Banks are still 'too big to fail', says SNB chairman

Swiss National Bank SNB Chairman Thomas Jordan speaks to media during a news conference in Bern June 20, 2013.

Credit: Reuters/Ruben Sprich

ZURICH | Sat Sep 14, 2013 4:34am EDT

ZURICH (Reuters) - More still needs to be done to let global banks be wound down without harming the wider economy, Swiss National Bank Chairman Thomas Jordan said in a newspaper interview published on Saturday.

"The too-big-to-fail problem is not yet fully solved," Jordan told Finanz und Wirtschaft.

Authorities have been grappling since the collapse of U.S. investment bank Lehman Brothers five years ago with the question of how banks regarded as systemically important, or too-big-to-fail, can be recapitalized without causing panic or needing taxpayer cash.

After Switzerland's biggest bank UBS (UBSN.VX) had to be bailed out by the government in 2008, Swiss regulators have implemented tough new capital requirements for banks, which go beyond the rules stipulated by Basel III.

"If the winding down isn't possible then the buffers will have to be raised accordingly," said Jordan, adding there were several possibilities including contingent-convertible bonds.

In its yearly stability report published in June, the SNB urged UBS (UBSN.VX) and Credit Suisse (CSGN.VX) to further improve their leverage ratios. The Swiss financial market regulator requires a leverage ratio of 4.3 percent by 2019.

"What matters now is that banks implement the respective requirements consistently and rapidly," Jordan said. "Whether further measures will be necessary depends above all on whether the goal of an orderly winding down of major international banks is achieved."

Jordan said he did not think it would be better to separate investment banking from retail banks.

"As long as banks have sufficiently high equity capital and a structure that lets them be unwound at their disposal, they can choose their preferred business strategy themselves," he said.

(Reporting by Caroline Copley; Editing by Alison Williams)

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Summers cancels Citi events, while Fed chief decision pending

Senior White House economic adviser Lawrence Summers speaks during an interview with Reuters in Washington, June 24, 2010.

Credit: Reuters/Molly Riley

By P.J. Huffstutter

CHICAGO | Sat Sep 14, 2013 5:11pm EDT

CHICAGO (Reuters) - Former Treasury Secretary Lawrence Summers has pulled out of speaking engagements and other events involving Citigroup Inc while President Barack Obama considers whether to nominate the Harvard economist as the next chairman of the Federal Reserve, the bank said in a statement.

"Mr. Summers has withdrawn from participation in all Citi events while he is under consideration to be Chairman of the Federal Reserve," Danielle Romero-Apsilos, a spokeswoman for the third-biggest U.S. lender, said in a statement e-mailed to Reuters on Saturday.

Summers, a former economic adviser to Obama, has bowed out of a keynote address on global economic challenges at a Citigroup research seminar next month, according to a Bloomberg report.

While Summers is widely thought to be Obama's preferred choice to replace Fed Chairman Ben Bernanke when his term is up in January, an unusually vitriolic public debate has erupted over that possibility in recent months.

The White House said on Friday that the president had not yet made up his mind on who should lead the U.S. central bank - a decision that traditionally has generated little interest beyond Wall Street and academia.

But since Summers emerged as a lead contender for the job this summer, his history as a consultant to large financial institutions including Citigroup has fueled debate among critics and lawmakers about his suitability for the top Fed job.

Summers has been praised as a brilliant economist and a shrewd policymaker. But his work with financial firms has critics maintaining that his relationship with Wall Street is too cozy to maintain the Fed's vaunted independence.

The central bank plays a key role in guiding the world's largest economy and has taken on new oversight responsibilities following the worst U.S. financial crisis since the Great Depression.

Summers, who has also been paid to write a column for Reuters, was a key economic adviser to Obama in his 2008 campaign as well as during his first term. After heading the White House National Economic Council, he left the administration in 2010 to pursue a career in the private sector.

Some Democrats are not happy with Summers, who served as Treasury secretary under President Bill Clinton, because he backed banking deregulation in the 1990s, which they believe sowed the seeds for the 2007-2009 financial crisis.

The financial crisis led to a massive taxpayer bailout of Wall Street that continues to anger many ordinary Americans and could become another issue for Summers.

Four Democrats on the Senate Banking Committee are now expected to vote "No" if Obama nominates Summers as the next chair of the Federal Reserve, further complicating one of the most vital decisions of his second term.

Fed Vice Chair Janet Yellen is also a candidate for the job.

A letter urging her nomination has been signed by 20 Senate Democrats. If nominated and confirmed, Yellen would be the first-ever woman to lead the U.S. central bank.

