Barclays chairman quits after "devastating" Libor blow - Reuters
LONDON |
LONDON (Reuters) - Barclays Plc Chairman Marcus Agius quit on Monday, saying "the buck stops with me" after an interest rate rigging scandal dealt "a devastating blow" to the bank's reputation.
Agius, chairman for 5-1/2 years, is the first major scalp from the scandal, which is likely to draw in more banks and potentially the regulatory authorities, but his resignation did not take the heat off Chief Executive Bob Diamond, who is under pressure to go, too.
"The buck in Barclays stops with Bob Diamond, and it is Bob Diamond who must accept responsibility," said John Mann, a Labor politician who is part of a panel of lawmakers who will grill Diamond on Wednesday and Agius on Thursday.
"He (Diamond) must resign. He's got to go. There is no role for people like him if banking is to be trusted again in this country and if British banking is to restore its tarnished reputation in the world, which of course is of great importance to our economy," Mann said on Sky News.
Diamond and Agius have also faced calls from some shareholders to resign after Barclays was last week fined $453 million by British and U.S. regulators for submitting inaccurate submissions on the Libor interest rate.
"I still think it is going to be hard for Bob Diamond to keep his job. I don't think he has built up enough shareholder goodwill in the past to be able to ride this one out," said a top 25 investor in the bank, who asked not to be named.
Barclays has admitted that some of its traders attempted to manipulate the setting of the London interbank offered rate (Libor), which is used worldwide as a benchmark for setting prices on about $350 trillion of derivatives and other financial products.
"Last week's events - evidencing as they do unacceptable standards of behavior within the bank - have dealt a devastating blow to Barclays reputation ... The buck stops with me, and I must acknowledge responsibility by standing aside," Agius said in a statement.
When Diamond and Agius appear before the parliamentary committee this week they are likely to be quizzed on what the Bank of England (BoE) and other regulators knew.
Details released in documents last week could prove embarrassing to the BoE, after sources said a key conversation held in October 2008 cited in the documents was between Diamond and BoE Deputy Governor Paul Tucker.
Some people at Barclays mistakenly believed the bank had been granted permission to submit artificially low Libor estimates after that conversation, the documents released last week showed.
More than a dozen other banks are being investigated in the long-running global probe by authorities in North America, Europe and Japan, including Citigroup, HSBC, UBS and Royal Bank of Scotland. Analysts and bankers expect more big fines.
ROOT & BRANCH REVIEW
Barclays has admitted it submitted artificially low estimates of its borrowing costs from late 2007 to May 2009 because it thought rivals were doing the same and higher submissions would make it appear to be in trouble.
Between November 2007 and October 2008 some Barclays employees raised concerns with the British Bankers' Association - the UK banking lobby group that is also responsible for setting Libor - the Financial Services Authority, the BoE and the Federal Reserve Bank of New York regarding its concern that Libor rates were being set too low, U.S. Department of Justice documents said.
It said the employees did not provide "full and accurate information" to the authorities.
Barclays said it would launch an audit of its business practices, led by Michael Rake, its senior independent director, who will move up to deputy chairman.
"I am truly sorry that our customers, clients, employees and shareholders have been let down," Agius said.
The audit will undertake "a root and branch review of all of the past practices that have been revealed as flawed" and assess implications for its practices and culture. Diamond said its recommendations would be implemented in full.
Agius said Barclays had been "well served by an excellent executive team" under him, first led by John Varley and now by Diamond.
Agius became chairman at the start of 2007 after more than 30 years as an investment banker and then chairman at Lazard.
He is also BBA chairman, but that position is always drawn from one of the banks, so he is set to leave that position too.
(Additional reporting by Tim Castle and Sinead Cruise; editing by Anna Willard and Will Waterman)
PRI's Pena Nieto wins Mexican presidency, early results show - CBC
The party that ruled Mexico with an iron grip for most of the last century has sailed back into power, promising a government that will be modern, responsible and open to criticism.
Though Institutional Revolutionary Party candidate Enrique Pena Nieto's margin of victory was clear in the preliminary count from Sunday's election, it was not the mandate the party had anticipated from pre-election polls that had at times shown the youthful, 45-year-old with support of more than half of Mexico's voters.
