in Diyala along the disputed border between the autonomous Kurdistan region and Arab-dominated southern Iraq.Since Saturday, Sunni Arab tribesmen aligned wi... ============ As oil dips below $90, a reminder of Gulf 2014 budget breakeven prices: Bahrain $135, Saudi $93, rest < $80 Budget breakeven oil prices in most Gulf Arab producers are creeping upwards, as governments continue to push through investment stimulus programs despite flatter production. The budget breakeven price is a useful tool to understand what price of oil is needed to ensure that a budget is in balance for a given level of government spending. Breakeven prices for Gulf states shot up from an average of USD 43.2 per barrel in 2007 to USD 78.8 by 2011 in the wake of the Arab Spring, as governments unleashed billions of dollars of investment to appease their populations. Breakeven oil prices fell in 2012 but the dip proved to be temporary and breakeven prices have again begun to edge up, notes Deutsch Bank. "For the region as a whole, we estimate that the breakeven price increased by about USD 6 per barrel to USD 79 per barrel in 2013 as oil production stabilized but public spending continued to grow. "We think that the breakeven price for the region will increase a little further this year to USD 81 barrel with a moderate increase in oil production helping to offset the impact of further growth in government spending," wrote Richard Burgess, analyst at Deutsche Bank in a note to clients. PRODUCTION PRESSURES OPEC crude oil supplies dropped by 890,000 barrels per day in March, as Iraqi, Saudi and Libyan exports fell, according to the International Energy Agency. OPEC heavyweight Saudi Arabia's output fell to the lowest level in almost a year in March, down by 285,000 bpd to 9.57 million bpd from February levels. "Saudi supplies to the market, which include sales from storage, were reported at 9.53 million bpd in March, around 370,000 bpd below the previous month," the IEA said in its April report. Deutsche Bank expects Saudi output to average around 9.8 million bpd this year, similar to its production level of 2012 -- but breakeven prices are expected to much higher than the USD 81 in that year. "The increase stems from: the small drop in oil production last year; moderate growth in real public spending of about 2%; and a drop in non-oil revenues. Even if oil average for last year, we think the budget breakeven price (for Saudi Arabia) will edge up a little further to USD 93 per barrel this year. "This would allow for further positive real growth in public spending of about 1%. The breakeven price could be lower than this, however, if nonoil revenues rebound more strongly than we have assumed." BIG SPENDERS Oil production from the UAE, Kuwait, Oman and Qatar has been steady over the past few years and is likely to remain at similar levels. But what's changed is public spending patterns, which are moving the needle on breakeven prices. In Qatar, gas production has reached a near-term plateau while oil production from mature fields has fallen (Deutsche Bank includes gas prices in its breakeven oil price figure). "The government is proceeding with efforts to diversify the economy, with a number of large capital projects, and this will push the breakeven price up to USD 68 barrel this year," Deutsche noted. Fiscal expansion is also continuing in Kuwait, which will see breakeven prices increase. "Having been the lowest in the region for many years, the breakeven price in Kuwait will probably exceed USD 70 per barrel this year." But that's not the case in other Gulf states. In the UAE, budget breakeven oil price has eased back from USD 95 per barrel in 2011 -- at the height of the government's fiscal stimulus -- to around USD 72.2 per barrel last year. The breakeven price is expected to slide back to USD 71 per barrel in 2014 - the lowest in six years. Fiscal consolidation is also bringing down the breakeven price in Oman following a spike in government spending in 2012. Compared to other countries that rely heavily on hydrocarbon exports, Gulf states seem to be in a much better fiscal position to sustain themselves in the event of a decline in oil prices. Gulf states generated a little over USD 500 billion in oil revenues in each of the past few years, and they remain well cushioned from a sudden crude price crash. BAHRAIN NEEDS MORE Within the region, of course, there are huge discrepancies. Bahrain, a small oil producer, has the highest breakeven oil price of USD 134 per barrel for 2014, given its weak fiscal position. Indeed, Bahrain's breakeven is higher than all the other oil-producing countries surveyed by the German bank, including Venezuela (USD 121 per barrel), Nigeria (USD 118.8) and Russia (USD 101.7). "The political unrest of the past three years has already been a drag on economic growth and has raised fiscal vulnerabilities as the government has responded with additional expenditure," said Citibank in a report. The Wall Street bank expects non-oil growth to slow down, but oil production to stabilize, resulting in medium-term growth in the 3.5% to 4.5% range. "Upside risks to this outlook include a resolution of the country's ongoing political turmoil (still unlikely in the near term, in our view, despite latest initiative) and greater-than-expected assistance from Gulf neighbors, including Saudi Arabia. This may include, for example, an increase in the allocated share of output from the shared Abu Safa oil field, which would dramatically boost Bahrain's domestic Published on Oct 13, 2014 Russian ruble's down, but is it because of sanctions? "Not really" says financial consultant Patrick Young. The reasons: US stops flooding the world with green-bucks and Saudi oil manipulations. ============================== There is nothing more valuable than water, but the depletion of the water is concerned. A large amount of water is required industry, even in energy development, along with the production of oil and gas of fossil fuel, a large amount of "fossil water" is produced. With water that has accumulated in the hundreds of millions of years ago the ancient salt is small, can be treated, "fossil water" is used as industrial water. =============== BreakingNews: #IS advancing inside #Kobane #AynalArab city. Tell Sh'eer and the Hospital are both under #IS control now. ======== World economies warn of global risks, call for bold action Sat, Oct 11 19:49 PM EDT By Krista Hughes and Leika Kihara WASHINGTON (Reuters) - The International Monetary Fund's member countries on Saturday said bold action was needed to bolster the global economic recovery and they urged governments not to squelch growth by tightening budgets too drastically, although Germany poured cold water on the idea of a new global "crisis." With Japan's economy floundering, the euro zone at risk of recession and even China's expansion slowing, the IMF's steering committee said focusing on growth was the priority. "A number of countries face the prospect of low or slowing growth, with unemployment remaining unacceptably high," the International Monetary and Financial Committee said on behalf of the Fund's 188 member countries. The Fund this week cut its 2014 global growth forecast to 3.3 percent from 3.4 percent, the third reduction this year as the prospects for a sustainable recovery from the 2007-2009 global financial crisis have ebbed, despite hefty injections of cash by the world's central banks. The IMF has flagged Europe as the top concern, a sentiment echoed by many policymakers, economists and investors gathered in Washington for the Fund's fall meetings. European officials sought to dispel the gloom. European Central Bank President Mario Draghi said the drag from fiscal tightening in the euro zone was set to fade, while German Finance Minister Wolfgang Schaeuble downplayed the idea that the region's largest economy was at risk of recession. "There is no reason to talk about a crisis in the global economy," Schaeuble said. The IMF committee called for fiscal policy flexibility, but efforts to provide more room for France to meet its European Union deficit target looked set to founder on Germany's insistence that the agreement on fiscal rectitude was set in stone and that the bloc would not be writing any new checks. STORM CLOUDS GATHER The United States has been a relative bright spot in the otherwise darkening global economic picture, and investors have rushed into dollars as a result. Still, while U.S. growth has picked up, soft inflation and wage growth suggest the slowest-ever postwar recovery is not delivering a sustained boost to demand, and concerns are growing that the global slowdown will undercut the U.S. economy as well. Top officials from the U.S. Federal Reserve highlighted growing risks, with the central bank's No. 2 saying the global slowdown could delay plans for a U.S. interest rate hike. "In determining the pace at which our monetary accommodation is removed, we will, as always, be paying close attention to the path of the rest of the global economy and its significant consequences for U.S. economic prospects," he said at a conference of the Institute for International Finance. The IMF panel urged nations to carry out politically tough reforms to labor markets and social security to free up money to invest in infrastructure to create jobs and lift growth. "Our key concern is to look ahead so that we avert .... the very real risk of a prolonged period of subpar growth," said Singaporean Finance Minister Tharman Shanmugaratnam, the panel's chairman. The committee also called on central banks to be careful when communicating changes in policy in order to avoid financial market shocks. While not naming any central banks, the warning appeared aimed at the Fed, which is set to end its current bond-buying program this month. Its next step, expected in mid-2015, would be to raise rates. The Fed has debated a change to its commitment to holding rates near zero for a "considerable time" at its recent policy meetings, but is stepping gingerly to avoid roiling financial markets. It does not want a repeat of the "taper tantrum" it touched off last year when it signaled its easing of monetary policy was drawing to a close. (Reporting by Krista Hughes and Leika Kihara; Additional reporting by Howard Schneider, Jason Lange, Randall Palmer, Anna Yukhananov and Jan Strupczewski; Writing by David Chance; Editing by Tim Ahmann) ========== Six years after Lehman’s crash, US and UK play out next financial crisis War game designed to test readiness of central banks as exercise will stress-test new global regulations Larry Elliott in Washington The Guardian, Saturday 11 October 2014 The top financial brass from the Treasuries and central banks of Britain and the US are to take part in a war game, behind closed doors in Washington on Monday, to test how they would handle another Lehman Brothers-style banking crisis . Six years after the financial earthquake that led to the multibillion-pound taxpayer bailouts of Royal Bank of Scotland and Lloyds Banking Group, the most senior policymakers from both sides of the Atlantic will try to find out whether they are now any better prepared for the collapse of a bank deemed too big to fail. The chancellor, George Osborne, and Mark Carney, the governor of the Bank of England, will stay on at the end of the annual meetings of the International Monetary Fund and World Bank to head the UK team in the exercise, which is to be held at the offices of the Federal Deposit Insurance Commission – the organisation that guarantees US bank deposits. They will be joined by 11 others, including the chairman of the Federal Reserve, Janet Yellen, the US treasury secretary, Jack Lew, and regulators from Britain and America, for a test of how the authorities would respond to two possible scenarios – the collapse of an American bank with UK operations and the failure of a British bank with operations in the US. Although the war game will not be based on any specific institution, UK banks with operations in the US include Barclays and HSBC, while US investment banks such as Goldman Sachs and Bank of America have a big presence in the City. Osborne said it was the first time a war game had been conducted at such a senior