Forex School - Forex Learning » Banks

Irish banks look beyond “bad bank,” recession

admin — Wed, 31 Mar 2010 09:47:49 +0000

DUBLIN (Reuters) – Bank of Ireland will raise from private sources much of the 2.7 billion euros ($3.6 billion) it needs, potentially becoming the only member of Ireland’s “bad bank” scheme to escape a fresh bailout.

Asian Markets

The bank’s statement on Wednesday that it was in fundraising talks with investment banks is a relief for the Irish government, which faces years of scrimping to plug a black hole created by the profligate financial sector.

The heaviest losses of all stem from now nationalized Anglo Irish Bank, which on Wednesday confirmed weeks of speculation by announcing a loss of 12.7 billion in the 15 months to December, the deepest shortfall in Irish corporate history.

The bank needs up to 18 billion euros of fresh state capital, almost as much as Dublin borrows in a year to fund its budget deficit.

Prospects for Bank of Ireland were relatively rosy and its shares jumped more than 24 percent after it said loan losses had peaked and it was in talks to raise capital to compensate for poor returns on property loan sales to the bad bank, the National Asset Management Agency (NAMA).

Ireland’s biggest bank by market value will privately raise about half of the capital it requires to provide a buffer against future losses. The state will convert some of its 3.5 billion euros of preference shares into ordinary equity but should not have to underwrite the rights issue.

“It’s not a proud boast to say you’re least worst… Relative to performance that kind of an issue is not something we take a lot of comfort out of,” Richie Boucher, CEO of Bank of Ireland, told a news conference.

Referring to the scale of property losses other banks were exposed to, he said: “I think the level of debt and exposures is pretty big, it’s pretty frightening.”

The problem all the Irish banks face will be competing for business in Ireland’s shrunken domestic banking sector.

In all, the three banks and two building societies involved in the bad bank scheme require at least 22 billion euros, with a possible further 10 billion for Anglo Irish at a future date.

The listed bank with the biggest capital problems, Allied Irish Banks (AIB) has been given time to try and sell assets before getting a fresh bailout, but some analysts still think it could end up 75 percent owned by the state.

AIB shares remained under pressure on Wednesday, falling 2.8 percent as it continued to digest Tuesday’s flood of announcements on the level of discounts NAMA will pay to take on property loans and the consequences for banks’ capitalization.

“They’re not in a good position, but at least people know. Investors are looking at the clarity of what they have to do,” one trader said of Allied Irish. “For Bank of Ireland, there’s a half decent underlying operating base.”

Bank of Ireland is selling the first tranche of its loans to NAMA at a discount of 35 percent and said the discount on the whole 12 billion euro portfolio will be in line with its previous guidance which pointed to a lower discount.

On Wednesday, it also reported an underlying loss of 1.47 billion euros for the nine months to the end of December, having shifted the end of its fiscal year to match the calendar year.

EFFORTS TO CUT

The injections into Anglo and two building societies take the form of promissory notes, in effect not paid for up to 15 years, which means it should not hold up Ireland’s efforts to cut what is one of Europe’s biggest deficits as a ratio of gross domestic product (GDP).

“But the cost of cleaning up Anglo may add 20 billion euros, about 12 percent of 2010 GDP, to government debt over 10 to 15 years,” Chief Economist Rossa White at brokerage Davy said.

The Irish government has insisted the cost is manageable, saying it has stabilized its economy with a series of public sector cuts announced in last December’s budget.

Ireland’s fiscal measures have done much to reassure international investors, who have compared the country favorably with Europe’s other struggling nations. The challenge is to maintain fiscal discipline.

“The magnitude of the financial problems is absolutely vast,” said Jim Power of financial services firm Friends First. “The budgetary medicine over the next few years is going to be extremely hard to swallow. Provided the government continues to address the problem, we should scrape through.”

The latest economic data on Wednesday added to the evidence Ireland’s economy is stabilizing at a low level. The number claiming unemployment increased by only 600 in March and the decline in private lending accelerated only marginally from 7.1 percent to 7.3 percent.

Finance Minister Brian Lenihan has said Ireland should begin emerging from recession late this year.

