UK regulators and global banks are discussing a potentially far-reaching overhaul of the calculation and regulation of interbank lending rates, amid claims that the benchmark for $350tn contracts worldwide may have been subject to manipulation.
The review comes as regulators in North America, Europe and Japan have expanded their year-long probes into alleged manipulation of the London Interbank Offered Rates, and other benchmark lending rates, which help set the price of financial products, including mortgages and credit cards.
The Libor rate-setting process is not considered a regulated activity under the UK Financial Services and Markets Act, but US and European banks and interdealer brokers have suspended or fired more than a dozen traders in recent months following allegations of abuse.
The British Bankers' Association, which sponsors Libor, and many of the banks that help set it met Treasury officials, the Bank of England and the Financial Services Authority on Monday to kick off the review process. The rethink will take into account regulatory changes such as the planned imposition of new global bank liquidity requirements in 2015.
The BBA said in a statement: "As part of the normal reviewing processes of Libor, a number of contributing banks met today to consider future regulatory and market developments, such as the incoming liquidity rules, relevant to the parameters that Libor measure."
It added that "a technical discussion with interested groups including users of the rate will commence shortly", and promised to keep the market and government officials updated.
People familiar with what was discussed in the meeting said the review could encompass everything from revamping the way Libor rates are set to imposing new regulatory oversight and compliance requirements on participating banks.
Industry participants did much of the talking, discussing market concerns about the rate-setting process and making suggestions on how to improve it. The FSA, Bank and Treasury representatives did not make clear what approaches they favoured.
Libor is set daily under the auspices of the BBA in 10 currencies. Panels of banks submit estimates of their unsecured borrowing costs over 15 different time periods to Thomson Reuters, and these are used to calculate the daily rate.
Oversight of the process is managed by the Foreign Exchange and Money Markets Committee, which is independent of the BBA and chaired by a representative of a panel bank that submits rates in at least three currencies. Thomson Reuters is responsible for looking into any outlying rates but does not make public its investigations – or any reports to the oversight committee.
Bajaj Holdings takes 3% in MCX
Rahul Bajaj-promoted Bajaj Holdings and Investment Ltd has picked a 3.06 per cent stake in the listing-bound Multi Commodity Exchange (MCX).
In a notice to investors, MCX indicated Bajaj purchased 1.56 million MCX shares from Passport Capital LLC. The deal would lead to a change in the list of top 10 shareholders in the prospectus, the company added.
Passport Capital, which operates as a hedge fund, was the fourth largest shareholder in the company with 2.5 million shares or 4.9 per cent stake as on February 10, when the company filed a draft red herring prospectus.
After this deal, Bajaj Holdings will take a joint ninth slot in the top shareholders list, holding an identical number of shares as Nabard. Passport Capital, with less than one million shares, will drop out of that list.
According to sources, transfer agreement between Passport and Bajaj Holdings was struck at Rs 800 per share, a fews days before the MCX offering opened for subscription. The source added the Forward Markets Commission (FMC) is set to clear the share transfer.
Passport Capital had acquired these MCX shares in two tranches in the past, at Rs 860 and Rs 1,155 per share. Thereafter, MCX had issued bonus shares in the ratio of 1:4 to shareholders. After adjusting for the bonus issue, the cost of each share acquisition for Passport comes to Rs 900 plus, said sources.
HT Media, another shareholder with 0.2 per cent stake, also exited the company in the run up to the IPO, according to the above notice. MCX shareholders have raised Rs 663 crore in an offer for sale, pricing each share at Rs 1,032.
The issue is getting listed in early March.
In June 2011, Passport had sold 1.6 per cent stake for Rs 62 crore in Financial Technologies (India) Ltd, one of the promoters of MCX. Passport had been cutting its stake in MCX since 2009, when it held 10 per cent in the company.
Passport Capital had started building up stakes in Financial Technologies during January 2007, when its share was trading at around Rs 1,700. The hedge fund continued to build up stake in the firm as its stock price reached over Rs 3,000 per share and was trading between Rs 2,400 and Rs 2,700 during late 2007, thus, increasing its stake to 4.23 per cent by March 2008. The fund had later averaged out its investment by buying more shares after the financial meltdown in 2008, raising its stake to 10 per cent in March 2009.
San Francisco-based Passport Capital LLC, founded by John H Burbank III in 2000, manages approximately $4.7 billion in assets. It has invested in other Indian companies like VA Tech Wabag and Koutons Retail.
Other shareholders of MCX include Euronext, Merrill Lynch, IFCI, Intel Capital and New Vernon Private Equity, besides ad-for-equity investors HT Media and Bennett, Coleman & Co, among others.
A disorderly default in Greece would probably leave Italy and Spain needing outside help to stop risks spreading and cause more than €1 trillion damage to the eurozone, the Institute of International Finance (IIF) said.
"There are some very important and damaging ramifications that would result from a disorderly default on Greek government debt," the IIF said in a document obtained by Reuters.
"It is difficult to add all these contingent liabilities up with any degree of precision, although it is hard to see how they would not exceed €1 trillion."
The document, obtained from a market source, was dated February 18 and marked IIF Staff Note: Confidential.
The IIF wants bondholders to sign up by a Thursday (tomorrow) deadline for a bond swop deal aimed at saving Greece more than €100 billion and putting the country on a more stable footing.