Instead, he won 38 per cent support, about 7 points more than his nearest rival, according to a representative count of the ballots, and he went to work immediately to win over the two-thirds who didn't vote for him, many of whom rejected his claim that he represented a reformed and repentant party.
"We're a new generation. There is no return to the past," he said in his victory speech. "It's time to move on from the country we are to the Mexico we deserve and that we can be ... where every Mexican writes his own success story."
But his top challenger, leftist candidate Andres Manuel Lopez Obrador, refused to concede, saying he would await a full count and legal review. He won roughly 31 per cent of the vote, according to the preliminary count which has a margin of error 1 percentage point.
Lopez Obrador in 2006 paralyzed Mexico City streets with hundreds of thousands of supporters when he narrowly lost to President Felipe Calderon.
This time, only about 700 gathered at his campaign rally and he cancelled plans to proceed to the Zocalo, the main square he filled as recently as Wednesday.
"We have information that indicates something different from what they're saying officially," he said. "We're not going to act in an irresponsible manner."
'He'll stabilize the cartels'
The PRI for 71 years ruled as a single party known for coercion and corruption, but also for building Mexico's institutions and social services. It was often accused of stealing elections, including the 1988 presidential vote. But PRI governments were also known for keeping a lid on organized crime, whose battles with government and each other under Calderon have taken more than 50,000 lives and traumatized the country.
Repeating a popular belief of many Pena Nieto supporters, Martha Trejo, 37, of Tampico said, "He'll stabilize the cartels. He'll negotiate so they don't hurt innocents."
Pena Nieto in his victory speech vowed he won't make pacts with organized crime, rather will focus on curbing violence.
Many predict he will build on Calderon's economic and security strategies but, working with a more friendly congress, may have more success. The main test of a new PRI will be how it handles corruption.
"We know there is some local corruption in the PRI with organized crime," said Andrew Selee of the Washington-based Mexico Institute. "The question is will they ignore it or go after it aggressively."
The vote Sunday went smoothly with the usual protests at polling places that ran out of ballots and a few arrests for small cases of alleged bribery or tampering of ballots.
Josefina Vazquez Mota of the ruling National Party, Mexico's first woman candidate for a major party, conceded almost immediately after the polls closed and exit surveys showed her trailing in third place. The preliminary count gave her roughly 26 per cent.
Her party, the PAN, unseated the PRI in 2000 with the victory of Vicente Fox, who won more than 40 per cent of vote, and again with Calderon in 2006, who won by a half percentage point over Lopez Obrador.
"I think this will be a major setback," businessman Leonardo Solis, 37, said of the PRI victory. "I don't think they've changed much, but we'll see soon enough.”
Official results expected next weekend
Results from the polling stations trickled in all night and will continue. The official results will be announced next weekend.
At the PRI headquarters in Mexico City, a party atmosphere broke out with supporters in red dancing to norteno music. The vote count came in slowly and it was too early to say if the PRI would retake at least one of the two houses of Congress and some of the governorships nationwide
Pena Nieto, who is married to a soap opera star, also has been dogged by allegations that he overspent his $330 million campaign funding limit and has received favorable coverage from Mexico's television giant, Televisa.
University students launched a series of anti-Pena Nieto marches in the final weeks of the campaign, arguing that his party hasn't changed since its days in power.
Pena Nieto praised their protests Sunday as a positive sign of the democracy and said he, too, wants to see Mexico change.
"You have given our party a second chance," he said. "We will honor that with results."
Analysis: Mexico's creaky economy to test Pena Nieto's ambitions - Reuters
MEXICO CITY |
MEXICO CITY (Reuters) - Mexico's creaky domestic economy, riddled with monopolies and inefficiencies, makes the next government's goal of boosting growth to rates last seen in the 1970's seem like a pipe dream.
The return to power of the Institutional Revolutionary Party, or PRI, in Sunday's presidential election may be a chance for the most significant economic remodeling in a generation.
But the checkered history of reforms in Latin America's second-biggest economy, producing failure as often as success, underscores the size of the challenge.