Bank of Ireland shares rose 24 percent to 1.60 euros by 1450 GMT, after rising as high as 1.7 euros. The stock has bounced from a low of 0.12 euros set a year ago but languishes well below a peak of 18.83 euros seen in early 2007.

(Additional reporting by Padraic Halpin and Barbara Lewis; Editing by David Holmes and Jon Loades-Carter)

($1=.7403 Euro)

Asian Markets

feeds.reuters.com

China banks absorbed $170 billion FX swaps in ‘09: report

admin — Wed, 03 Mar 2010 00:57:36 +0000

Chinese commercial banks absorbed about $170 billion in foreign exchange from the financial system last year, mainly through yuan-dollar swaps, state media on Wednesday cited a former official as saying.
The Shanghai Securities News cited Xu Shanda, former deputy head of the State Administration of Taxation, as saying that the State Administration of Foreign Exchange (SAFE), the foreign exchange regulator, absorbed about 1 trillion yuan through the swaps in 2009.
Xu estimated that such swaps could exceed $500 billion this year, thereby taking some 3 trillion yuan out of the financial system, but did not say how he had arrived at that estimate.
The central bank started conducting such yuan-dollar swaps in late 2005, but maintains tight secrecy over its activity in the market, partly because it does not want prices quoted for the swaps to lead to speculation over yuan appreciation.
SAFE is an arm of the central bank and is in charge of foreign exchange policy and managing the country’s $2.4 trillion in foreign reserves.
Authorities have been struggling to absorb a massive amount of yuan liquidity that has flowed into the interbank market as a result of inflows of foreign exchange from the trade surplus, foreign investment and speculative capital.
It has so far raised banks’ required reserves twice this year and has stepped up its sterilization of such inflows through its open market operations, draining a net total of about 193 billion yuan so far this year.
Xu said that stepping up forex swaps would be a better way of absorbing such liquidity than increases in banks’ required reserves, but did not specify why.

feeds.reuters.com

Asia shares up, banks shrug off China policy move

admin — Tue, 16 Feb 2010 22:33:40 +0000

Asia shares up, banks shrug off China policy move
Asian shares leapt to a three-week high on Wednesday, powered by financial and resource shares after investors bought commodities on a weaker dollar, while Hong Kong shares shrugged off China’s latest move to temper robust lending.
The Hang Seng rose 1.8 percent after a long Lunar New Year holiday break, with Chinese bank stocks such as Bank of China surging in reaction to Friday’s surprise hike in bank reserve requirements by Beijing as it tries to moderate credit growth and inflationary pressures.
The announcement, which came on the heels of a similar move last month and was earlier than expected, had rattled markets on Friday by raising investors’ fears that tighter policies in the world’s third-largest economy would be more aggressive than thought and may damage global growth.
By the time Hong Kong stocks opened on Wednesday much of the initial excitement appeared to have dissipated.
“It seems that the market has already factored in the reserve ratio requirement increases,” said Castor Pang, research director at Cinda International. “The Hang Seng and the A share market have dropped too much recently.”
Shanghai markets remain shut this week.
Shares in Europe were set to extend gains, with Britain’s FTSE 100 to open up as much as 0.6 percent and France’s CAC to open up as much as 0.9 percent, financial bookmakers said.
Japan’s benchmark Nikkei average gained 2.7 percent for its biggest one-day percentage gain since December 3, but trading volume was one of the thinnest this year, with market players unsure how long the rebound will last.
The MSCI index of Asian shares outside Japan rose 1.8 percent, touching its highest level in three weeks.
Resource shares gained after copper led a rally across the broader base metals complex on Tuesday as the dollar stumbled and as equities markets recovered from a sell-off in recent weeks that was triggered by growing debt problems in Greece and fears that the global economic recovery was losing momentum.
U.S. stocks posted gains of as much as 1.8 percent overnight as traders returned from a three-day break, helped by strong New York State factory data and gains in Europe, where shares were buoyed by upbeat results from UK bank Barclays.
“There’s a bit more of a shift to riskier assets, especially those linked to commodities, and this may continue for a day or two,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management in Tokyo.
“There’s no question that the U.S. economy is improving, especially if you look at indicators, although this does raise the question of when we could expect an interest rate hike.”
Toyota Motor was flat after U.S. regulators opened an investigation into whether it had acted in a timely way to recall cars for acceleration problems. The automaker also moved to slow its U.S. production.
In Seoul, shares rose 1.7 percent as the U.S. data fueled foreign buying of financial and technology stocks, but a fall in the dollar and strengthening in the won limited gains in Hyundai Motor and other exporters.
In the afternoon, South Korea’s foreign exchange authorities were buying dollars to curb the won’s strength.
Australian stocks rallied 2.2 percent, the biggest one-day gain in two-and-a-half months.
Top miners BHP Billiton and Rio Tinto climbed 2.1 and 3.3 percent respectively as investors eyeing strong growth in Asia piled into industrial metals.
The dollar index, a gauge of its strength against six other major currencies, was unchanged from late U.S. levels after shedding 0.8 percent the previous session and hitting its lowest level in a week. It was the biggest one-day fall since November.
The euro held steady after surging 1.3 percent against the dollar on Tuesday. Investors were still cautious, however, wary that Greece’s debt problems have yet to be solved, and the euro remains highly sensitive to more negative fiscal news.
It was trading at $1.3769, steady on the day and well above last week’s nine-month low of $1.3532.
Gold prices steadied near two-week highs, with spot gold at $1,119 an ounce.
U.S. crude futures edged higher above $77 a barrel.
in TOKYO,

