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Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

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Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

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Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

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Barclays and HBOS: two banks, two different fates

Category : Business

Separate reports into the crises at two of Britain’s largest lenders revealed a common cause of their problems, but widely varying careers in the aftermath of the crash

In the early hours of 15 September 2008, as the US bank Lehman Brothers was collapsing, many feared the worst, and they were proved correct: markets crumbled and, in the coming days and weeks, so did some 30 banks around the world. But few would have guessed that, five years on, the fallout from that crisis would still be front-page news.

Last week, two reports into two banks that fared very differently after the crisis – Barclays and HBOS – were published, shedding light once more on a furious fight for survival in the dark days of 2008. Barclays succeeded and HBOS failed spectacularly.

What both banks had in common was that their problems were rooted in the phenomenal race for growth during the go-go years of the early 2000s. The traditional caution of bankers was thrown aside and a dash for expansion, fuelled by lending and financial engineering, took hold. Barclays moved into tax avoidance – its structured capital markets division generated more than £1bn in revenue in the four years to 2010 – and failed to stop its traders rigging the Libor interest rate, which eventually resulted in a £290m fine.

The two reports could not be more different. The 244 pages detailing the cultural crisis inside Barclays were commissioned by the bank itself, as a demonstration of its determination to clean up its act. It employed a lawyer – City grandee Anthony Salz, a director of the Scott Trust, which owns the Observer – to investigate how and why standards had hit rock bottom. Salz interviewed 600 individuals in nine months, although none is quoted even anonymously in the analysis.

On its way to making 34 recommendations, the report concludes that the bank overpaid its staff, chased an ambition to become a top five player at all cost and failed to make its 140,000 staff understand they worked for the same organisation. Barclays’ new chairman, Sir David Walker, who is writing a cheque for £17m to cover the costs of the review, described its contents as “uncomfortable reading at times”.

In contrast, the 96 pages on HBOS produced by the parliamentary commission on banking standards, whose members include MPs and peers and the new archbishop of Canterbury, was an excoriating attack on the incompetence of the three men at the bank’s helm. It pulled no punches and called for City regulators to conduct an investigation into whether the three – long-standing chairman Lord Stevenson, and chief executives Sir James Crosby and Andy Hornby – should be banned from the City for life. None has commented on the scathing attack on their “toxic” mistakes. Just how much the HBOS report has cost the taxpayer is unclear, but it will be a fraction of the Barclays bill.

HBOS did not survive the Lehman fallout: within three days it had been rescued by Lloyds TSB. A month later, it was bailed out with £20bn of taxpayers’ cash. Barclays did scrape through, but only by going cap in hand to Middle Eastern investors; the circumstances of that venture are now being investigated by the Serious Fraud Office. Salz describes this desperate battle to avoid a bailout as making Barclays look “too clever by half”, damaging its relationship with overstretched regulators and its own investors.

While HBOS was being rescued, Barclays was still chasing growth, snapping up the Wall Street operations of the collapsed Lehman Brothers – a move that Salz said added to the management challenges facing a bank that was already stretched.

Stories had circulated for years about splits inside Barclays. The high street tellers felt no link to Bob Diamond’s casino operations, which the report said had a win-at-all-costs attitude that came to dominate the organisation. Diamond’s chief operating officer, Paul Idzik, was infamous for his behaviour, which included cutting off people’s ties and snapping pens that did not bear the company logo.

But the Salz report shows the retail bank was not blameless either. Salz details a culture of fear that pervaded the division when it was run by the Dutchman Frits Seegers, who left suddenly in 2009. Sales targets were tough, and staff incentivised to push loans with profitable payment protection insurance (PPI) attached.

Diamond and Seegers were put in charge of the two big businesses inside Barclays by the then chief executive John Varley, who failed to prevent them running the two divisions as separate silos. Salz said that while this was not Varley’s intention, he had failed to create a “cohesive” top team.

Barclays’s new boss, Antony Jenkins, who is trying to reinvent the bank, is not entirely spared criticism either. It is not levelled directly at him, but Jenkins ran the Barclaycard operation that sold millions of pounds of useless PPI to cardholders.

At HBOS, there was no hope of surviving the Lehman fallout. In fact, the parliamentary report makes it clear that it would have gone bust even if there had been no financial crisis because of the £47bn of losses racked up in just three of its divisions.