Enrique Pena Nieto, who won with about 38 percent of the vote according to a quick count by electoral authorities, aims to lift growth to 6 percent a year by making labor markets more flexible, boosting tax revenues and allowing more private companies to enter the oil industry.
If implemented in full, the reforms would be the deepest since Mexico embraced privatization, bank deregulation and free trade in the 1980s and 1990s. Those reforms culminated in Mexico's 1994 entry into the North American Free Trade Agreement (NAFTA) with the United States and Canada.
Pena Nieto's chance of success hinges on whether the PRI secures more than half the seats in Congress, which was not clear on Sunday night, and whether it can bring on board PRI-affiliated but independently powerful labor unions for reforms which will hurt many of their members.
"Reforms won't be automatic and most likely will still require political negotiations with opposition parties and the unions," said Fitch sovereign ratings analyst Shelly Shetty.
NAFTA helped turn Mexico into a major exporter of computers, cars and fridges for foreign markets. Exports are almost double 1990 levels at 32 percent of gross domestic product, or GDP.
But that dynamism stands in stark contrast to a sluggish and archaic domestic market. The two-speed economy has taken Mexico further from its goal of joining the emerging-economy A-list and competing with countries such as India and Brazil.
A lack of competition stifles innovation and means Mexicans are overcharged billions of dollars a year for basic services.
High business costs drive similar sums into the informal economy, depriving the government of valuable tax revenue and crimping investment in education, infrastructure and research and development, vital building blocks for future growth.
Economic growth has languished at an average 2.6 percent annual rate over the last two decades, compared to 7 percent in India and 10 percent in China, partly due to the meager trickle of reforms. In recent years, a fierce drugs war has raised security fears and put off some investors.
Productivity is lower now than in 1981, the year before a debt crisis that ended a golden era of three decades of 6-percent-plus average annual growth. Income inequality has worsened and investment has stagnated at half the rate of that in China.
The last round of major reforms, book-ended by the 1982 debt crisis and another deep financial crisis in the mid-1990s, did succeed in cutting government debt to levels Europe would now be proud of and wrestling inflation down from a 1987 peak near 150 percent to around 4 percent now.
But the reforms have not boosted Mexico's potential growth rate, the top speed possible without fanning inflation. At about 3 percent, it is less than half that estimated by the International Monetary Fund for the emerging economies of Asia.
"The reforms that were made in the 1980s and 1990s were there to prevent a dying patient from dying but that doesn't necessarily mean it's going to bring him to good health," said Economist Intelligence Unit analyst Rodrigo Aguilera.
"We had a heart attack in 1982 and another one in '94, I guess those reforms saved us from ending up worse but they didn't necessarily generate a more dynamic economy."
One quick way for Pena Nieto to boost growth would be to increase lending to the private sector via a proposed new state bank. At 20 percent of GDP, lending is half the level of Brazil and small firms who turn to boutique lenders complain of paying interest of 50 percent-plus.
Another could be giving competition regulators more teeth against opposition from family-run oligopolies which control industries such as cement, bread making and communications, the home turf of Carlos Slim, the world's richest man.
The Organisation for Economic Co-operation and Development estimates that Mexicans, who pay on average $90 a month for broadband internet access compared to $55 in Chile, have been overcharged $13.4 billion a year for communications services.
FIX THE FOUNDATIONS
Mexico watchers see a holy trinity of labor, fiscal and energy reforms as vital to bringing the economy into the 21st century and even narrowing the income gap with the United States, which is about three times wealthier than Mexico in terms of per-capita GDP.
Energy reform is the most important of the three. It centers on opening the state-run oil industry to more private investment, either via the sale of a stake in state monopoly Pemex or constitutional change to grant oil concessions to private companies, which would attract much-needed investment.
Oil production has fallen by a quarter since a peak in 2004 to around 2.55 million barrels per day. Pemex believes there are up to 29 billion barrels of crude equivalent in the Gulf of Mexico, more than half Mexico's potential resources, but Pemex lacks the technology or expertise to tap the riches on its own.
HSBC and BNP Paribas estimate that opening the oil sector could boost Mexico's potential growth by as much as one percentage point.