feeds.reuters.com

G7 agrees banks must help pay crisis costs

admin — Sat, 06 Feb 2010 13:56:03 +0000

IQALUIT, Canada (Reuters) -
Group of Seven officials agree banks must contribute toward the cost of dealing with the financial crisis but have not agreed on how they should pay, a German official said on Saturday.
“There is a consensus that banks themselves have to contribute to pay for the financial burden of the crisis,” the official said, speaking on condition of anonymity.
But he said there was no agreement on exactly what form payments should take.
The British government has announced a 50 percent levy on large bonuses at banks to help cover the cost of the crisis.
U.S. lawmakers have been slower to move on taxing bonuses. President Barack Obama in January proposed a fee on the largest financial companies to recoup expected taxpayer losses associated with the bailouts.
The German official said Canada, which did not have to bail out its banks during the crisis, had put forward ideas on strengthening lenders and broader financial market reform.
“Canada has made a proposal, in which three points have been lined out, and which were supported. The first issue is that of capital rules,” the official said.
“The second is to recreate a transparent securitization market. And the third is the sector of market infrastructure especially for derivatives.”
A revival of the securitization market could play a key role in supporting the global economic recovery.
Securitization of subprime mortgages, in which home loans are bundled and sold onto the secondary debt market as securities, helped inflate the U.S. real estate bubble that burst in 2007-2008, triggering the financial crisis.
Since then, the securitized mortgage debt market has been flat on its back, kept alive largely by government support, with bankers and regulators searching for ways to revive it.
President Obama, seeking to make lenders more concerned about the repayment potential of loans they make, wants to require that they keep on their books a minimum percentage of the loans that they securitize.
The U.S. Congress so far has backed Obama’s so-called “skin in the game” rule, and is debating other measures that would require clearer disclosure of the risks inherent in often complex securitized debt instruments traded on the markets.
The German official also said Finance Minister Wolfgang Schaeuble has invited his G7 counterparts to a May 20 meeting in Berlin on financial system regulation.
The conference, hosted by Schaeuble and attended by Chancellor Angela Merkel, is being attended by central bankers, regulatory authorities and academics.
The gathering will “work toward an integrated global framework in order to provide a level playing field,” according to the invitation letter Schaeuble sent to his G7 colleagues.
It will also aim to “review achievements made so far, and to gather a new political momentum to address the remaining challenges ahead.”

