Corruption Charges Brought Against Former Employees of HBOS’s High Risk Lending Unit
On January 8, the Crown Prosecution Service issued a press release stating that eight people had been charged in connection with Operation Hornet, an investigation by Thames Valley Police into allegations of fraudulent trading, money laundering and conspiracy to corrupt at HBOS’s high risk lending unit. The allegation is that in return for high value gifts, a turnaround consultancy, Quayside Corporate Services, was appointed to administer £35 million worth of loans made to corporate customers in difficulty. Neither Bank of Scotland nor Lloyds Banking Group is the subject of the investigation.
Basel Committee on Banking Supervision Endorses Revised Basel III Liquidity Standards for Banks
It was announced on January 6, that the Basel Committee on Banking Supervision’s (BCBS) Group of Governors and Heads of Supervision (GHOS) has endorsed revised Basel III liquidity standards for banks. This was later welcomed in a statement made by Michael Barnier of the European Commission on January 8.
The revised liquidity standards relate to the formulation of liquidity coverage ratio (LCR), which is an essential part of the reforms being made by Basel III. The package of amendments, which is summarised in a document headed Annex 1, comprises of four elements as follows:
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revisions to the definition of high quality liquid assets and net cash outflows;
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a timetable for phasing in the standard;
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a reaffirmation of the usability of the stock of liquid assets in periods of stress (including during the transition period); and
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an agreement that the Basel Committee will conduct further work on the interaction between the LCR and the provision of Central Bank Facilities.
In addition to the revised liquidity standards, the GHOS also reiterated the importance of full and timely implementation of the Basel III standards. It also endorsed a new charter for the BCBS in order to enhance understanding of its activities and decision-making processes, and identified that a review of the net stable funding ratio would also be a priority over the next few years.
European Commission Report on Financial Conglomerates Directive Review
On January 9, the Council of the European Union published a cover note annexing the European Commission’s report of December 20, 2012, on its review of the Financial Conglomerates Directive (2002/87/EC) (FICOD), which focused, among other things, on coverage relating to unregulated entities within a wider corporate group which operates in the finance sector.
Having conducted the review, the European Commission concluded that the following issues would be of most relevance in a future revision of FICOD:
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the criteria by which a conglomerate is defined and identified;
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the criteria by which the parent entity ultimately responsible for meeting group-wide requirements is identified; and
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the strengthening of enforcement in respect of the ultimately responsible parent entity.
The European Commission does not propose that FICOD should be amended in 2013. However, FICOD will remain under constant review in order to identify a more appropriate time for amending legislation to be introduced.
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