Elsewhere in Latin America, Colombia's state-run Ecopetrol and Brazil's Petrobras have both sold some shares. However, the EIU's Aguilera said Pemex would need a major overhaul to be an attractive buy.
At the same time, the new government plans to cut Mexico's dependency on oil revenue, which makes up a third of the federal budget, one reason cited by rating agencies for capping Mexico's credit rating at the current BBB/Baa1, below Chile at A+/Aa3.
Mexico's narrow tax base is half the size of many European countries, and the IMF estimates government revenue at 22 percent of GDP this year, versus 36 percent in Brazil.
Pena Nieto's campaign chief and possible finance minister, Luis Videgaray, told Reuters in March that ending a value-added-tax exemption on food and medicine, as long as a way could be found to compensate the poor.
An economist educated at the Massachusetts Institute of Technology, Videgaray is part of a new generation of PRI technocrats whom analysts consider well-qualified to keep Mexico's finances healthy.
Dismantling all tax exemptions would add more than 4 percent of GDP to fiscal revenues, according to economists at Citigroup, and this would allow more investment by the state in sorely needed infrastructure such as schools and hospitals.
Another way to raise more taxes, and tackle the massive problem of low productivity, is to entice some of the estimated 14 million people working in the black economy into formal employment, using a new social-security system as a carrot.
Firms are loath to hire, partly because of labor and social security costs that are almost double the Latin American average, according to the World Bank's 2011 Ease of Doing Business survey. Former IMF official Claudio Loser estimates informal workers cost Mexico $10-$15 billion in lost taxes every year, enough to cover up to two years of the federal health budget.
Having so many workers in low-paid, low-skill informal jobs has helped depress Mexican productivity and means it lags well behind the similarly sized economies of Australia and Korea on measures such as GDP per hour worked.
SIX PERCENT "UNREALISTIC"
Mexico's central bank governor, Agustin Carstens, whose six-year term runs until the end of 2015, has said a full palette of reforms could boost annual growth to 5 percent or more, but most economists see the PRI's promise of 6 percent as unrealistic.
"That's a bit ambitious," said Edwin Gutierrez, portfolio manager with Aberdeen Asset Management, which has $295 billion under management or advice.
"It's going to be a slow grind. It would be great if we got there but let's crawl before we walk. Getting to 4 percent would be great, 5 would be fantastic."
Moody's Investors Service analyst Mauro Leos said a one-percentage-point boost to trend growth would cut the jobless rate and attract investment.
But even a best-case scenario will not necessarily guarantee Mexico the A-grade credit rating that has eluded it so far.
"If you think of what is a typical A-rated country, the countries that come to mind are the Czech Republic, Poland, Korea - countries that have a very balanced structure in every respect," Leos said, noting that Mexico also has to boost its rule of law, judicial system and other institutions.
"For us, what is really relevant are the next six years, more than the next six months," he said.
(Additional reporting by Daniel Trotta and Rachel Uranga; Editing by William Schomberg, Kieran Murray and David Brunnstrom)
UPDATE 5-Eastern U.S. battles heat wave amid power outages - Reuters UK
* Triple-digit heat blankets broad swath of the country
* Restoring power could take up to a week in some areas
* Labor dispute adds to heat wave troubles in New York (Adds three deaths, numerous injuries in North Carolina)
WASHINGTON, July 1 (Reuters) - Blistering heat blanketed much of the eastern United States for the third straight day on Sunday, after violent storms that took at least 15 lives and knocked out power to more than 3 million customers.
Emergencies were declared in Maryland, Ohio, Virginia, West Virginia and Washington, D.C., on Saturday because of damage from storms that unleashed hurricane-force winds across and a 500-mile (800-km) stretch of the mid-Atlantic region.
The storms' rampage came as sweltering temperatures topped 100 Fahrenheit (38 Celsius) in several southern cities, including Atlanta, where the mercury hit an all-time record of 106 degrees (41 Celsius) on Saturday and reached 105 on Sunday.
Over two dozen cities across 10 states set or tied all-time record high temperatures on Friday and Saturday, including Columbia, South Carolina; Knoxville, Tennessee; and Raleigh, North Carolina.