feeds.reuters.com

Currencies ahead of central banks rate decisions

admin — Sat, 06 Feb 2010 09:21:59 +0000

Thu, Feb 4 2010, 11:59 GMT
by ecPulse.com analysis team
The dollar is gaining massive grounds in markets, as investors are avoiding higher yielding assets, which once again supports the dollar to rise versus majors since once again there are worries in marketsregarding the global recovery taking longer than presumed to occur, especially since European economies are having a hard time to try and lower their deficits. The Dollar Index, which usually measures strength of the dollar versus six major currencies, is currently traded at 79.59 while recording a high of 79.70 and a low of 79.34.
Today is a big day in the euro zone,where the ECB will announce interest rates, whereexpectations show that they will remain steady at 1.00%; while later on in the day, President Jean-Claude Trichet will give speak at press conference stating the latest economic progress. Currently, we see that the EUR/USD is being traded at 1.3845 between the support of 1.3800 and the resistance of 1.3925, while so far recording a low of 1.3825 and a high of 1.3902. The momentum indicators on the one-hour charts are showing us a downwards trend, while the pair trades close to an oversold area.
The Bank of England today is scheduled to announce their rate decision, in which expectations show will leave them steady at 0.50 percent, the lowest since the bank’s foundation in 1694. Also, the pound like the euro is plummeting versus the federal currency based on the fears in markets; the pair is currently traded at 1.5847, while recording a high of 1.5917 and a low of 1.5822. For the GBP/USD we see that there is a support at 1.5800 and a resistance at 1.5910, while here also we see that the pair is being traded in an oversold area.
Turning to the yen, we see that it is a different story as it rises past the dollar especially after retail sales in Australia unexpectedly fell, while unemployment rates in New Zealand soared to the highest level since 1999; therefore increasing the appeal of the yen as a refuge. The USD/JPY is being traded at 90.59 between the support of 90.20 and the resistance of 91.30, while recording a high of 91.07 and a low of 90.58.

fxstreet.com

World stocks tumble as Obama targets banks (AP)

admin — Fri, 22 Jan 2010 19:11:55 +0000

LONDON – World markets fell Friday, led by bank stocks after
to avert future financial crises.
or cost taxpayer money in bailouts.
The announcement spooked investors, causing a sell-off in Europe after sharper falls in the U.S. and Asia.
Britain’s FTSE 100 stock index was down 1.0 percent at 5,280.82 and
shed 1.0 percent to 5,691.31.
’s CAC-40 lost 1.0 percent to 3,823.01.
Wall Street fell for a third day on the open, with the
down 0.6 percent at 10,330.18 and the Standard & Poor’s 500 index down 0.5 percent at 1,110.87.
’s recent moves to prevent its economy from overheating amid worries of inflation and asset bubbles.
Bank stocks were hit hardest, with Barclays Plc down 5.8 percent,
3.8 percent and
4.2 percent lower.
Adding to the uncertainty are questions about whether this year’s economic prospects justify more gains after the run-up in stock prices that began in early 2009, said Mark Matthews, strategist at Macquarie Capital Securities in
.
Last year “was such an amazing ride and people are starting to wonder if the recovery that we’re seeing in 2010 was already priced in,” Matthews said.
Upbeat earnings from McDonald’s,
and Kimberly-Clark failed to reassure investors, who moved to cash in on their gains on a 10-month rally in equities.
In Europe, attention remained focused on the debt problems of Greece, with officials stressing the country will not need a bailout but will manage its funding on the market. The possibility that other countries, such as Portugal or
, could also have trouble handling their debt has kept markets on edge, pushing the euro to 5-month lows against the dollar.
The euro recovered somewhat on Friday, to $1.4118 from $1.4082 late Thursday. The dollar weakened to 90.25 yen from 90.49 yen.
In the U.K., officials statistics confirmed that British consumers splurged on food and drink during the holidays, with retail sales rising 3.6 percent in December. The rise, however, was not a strong as some analysts expected, suggesting recovery from recession will be gradual.
In Asia earlier,
led the drop, with the
stock average diving 2.6 percent to 10,590.55.
dropped 0.7 percent to 20,726.18 and Korea’s main market index lost 2.2 percent to 1,684.35.
Elsewhere, China’s Shanghai benchmark fell 1 percent, India’s Sensex shed 1 percent and Australian stocks retreated 1.6 percent.
While banks in the U.S. fell steeply, shares in
performed better, with many closing the session higher. Japanese lender
edged up 0.2 percent and China’s ICBC gained 2.3 percent in
. Other industries like commodities suffered big drops as concerns about future global demand prompted investors to scale back their riskier bets.
edged lower, with benchmark crude for March delivery down 40 cents at $75.68 a barrel. The contract dropped $1.66 to settle at $76.08 overnight.
AP Business Writer Jeremiah Marquez contributed to this report from Hong Kong.