level. “We will work through how we would respond to the failure of a cross-border firm. We are going to make sure we could handle an institution previously regarded as too big to fail,” he said. The decision by the US authorities to let Lehman collapse in September 2008 set off a chain reaction in financial markets that was only halted when governments around the world stepped in with taxpayers’ cash to recapitalise banks seen as at risk. Monday’s game will involve the collapse of a single bank rather than the sort of systemic failure threatened in 2008. But Osborne said lessons had been learned from 2008, with policymakers now having options they lacked then. The chancellor said he needed to be sure the government was better prepared for “what’s thrown at us and better prepared to protect taxpayers than the previous administration in the UK was”. The last Labour government pumped more than £65bn into RBS and Lloyds in October 2008 but Osborne said “enormous progress” had been making on tackling the too-big-to-fail problem since then. The war game is designed to stress-test the new domestic and global rules for regulating and supervising banks devised since 2008. In the UK, the government has handed new watchdog powers to the City, ring-fenced the retail operations of banks from their investment arms and forced banks to hold more capital. At the global level, the Financial Stability Board, chaired by Carney, has been seeking to ensure financial regulation is consistent across borders. Osborne said: “In 2008, the judgment of my predecessor and others was that banks like RBS were too big to fail. I want to make sure that either myself or my successors in this job would have real options and would avoid bailing in the taxpayer. I’m pretty confident that is the case.” The chancellor said Monday’s event would try to pack into a morning a crisis that would unfold over several days. “No war game is like war itself,” Osborne said. “But it means we will be far better prepared. I’m sure this is not the last time this will happen.”Monday’s war game will take place after the annual meeting of the International Monetary Fund in Washington in which the risk of a fresh recession in the euro zone has been a dominant theme. Osborne said the problems of the euro zone posed “the biggest threat to the world and UK economies” and admitted that Britain was “not immune” to the deteriorating outlook for its biggest trading partner. “This is a critical moment for the British economy and the world economy”, the chancellor said. “Serious clouds are gathering on the horizon”. Osborne made it clear that he expected UK growth to slow as a result of its exposure to the euro zone. “There are risks to Britain’s growth from the euro zone and we are seeing some of them materialise”, he said. The chancellor said that the euro zone finance ministers and central bank governors knew they were “under the microscope” in Washington. “They know they have some questions to answer.” http://www.theguardian.com/business/2014/oct/11/lehman-crash-play-financial-crisi-war-game ============ The Asian markets ended lower amid heightened risk aversion due to continuing uncertainty about the trajectory of global growth. The Australian market was the worst performer in the region, with the nation's key average plunging over 2 percent. The sharp retreat in commodity prices also worked against the markets. Australia's All Ordinaries languished below the unchanged line throughout the session before closing down 107.60 points or 2.03 percent at 5,186, its lowest closing level since February 7th, 2014. The markets witnessed a broad based sell-off, with energy stocks among the worst hit. The major U.S. index futures are pointing to a lower opening on Friday, with sentiment reflecting an extension of the negative mood that was evident intermittently in recent sessions. With global growth concerns engulfing the markets, money is being moved out of risky bets and into safe havens. Accordingly, commodities, equities and risk currencies are seeing weakness. With no meaningful catalysts to influence trading in the session, a reversal in sentiment is unlikely, although Fed speeches scheduled for the day could create ripples in the markets. U.S. stocks succumbed to a wave of selling on Thursday, as global growth worries were accentuated by weak German exports data. The major averages opened lower and declined steadily throughout the session before closing at their lowest levels in about 2 months. ==================

Qatar: what’s next for the world’s most aggressive deal hunter?

July 4, 2013 8:55 pm Qatar: what’s next for the world’s most aggressive deal hunter? By Camilla Hall, Simeon Kerr, Roula Khalaf, Lionel Barber, Patrick Jenkins and Ed Hammond As the global economy recovers, the nation must grapple with the end of sky-high returns On a visit last year to Qatar Holding’s headquarters, a Gulf banker stepped inside a boardroom, intrigued by what he glimpsed as he walked past. His attention fixed on a set of whiteboards, each scrawled with the names of an array of global companies. This, he suspected, was a shopping list. Some of the companies, including Valentino, the Italian fashion label, had already been bought by other Qatari investors. So had a stake in Germany’s Siemens, which was also on the boards. Printemps, a French department store, would be snapped up months later. “It was as if there was no company that doesn’t interest them,” the banker says. Qatar's LNG exports Volume and global share Qatar lined up for £10bn UK projects fund Investors welcome news of Qatar transition David Gardner Qatar shows how to manage a monarchy Qatar shakes up investment fund Qatar seeks to shake off trophy investor image Qatar fund seeks to soften image Buying up the world How Qatar Holding has put its cash to work since 2007 Qatar eyes IPO for $12bn vehicle Qatar to invest €1bn in Italian groups IN Analysis Russia Imperialism awakes France Hollande’s appeal African banks Fragile dream North Korea Glimmer of hope The wish list illustrates the seemingly unlimited ambition – and resources – of Qatar, a small Arab state that in just a few years has parlayed its enormous gas riches into an extraordinary investment portfolio. For Qatar’s cash-rich sovereign wealth fund, the financial crisis proved to be a buying opportunity. “We have cash,” Ahmad al-Sayed, who on Tuesday was promoted to chief executive of Qatar’s sovereign wealth fund, remarked in 2009. “Cash is king.” Qatar put that cash to work securing some of the biggest deals in recent years, from the multibillion-pound capital-raising of Barclays in 2008 to last year’s $76bn takeover by Glencore, the commodity trading house, of Xstrata, the mining company. And Qatar’s name has popped up as a potential investor in countless other transactions, consummated or not. The state flexed its financial muscle through a wide range of corporate and royal investments. But it is Qatar Holding, the vehicle of its sovereign wealth fund, the Qatar Investment Authority, that has upturned the investment world. As its clout increased, the QIA negotiated alongside some of the world’s most powerful business and political leaders, among them Tony Blair, former UK prime minister, and Nicolas Sarkozy, France’s ex-president, during sensitive transactions. Since 2009, Qatar Holding received $30bn-$40bn a year from the state, lending it such astonishing financial power that normal rules of investing did not apply; losses could be easily absorbed and big gambles taken. It also was able to extract unusually favourable terms. “They were providers of liquidity in an illiquid world. The opportunities for them were different from other institutions,” says a western adviser. “And you don’t take an idea to them without a significant return.” Yet the unique market conditions that allowed the QIA to build its investment portfolio have passed. Stock markets have rebounded strongly since the depths of the crisis and economies have stabilised. As investor confidence returns, the privately negotiated deals, generous terms and big discounts that Qatar demanded and often received may become a thing of the past. “What happens when the world becomes more normalised? You can do deals in higher-risk countries or you have to moderate your return requirements or not spend as much money,” says a western banker. There are momentous changes within Qatar, too. It has a new emir, Sheikh Tamim bin Hamad bin Khalifa al-Thani, who assumed power last week after his father abdicated. And growth in Qatar’s liquefied natural gas exports is slowing. Months before the dynastic transition, Qatar Holding brought in consultants including McKinsey and PwC to conduct an extensive internal review of how it operates. It was led by Mr al-Sayed, the 37-year-old lawyer who has overseen the fund’s growth since 2009. The review appears to be a recognition that the young fund needs to adapt to become a more robust institution – less of an extremely well capitalised start-up and more like the investment arms of established peers in Abu Dhabi and Kuwait. Sheikh Tamim bin Hamad bin Khalifa al-Thani, left, with former prime minister Hammad bin Jassim ©AFP Pedestrians walk past a branch of the Agricultural Bank of China in Beijing. Qatar Holding paid $2.8bn for a 2.1% stake in the Chinese bank in 2010. ©AFPA Sainsbury supermarket in Greenwich, London. In January 2008 Qatar Holding paid $2.2bn for a 17.9% stake in the British retailer. ©PAA pedestrian stands beside a logo for Spain's Banco Santander in London. Qatar Holding bought a 5% stake in the bank for $2.7bn in 2010. ©ReutersA Porsche 911 Black Editionat in Stuttgart. In August 2009 Qatar Holding paid $2.8bn for a 5 per cent stake in the German carmaker. ©BloombergIberdrola, Spain's second-biggest power company. In 2011 Qatar Holding bought a 6.1% stake in the Spanish utility for $2.8bn. ©BloombergThe Barclays headquarters building in London. In June 2008 Qatar Holding paid $4.5bn for a 10% stake in the British bank. In October the same year it paid $6bn for a 6% stake. ©ReutersCredit Suisse's headquarters in Zurich. Qatar Holding paid $4.3bn for a 12.6% stake in the Swiss bank in 2008. ©ReutersLogos badges in a Volkswagen Golf production line in Wolfsburg. In 2009 Qatar Holding bought a 12.5 per cent stake in the German car maker for $7.1bn. ©ReutersThe Harrods department store in London. In 2010 Qatar Holding paid $2.2bn for the upmarket London store. ©AFPA logo on a window above the main atrium of the London Stock Exchange headquarters. Qatar Holding paid $1.3bn for a 20% stake in the exchange. ©Bloomberg BAA is the world's biggest airport operator. In 2012 Qatar Holding paid $1.4bn for a 20% stake in BAA, owner of airports including Heathrow and Stansted ©Bloomberg ‘HBJ’ But the big changes at Qatar Holding have already begun. When Sheikh Hamad bin Khalifa al-Thani handed power to his 33-year-old son, it rattled the investment banking community. But it was not the emir’s abdication that worried the bankers, who have raked in millions from Qatar Holding’s frenzied dealmaking. Instead, they were concerned about the fate of Hamad bin Jassim, the long-time prime minister and foreign minister who resigned at the same time as the emir. They had reason to fret. Within a week, HBJ, as the billionaire is often referred to by foreigners, was out of the QIA. HBJ set the style and tone of Qatar’s investment drive. “Personalities have much more of an impact at the QIA,” says a Gulf banker, comparing the fund with other sovereign vehicles in the region. “When you’re setting up something new, you’re setting the tone, the culture.” The team steering the QIA Sheikh Tamim, 33, is the second son of the former emir and Sheikha Moza. Educated at Sherborne and Sandhurst, the new emir’s career grew from the military into local roles in sports, technology and education. Sheikh Tamim is expected to refocus attention away from international affairs back on to Qatar’s domestic scene. Ahmad al-Sayed, 37, QIA chief executive. The new CEO was promoted to the role after steering Qatar Holding, its direct investment arm, through the financial crisis. He is a technocrat who has ascended the ranks from his role as a legal adviser. Mr al-Sayed