Friday, January 23, 2015
See my blog from June 8, 2011 about conversation I had with a city councilor where I talked about consolidation of services as the costs did not make sense and that is what happened in Australia in the 90's. Aivars Lode
Tuesday’s election results were historic for taxpayers who have clamored for more than a decade to consolidate Collier County’s empire of separate fire districts.
In each of four fire districts with a say in mergers, voters supported consolidating by percentages ranging from 61 percent to 70 percent.
Mergers passed to combine East Naples and Golden Gate fire districts and to blend North Naples and Big Corkscrew fire districts. This creates opportunities to trim administrative costs while adding frontline personnel and quick response equipment.
Taxpayers will save by not needing a new fire administration building in East Naples, projected to cost $5 million or more, because the merged district can use Golden Gate’s new headquarters. In the northern part of the county, the merger prevents separate districts from having to build two stations not far from one another on opposite sides of the boundary.
Benefits in North Naples-Big Corkscrew include reducing the number of chiefs, cutting costs, and redirecting the savings into front-line personnel and equipment. The merger is projected to save taxpayers $2.3 million in the first five years.
More than two-thirds of voters in a 2010 straw ballot supported the idea that independent fire districts in Collier County and other districts operated by county government should merge. Tuesday’s results are a welcome call to end fire district fiefdoms in Collier County.
I identified this back in July of 2012, and now fines are being levied. Aivars Lode
By Kirstin Ridley, Joshua Franklin and Aruna Viswanatha
LONDON/ZURICH/NEW YORK (Reuters) - Regulators fined six major banks a total of $4.3 billion for failing to stop traders from trying to manipulate the foreign exchange market, following a yearlong global investigation.
HSBC Holdings Plc, Royal Bank of Scotland Group Plc, JPMorgan Chase & Co, Citigroup Inc, UBS AG and Bank of America Corp all faced penalties resulting from the inquiry, which has put the largely unregulated $5-trillion-a-day market on a tighter leash, accelerated the push to automate trading and ensnared the Bank of England.
Authorities accused dealers of sharing confidential information about client orders and coordinating trades to boost their own profits. The foreign exchange benchmark they allegedly manipulated is used by asset managers and corporate treasurers to value their holdings.
Dealers used code names to identify clients without naming them and swapped information in online chatrooms with pseudonyms such as "the players", “the 3 musketeers” and “1 team, 1 dream." Those who were not involved were belittled, and traders used obscene language to congratulate themselves on quick profits made from their scams, authorities said.
Wednesday's fines bring total penalties for benchmark manipulation to more than $10 billion over two years. Britain's Financial Conduct Authority levied the biggest penalty in the history of the City of London, $1.77 billion, against five of the lenders.
"Today's record fines mark the gravity of the failings we found, and firms need to take responsibility for putting it right," FCA Chief Executive Officer Martin Wheatley said.
He said bank managers needed to keep a closer eye on their traders rather than leaving it to compliance departments, which make sure employees follow the rules.
The investigation already has triggered major changes to the market. Banks have suspended or fired more than 30 traders, clamped down on chatrooms and boosted their use of automated trading. World leaders are expected to sign off on regulatory changes to benchmarks this weekend at the G20 summit in Brisbane, Australia.
In the United States, which has typically been more aggressive on enforcement than other jurisdictions, the Department of Justice, Federal Reserve and New York's financial regulator are still probing banks over foreign exchange trading.
Regulators said the misconduct at the banks ran from 2008 until October 2013, more than a year after U.S. and British authorities started punishing banks for rigging the London interbank offered rate (Libor), an interest rate benchmark.
The foreign exchange probe has wrapped up faster than that investigation did, and Wednesday's fines reflected cooperation from the banks. Britain's FCA said the five banks in its action received a 30 percent discount on the fines for settling early.
The U.S. Commodity Futures Trading Commission ordered the same five banks to pay an extra $1.48 billion. Swiss regulator FINMA also ordered UBS, the country's biggest bank, to pay 134 million francs ($139 million) and cap dealers' bonuses over misconduct in foreign exchange and precious metals trading.
The U.S. Office of the Comptroller of the Currency fined the U.S. lenders a total of $950 million. It was the only authority to penalize Bank of America.