us.rd.yahoo.com

Obama threatens fight with banks on new risk rules

admin — Fri, 22 Jan 2010 01:49:36 +0000

WASHINGTON (Reuters) – President Barack Obama threatened to fight Wall Street banks on Thursday with new proposals to limit financial risk taking, sending stocks and the dollar tumbling.
Obama, a Democrat who is struggling to advance his agenda after a key election loss this week, laid out rules to restrict some banks’ most lucrative operations, which he blamed for helping to cause the financial crisis.
“If these folks want a fight, it’s a fight I’m ready to have,” Obama told reporters at the White House, flanked by his top economic advisers and lawmakers.
“We should no longer allow banks to stray too far from their central mission of serving their customers,” he said.
After a mixed first year as president, Obama took a tough, populist-tinged stance aimed at revving up his political base by exploiting anger over Wall Street excess.
The proposals, which need congressional approval, would prevent banks or financial institutions that own banks from investing in, owning or sponsoring a hedge fund or private equity fund.
They also would set a new limit on banks’ size in relation to the overall financial sector that would take into account deposits — which are already capped — as well as liabilities and other non-deposit funding sources.
Financial sources said Treasury Secretary Timothy Geithner had hesitations about the proposals, concerned that good economic policy was being sacrificed for politics. But a White House official said the plan had the unanimous backing of Obama’s economic team.
Geithner told the PBS program “NewsHour” it is not in the national interest to allow the financial industry to keep conducting business as usual.
“Our financial system today is still operating under the same rules that helped create this crisis. And we need to move with Congress to change that system,” he said.
The proposed rules also would bar institutions from proprietary trading operations, unrelated to serving customers, for their own profit.
Proprietary trading involves firms making bets on financial markets with their own money rather than executing a trade for a client. These expert trading operations, which can bet on stocks and other financial instruments to rise or fall, have been enormously profitable for the banks but can hold huge risks for the financial system if the bets go wrong.
The White House blames the practice for helping to nearly bring down the U.S. financial system in 2008.
The White House said it wants to coordinate with international allies in its implementation of the measures.
Big financial institutions criticized Obama’s move.
“Trading, proprietary or otherwise, did not lead to the financial crisis,” said Rob Nichols, president of the Financial Services Forum, a lobbying group for CEOs of firms such as Goldman Sachs and JPMorgan Chase.
He said the government should be focused on better risk management, corporate governance and other forms of regulatory oversight, “rather than arbitrarily banning certain activities, or setting arbitrary size limits.”
Obama’s move is the latest in a series to crack down on banks and follows a devastating political loss for his party in Massachusetts on Tuesday, when a Republican captured a U.S. Senate seat formerly held by the late Democratic Senator Edward Kennedy, potentially imperiling his domestic agenda.
Bank shares slid and the dollar fell against other currencies after Obama’s announcement.
JPMorgan fell 6.59 percent, helping push the Dow Jones Industrial average down 2 percent.
Citigroup Inc fell 5.49 percent and Bank of America Corp fell 6.19 percent while Goldman dropped 4.12 percent despite posting strong earnings on Thursday.
Ralph Fogel, investment strategist at Fogel Neale Partners in New York, said the move would have a major impact on big-name brokerage firms like Goldman Sachs and JPMorgan.
“If they stop prop trading, it will not only dry up liquidity in the market, but it will change the whole structure of Wall Street, of the whole trading community,” he said.
Underscoring the high level of public anger at banks, a majority of 1,006 Americans surveyed in a Thomson Reuters/Ipsos poll said executive pay was too high.
White House economic adviser Austan Goolsbee said the proposals were not designed to be punitive. He said they aimed to end the concept that some banks were “too big to fail” and to show that when such firms “mess up, they die.”
Before his announcement, Obama met with Paul Volcker, the former Federal Reserve chairman who heads his economic recovery advisory board and who favors putting curbs on big financial firms to limit their ability to do harm.
The House of Representatives approved a sweeping financial regulation reform bill on December 11 that included a provision that would empower regulators to restrict proprietary trading. The Senate has not yet acted on the matter.
,
,
,