studied banking and financial law at Boston University and also has an executive MBA. Sheikh Abdullah bin Hamad bin Khalifa al-Thani, 25, QIA vice-chairman. His appointment marks another promotion for the second son of the former emir’s third wife. Three years after graduating from Georgetown’s Doha campus, the low-profile royal runs the ruler’s court and has taken several board positions, including with Vodafone Qatar. Sheikh Hamad bin Jassim al-Thani, 53, former chief executive of the QIA. He has been the former emir’s right-hand man since aiding the palace coup of 1995. As foreign minister and prime minister, his business acumen and diplomatic savvy raised the country’s profile as a go-to investor and regional mediator. But his interests also stirred disgruntlement. Hussain al-Abdulla, 56, QIA board member. Known as “the Doctor” – a nod to his PhD – he has dedicated his long career to Qatar’s public finances. Gaining a foothold at the QIA as an executive board member under the former chief executive, he came through the government bureaucracy, starting in the economics department of the emir’s office in the early 1980s. Ali Sherif al-Emadi, QIA board member. As chief executive of Qatar National Bank, the US-educated Mr Emadi served as an understudy to Youssef Kamal, the experienced finance minister and QNB chairman. Mr al-Emadi’s brother is also married to Mr Kamal’s daughter, making the transition to a younger generation another family affair. Sheikh Tamim, the new ruler, has long been the chairman of the QIA. His statement last week that he wanted to avoid behaviour that appeared arrogant was taken as a veiled reference to HBJ’s brash style, both in politics and finance. Some bankers worry that HBJ’s departure will mean a slowdown in the pace of external investment. HBJ was the principal generator of deals, using his impressive roster of political, business and banking contacts. (Credit Suisse, in which Qatar Holding has a minority stake, has been used more than most.) Qatar, in fact, has seen “every good deal in the world almost directly”, as one private equity manager puts it. HBJ’s brinkmanship, along with a diplomatic mediation by Mr Blair, clinched Glencore’s takeover of Xstrata, the miner in which Qatar Holding had a stake. But the deal was completed only after Doha squeezed out a higher price. The grandson of a pearl trader, HBJ is a contrarian and a consummate dealmaker. “With HBJ, you have seven minutes to tell him the circumstances of a deal and he’ll give you a reaction in seven seconds,” says a person who has done business with him. “He judges how good a deal is by how far he can push you  . . .  it’s a culture that goes through the organisation. They leave nothing on the table.” At times, he invested personal funds in Qatar Holding deals, an example of the blurring of roles in the autocratic Gulf state. Long-time observers in Doha say that HBJ’s outsized power and his personal wealth – he is thought to be richer than the outgoing emir – made other members of the royal family uncomfortable and hastened the transition to Sheikh Tamim. It is an open secret in Doha that HBJ and Sheikha Moza, the new emir’s mother, have not been on the best of terms. Analysts say that HBJ’s departure was linked to the emir’s abdication, giving the younger ruler the room to assert himself. Even before the dramatic events in Doha last week, HBJ was stepping back from the fund. Although the bankers close to him will be disappointed, his departure clarifies the lines between political leaders and the state’s sovereign wealth fund. This could accelerate the fund’s evolution into a more professional institution. That Mr al-Sayed, a protégé of HBJ, should have replaced him came as a surprise to the financial community in Doha and beyond. It was assumed that another prominent member of the al-Thani family would be handed the job. Like his mentor, Mr al-Sayed is known for a tough negotiating style, often leaving his counterparts guessing about whether he will close a deal until the last minute. But he is also a tireless worker and loyal servant to the al-Thanis, part of a new generation of Qataris now being promoted by the young emir. According to one person who has done business with Qatar Holding, Mr al-Sayed has also played his cards well, helping Sheikh Tamim in some private acquisitions. Mr al-Sayed earned a master's degree in banking and financial law from Boston University. Promoted from legal counsel to chief executive of Qatar Holding in 2009, he came in, as one banker says, “on the ground floor” and rode the recovery cycle. People close to the fund say that it has delivered upward of 17 per cent a year in average returns since 2009. But gauging the success of Qatar Holding’s deals is not straightforward because their financial structures are often not disclosed. Bankers say that a majority of its investments are not the high-profile deals but in undisclosed trading of shares. Some of the fund’s biggest investments have done very well, including its participation in the Barclays cash calls of 2008, which netted about £1.7bn after the staged sale of its warrants in the British bank, according to Reuters estimates. The fund still holds 6.7 per cent of Barclays. Its bet on the merger of Glencore and Xstrata has also paid off. The value of its stake has more than doubled, according to Financial Times calculations. However, some of its other deals do not look so bright. Shares in Iberdrola, the Spanish utility, are down 22 per cent since March 2011 when the fund took a 6.2 per cent stake. Its stake in Hochtief, the German construction group, may have also lost value as the shares have sunk more than 13 per cent since it declared its 9.1 per cent stake in December 2010. Mr al-Sayed’s future is now secure. “He’s the guy who for the last four years has been leading it day-to-day, so his promotion means continuity, no disruption, particularly as Sheikh Tamim has been the chairman of QIA,” says a senior western banker. “Now Ahmad has to go only to Tamim. In a way it will make things smoother.” The Doctor People who have had dealings with the fund say the top job at Qatar Holding was slated to go to Hussein Ali al-Abdullah, a QIA board member in his 50s. In investment circles, he is known simply as “the Doctor” and was also a mentor to Mr al-Sayed. He is considered to be the founder of Qatar’s sovereign wealth fund, arguing for the need for a nest egg for Qatar’s 300,000 nationals – and to prepare for when the gas riches run out. Considered a calm, wise hand, Mr al-Abdullah has preferred to maintain an oversight role rather than thrust himself into the daily management that keeps Mr al-Sayed busy until late into the night. He too is staying on as a board member of the QIA. It was the Doctor who declared last year that the investment strategy of Qatar Holding could be summarised in two words: “No strategy”. The statement encapsulates perfectly the fund’s single-minded pursuit of deals. To a large extent, the fund’s investments have been driven by a simplistic rationale. Qatar Holding made its mark in London in part because it is a market in which the royals feel comfortable. The same could be said for the Volkswagen-Porsche deal in 2009 that put Qatar Holding on the map. Goldman Sachs was the first to suggest that Qatar buy into Porsche in the spring of that year as the car company was engaged in a heated feud with VW. But HBJ’s interest is thought to have already been piqued by a meeting with a member of Porsche’s board. As with London property, there was a personal magnetism at work. HBJ loved Porsche cars, as does Mr al-Sayed, who led the negotiations on the transaction. As the battle between Porsche and VW raged on, Credit Suisse, Qatar Holding’s adviser, suggested a bolder plan: that the two companies merge. The idea captured HBJ’s imagination. He travelled to Germany for high-level talks, including a meeting with Angela Merkel, chancellor, while Mr al-Sayed negotiated with provincial officials and company executives. “They [the Qataris] took a gamble on recovery, and they won – they rode out the storm and are now making money hand over fist,” says a banker who was involved in the deal. In June this year, Qatar Holding sold its 10 per cent stake in Porsche back to the owning families, rounding off the Qatari role in the complex merger. The VW-Porsche deal reflected the image of Qatar that the al-Thanis were looking to project – that Arab hydrocarbons wealth could be deployed shrewdly. It is a matter of national pride that Qatar Holding has taken board seats at big companies, from the owners of Heathrow and Canary Wharf in the UK to Credit Suisse and Volkswagen, making decisions that are relevant to some of the world’s most prominent companies. The board seats are seen as a way to groom the next generation that is now taking over. Hard bargaining Qatar Holding’s hard bargaining worked at a time when there were few other investors looking to take on risk. But the fund has also developed a reputation as a difficult partner that would be best avoided – particularly when it comes to property deals. When the fund bought buildings directly, it was criticised by other property investors for over-negotiating and bullying sellers. “They don’t buy property like anyone else; they treat it like corporate M&A,” says the head of one of the world’s largest property fund managers. “Everyone negotiates hard but there are very few deals when one party literally walks away hoping they never see the other again.” Qatar’s drive for higher yield may also have drawn attention for the wrong reasons. In the UK, the Serious Fraud Office is investigating certain “commercial agreements” between Barclays and Qatar Holding in 2008. (The fund denies any wrongdoing). In France, where it has widespread real estate investments, Qatar’s dealmaking has stirred political controversy. In 2008, Mr Sarkozy, then president, pushed for a law exempting Qatari real estate investments from capital gains taxes, so eager was Paris for more Qatari funding. But when Doha sought to invest in the capital’s suburbs, there was an outcry that the Gulf state was buying influence among France’s restive Muslim youths. The Qataris met their match while haggling over Harrods, one of London’s great brands. The fund spent a year negotiating for the £1.5bn purchase of the luxury retailer from Mohamed al-Fayed, the Egyptian tycoon. This time, it was Mr al-Fayed who threatened to pull out. Mr al-Fayed tried to sell the store without the underlying real estate, a proposal dismissed by the Qataris. He attempted to throw his Fulham Football Club into the mix but the Qataris wanted the Ritz in Paris instead. “The Harrods negotiation was tough and mercurial throughout. They – al-Sayed and Fayed – were both mad as mongeese,” says one banker who was involved in the deal. Even within the oil-rich Gulf, where sovereign wealth funds from Kuwait to Abu Dhabi are powerful international financiers, Qatar Holding and its parent, the QIA, are unusual vehicles. It is now in the midst of the internal review to move on to what a person close to the fund calls “the next stage.” The fund needs to determine exactly what kind of investment group it wants to be. Qatari officials hate being described as having “deep pockets”, saying it insinuates that they are willing to overpay for assets. (Some bankers say this is true in some cases.) Instead, says one former staff member, the objective is to be thought of as a big private equity group, such as a Blackstone or a KKR. There are some similarities. Although Qatar Holding says it had no debt at the end of 2012, bankers say it used debt in some deals to maximise returns and manage liquidity. “Sometimes they use it to hit a mythical returns number. They just like to use other people’s money,” says one banker. Qatar Holding has often asked its bankers to assemble deal structures with ample downside protection, whether through warrants, debt funding from the banks or companies targeted for acquisition or high yielding convertible bonds. The long game Compared with other Gulf funds, the QIA’s size, agility and investment style seem like a private equity group. The Abu Dhabi Investment Authority is a 1,400-strong bureaucracy