Wednesday's settlement, said it had pulled out of talks with the FCA and the CFTC to try to seek "a more general co-ordinated settlement" with other regulators that are investigating its activities.
The FCA said its enforcement activities were focused on those five plus Barclays, signaling it would not fine Deutsche Bank AG.
The CFTC declined to comment on whether it was looking at other banks.
Britain's Serious Fraud Office is conducting a criminal investigation, and disgruntled customers can still pursue civil litigation.
RBS, which is 80 percent owned by the British government, received client complaints about foreign exchange trading as far back as 2010. The bank said it regretted not responding more quickly.
The other banks were similarly apologetic.
BANK OF ENGLAND
The currency inquiry struck at the heart of the British establishment and the City of London, the global hub for foreign exchange dealing.
The Bank of England said on Wednesday that its chief foreign exchange dealer, Martin Mallet, had not alerted his bosses that traders were sharing information.
The British central bank, whose governor, Mark Carney, is leading global regulatory efforts to reform financial benchmarks, has dismissed Mallet but said he had not done anything illegal or improper.
It also said it had scrapped regular meetings with London-based chief currency dealers, a sign the BOE wants to put a distance between it and the banks after the scandal.
Shares of banks involved in the settlement were down slightly Wednesday afternoon. Bank of America dipped 0.2 percent, JPMorgan fell 1.6 percent, and Citi was 0.6 percent lower.
RBS was down 1 percent, HSBC was down 0.3 percent, and UBS was down 0.1 percent in after-hours trading.
(1 US dollar = 0.9630 Swiss franc)
(Additional reporting by Steve Slater, Huw Jones, Jamie McGeever, Clare Hutchison and Matt Scuffham in London and Katharina Bart in Zurich; Writing by Carmel Crimmins and Emily Stephenson; Editing by Alexander Smith, Anna Willard, David Stamp and Lisa Von Ahn)
Thursday, January 1, 2015
When everyone thought the low dollar was an issue, it lulled issuers into a false sense of security and made them forget about the foreign exchange risk. Aivars Lode
From Brazil to Thailand, Firms That Sold Bonds in Dollars Now Face Steep, Even Staggering Costs
By Ian Talley and Anjani Trivedi
The soaring U.S. dollar is squeezing companies in emerging markets from Brazil to Thailand that now face higher costs on roughly $1 trillion in bonds sold to investors before the greenback’s surge.
For 2014, the dollar is on track to gain more than 7% compared with a group of emerging-market currencies tracked by the Federal Reserve Bank of St. Louis. As the rise ripples through economies around the world, it is causing particular pain at firms in emerging markets that issued bonds in dollars instead of local currency.
The dollar’s rise means it costs more to make regular bond payments and pay off outstanding bonds as they mature. That is starting to hurt earnings at many companies, will likely force some to dip into emergency reserves and could trigger defaults on some corporate bonds, analysts warn.
To some economists, the mounting pressure evokes memories of currency crises in Asia and Latin America during the 1980s and 1990s, when the strong U.S. dollar helped trigger slides in economic growth and prices for real estate, commodities and other assets.
“The investor community is becoming very much one-way or crowded toward retrenching to the U.S.,” says Nikolaos Panigirtzoglou, global markets strategist at J.P. Morgan Chase & Co.
Many of the same countries are vulnerable again now, but few analysts and investors foresee a full-blown crisis.
More than two-thirds of the outstanding corporate bonds in emerging markets are considered high-quality by major rating firms, meaning they carry a low default risk.
Meanwhile, some companies have been trying to shield themselves from possible harm by issuing at least some bonds in their home country’s currency. “I don’t think it’s a systemic issue,” says Samy Muaddi, a portfolio manager at mutual-fund giant T. Rowe Price Group Inc.
In 2014, companies in emerging markets issued a record-high $276 billion of dollar-denominated bonds as of Tuesday, according to Dealogic. Such sales soared after the financial crisis as borrowers took advantage of rock-bottom interest rates set by the Federal Reserve and other central banks.
Countries also have flocked to dollar-denominated bonds, saddling those governments with higher debt-service costs as the dollar rises. Analysts say many countries generally are in a stronger position to withstand the dollar’s pain because their reserves are larger than in previous crises.