The heat wave continued on Sunday for millions of people from the Plains to the mid-Atlantic. One of the hardest hit cities was Charlotte, North Carolina, where the mercury reached 104 degrees (40 C) on Sunday.
From St. Louis, Missouri, to Washington, D.C., temperatures were forecast to hit more all-time records.
"CATASTROPHIC" DAMAGE TO POWER GRIDS
Thunderstorms and high winds battered eastern North Carolina on Sunday afternoon, leading to three more deaths on top of at least 12 caused by deadly storms in several states on Saturday.
In Pitt County near Greenville, a man was killed when his shed fell on him as he tried to put his golf cart inside, said David Glenn of the National Weather Service.
A couple were killed in neighboring Beaufort County when a tree fell on their golf cart, he said.
More than 40 people were reported injured in Beaufort County and numerous homes were damaged in Pitt County, said Christy Wallace, spokeswoman for the Pitt County sheriff.
After power outages that affected some 15,000 customers, power was restored to most by late Sunday, Greenville Utilities reported.
Powerful storms that brought wind gusts of up to 90 mph on Sunday knocked out power to more than 200,000 Commonwealth Edison customers in Northeastern Illinois and about 138,000 remained without power on Sunday night, the utility said.
Power crews worked on Sunday to restore service to homes and businesses, and officials in some areas said the job could take up to a week. Utilities in Ohio, Virginia and Maryland described damage to their power grids as catastrophic.
Previous storms had left six people dead in Virginia and more than 1 million customers without power, and killed two people in Maryland, officials said.
A falling tree killed two cousins, aged 2 and 7, in New Jersey and heat was blamed for the deaths of two brothers, ages 3 and 5, in Tennessee who had been playing outside in 105-degree (41-degree C) heat
About 489,000 customers remained without power in Maryland on Sunday night, down from more than 1 million without lights and crucial air conditioning earlier on Sunday.
HEATED LABOR DISPUTE
In Ohio, severe storms knocked out power to about 1 million homes and businesses on Friday across two-thirds of the state. Governor John Kasich sought and was granted federal emergency assistance.
Storms had also left about 614,000 customers without power in West Virginia, about 135,000 in Indiana, and at least 206,000 in New Jersey, officials said.
In New York, a heated labor dispute threatened to compound problems posed by the summer heat wave, which has already put an added strain on the electrical grid for New York City and suburban Westchester county.
Power utility Consolidated Edison Inc locked out its unionized workers early on Sunday after contract talks broke down, both sides said, raising the possibility of power cuts.
The company said it had asked to extend negotiations for two more weeks but the union, which had threatened a strike by its 8,500 workers over a new contract, refused. In response, the firm told union members not to report for work on Sunday.
That left managers and any crews the company can hire to fix whatever problems arise as 8.2 million New Yorkers crank up their air conditioners to beat the heat. (Reporting by Karen Brooks in Austin, Texas, Alex Dobuzinskis in Los Angeles, Paul Thomasch in New York, Susan Guyett in Indianapolis, Tim Ghianni in Nashville and Alistair Bull in Washington; Editing by Tom Brown, Sandra Maler, Vicki Allen and Alessandra Rizzo)
Justin Bieber announces new tour in England next year - BBC News
Pop star Justin Bieber has lined up his first arena tour in England for two years.
The Canadian singer's six dates in 2013 will begin at Manchester Arena on 19 February.
The teenage star is not playing any shows on his Believe tour in Scotland, Wales or Northern Ireland.
The 18-year-old singer has only toured the UK once before. Fans will be able to buy tickets when they go on sale on Friday at 9am.
Justin Bieber's latest record Believe topped the UK album chart in June.
He has also scored the highest first week sales of any album in the US so far this year.
Believe sold 374,000 copies in its first seven days in America, according to Nielsen SoundScan.
It's the Canadian's fourth number one album in the States following My World 2.0, Never Say Never: The Remixes and Under The Mistletoe.
Bieber's 2013 dates are as follows:
Manchester Arena - 19 February
Sheffield Motorpoint Arena - 23
Liverpool Echo Arena - 24
Birmingham NIA - 27
Nottingham Capital FM Arena - 2 March
London O2 - 4
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