and invests the bulk of its assets in externally managed index-tracking funds; it acts more like a pension fund. The Kuwait Investment Authority has a staff of about 475 across Kuwait, Beijing and London. In contrast, Qatar Holding is exceedingly thin, with only 40 professional staff even though it has accumulated more than $100bn in assets during the past four years. But Qatar Holding has an advantage over private equity firms. It is, in essence, accountable only to one shareholder – the emir – and it can act as a longer-term investor. Staying lean has worked well for the fund so far. But for all the advantages of not having to get approval for deals through a chain of bureaucracy, as at ADIA, there are signs it is time for Qatar Holding to create a more formal structure. At Qatar Holding, decision making is so centralised that its bankers never call the shots. And like many employees in Qatar their movements in and out of the country are controlled by their employers in an archaic labour system. “You can’t get a piece of paper signed without Ahmad deciding, which creates bottlenecks,” says a senior banker. “But that’s the system, it’s not a democracy,” he adds. Anthony Armstrong, a high-flying American banker at Credit Suisse, was seconded to the fund after advising Qatar Holding on the complex VW-Porsche acquisition. He came to Qatar expecting to oversee some of the biggest deals of the financial crisis. But, according to people close to him, he felt powerless and could not wait for his 18-month stint to finish. Frustrated, Mr Armstrong took a business trip home and never returned. He was not available for comment. But he is one of several people who left the fund in the early stages, reflecting what they said was an internal chaos that undermined the fund’s potential. People close to Mr al-Sayed dismiss such criticism, arguing that he might be a hard-driving manager but that the atmosphere in Qatar Holding is friendly and staff turnover low. But management is waking up to calls for a more institutionalised fund. Qatar Holding is seeking a rating that would bring a measure of transparency. It is also expected to focus more on infrastructure and commodities investments, hoping to generate steady streams of cash flow. The biggest challenge, however, could be a shift in the investment climate. Having dominated the inward investment market for London property since the start of the financial crisis, Qatar has been overtaken in the past six months by a new wave of sovereign wealth interest, most notably from Norway and Malaysia. In banking too, Qatar recently discovered, with its stake in Russia’s VTB, that it is in a different position from a few years ago. The Qataris had hoped to finance all of VTB’s capital needs but their allocation came second to Norges, the Norwegian pension fund. For most investors, navigating through the financial crisis was a struggle for survival. For cash-flush Qatar Holding, it was a once-in-a-lifetime opportunity. Only today, with the combination of a stronger global economy and the waning influence of its dominant figure, HBJ, will it face its real test. But for a small state that realises that the source of its success is finite, there is no question that it will continue to scour the globe for places to put its cash. As one Qatari official once put it: “If we spend all our money in Qatar, every Qatari would have a house on the moon.” The Shard: A vanity project that soars empty above London’s skyline In financing The Shard in 2008, Qatar achieved one of its main goals: recognition. A potent symbol of intent in any market, western Europe’s tallest skyscraper – built in the depths of the financial crisis – became one of the world’s most talked about properties before the first storey was complete. Financed by a consortium of state-backed Qatari funds, it was, many argued, little more than a vanity project; an economically flawed blight on the London skyline. Today, almost a year after completion, The Shard is giving its critics reason to feel vindicated: costing about £1.5bn, the glassy spire rises empty but for a scattering of mostly Qatari-backed tenants. It is because of this, and similar deals that have done more to raise profile than returns, that the tiny state is desperate to shake off its image as a deep-pocketed trophy hunter. The Shard: symbol of intent The push towards commercialisation reflects Qatar’s need to distinguish itself from the wash of sovereign wealth funds that have poured into the property market in the past three years. In 2011 Qatar was the largest overseas investor in UK property, spending more than £1bn on a spread of deals that included buying almost 1,500 apartments used to house athletes during the London Olympics. By the end of 2012, spending just £680m, it had slipped behind the newly aggressive sovereign wealth funds of Norway, Malaysia and China, according to data from Real Capital Analytics. “In their heyday, when the rest of the investment world was lying down, they were a young fund with a lot of ambition and firepower to match,” says a person who has worked on Qatar-funded deals. “They had the market to themselves . . . but the investment case was as much to do with political gain as commercial logic.” Those close to Qatar suggest the slowdown in spending is symptomatic of the peninsula’s transition towards becoming business-minded. Apart from reining in dealmaking, its ruling officials are looking at centralising the property investing process. The move, which would mark a departure from the complex network of investment vehicles it has used to trade property, was given added credence by the announcement this week that Ahmad al-Sayed, the head of Qatar Holding, the state’s direct investment arm, will also run the Qatar Investment Authority, its parent. “They are evolving, but as the world becomes more efficient, they are having to rethink the kind of deals they want to do and the kind of image that they want to present,” says an investment banker close to the QIA.

Insight: Sewage, "sloppy fits" and a tomb - Goldman's India build

Tue, Oct 23 06:39 AM EDT 1 of 3 By Tom Bill and Aditi Shah LONDON/MUMBAI (Reuters) - Goldman Sachs' reputation for hard-nosed efficiency faces a test in the chaos of Indian building standards, according to architects hired by the Wall Street bank. Construction is due to start soon on a Bangalore campus for some 4,000 back-office Goldman Sachs staff, but a report by Toronto-based architect Adamson Associates seen by Reuters said the project faces a string of obstacles including shoddy construction, corruption, poor sanitation and an on-site tomb. "India's industry standards of construction quality for commercial office space have not yet reached international standards, much less GS standards," the report said. It recommended developers "provide extra margins of tolerance (ie a 'sloppy fit')" and "not design anything that requires total precision" for the 22-acre site, which is close to a busy stretch of Bangalore's six-lane outer ring road. Goldman Sachs and Adamson Associates declined to comment. The bank's reaction to Adamson's recommendations is not clear. The report gives a rare behind-the-scenes insight into the way multinational companies in India view local standards and some locals have reacted angrily to the suggestion Goldman will have to lower its expectations so far. "This is a wrong notion. A wrong perception is being created. I would like to really confront a person who thinks like this," said Lalit Kumar Jain, national president of the Confederation of Real Estate Developers' Association of India. "This is a prejudiced mind without really understanding the reality on the ground of this country." The reaction to the architect's report will generate further publicity for the intensely scrutinised bank.

"It's a bit of a cheap shot for a foreign architect to throw stones at Indian construction standards," said one international developer operating in India who did not want to be named for fear of drawing criticism. "The standards are not the same but then neither is the cost. And that is why Goldman Sachs is putting a million square feet in India."

Construction costs in India are about 75 to 80 percent lower than in London, he said. But Ramesh Mysore, a Bangalore-based director of corporate real estate at outsourcing company Convergys, which entered India more than a decade ago and has more than 10,000 staff in the country, said the report only stated the obvious. Red tape and inexperienced developers are a big hurdle. "The challenge in India is there is still ambiguity in people giving a commitment and achieving it. In other countries, there is more promptness and respect," he said. "BIG BANG" As the financial crisis forces Western banks to rein in costs, they have increasingly turned to emerging economies to set up operations with lower wages and rents. Companies can save between 40 and 70 percent in places such as India, Asia's third-largest economy, according to a report this year by U.S. business consultant Everest Group and NASSCOM, an Indian industry body for technology companies. Earlier this month Goldman Sachs announced a third-quarter profit of $1.5 billion versus a $428 million loss in 2011 against the backdrop of a $1.9 billion cost cutting programme. Its Bangalore project - codenamed "Big Bang" inside the bank - will move workers from four offices elsewhere in Bangalore into a single campus about 15 km (9 miles) south-east of the city centre by 2017. The documents, more than 2,000 pages in all, underline the huge scale of Goldman's plans in the country. The Bangalore operation accounts for about 12 percent of the bank's global staff but that could more than quadruple to 18,000, the report said. The campus, which measures 900,000 square feet, comprises two buildings. Floor space will double if Goldman exercises development options. That would give it a site not much smaller than its 2.2 million-square-foot HQ in New York, a skyscraper on which Adamson was the executive architect. Goldman will pay an annual rent of about 565 rupees ($11) per square foot, local real estate agents said. That compares to a typical figure of 55 pounds ($89) in London's financial district or about $90 in the midtown Manhattan area of New York. Banks such as Bank of America Merrill Lynch, Barclays, HSBC, JPMorgan and RBS also have functions like risk and fraud management, finance and accounting in self-contained Bangalore sites known in India as "captive centres". SEWAGE AND STRAY DOGS However, building in India is not always straightforward. When a Reuters reporter visited the area where the Goldman Sachs campus will be located earlier this month, he saw a site fenced off with corrugated metal sheets. The presence of steel reinforcement rods was the only evidence of planned construction work at the site, which, based on maps contained in the Adamson report, appeared to be the future home of the Wall Street bank. Stray dogs wandered through pot-holed streets and dirt and rubbish were piled up in the surrounding areas, at odds with the glass-fronted modern office blocks which house firms including JP Morgan, Nokia and Cisco. A large sewage canal ran nearby, where a breeze blew foam into the air. The architect report notes the canal and warns of the possibility of foul odours, depending on "time of year (and) wind direction." Adamson underlined how closely Goldman Sachs should monitor the build, recommending "extensive use of mock-ups" that require approval before the final phases of building work proceed. "Keep the design simple, straightforward and easily understandable. Complex shapes will not likely be well-constructed," it said, while emphasizing the building had to be the best quality office block in Bangalore. Delays and shoddy construction at the 2010 Commonwealth Games in New Delhi, India's capital, exposed the dearth of skilled labor, building technology and expertise in the country. But things have improved since then, say people in the industry. "What happened at the Commonwealth Games was not good but the important thing to note is not everything happens like that," said Convergys Corporation's Mysore. "If you get attracted to a developer because the