(Reporting By P.J. Huffstutter in Chicago. Additional reporting by Alister Bull, Mark Felsenthal and Rachelle Younglai in Washington.)

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SEC denies rejecting settlement over money fund that 'broke the buck'

By Casey Sullivan and Nate Raymond

Sat Sep 14, 2013 5:31pm EDT

n">(Reuters) - The U.S. Securities and Exchange Commission denied Saturday that the commission had rejected a proposed settlement with managers of a large money market fund that "broke the buck" during the 2008 financial crisis, saying their negotiations never reached that point of consideration.

SEC lawyer Nancy Brown, in a brief court filing, said lawyers for defendants including Reserve Management Co. made a "misstatement" when claiming they had reached a settlement in principle with the regulator at the end of August, only to learn on September 5, that the SEC subsequently rejected it.

The claim that the SEC rejected a settlement with the money managers was made by John Dellaportas, a lawyer for the defendants. Dellaportas made the claim in a September 5 court filing and complained that the commission's "sudden refusal to settle" harmed fund shareholders with additional delays and costs.

"Today, much to our surprise, we were informed that, not only had the Commission rejected the proposed settlement agreement in principle that had been negotiated between defendants and the SEC staff, but it was also unwilling to settle with defendants on any other terms," he wrote, italicizing the last four words for effect.

The alleged breakdown was viewed as significant because it could derail a separate accord reached last week in which the founder of the fund, Bruce Bent Sr, and others agreed to settle a class-action lawsuit by the fund's investors.

Brown, the lawyer for the SEC, countered on Saturday.

"Contrary to their contention that a settlement had been considered and rejected by the Commission, the parties' negotiations never reached the point at which a proposal was submitted to the Commission for its consideration," said Brown in the filing.

Later on Saturday, Dellaportas filed a court letter in response to Brown and detailed the settlement discussions between the SEC and defendants along with his colleague Robert Romano.

"On September 5, the staff called Mr. Romano and advised him that "the Commission" would not be settling on the terms to which we had previously agreed, nor would it settle on any other terms," Dellaportas said in the filing.

A spokeswoman with the SEC did not respond to a request for comment. Brown did not respond either.

The case stems from events on September 16, 2008, when the net asset value of the $62 billion Reserve Primary Fund fell below the $1 per share it was designed to maintain.

Reserve Primary had held $785 million of debt from Lehman Brothers Holdings Inc, which went bankrupt the day before, and worries about the Lehman stake had spurred a flood of redemption requests that the fund could not meet.

Last November, a federal jury in New York cleared Bent and his son Bruce Bent II of civil fraud charges relating to the collapse, while finding the son liable for negligence.

The jury also found two corporate entities, Reserve Management and Resrv Partners Inc, liable on one count of securities fraud, and Reserve Management for violating a federal law governing investment advisers.

The SEC and the Reserve defendants had negotiated over issues left over from the trial, according to court filings.

The cases are SEC v. Reserve Management Co, U.S. District Court, Southern District of New York, No. 09-04346; and In re: The Reserve Primary Fund Securities & Derivative Class Action Litigation in the same court, No. 08-08060.

(Reporting By Casey Sullivan and Nate Raymond)

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Rosneft CEO says plans energy projects in Belarus: reports

Rosneft President and Chairman of the Management Board Igor Sechin smiles before a signing ceremony after talks with the Chinese delegation at the Kremlin in Moscow March 22, 2013.

Credit: Reuters/Sergei Karpukhin

MOSCOW | Sat Sep 14, 2013 11:25am EDT

MOSCOW (Reuters) - Igor Sechin, the head of oil giant Rosneft (ROSN.MM), says it is planning energy projects in Belarus, Russian media reported on Saturday, a sign the close Kremlin ally will not let a potash dispute undermine the Russian state firm's business in Belarus.

The collapse of a potash trading agreement in July triggered a diplomatic spat between Russia and its ex-Soviet ally, including Belarus's arrest of the head of Russian fertilizer firm Uralkali (URKA.MM).

The arrest put a new strain on the close but sometimes tense relationship between Russia and Belarus, which relies on Moscow for energy supplies and financial help but is important to the Kremlin as a military and economic ally.

However, Sechin, who is a close confidant of Russian President Vladimir Putin, appears committed to maintaining strong business ties with Belarus, a lucrative market for Russian energy firms due to an export tax waiver.

"Of course we have plans (in Belarus) - there is talk of oil projects and of oil and gas projects," RIA Novosti news agency quoted Sechin as saying.

The potash disagreement will not impact Rosneft's Belarussian plans, Sechin added, according to RIA. "It doesn't affect us... we have stable, normal partners."