Only one person – Peter Cummings, who ran the HBOS corporate lending arm – has so far faced any official sanction. At Barclays, the SFO continues to investigate former and current executives. But at HBOS, the chances of action seem slim. Crosby quit as an adviser to private equity group Bridgepoint after the report was published and is under pressure to relinquish his seat on the board at caterer Compass. Hornby has a top job at bookmaker Coral and Stevenson continues to hold directorships at the Tate and Glyndebourne. A three-year rule makes it difficult for City regulators to take any action against the trio.

In addition, the Financial Services Authority closed its enforcement investigation last year when Cummings was fined – even though it is yet to publish its own report into the catastrophe.

Pre-Marketing: Should Oracle finally buy HP?

Category : Business

Also: Lehman selling Archstone for $6.5 billion. And what the SEC’s Mary Schapiro leaves behind.

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Pioneer of money market funds cleared of fraud

Category : Business, Stocks

The heads of a top money market fund which broke the buck in the wake of the Lehman Brothers bankruptcy had been charged by the SEC with misleading investors.

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The trustee for Lehman Brothers’ U.S. brokerage and the overseers of its European arm have ended a long-running dispute of claim and counter-claim after the U.S. brokerage agreed to pay the European ops $12B that the latter will pay to its creditors….

Category : Stocks

The trustee for Lehman Brothers’ U.S. brokerage and the overseers of its European arm have ended a long-running dispute of claim and counter-claim after the U.S. brokerage agreed to pay the European ops $12B that the latter will pay to its creditors. The deal should speed up recoveries for Lehman’s customers, as well as its creditors. Post your comment!

Originally posted here: The trustee for Lehman Brothers’ U.S. brokerage and the overseers of its European arm have ended a long-running dispute of claim and counter-claim after the U.S. brokerage agreed to pay the European ops $12B that the latter will pay to its creditors….

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How to survive a Wall Street meltdown

Category : Business

The bankruptcy of Lehman Brothers almost killed Neuberger Berman. Can the company succeed now by embracing Lehman’s global ambitions?

Visit link: How to survive a Wall Street meltdown

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Nomura to cut equities and investment banking in strategic reset

Category : Business

Japanese group’s cost-cutting will be part of new strategic blueprint being mapped out by new CEO

Nomura Holdings is finalising plans to cut hundreds of jobs, mainly in equities and investment banking, in an overhaul aimed at restoring its overseas operations to profitability, people with knowledge of the planning within Japan’s largest brokerage said.

The cost-cutting will be part of a new strategic blueprint for Nomura being mapped out by Koji Nagai, who took over as CEO this month and has promised to rebuild the investment bank from the “ground up” after an insider trading scandal that forced the resignation of its top two executives.

While the size and scope of the streamlining are still being debated, one analyst estimated Nomura could target $750m (£475m)in annual cost savings, on top of a nearly completed $ cost-cutting drive. The plan will be made public early next month, according to people with knowledge of the matter who declined to be identified ahead of an official announcement.

Executives are looking to focus the cuts in cash equities, a business hit hard by the industry-wide slump in trading volumes but one that Nomura, which ranks among the top players in London, has trumpeted as a strength.

Investment banking positions outside a set of sectors identified as strategic are also at the front of the line for cuts, the sources said. Nomura declined to comment.

Nomura’s European operation, which employs about 4,000 people and generated 76bn yen, or $970m, in losses over the past year as the region slipped into its ongoing debt crisis, will account for the largest portion of the cuts. But Asia outside Japan and the Americas will be impacted as well.

“If you look at our earnings and the economic environment, it’s obvious what needs to be done in terms of geography and business lines,” a senior executive said.

Nagai and new CEO Atsushi Yoshikawa are keen to send a signal that they are not out to retreat from Nomura’s global ambitions. Nomura acquired the European and Asian operations of stricken Lehman Brothers in 2008 and has built out its operations in the United States on its own.

The plan will also highlight a shift in resources to more promising areas, such as fixed income, where it has been able to build market share and deliver consistent results. Nomura has made several key appointments in the past few months to shore up the business following the departure of ex-Lehman executive and wholesale division head Jasjit Bhattal in January.

Nomura CEO to quit over insider trading scandal

Category : Business

Shakeup comes a month after bank cut pay for both top executives in response to third insider trading scandal in four years

Nomura, Japan’s top investment bank, will appoint its securities unit head Koji Nagai as its new chief executive after Kenichi Watanabe quit to take responsibility for an insider trading scandal.

People with knowledge of the situation had earlier said the resignations of Watanabe and his top lieutenant, Takumi Shibata, were approved at a board meeting on Thursday morning.

The departure of the architects of Nomura’s takeover of the Asian and European assets of Lehman Brothers raises questions about the future of the global expansion strategy they pursued.