building looks great, is cheap and comes with some goodies, you are being misguided. You need to exercise caution," he said. The economic boom of recent years has helped to improve construction standards, local developers said. "Some of our buildings are better than some American ones," said J. C. Sharma, chairman of Bangalore-based Sobha Developers, which has built more than 24 million square feet of space for technology company Infosys. "Foreign architects should come and see the buildings here to realise India is also improving, although more slowly than China." RISKS That said, Goldman will still have to overcome the lack of a municipal sewer system and an unreliable water supply network. The report recommends the Bangalore campus treat waste on-site and install waterless urinals, even though it acknowledges associated "odours and cleanliness issues". Further hurdles include what the architect refers to as a tomb on the site that Goldman will have to take into account when positioning the perimeter wall. The Reuters reporter saw a gravestone marked with the dates '1913-1981' near the perimeter fence of the site presumed to be the future Goldman campus. The bank will also struggle to fit lifts in its building that are up to its usual standards, Adamson said. "The Indian market does not seem to value elevators as an aesthetic element," it said. "An aggressive full coverage preventative maintenance programme" was the only way to ensure they didn't break down. Goldman faces considerable "reputational risks" associated with the project, given India's reputation for corruption, use of child labor and the often basic conditions in construction worker camps, the report warned. The international developer working in India said the bank would have to minimize risks and increase security. "There are so many people waiting for Goldman to make a mistake." (Reporting by Tom Bill; Additional reporting by Harichandan Arakali in Bangalore; Editing by Sophie Walker and Simon Robinson)

Exclusive: U.S. regulators irate at NY action against Standard Chartered: India's top buyer of Iran oil turns to Azeri, Saudi

Mon, Jul 16 09:12 AM EDT * MRPL signs deal to buy Azeri crude * MRPL to buy extra oil in July from Saudi Arabia, UAE By Nidhi Verma NEW DELHI, July 16 (Reuters) - India's biggest buyer of Iranian oil, MRPL, has bought Azeri, Saudi and Emirati crude to replace imports from Iran in July and it may halt purchases from Tehran altogether as sanctions make shipments more difficult, industry sources said on Monday. Loss of exports to Mangalore Refinery and Petrochemicals (MRPL) would be a blow to Iran, which has seen overseas sales decline by more than half from a year ago due to U.S. and European Union sanctions. The sanctions against Iran's nuclear programme, which the West thinks is aimed at making weapons, are meant to cut the country's oil revenues. "MRPL has initiated steps to halt its imports from Iran. It is facing problems on a daily basis ... government pressure, sanctions and the latest is Iran's threat to shut the Strait of Hormuz," said one of the sources, The source declined to detail the steps MRPL was taking. The refiner has been forced to restrict its lifting from Iran to a fifth of the planned 3.3 million barrels per day (bpd) in July. Iran over the weekend renewed its threat to close the Strait of Hormuz unless sanctions against it were revoked. Flows through the Strait last year accounted for about 35 percent of all sea-borne traded oil, or almost 20 percent of oil traded worldwide. ALTERNATIVES MRPL has signed a two-month deal with Azerbaijan after shipments from Tehran were hit in July, besides buying an additional cargo each from its existing suppliers United Arab Emirates and Saudi Arabia, to offset Iranian supply cuts. The Indian refiner has an annual deal to lift 40,000 bpd from the UAE and 49,000 bpd from Saudi Aramco. MRPL's move highlights the gradual increase in share of non-Iranian supplies in the world's fourth-biggest oil importer's crude basket and the emergence of new trade routes as Tehran's exports decline. MRPL may import only one of its planned five Iran oil cargoes in July after its shippers Great Eastern Shipping Co.(GESCO) refused to carry Iranian crude and New Delhi scrapped an order permitting use of Iranian tankers and insurance. "Because of shipping problems with GESCO, MRPL had signed a two-month deal with Azerbaijan and it may renew this deal depending on the need," said one of the sources, all of whom have knowledge of the matter. MRPL had lifted three cargoes in February-April from Azerbaijan under a short term deal, the sources said. Indian Oil Corp., the country's biggest oil refiner, has been lifting 20,000 bpd of Azeri Light crude in 2012 under an annual contract while Hindustan Petroleum will soon start buying 10,000 bpd from Azerbaijan's national oil company SOCAR. DIFFICULT SITUATION MRPL, which has cut the size of its annual oil import deal with Iran by about 30 percent to 100,000 barrels per day (bpd), relies on Tehran for about a third of its annual oil needs. "It makes sense to renew the Azerbaijan contract or look at alternatives rather than dealing with Iran-related problems on a daily basis. If they shut the Strait of Hormuz then MRPL will be in a difficult situation," said the second source. MRPL Managing Director P. P. Upadhya declined to comment. India, Iran's second-biggest customer, has got a waiver from tough U.S. sanctions after reducing imports from Tehran and pledging a further cut of at least 11 percent in the current fiscal year ending March. EU sanctions from July 1 ban insurers and reinsurers from covering Iran oil shipments. Alarmed by the Iranian threats concerning the Strait of Hormuz, the UAE has begun loading cargoes through its long-awaited oil export terminal on the Gulf of Oman. The Gulf OPEC member hopes to increase exports from the new facility to around 1.5 million bpd. Saudi Arabia too has opened a bypass in the last few months, giving Riyadh scope to export more of its crude from Red Sea terminals should Iran try to block the Strait of Hormuz. (Editing by Anthony Barker) === Categorized | Banking & Finance, Security Obama Accuses Iraqi Bank of Aiding Iran Posted on 03 August 2012. Tags: 'Your Country' - United States, Elaf Islamic Bank, Iran, obama By John Lee. President Barack Obama has said that Iraq’s Elaf Islamic Bank carried out “transactions worth millions of dollars” on behalf of Iranian banks that had been blacklisted because of their to Iran’s nuclear programme. “We will expose any financial institution, no matter where they are located, that allows the increasingly desperate Iranian regime to retain access to the international financial system,” he said. The White House also announced expanded sanctions against those who purchase Iranian petrochemical products or provide “material support” to the National Iranian Oil Company and the Central Bank of Iran. (Source: The Telegraph) =============== Standard Chartered begins fightback on Iran allegations Wed, Aug 08 20:14 PM EDT 1 of 3 By Lesley Wroughton and Steve Slater WASHINGTON/LONDON (Reuters) - Cowboy local regulator or the exposer of lax federal bureaucrats? That's the key question being asked about New York banking regulator Benjamin Lawsky after his explosive charge that London's Standard Chartered bank abetted $250 billion of money-laundering transactions with Iran. Standard Chartered won help Wednesday from Britain's central bank governor, who portrayed Lawsky as marching to his own tune, and marching out of step with federal regulators in Washington. "One regulator, but not the others, has gone public while the investigation is still going on," the Bank of England's Mervyn King said at a news conference in London. The U.S. Treasury Department, in a letter responding to a request for clarification from British authorities, said it takes sanctions violations seriously. The British bank lost over a quarter of its market value in 24 hours after Lawsky, the head of New York State's Department of Financial Services, threatened Monday to cancel Standard Chartered's state banking license, which is critical for dealing in dollars. Lawsky called Standard Chartered a "rogue institution" for breaking U.S. sanctions against Iran. Standard Chartered shares bounced 7.1 percent on Wednesday to close in London at 13.15 pounds, up from a three-year low of 10.92 hit on Tuesday. They were still down 18 percent since the regulator's threat, which Chief Executive Peters Sands said was "disproportionate" and came as a "complete surprise." Meanwhile, Reuters Breakingviews reported that the U.S. Federal Reserve has asked Standard Chartered's New York office to report in every few hours on its liquidity position, according to people familiar with the situation. The concern is that the possibility of Standard Chartered losing its New York license could spook trading counterparties or depositors, although there is no suggestion that this is happening, Breakingviews said.

The bank's top executives, some like Sands scrambling back from summer vacations, worked on a defense strategy. So far, the executives have contested the regulator's figures and his interpretation of the law, but they have given little further detail. The bank says only a tiny proportion of its Iran-related deals - less than $14 million - was questionable under U.S. sanctions rules. Sources told Reuters that federal banking regulators in Washington, who had been probing Standard Chartered's Iran-related deals for more than two years, were surprised by the timing of Lawsky's charges and the stridency of his language.

Lawsky's Department of Financial Services had come to the conclusion the case was getting old and that it wanted to move forward, a person with knowledge of the situation said. The department told other agencies at a meeting in April that it planned to move forward with the case, the person said. Members of Lawsky's office met representatives of Standard Chartered around May but did not inform the bank it planned to issue an order against it, the person said. "This is a case about Iran, money laundering, and national security," Lawsky said in a statement on Wednesday. "We will continue to work closely with our law enforcement partners, both federal and state, in this effort. No bank, big or small, foreign or domestic, is above the law." In Washington, Adam Szubin, director of the Treasury Department's Office of Foreign Assets Control, said in a letter to British authorities that his office is investigating Standard Chartered for "potential Iran-related violations as well as a broader set of potential sanctions violations." The letter, which was dated Wednesday and obtained by Reuters, came in response to a British request for clarification of U.S. sanctions laws. Although much of the letter focused on so-called U-turn transactions, which are at the center of New York's allegations, the letter said it was not a comment on Lawsky's action. The alleged U-turn transactions refer to money moved for Iranian clients among banks in the United Kingdom and Middle East and cleared through Standard Chartered's New York branch, but which neither started nor ended in Iran. In London, King drew unfavorable comparisons between the handling of this case and other U.S. actions against British banks, such as the investigation of interest rate manipulation at Barclays PLC. In the Barclays case, he said, all regulators in Britain and the United States produced coordinated reports after the investigation was complete. "I think all the UK authorities would ask is that the various regulatory bodies that are investigating the particular case try to work together and refrain from making too many public statements until the investigation is completed," King said.

Standard Chartered's Sands, in his first public comments since the crisis arose, offered no major new information on the allegations, which the bank has been reviewing with authorities for the past two years. "(We) fundamentally reject the overall picture and believe there are no grounds for them to take this action," he told reporters. The threat to cancel the bank's license to operate in New York would be "wholly disproportionate," he said.