Reports that Uralkali's top shareholder Suleiman Kerimov, whom Belarus has accused of abuse of power, is selling his stake are likely to have been welcomed by Belarus, with one commentator suggesting a deal would secure the release of the firm's chief executive from prison.

Sechin's comments follow a meeting on Wednesday between him and authoritarian Belarussian President Alexander Lukashenko in Minsk and the news that Russia's oil pipeline monopoly Transneft would cut supplies less than previously planned, despite the need for repairs.

RIA reported on Saturday that Sechin said Rosneft, which accounts for around half of Russian oil flows to Belarus, was not planning on cutting its oil supplies to the country, although exports were hampered by infrastructure constraints.

State-controlled Rosneft will produce more oil in 2014 than the 206 million metric tons it forecasts it will pump this year, Sechin added.

Belarus arrested Uralkali's CEO, Vladislav Baumgertner, on August 26, charging him with abuse of office.

(Reporting by Alessandra Prentice; editing by James Jukwey)

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Drummond says Colombia mines, port to reopen after government ends strike

BOGOTA | Sat Sep 14, 2013 9:43pm EDT

BOGOTA (Reuters) - The Colombian operations of U.S.-based coal miner Drummond DRMND.UL will reopen on Saturday evening, the company said, after the government intervened to end more than seven weeks of strike action that shut down its two mines and port.

The stoppage halted about one-third of production by the world's No. 4 coal exporter and was the second major strike in Colombia's coal sector this year, cutting royalty revenues for the government and crimping economic growth.

"We should be returning to normality of work from the night shift of today, September 14th," the company said in a statement, listing the different groups of workers that would cover various shifts in the coming days.

On Friday, Colombia's Labor Ministry said it was sending the case to an arbitration tribunal after the majority of the company's 5,000 direct, non-contract employees voted to resolve the dispute that way.

No one at the Sintramienergetica union, which organized the strike, answered calls to confirm members were returning to their jobs. On Friday night, a union negotiator, Cesar Flores, said no official notification had been received from the government that it was ending the strike.

The strike added to disruption in an already turbulent year for Colombia's coal sector, with a month-long strike at its biggest miner, Cerrejon, in February and logistics problems that had affected rail transport and the loading of ships.

The Drummond stoppage has had little impact on coal prices however, with the global market well-supplied, a factor that has weighed on prices for most of this year. Coal for delivery to Europe (ARA) traded at $78 a ton on Friday.

Drummond exported 26 million tons of coal in 2012, about one-third of the national total. It had been expected to produce 32 million tons out of some 94 million tons of forecast national output in 2013, which would earn the nation about 900 billion pesos ($480 million) in royalties, the government has said, up from 700 billion pesos last year.

Those targets are likely to be jeopardized after two prolonged stoppages in a sector that accounts for about 2.4 percent of the Andean nation's gross domestic product.

The strike immediately shut down Drummond's exports since it included workers at its privately operated port as well as laborers at its two mines, Pribbenow and El Descanso, in the north of the country.

Workers represented by the Sintramienergetica union are demanding a pay increase above the 5 percent Drummond has offered, a fixed monthly salary instead of hourly pay and new jobs for 400 port workers who are to be made redundant next January with the introduction of direct conveyor-belt loading of ships.

In a proposed three-year pay deal posted on its website, Drummond said it was also offering workers a one-time 8.5 million peso ($4,400) bonus on signing the agreement.

(Reporting by Peter Murphy; Editing by Peter Cooney)

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Maternal PTSD linked to children's trauma

By Kathleen Raven

NEW YORK | Thu Sep 12, 2013 11:36am EDT

NEW YORK (Reuters Health) - The children of mothers with posttraumatic stress disorder (PTSD) may be at high risk of being traumatized themselves, according to a small new study in urban U.S. neighborhoods.

Inner-city kids whose mothers had PTSD experienced more traumatic events - such as neighborhood shootings, domestic violence, dog bites or car accidents - before age five than kids whose mothers were depressed or had no mental health issues, researchers found.

Mothers with a combination of PTSD and depression were also more likely to report psychologically or physically abusing their child, compared to mothers with just one of those disorders.

"The main take-home message is that when parents are suffering, their children suffer, too," said Dr. Howard Dubowitz, professor of pediatrics at University of Maryland School of Medicine in Baltimore.

"Those of us who are involved in helping to take care of kids can't ignore what problems mothers and fathers may be struggling with," added Dubowitz, who was not involved in the study.

Children exposed to trauma are themselves at greater risk of a mix of health challenges later on in life, such as obesity, drug and alcohol addictions, heart disease, suicide and mental health disorders, experts said.