Overall, companies and sovereign-debt issuers have $6.04 trillion in outstanding bonds, up nearly fourfold since the 2008 financial crisis, according to Dealogic, a financial-data provider.
Fourth-quarter results due in January from companies throughout the world will begin to show how much the soaring U.S. dollar is hurting companies in emerging markets.
Earnings at many companies in Latin America will likely be hit, says Eduardo Uribe, who oversees corporate-debt assessments there for bond-rating firm Standard & Poor’s Ratings Services, a unit of McGraw Hill Financial Inc.
Many emerging markets also are being pummeled by falling prices for commodities such as oil and slower economic growth. Bond markets in emerging-market countries recently suffered one of their worst selloffs since the financial crisis, based on a Barclays PLC index of emerging-market debt in dollars.
The Indonesian rupiah, Chilean peso, Brazilian real and Turkish lira are near multiyear lows. Mexico’s central bank bought pesos earlier this month to keep the depreciating currency from pushing the economy into a funk.
More pressure will come if the Fed raises interest rates next year for the first time since 2006. Luca Paolini, chief strategist at Pictet Asset Management, says the firm reduced its exposure to emerging-market corporate bonds a few months ago on concerns about a potential slide. “There may be a lot more volatility next year, and we can’t rule out some credit event that can generate a lot of panic,” he says.
Fears are swirling about Russia, where the ruble has swung sharply as the economy struggles under the weight of Western sanctions and lower oil prices. Lubomir Mitov, chief European economist at the Institute of International Finance, a banking trade group, forecasts “a widespread wave of corporate defaults” in Russia next year.
As investors shift from currencies, stocks and bonds in emerging markets to dollars, the move threatens to depreciate local currencies even more.
A Christmas tree in front of the Petronas Twin Towers in Kuala Lumpur, Malaysia. The landmark includes the headquarters of state-run oil and gas company Petroliam Nasional Bhd., or Petronas, which is being hurt by the U.S. dollar's rise against the ringgit. About 70% of the company's debt is denominated in U.S. dollars. European Pressphoto Agency
The stronger dollar also pushes the cost of new borrowing higher. Prices for bonds issued by Russia’s OAO TMK, one of the world’s largest pipe makers, that are due in 2018 are down by more than 30% since late October. Bond prices move in the opposite direction from borrowing costs.
In the U.S., the stronger dollar hurts exporters by increasing their production costs compared with foreign rivals and shrinking their non-U.S. profits when converted into dollars. The dollar’s rise makes imports more attractive to American consumers.
Top officials at the International Monetary Fund and the Bank for International Settlements, two of the world’s leading financial institutions, have warned that the exchange-rate turmoil could lead to corporate defaults and asset-price busts around the globe. Some analysts expect the IMF to lower its five-year growth forecast for emerging markets.
Brazilian sugar producer Virgolino de Oliveira SA is struggling with its debts as sugar prices fall. Ratings firm Fitch Ratings, a unit of Hearst Corp. and Fimalac SA, warned this month that the Brazilian company will likely default in the coming months on debt that includes dollar-denominated notes. The company didn’t respond to requests for comment.
Malaysia’s state-run oil and gas company, Petroliam Nasional Bhd., or Petronas, said in its third-quarter results that the dollar’s rise against the ringgit was partly to blame for lower quarterly revenues. About 70% of the company’s debt is in U.S. dollars, and its bond yields spiked as the ringgit fell nearly 9% in the past six months.
The financial hit was bad for Malaysia’s government, which collects major revenue from oil and gas sales.
Shweta Singh, a senior economist at research firm Lombard Street Research, expects the dollar to keep climbing as the U.S. economy strengthens and emerging markets keep struggling to rev up economic growth. As a result, “the debt burdens of emerging markets will intensify,” she says.
If problems deepen, they could bruise investors who poured money into emerging markets and are still holding on to those investments. The bond-sale boom was fueled by investors who roamed the world seeking higher returns after the financial crisis, including from dollar-denominated bonds.
But overall investments in emerging markets by outsiders have grown so huge that it would be hard during a jolt for investors to sell without pushing those markets sharply lower, many analysts say.
—Nicole Hong contributed to this article.