Although Standard Chartered's business is concentrated in emerging markets, which has helped insulate it from the global financial crisis, it needs to be able to operate in New York so it can offer dealings around the world in U.S. dollars. Also on Wednesday, Deloitte LLP, which was accused in Lawsky's order of wrongdoing in its role as an outside consultant to Standard Chartered, denied any misconduct. Deloitte was hired by Standard Chartered after U.S. authorities reprimanded the bank for similar lapses on transactions in 2004. "Deloitte had no knowledge of any alleged misconduct by any Standard Chartered Bank employees and categorically denies that it aided in any way any violation of law by the bank," the firm said in a statement. Specifically, Deloitte said it "absolutely did not delete" references to transactions from a report, contrary to an allegation in Lawsky's order. CURSING THE AMERICANS On Monday, Lawsky had reproduced what he said were quotes from an unidentified Standard Chartered executive director in a conversation in 2006 that demonstrated the bank's "obvious contempt" for U.S. banking regulations. "You f---ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians?" the quote was rendered in documents released by the regulators. People familiar with the situation said the bank's group finance director, Richard Meddings, one of five executive directors at the time, was the unnamed man. Ray Ferguson, a bank executive who attended that meeting, told Reuters that while Meddings had used the expletive in a heated exchange, he did not, to his recollection, say the second part of the quote attributed to him about U.S. sanctions. Meddings did not respond to repeated requests for comment. Asked for the bank's view on the quote, Sands said: "We don't believe it's accurate." He defended the ethics of the bank, which he has run for six years: "I don't think there is anything wrong with the culture at Standard Chartered," Calling the allegations "very damaging", he said he would address "mistakes" that had been "clearly wrong", but said: "There were no systematic attempts to circumvent sanctions." The BoE's King said he did not share the view held by some that the move in New York was part of a concerted U.S. effort to undermine London as a financial center, following the Barclays probe and a U.S. Senate panel report that criticized HSBC Holding's efforts to police suspect transactions. One British lawmaker, however, said the affair was part of a "political onslaught" in the United States against British banks. "I think it's a concerted effort that's been organized at the top of the U.S. government. I think this is Washington trying to win a commercial battle to have trading from London shifted to New York," said John Mann, a member of parliament's finance committee, who also called for a parliamentary inquiry. (Additional reporting by Nate Raymond, Patrick Temple-West, Sinead Cruise, Kelvin Soh, Anjuli Davies and Sarah White; Writing by Eddie Evans; Editing by Leslie Adler) ============== Exclusive: U.S. regulators irate at NY action against Standard Chartered Thu, Aug 09 14:36 PM EDT By Carrick Mollenkamp and Emily Flitter and Karen Freifeld NEW YORK/LONDON (Reuters) - The U.S. Treasury Department and Federal Reserve were blindsided and angered by the decision of a New York banking regulator to launch an explosive attack on Standard Chartered Plc over $250 billion in alleged money laundering transactions tied to Iran, sources familiar with the situation said. By going it alone through the order he issued on Monday, the head of the recently created New York State Department of Financial Services, Benjamin Lawsky, also complicates talks between the Treasury and London-based Standard Chartered to settle claims over the transactions, several of the sources said. His action, which included releasing embarrassing communications and details of the bank's alleged defiance of U.S. sanctions, is rewriting the playbook on how foreign banks settle cases involving the processing of shadowy funds tied to sanctioned countries. In the past, such cases have usually been settled through negotiated settlements with public shaming kept to a minimum. In his order, Lawsky said the bank's dealings exposed the U.S. banking system to terrorists, drug traffickers and corrupt states. But the upset expressed by some federal officials, who were given virtually no notice of the action, may provide ammunition for Standard Chartered to portray the allegations as coming from a relatively new and over-zealous regulator. Given the content of the order, which described Standard Chartered as a "rogue institution" that "schemed" with the Iranian government and hid from law enforcement officials some 60,000 secret transactions over nearly 10 years, the bank may need to come up with a strong defense. Lawsky did not respond to several requests for comment on Tuesday. A Fed spokesperson said that it had been working closely with various prosecutorial offices on matters involving Iran and other sanctioned entities but could not comment on ongoing investigations. White House Press Secretary Jay Carney said that the government takes alleged violations of sanctions "extremely seriously" and the Treasury remains in close contact with federal and state authorities on the matter. Treasury declined to add to that comment. SHARES SINK New York's attack on the bank's integrity and especially its threat to revoke its state banking license wiped $17 billion off the bank's market value on Tuesday. Shares in Standard Chartered fell 16.4 percent to 12.28 pounds Tuesday, after earlier touching a three-year low of 10.92 pounds. The stock has fallen 24 percent since news emerged of the New York action on Monday. The loss of a New York banking license - effectively a permit to conduct transactions worth hundreds of billions of U.S. dollars - could be a death knell for a global bank like Standard Chartered. The 160-year-old bank said it has been in talks with U.S. authorities over its Iran transactions since early 2010 and stressed that the sudden accusations by New York came as a shock. In a statement Monday, the bank said it was "engaged in ongoing discussions with the relevant U.S. agencies. Resolution of such matters normally proceeds through a coordinated approach by such agencies. The Group was therefore surprised to receive the order from (the New York bank regulator) given that discussions with the agencies were ongoing." Lawsky's move also undercut the Treasury's Office of Foreign Assets Control, which has held enforcing economic sanctions against Iran as its top goal. The surprise left the office's leader, David Cohen, the undersecretary for terrorism and financial intelligence, scrambling to come up with a response, sources said. The New York regulator's action may also cause problems for Treasury Secretary Timothy Geithner. The Federal Reserve Bank of New York overseas branches of foreign-owned banks located in New York, and as president of the New York Fed from 2003 to 2009, Geithner would have had ultimate responsibility for regulating Standard Chartered during the period when much of the alleged money laundering took place. Geithner has come under fire from Congress for the New York Fed's failure to stop banks from manipulating a key benchmark interest rate, Libor. POLITICAL CONSIDERATIONS Sources familiar with the New York regulator's decision say it was based in part on a worry that the Treasury and the Fed were trying to slow the settlement process down until conditions were more politically favorable. The U.S. presidential election is only three months away and Geithner has indicated he will leave his post at the end of the year. Standard Chartered, which sought the advice of one of New York's top law firms, had hoped that coming clean and turning over internal records to federal regulators would yield a settlement, some other sources said. Those records also were turned over to the New York's bank regulator which last year was combined with an insurance agency to create the new financial watchdog headed by Lawsky, a former prosecutor and aide to New York Gov. Andrew Cuomo. Lawsky's aim, according to the sources, was to cast more sunlight on a bank's alleged transgressions. Lawsky's agency, these people said, wasn't interested in a quiet pact of the sort reached by federal authorities in recent years. In 2010, for example, Barclays Plc paid $298 million in a settlement with regulators including the Treasury Department's sanctions regulator and the Manhattan district attorney's office. The bank, in settlement documents, said it cooperated in the probe. Barclays, like Standard Chartered, was advised by Sullivan & Cromwell, known as the go-to New York law firm for banks facing regulatory scrutiny. The Barclays settlement, while receiving news coverage, was a fairly bland document that listed Barclays transactions but few insider details, such as emails. Other banks, including Credit Suisse Group and ING Bank NV, have settled in much the same way with U.S. regulators. HUGE GULF One area of sharp disagreement between the bank and Lawsky is just how much in illicit funds is involved in the case. Standard Chartered put the value of Iran-related transactions that did not comply with regulations at less than $14 million, against the New York regulator's estimate of $250 billion. Lawsky said Standard Chartered moved money through its New York branch on behalf of Iranian financial clients, including the Central Bank of Iran and state-owned Bank Saderat and Bank Melli, that were subject to U.S. sanctions. The transactions generated hundreds of millions of dollars in fees, Lawsky said. Monday's order alleged that Standard Chartered removed codes on money transfers and altered message fields, inserting phrases such as "NO NAME GIVEN" to hide the nature of the transactions. At the center of concern were alleged "U-Turn" transactions, involving money moved for Iranian clients among banks in Britain and the Middle East and cleared through Standard Chartered's New York branch, but which neither started nor ended in Iran. Such transactions were permissible until November 2008, when the Treasury Department prohibited them on concerns that they were being used to evade sanctions, and that Iran was using banks to fund nuclear and missile development programs. The New York order also alleged that even as some banks exited the U-Turn transactions, Standard Chartered hustled to "take the abandoned market share." As part of a review the bank sought to give to regulators, Standard Chartered hired Promontory Financial Group, a Washington, D.C., consulting firm run by Eugene Ludwig, who served as the U.S. Comptroller of the Currency from 1993 to 1998. Promontory was hired to review Standard Chartered's transactions tied to Iran. Standard Chartered's internal review ultimately led to bank settling on the figure of less than $14 million for improper transactions. BACK FROM VACATION Lawsky's agency also received the Standard Chartered internal review, according to people familiar with the situation. But the new regulator had little interest in a settlement that didn't yield embarrassing details about Standard Chartered's activities, these people said. Earlier this year, representatives of the bank met with Lawsky's office to argue that the illicit transactions were a technical violation, according to one source. Lawsky's investigators weren't convinced, this person said. The bank, which must appear before the New York regulator on August 15, on Monday called Lawsky's interpretation of the U-turn exemption "incorrect as a matter of law." Standard Chartered Chief Executive Peter Sands scrambled back from vacation to help the bank plan a defense and limit damage to its reputation. The broadside against Standard Chartered has touched a nerve in the UK, where some investors and at least one lawmaker, have even alleged it might be part of a plot by U.S. authorities to undermine London as a banking center. Standard Chartered is the third British bank to be ensnared in U.S. law enforcement probes in recent weeks. Barclays agreed to pay $453 million to settle U.S. and British probes that it rigged a global lending benchmark in June. A month later, a U.S. Senate panel issued a scathing report that criticized HSBC's efforts to police suspect transactions, including Mexican drug traffickers. "I think it's a concerted effort that's been organized at the top of the U.S. government. I think this is Washington trying to win a commercial battle to have trading from London shifted to New York," said John Mann, a member of parliament's finance committee who also called for a parliamentary inquiry. Mann, from the center-left Labor party, has become a public scourge of London bankers' greed and immorality during the financial crisis. But he told Reuters he saw "anti-British bias" behind "disproportionate publicity that's given