feeds.reuters.com

Banks decline amid earnings, fee worries

admin — Tue, 12 Jan 2010 12:14:33 +0000

Banks decline amid earnings, fee worries
CHARLOTTE, North Carolina (Reuters) – U.S. bank stocks fell on Tuesday after reports that the Obama administration might charge banks more than $100 billion made investors worry about the sector’s profits.
Major U.S. banks’ stock prices saw deeper declines than their regional bank counterparts.
The Obama administration is considering charging the nation’s largest banks more than $100 billion to recoup losses from the Troubled Asset Relief Program.
“That’s a really big number for the banking industry, particularly the biggest banks, to swallow,” said Jefferson Harralson, a Keefe, Bruyette and Woods Inc analyst.
The proposed fee represents a steep payment for large banks already struggling to generate earnings and paying higher Federal Deposit Insurance Corp premiums, analysts said.
It would also come after many have already repaid billions of dollars in government bailout aid.
The KBW Bank Index .BKX — a leading sector index — declined 1.96 percent to 46.11 in Tuesday trading. The sell-off comes after a brief rally for bank stocks from the end of December through the early days of January.
“Some of these names got ahead of themselves,” said Jeff Davis, a bank analyst with FTN Equity Capital Markets.
The largest U.S. banks, like Bank of America Corp (
BAC.N
JPM.N
) posted stock price declines greater than 3 percent. Citigroup Inc’s (
C.N
) stock price dipped 2.75 percent.
Regional bank stocks posted smaller declines through mid-day. Regions Financial Corp (
RF.N
) declined 1.42 percent to $6.23, and Fifth Third Bancorp (
FITB.O
) traded at $11.05 per share, a 1.34 percent decline.
(Reporting by Joe Rauch. Editing by Robert MacMillan)

feeds.reuters.com

JAL bankruptcy proposed as option to banks: sources

admin — Sun, 27 Dec 2009 17:59:39 +0000

TOKYO (Reuters) – A state-backed turnaround fund may seek to put Japan Airlines Corp through bankruptcy court as part of a restructuring of the struggling carrier, two sources with knowledge of the matter said.
JAL applied in October to the Enterprise Turnaround Initiative Corp of Japan, a fund established this year to help revive firms with state-guaranteed loans. The ETIC will decide whether to support JAL as early as next month.
The ETIC has discussed with JAL’s creditors the possibility of using a Chapter 11-style bankruptcy procedure along with making fresh loans and investment, but has not ruled out a restructuring outside of bankruptcy court, the two sources said.
Government officials have said a court-led reorganization was a possibility but the state is at the same time wary of the potential disruption to air travel. JAL is Asia’s largest carrier by revenue and handles more than half of air traffic in Japan.
A bankruptcy could also complicate talks with American Airlines and Delta Air Lines, which are courting JAL with rival offers of investment to gain access to its network in Asia and closer ties on U.S.-Japan routes.
“If JAL really were to file for bankruptcy, that would cause chaos,” said Kotaro Toriumi, an airline analyst and professor at Josai International University. “At this moment I think the chance of a JAL bankruptcy is still quite small.”
In addition to ongoing talks with creditors, the ETIC met with JAL over the weekend and explained that bankruptcy was being considered as an option, the two sources said, speaking on condition of anonymity given the sensitivity of the matter.
The ETIC and JAL declined to comment.
The chances of bankruptcy appeared to increase last week when Finance Minister Hirohisa Fujii said the state would not back any more loans to JAL, raising the risk it could run out of cash amid a slump in travel demand.
JAL was saddled with 1.5 trillion yen in total liabilities as of the end of September. At that level its bankruptcy would be the 6th biggest ever in Japan, ranking just below the 2001 collapse of retailer Mycal.
“If JAL were allowed to go into a court-led reorganization just as it is right now it would trigger major social confusion,” said one of the sources. “There would be uproar over mileage, planes would be grounded, clients would suspend transactions.”
JAL’s main creditors include the state-owned Development Bank of Japan and the country’s top three private banks — Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Financial Group.
The ETIC is considering a plan that would involve JAL filing for reorganization under the Corporate Rehabilitation Law, a process similar to Chapter 11 in the United States but that can prove lengthy, sometimes taking several years to complete.
Worried about the risk to JAL’s operations during that period, the ETIC is mulling ways to accelerate the process. This could include seeking approval to opt out of some of the normal processes usually required, one of the sources said.
At the same time the ETIC would provide JAL financing, either in the form of loans or investments, by drawing on the 1.6 trillion yen in state-guaranteed money available to it in the current fiscal year to March.
Investors appeared unfazed by news of a possible court-led restructuring. The news was reported earlier on Monday by Kyodo news and the Nikkei business daily, while Reuters reported last week that the ETIC had not ruled out bankruptcy.
JAL’s stock fell 1 percent to 96 yen, versus a 1.3 percent gain in the benchmark Nikkei average.
“The market consensus seems to be they will never let JAL go bust, and the impact of JAL’s problems on the overall economy has already largely been factored in,” said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.
JAL’s stock has already lost more than half its value this year while the spread on its 5-year credit default swaps, which are used as insurance against bankruptcy, are quoted at distressed levels above 2,300 basis points.
The news could nevertheless give pause to American Airlines and Delta, which have been fighting a heated public relations battle to pitch themselves as the ideal partner to help JAL rebuild itself.
American has said that it and other members of the Oneworld airline alliance along with private equity fund TPG are willing to invest $1.1 billion in JAL to prevent it from defecting from Oneworld to Delta and the rival Skyteam group.
Delta is offering a $1 billion financial aid package, half in equity, and has said it would consider investing in JAL even if it were put through bankruptcy court.
Both have said they would apply for anti-trust immunity to cooperate more closely with JAL on pricing and scheduling under a recently agreed “open skies” pact between the U.S. and Japan.
JAL has said it will make a decision on which overseas partner it will choose by early January.