If it fails to win support, the European Central Bank would likely suffer substantial losses, the document said, estimating the central bank's exposure to Greece of €177 billion was over 200% of its capital base.
Both Ireland and Portugal would need more outside help to insulate them from Greece, which could cost €380 billion over five years, the IIF estimated.
A disorderly Greek default would also probably require "substantial support to Spain and Italy to stem contagion there", which could cost another €350 billion, it said.
The IIF, which helped negotiate the bond swop deal on behalf of creditors, said there would be more massive bank recapitalisation costs, which could easily hit €160 billion. —Reuters
With electioneering in five states coming to an end, state-owned oil companies are pushing for raising petrol price by over Rs 5 per litre but the actual increase would depend on the government nod.
"We are losing Rs 5.10 per litre on petrol currently," a senior oil company official said. "With counting for Assembly elections in five states ending today, we would be approaching the government for appropriate directions on price revision."
Oil firms had last revised petrol prices on December 1 after which rates have not been changed because of Assembly elections in states like Uttar Pradesh.
Oil cos push for over Rs 5 per litre hike in petrol price
Indian Oil, Bharat Petroleum and Hindustan Petroleum together have lost over Rs 900 crore since the last revision which was done at international gasoline price (the benchmark for deciding domestic retail rates) of $ 109 per barrel. Gasoline rates have since risen to $ 130.71 a barrel.
"In all probability, petrol price will be increased but by how much is for the government to decide," the official said.
With Congress faring poorly in the Assembly polls, it remains to be seen if the UPA-government would give nod for an increase just ahead of the Budget session of Parliament which begins on March 12.
Oil firms also want an increase in diesel and cooking gas prices but that call would have to be taken by an Empowered Group of Ministers, where key allies like Trinamool Congress and DMK are represented. Mamata Banerjee-led TMC is opposed to any fuel price hike.
State-owned oil firms lose Rs 13.55 per litre on diesel. They also lose Rs 29.97 a litre on kerosene and Rs 439 per 14.2-kg domestic LPG cylinder.
Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum are losing about Rs 450 crore per day on sale of diesel, domestic LPG and kerosene.
Officials said the call on raising diesel prices would be taken by the EGoM as and when it meets while petrol rates would be revised by oil firms themselves.
Petrol price were freed from government control in June 2010 but rates have not moved in tandem with imported cost.
While petrol price were last revised on December 1 when they were cut by Rs 0.78 per litre to Rs 65.64 per litre in Delhi, diesel currently costs Rs 40.91 a litre.
The Greek government has won enough backing for a debt swap deal that will enable the country to avoid bankruptcy and stay in the euro.
Officials in Athens say 95% of bondholders have reportedly agreed to the plan to reduce the country's debt by more than 100bn euros (£85bn).
That is well above the minimum 75% threshold required.
A formal announcement will be posted on the Greek Finance Ministry website later.
Greece needs to secure an agreement on its debts before it can get a second bailout from the eurozone.
Athens had said it wanted 90% of banks and others to agree to a 53.5% cut in the 206bn euros (£172bn) of Greek bonds they hold.
German reinsurance group Munich Re, French banks Societe Generale and BNP Paribas, and some pension funds, are among those who have reportedly agreed to sign up.
Some small pension funds had apparently refused to back the swap, while others said they would wait to see what hedge funds decided.
The European Union (EU) and International Monetary Fund (IMF) have said without a debt swap Greece will not get its latest bailout of 130bn euros.
The head of the Institute of International Finance (IIF), the body which has been leading the debt talks for large private creditors, said on Thursday he was expecting a "very high" take-up.
Speaking from Rio de Janeiro, Charles Dallara, IIF managing director, said: "The investors must know that there is no other alternative to this process, there is no more money to save Greece.
"It's a positive deal that will allow Greece to move into the next phase of rebuilding its economy."
Had the deal had not been agreed, Greece would not have the money to meet a big bond repayment due on March 20.
The IIF says this would have cost the European economy up to a trillion euros.
The hope now is that by slashing its overall debts, Greece, which is in its fifth year of recession, can gradually return to growth.
Figures released on Thursday showed the number of people out of work in the country shot up to a record 21% in December.
Youth unemployment has also exceeded 50% for the first time, with 51.1% of Greeks aged between 15 and 24 now out of work.
The next bailout will be on top of the 109bn euros (£91m) loaned to Athens by the EU and IMF in 2010.
" The World's population will grow from 7 billion to 8.3 billion people over the next decade. Meanwhile, arable land across the world will shrink and living standards will continue to rise, with the OECD projecting 3 billion new middle class consumers over the next 20 years. Many of these people will change their diets in favour of more animal protein. Livestock is quite inefficient in terms of converting grain to energy, so the pressure on farmers to deliver more produce will be immense.
We conclude that agriculture should be represented in every long-term portfolio, but farm land has already risen a lot in value. Are there other and better ways to be exposed to agriculture? These and other questions are addressed in this month's Absolute Return Letter. "
We conclude that agriculture should be represented in every long-term portfolio, but farm land has already risen a lot in value. Are there other and better ways to be exposed to agriculture? These and other questions are addressed in this month's Absolute Return Letter. "