to British banking problems as opposed to American banking problems". A British executive at an institution which ranks among the top 25 shareholders in Standard Chartered saw, like Mann, a politically motivated move by U.S. officials irked by the major role London plays in the global financial industry, attracted big investments from major U.S. banks like JPMorgan Chase, Goldman Sachs and Morgan Stanley "Are we starting to see an anti-London bias in U.S. regulatory activities?" the executive asked. "Oh yes. Is there any subtle form of banking sector protectionism going on? Yes." TOP LAW FIRMS Standard Chartered has hired two prominent law firms -- Sullivan & Cromwell in New York and Slaughter and May in London - to represent it in its dealings with various U.S. authorities over transactions linked to Iran. Among the Sullivan & Cromwell partners working for Standard Chartered is Rodgin Cohen, one of the best-known U.S. corporate lawyers, a person familiar with the matter said. Sullivan & Cromwell has represented other non-U.S. banks probed for allegedly ignoring U.S. sanctions against countries. The United States imposed economic sanctions on Iran in 1979. Until November 2008 U.S. banks could process some transactions for Iranian banks or individuals provided they were initiated offshore by non-Iranian foreign banks and were on the way to other non-Iranian foreign banks. Such transactions were known as "U-turns." David Proctor, who worked for Standard Chartered from 1999 until 2006 and who oversaw the Iran business briefly in 2006 when he was CEO in the United Arab Emirates, said the rules on dealing with Iran were unclear. "At the time (May 2006), ... the key question was to try and understand exactly what counted as a U-turn transaction," he said. Proctor, who now provides advice for banks with BAS Consulting in Singapore, added that Standard Chartered now has to help clear up what actually happened. "Banks these days don't have a choice," he said. "You have to be transparent." (Writing by Jonathan Stempel, Alwyn Scott, Martin Howell; Reporting by Emily Flitter, Carrick Mollenkamp, Karen Freifeld, Aruna Viswanatha, Nate Raymond and Steve Slater; Additional reporting by Margaret Chadbourn, Karen Freifeld and Noeleen Walder in the United States; Sinead Cruise, Raji Menon, Adam Parry, Martin de Sa'Pinto, Matt Scuffham and Sarah White in Europe; and Rachel Armstrong, Saeed Azhar, Kevin Lim, Kelvin Soh and Denny Thomas in Asia; Editing by Margaret Chadbourn, Jonathan Stempel, Leslie Gevirtz,) ================ Standard Chartered denies claims it is a "rogue institution" Last updated: Aug 7th, 2012 News by Sarah Modlock Scams | Login or register to post comments Standard Chartered shares took a hit on Tuesday as investors in Hong Kong were spooked, despite the bank denying allegations that it illegally "schemed" with Iran to launder money. The UK-based bank's shares fell in Hong Kong before plunging in London, where it lost almost 18% on the opening bell. Investors sold after US regulators claimed Standard Chartered laundered as much as $250 billion (£161 billion) over nearly a decade. Share with friends: You might also like: • Who's next in the Libor banking scandal? • Stocks to watch in August • HSBC named in money-laundering scandal • How to stay off scammers' suckers lists • The NatWest crash - how to get your money back See more stories about: •banks Follow us:Facebook Twitter Newsletter The New York State Department of Financial Services (DFS) says the bank hid 60,000 transactions for "Iranian financial institutions" despite US economic sanctions. The bank has issued a statement denying the allegations. It claims the DFS has not presented a full and accurate picture of the facts. It says that in January 2010, it voluntarily approached all relevant US agencies, including the DFS, and informed them that it had initiated a review of transactions relating to Iran in the period 2001-2007. Standard Chartered states that "well over 99.9% of the transactions relating to Iran complied with the U-turn regulations. The total value of transactions which did not follow the U-turn was under $14 million." However, the drama looks set to unfold further. The regulator says that its nine-month investigation found instruction manuals designed to help senior staff obscure the Iranian transactions. It says numerous emails going back as far as 1995 showed how the bank's lawyers advised on ways to go about circumventing US sanctions. "Standard Chartered's actions left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity," it says. US regulators also claim to have found evidence that the bank had similar schemes for other countries under sanctions including Libya, Burma and Sudan, but say investigation of these matters is ongoing. Standard Chartered is the sixth bank since 2008 to be implicated in dealings with sanctioned countries such as Iran in investigations led by federal and New York law enforcement officials. Four banks - Barclays, Lloyds, Credit Suisse Group and ING Bank - have agreed to fines and settlements totalling $1.8 billion. Last month, HSBC set aside £700 million to address money laundering penalties. If the extent of Standard Chartered's involvement is as widespread as the DFS claims then it will be facing considerable costs. In a worst case scenario, the loss of a New York banking licence would be a devastating blow for Standard Chartered which processes $190 billion every day for global clients, the US bank regulator says. This was written for our sister website, Interactive Investor. ==================== Tue 13:04 Re: I respectfully suggest you read the... metal monkey Hypocrites. Cant stand them. --------------------------------------------------- 100% agree. I spent twelve years working on VLCCs (very large crude carriers) shifting 300,000 M3 of Iranian crude (per shipment) from Kharg Island to the US. Except we never delivered the cargo direct to the states - they sent down their smaller, empty tankers to a rendezvous area north of the Caribbean and the crude was transferred ship to ship. Everything was above board using BP Shipping vessels. The US spent billions of dollars on Iranian crude and no doubt still do. One rule for them, one rule for everyone else. bythesea, Sorry to hear of your woes. The advice to 'hang on in there' by fellow posters should in my opinion be heeded unless you urgently need the money that's tied up in SXX. As you read through the replies to your original post, you will no doubt feel some relief at the support and encouragement shown and probably choose to stick with it for a while more. The SP may drop further (Fosters100 is an investing genius and explains in great detail why in his 20:52 post). If and when it does drop, I sense you will be feeling miserable and irritable again, the words of encouragement here quickly forgotten. My advice would be to exit as soon as you are in profit again - either in whole or remove your existing capital and leave the rest on a 'free ride' so that you don't need to watch the daily SP movements. I hope you are not offended when I suggest that perhaps you should not be investing your money in AIM stocks, or perhaps any stocks at all, as you seem to be unable to handle (emotionally and mentally), the reality of seeing your capital reduced, albeit a paper loss. As annoying as it is, you should be able to ride out SP drops, yet by your own account it's affecting your personal and your family life and will remain to do so until the SP rises to a point where you are in profit. Again, sorry if this is appears patronising, but this investing lark is not for you unless you can separate these issues. The possibility of huge returns on this investment is incredibly tempting, but it will take time. Whilst waiting, the trade-off should not be the erosion of one's family life and personal well-being. I sincerely wish you all the best, but position yourself accordingly, here in SXX and other investments, so that you never let a falling SP drag you down with it. ================== http://www.iii.co.uk/investment/detail/?display=discussion&code=cotn%3ASTAN.L&threshold=0&pageno=3&it=le Tue 11:56 What this is really all about.... CroftOriginal What this is really all about.... I don't hold and Standard Chartered Bank shares so I have no vested interest here but this is my take on what we are seeing play out here. There is a much bigger picture so you need to stand back a bit. The world economy, the financial services and banking industry and the world currency markets are undergoing a massive change. This can be seen by the collapse of the world economy, sovereign debt default, private banking collapse and currency manipulation. China has for some time been pinning its currency at too low a level against the rest of the world, this has been used as a weapon to flood the US with cheap imports pushing the balance of payments against the US, shutting down US manufacturing and weakening the US. Coupled with this is the use of the dollar as the world reserve currency and the requirement that all oil is traded in dollars. In other words if you are China and you want to buy oil then you need US dollars in order to do this. Middle East countries have not, until recently accepted any other currency, Saudi spend huge amounts of US oil dollars on US military equipment. Having the world's reserve currency as your own means that you hold control over the world, you can implement sanctions against countries and when needed you can turn on the printing presses and generate more money at the flick of a switch. This is essentially why the US are flexing their muscles. If you look at the two banks that they have recently focused their sights on they are HSBC and Standard Chartered. What is it about these banks that scares the US? Well if we turn our attention back to China, their aim is to end the world reserve currency status for the US dollar, they would like to see a new reserve currency but they know that the world wouldn't trust China or any Chinese state bank to look after such a currency. So what non US banks with a strong presence in Asia are big enough and would be trusted by the world to the extent that they could be responsible for a currency? Well if we look at HSBC and Standard Chartered they are non US, they are worldwide banks, they have a strong presence in Asia, they already look after the Honk Kong currency, they have a proven track record. They are trusted banks that operate on the world stage. So I ask again, what is this really all about ? The end of the US dollar as a world reserve currency is already under way, Libya were taking payment for oil in gold bars, Iran have until recent sanctions taken payment in Euros. Once the US dollar is no longer required by the rest of the world then it will implode, the US will either default on their national debt or massively devalue. It will be the end of the US as a world power, and that is what is driving the US. =============== TEXT-Fitch: Standard Chartered allegations potentially negative Thu, Aug 09 12:34 PM EDT Aug 9 - Fitch Ratings views the potential significant implications from allegations of regulatory and legal violations by the New York State Department of Financial Services (DFS) as a negative rating factor for Standard Chartered Bank ('AA-'/Negative) and for its parent, Standard Chartered Plc ('AA-'/Negative). Fitch believes it is too early to take a view on the likelihood of different scenarios, some of which are outlined below, given the contradictions in the bank's and DFS's position. The ratings could though be downgraded when there is more clarity, possibly following the hearing on 15 August 2012. The accusations and strong market reactions to it have damaged the bank's reputation and it is possible that its franchise will suffer depending on how and when the case is resolved. However, Standard Chartered has informed Fitch that deposit outflows have been limited so far and that its USD liquidity has remained strong. The bank has substantial sources of USD liquidity outside its New York branch. The agency may maintain the ratings at the current level if - under the least negative scenario - the issue is resolved relatively quickly by way of a penalty or fine, as well as possible additional compliance costs, all of which can be absorbed by its high profitability. Even so, recent developments reiterate governance and compliance challenges for banks that are active in many jurisdictions which, if becoming more pronounced, may no longer be commensurate with a rating in the 'AA' range. Risks of complying with numerous legal and regulatory frameworks and reporting to multiple enforcing authorities with sometimes varying expectations can increasingly affect profit, franchise, reputation and investor/depositor confidence. The ratings would likely be placed on Rating Watch Negative or could be downgraded by one or more notches if there