feeds.reuters.com

U.S. banks fight plan to share information abroad

admin — Sat, 26 Dec 2009 01:57:16 +0000

U.S. banks fight plan to share information abroad
WASHINGTON (Reuters) – A U.S. financial crime agency’s plan to let foreign police seek information from American banks is drawing opposition from groups representing U.S. financial institutions.
The proposed rule by the Financial Crimes Enforcement Network (FinCEN), a division of the Treasury Department, would also permit U.S. state and local law enforcement authorities to make similar information-sharing requests of banks.
Regulations adopted after the 9/11 attacks in 2001 allow only federal law enforcement agencies, through FinCEN, to request such information.
FinCEN can require U.S. financial institutions to search their records to determine whether they have done business with individuals suspected, based on credible evidence, of terrorism or money laundering.
Written comments on the proposed expansion of the rule were due December 16, and more than half a dozen organizations, including the American Bankers Association (ABA) and the Credit Union National Association, said the plan is intrusive.
In a 13-page letter, ABA Vice President Robert Rowe called the proposal “premature and unfounded” and said it represented a “dangerous broadening” of the information-sharing process.
“There is absolutely no indication that the extraordinary power available under the 314(a) data-match program was ever intended by Congress to be put at the service of foreign countries,” he wrote, referring to FinCEN regulations that are part of the U.S. Patriot Act of 2001.
The Credit Union National Association, a trade organization that represents thousands of state and federal credit unions, said it was worried about the burden the rule would impose on its members.
FinCEN has estimated that information requests under the rule would require no more than 72 additional hours per year per institution to process. The association said many of its small members cannot afford to automate their processes.
“As a result, search requests would take significantly longer in a manual environment,” it said.
FinCEN would review the banks’ comments before deciding how to proceed, spokesman William Grassano said. “As with all comment letters FinCEN receives on proposals, we carefully review and consider the points made and perspective brought to the discussion,” he said.
FinCEN in November proposed adopting screening procedures to assure that foreign law enforcement agencies use the information-sharing program only in “significant situations” and only if unable to find needed information through traditional investigative means.
“This program for sharing information with the financial industry is a proven tool, and these changes will help further protect the integrity of our national financial system,” FinCEN Director James Freis said in a statement last month.
Although comment periods on proposed rules often last as long as 180 days, FinCEN limited the period in this case to 30 days. The agency said the timing of the proposal was prompted by international treaty obligations.
(Reporting by Dan Margolies. Editing by Robert MacMillan)

feeds.reuters.com