Nagai, a three-decade company veteran, took over that unit in April as part of a management reshuffle.

Nomura’s shakeup comes a month after the bank cut pay for both of its top executives in response to the third insider trading scandal since Watanabe, who joined the bank in 1975, took the helm four years ago.

“When you look at their history, the number of scandals, this was the last straw,” said Jim Sinegal, an analyst with Morningstar research house.

At the start of a news briefing on the results, the CFO Junko Nakagawa apologised for the insider trading scandal and promised to bolster internal controls. She and three other executives bowed in apology.

“I can’t say that there is no impact on our earnings,” she said. “It is difficult at this stage to numerically estimate the possible damage. All we want to do is make efforts to regain trust.”

The resignation of Watanabe, 59, had been expected by many inside Nomura since signs emerged that the bank’s leadership was at loggerheads with Japan’s financial regulators, which accused Nomura of being slow to respond to an investigation into insider trading practices that had grown rampant in the Tokyo market.

The turmoil comes as the industry globally finds itself under huge financial and regulatory pressure.

Investment banks have been hammered both by falling trading and advisory income as clients pull back from markets because of the eurozone debt crisis, and by political calls for a change in their culture after a string of scandals, most recently over the fixing of Libor.

Watanabe and Shibata, Nomura’s chief operating officer, oversaw the troubled 2008 attempt to absorb assets of the failed US bank Lehman Brothers and a key question for their successors will be whether to follow their ambitious plans for worldwide expansion.

That strategy was dealt a blow earlier this year with the abrupt departure of Jasjit Bhattal, Lehman’s former Asia Pacific CEO who helped broker the deal, and who had been seen as a possible successor to Watanabe.

Moody’s Investors Service cut its debt rating on Nomura to one notch above speculative or “junk” grade in March, citing concerns about the long-term profitability of its overseas operations.

Nomura booked a pretax loss of ¥12.1bn (£99m) in the latest quarter overseas, but that was about half the loss in the previous quarter – suggesting the cost-cutting plan is starting to bear some fruit.

The scandal that brought down the bank’s leaders dates back to 2010. Nomura has confirmed it was the source of leaks on planned share offerings by the energy firm Inpex, Mizuho Financial Group and Tokyo Electric Power.

In all three cases, employees in its institutional sales department provided the tipoffs.

A panel of attorneys brought in by Nomura to investigate the insider trading cases said it found equity sales staff would regularly pump colleagues for inside information about upcoming stock offerings and then share tips with investors.

Watanabe’s decision to step down was welcomed by Tsutomu Okubo, the lead director of a ruling Democratic party of Japan committee that has been crafting stronger insider trading rules.

“I applaud Watanabe’s resignation from the perspective that it is aimed at leading to a reform of the securities industry,” Okubo told reporters.

Nomura, Japan’s largest brokerage, is awaiting possible sanctions from Japan’s Financial Services Agency but the scandal has already cost it clients.

Some asset managers have stopped trading with the firm to meet their own compliance rules and it has lost underwriting business, including being left off the government’s sale of $6bn worth of Japan Tobacco shares.

Shares of Nomura have fallen in value by more than a third since the first insider trading case emerged in March.

Scandals have forced Nomura to change executive leadership twice since the collapse of Japan’s asset bubble. In 1991, the then president Yoshihisa Tabuchi resigned after the brokerage admitted to compensating favoured clients for stock losses.

In 1997, Hideo Sakamaki stepped down as president after the bank was found to have channelled more than $3m to a gangster in order to keep him from raising trouble at its 1995 shareholder meeting.

David Einhorn Folds ‘Em: Dell, Best Buy Gone

Category : Business, Stocks

NEW YORK (TheStreet) –”You gotta know when to hold ‘em. Know when to fold ‘em.” — Kenny Rogers.

Hedge fund manager and part-time poker player David Einhorn has followed that advice, cutting his positions in Best Buy and Dell, he told investors in a letter today.

The Greenlight Capital manager, known for his short positions in Lehman Brothers and Green Mountain Coffee Roasters, noted that the investments in the two companies underperformed, and it was time to move on. …

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A Barclays split would only resurrect Lehman

Category : Business

A breakup of Barclays would essentially bring Lehman Brothers back from the grave, sending Wall Street in the wrong direction.

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Big banks are big mess. Run away!

Category : Business

With concerns about the U.S. job market resurfacing, there are legitimate worries that credit quality could start to decline. And we still don’t know with any certainty whether big banks can withstand a chaotic Lehman-like event in Europe.

See the original post: Big banks are big mess. Run away!

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