was a heightened risk of Standard Chartered losing its New York branch licence and if its ability to clear USD was disrupted or ultimately stopped. The magnitude of any downgrade would depend on how significant the potential implications are. They could range from increased operating costs to material adjustments to its business model affecting diversification benefits, financial strength and customer loyalty. Fitch views Standard Chartered's access to the USD clearing system as integral to its Wholesale Banking franchise in Asia, Africa and the Middle East as there are significant USD-denominated transactions. Ratings would also be sensitive to any protracted dispute placing the bank at risk of material deposit outflows or a reduction in business relationships and franchise as a result of a weakened reputation. In an order effective 6 August 2012, DFS accused Standard Chartered of having conducted USD250bn non-compliant USD transactions with Iranian counterparties during 2001-2007 thereby knowingly violating US law. The bank admits non-compliant transactions due to administrative errors of USD14m but otherwise strongly rejects the allegations and stated that it stopped entering into new business with Iranian customers in 2007. The Outlooks on Standard Chartered Plc's and Standard Chartered Bank's Long-term Issuer Default Ratings were revised to Negative from Stable on 5 March 2012. The Outlook revisions reflected the continued rapid growth into markets where Fitch believes systemic risks are growing due to the rising influence of the rapidly developing Chinese economy and its large banking sector.Additional information is available at www.fitchratings.com. ==== Standard Chartered helped build damning case against itself Fri, Aug 10 19:08 PM EDT By Aruna Viswanatha and Andrew Longstreth WASHINGTON/NEW YORK (Reuters) - Standard Chartered, the British bank facing explosive money laundering allegations from New York State's top bank regulator, appears to have been burned by a decision to waive attorney-client privilege, a move that usually helps appease U.S. authorities. While firms on occasion hand over troves of privileged documents to investigators, that practice generally comes with an understanding that the information will not be made public. But the 27-page complaint filed earlier this week by the New York State Department of Financial Services, a newly created regulator led by former prosecutor Benjamin Lawsky, is jam-packed with emails detailing damning legal advice used to illustrate a "rogue institution." Lawyers who work on similar investigations say that Lawsky's actions may make corporations think twice before turning over sensitive documents. "The action of this regulator will have a deterring effect on the nature and extent of cooperation in similar kinds of cases without some specific assurances," said Robert Bennett, a prominent white-collar defense attorney at Hogan Lovells who represented Enron and HealthSouth in criminal investigation. In a surprise move, the New York regulator broke away from federal authorities also probing the bank and threatened to strip Standard Chartered of its state banking license. It alleged that Standard Chartered "schemed" with the Iranian government and hid $250 billion of transactions in violation of U.S. sanctions on Iran. Standard Chartered has denied the accusations and noted that it approached all the U.S. agencies, including the Treasury Department and New York Federal Reserve Bank, in January 2010 to come forth with its own review of its transactions. It said it "waived its attorney-client and work product privileges to ensure that all the U.S. agencies would receive all relevant information." While direct regulators like the Department of Financial Services do have access to the legal files of the banks they regulate, even without a waiver, it is rare for regulators to exploit the documents in such a public fashion. In a coordinated investigation, the state regulator would typically act in concert with its federal counterparts. Standard Chartered's cooperation could ultimately benefit the bank in the form of a more lenient settlement. Reuters reported on Friday the bank is in talks to resolve the probe and could enter a settlement next week. Representatives of the New York regulator, the U.S. Justice Department, and Standard Chartered all declined to comment. BUILDING A CASE New York's case against Standard Chartered seems to heavily based on emails that could be considered privileged; nearly every page of the order includes emails or memos that seemingly constitute legal advice. It quotes a 1995 email, for example, in which the bank's general counsel suggests London operations could keep New York out of the loop and route suspect transfers to another clearing bank in the United States to keep the New York branch on the right side of the law. In 2001, another email from a group legal adviser suggested payment instructions for Iranian clients shouldn't identify the client or the purpose of the payment. That same year outside lawyers told the bank it should provide additional information to its New York branch about certain payments, an instruction reiterated by outside lawyers in 2003, according to emails quoted in the order. The New York case also includes details of 2005 emails and notes from the bank's lawyers discussing sanctions concerns. WAIVER PULLBACK The waiver of attorney-client privilege became a central focus of regulators about a decade ago when a spate of corporate accounting scandals, such as those at Enron Corp and WorldCom Inc, came to light. To get to the bottom of cases, the government pressured companies to waive the privilege. A Justice Department memo explicitly allowed prosecutors to consider whether a company waived privilege as a factor in deciding whether to charge a company. But corporate lawyers began complaining that the policy weakened the ability of attorneys to speak candidly with their clients, and the Justice Department revised its guidelines in 2008 to prohibit prosecutors from asking companies to waive privilege. Companies don't often provide waivers anymore, defense lawyers said, especially since such waivers could open to door to private plaintiffs obtaining those same documents. "It's pretty infrequent," a former federal prosecutor said. "You don't want to waive it, because it opens the floodgates and exposes it to civil litigants." (Reporting By Aruna Viswanatha and Andrew Longstreth; Editing by Eddie Evans and Leslie Adler) ==== Standard Chartered helped build damning case against itself Fri, Aug 10 19:08 PM EDT By Aruna Viswanatha and Andrew Longstreth WASHINGTON/NEW YORK (Reuters) - Standard Chartered, the British bank facing explosive money laundering allegations from New York State's top bank regulator, appears to have been burned by a decision to waive attorney-client privilege, a move that usually helps appease U.S. authorities. While firms on occasion hand over troves of privileged documents to investigators, that practice generally comes with an understanding that the information will not be made public. But the 27-page complaint filed earlier this week by the New York State Department of Financial Services, a newly created regulator led by former prosecutor Benjamin Lawsky, is jam-packed with emails detailing damning legal advice used to illustrate a "rogue institution." Lawyers who work on similar investigations say that Lawsky's actions may make corporations think twice before turning over sensitive documents.

"The action of this regulator will have a deterring effect on the nature and extent of cooperation in similar kinds of cases without some specific assurances," said Robert Bennett, a prominent white-collar defense attorney at Hogan Lovells who represented Enron and HealthSouth in criminal investigation.

In a surprise move, the New York regulator broke away from federal authorities also probing the bank and threatened to strip Standard Chartered of its state banking license. It alleged that Standard Chartered "schemed" with the Iranian government and hid $250 billion of transactions in violation of U.S. sanctions on Iran. Standard Chartered has denied the accusations and noted that it approached all the U.S. agencies, including the Treasury Department and New York Federal Reserve Bank, in January 2010 to come forth with its own review of its transactions. It said it "waived its attorney-client and work product privileges to ensure that all the U.S. agencies would receive all relevant information." While direct regulators like the Department of Financial Services do have access to the legal files of the banks they regulate, even without a waiver, it is rare for regulators to exploit the documents in such a public fashion. In a coordinated investigation, the state regulator would typically act in concert with its federal counterparts. Standard Chartered's cooperation could ultimately benefit the bank in the form of a more lenient settlement. Reuters reported on Friday the bank is in talks to resolve the probe and could enter a settlement next week. Representatives of the New York regulator, the U.S. Justice Department, and Standard Chartered all declined to comment. BUILDING A CASE New York's case against Standard Chartered seems to heavily based on emails that could be considered privileged; nearly every page of the order includes emails or memos that seemingly constitute legal advice. It quotes a 1995 email, for example, in which the bank's general counsel suggests London operations could keep New York out of the loop and route suspect transfers to another clearing bank in the United States to keep the New York branch on the right side of the law. In 2001, another email from a group legal adviser suggested payment instructions for Iranian clients shouldn't identify the client or the purpose of the payment. That same year outside lawyers told the bank it should provide additional information to its New York branch about certain payments, an instruction reiterated by outside lawyers in 2003, according to emails quoted in the order. The New York case also includes details of 2005 emails and notes from the bank's lawyers discussing sanctions concerns. WAIVER PULLBACK The waiver of attorney-client privilege became a central focus of regulators about a decade ago when a spate of corporate accounting scandals, such as those at Enron Corp and WorldCom Inc, came to light. To get to the bottom of cases, the government pressured companies to waive the privilege. A Justice Department memo explicitly allowed prosecutors to consider whether a company waived privilege as a factor in deciding whether to charge a company. But corporate lawyers began complaining that the policy weakened the ability of attorneys to speak candidly with their clients, and the Justice Department revised its guidelines in 2008 to prohibit prosecutors from asking companies to waive privilege. Companies don't often provide waivers anymore, defense lawyers said, especially since such waivers could open to door to private plaintiffs obtaining those same documents. "It's pretty infrequent," a former federal prosecutor said. "You don't want to waive it, because it opens the floodgates and exposes it to civil litigants." (Reporting By Aruna Viswanatha and Andrew Longstreth; Editing by Eddie Evans and Leslie Adler) ============== Exclusive: Standard Chartered, regulators in settlement talks Fri, Aug 10 18:48 PM EDT By Carrick Mollenkamp (Reuters) - Standard Chartered is in talks with multiple law-enforcement officials, including New York's banking regulator, to resolve a probe into improper Iranian money transactions by the British bank, according to people familiar with the situation. The settlement negotiations are expected to last through the weekend and could result in a resolution by next week, these people said. The negotiations are at a delicate stage and could collapse, they added. The negotiations come after a rancorous week that began when Benjamin Lawsky, superintendent of the New York Department of Financial Services, alleged in an order on Monday that the bank processed thousands of illegal transactions tied to Iran and that Standard Chartered had covered up its actions using incomplete or false records. Lawsky demanded that Standard Chartered officials appear at his office next Wednesday to explain why the bank should be allowed to keep doing business in New York, a global hub for the processing of dollars. The hearing remained on the calendar as of Friday afternoon. Lawsky's order not only shocked the bank but also federal and local regulators. The bank had been cooperating in a months-long probe and subsequent settlement talks with federal and local regulators. The U.S. Justice Department, Federal Reserve Bank of New York and Manhattan District Attorney's office had been engaged in those talks. (Reporting by Carrick Mollenkamp; Editing by Richard Chang) ========