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EXPERIENCE - KNOWLEDGE - INTEGRITY: 25 years of experience in media production; newspaper, magazines, radio, tv, web-publishing, multimedia and corporate communications . Also experienced in starting new business, management and consulting. Areas of expertice: Economic- and financial journalism,... More
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  • Banks Rigged €10 Trillion Derivatives Market

    After two years and two months of investigations the EU commission have reached a preliminary conclusion: 13 major banks cooperated with theInternational Swaps and Derivatives Association (ISDA) and data service provider Markit to prevent credit derivatives from being traded on public exchanges so they could maintain their lucrative income from the unregulated €10 Trillion over-the-counter (OTC) market.

    "Over-the-counter trading is not only more expensive for investors thanexchange trading, it is also prone to systemic risks."

    Joaquín Almunia

    (click to enlarge)

    "If, after the parties have exercised their rights of defence, theCommission concludes that there is sufficient evidence of an infringement, it can issue a decision prohibiting the conduct and impose a fine of up to 10% of a company's annual worldwide turnover," the EU commission says in a press release.

    The European Commission has informed some of the world's largest investment banks of its preliminary conclusion that they infringed EU antitrust rules that prohibit anti-competitive agreements by colluding to prevent exchanges from entering the credit derivatives business between 2006 and 2009, according to a press release dated July 1.

    However, sending a letter of objections to the banks on institutions involved does not prejudge the final outcome of the investigation, the commission adds.

    "Between 2006 and 2009, Deutsche Börse and the Chicago Mercantile Exchange tried to enter the credit derivatives business. The exchanges turned to ISDA and Markit to obtain necessary licenses for data and index benchmarks, but, according to the preliminary findings of the Commission, the banks controlling these bodies instructed them to license only for "over-the-counter" (OTC) trading purposes and not for exchange trading. Several of the investment banks also sought to shut out exchanges in other ways, for example by coordinating the choice of their preferred clearing house."

    "The Commission takes the preliminary view that the banks acted collectively to shut out exchanges from the market because they feared that exchange trading would have reduced their revenues from acting as intermediaries in the OTC market."

    Adding Fuel to the Fire

    The main components of the credit derivative market is the CDO's (Collateralized Debt Obligation) and the Credit Default Swaps(CDS).

    The swaps have caused substantial volatility in the financial markets over the last years as these derivatives, used to hedge national public debt obligations, has caused significant additional costs to troubled countries like Greece, Spain, Ireland and Italy.

    The following 13 financial institutions are suspected of violating article 101 of the Treaty on the Functioning of the European Union (TFEU) that prohibits anti-competitive agreements.

    1. Bank of America, Merrill Lynch
    2. Barclays
    3. Bear Stearns
    4. BNP Paribas
    5. Citigroup
    6. Credit Suisse
    7. Deutsche Bank
    8. Goldman Sachs
    9. HSBC
    10. JP Morgan
    11. Morgan Stanley
    12. Royal Bank of Scotland
    13. UBS

    Additionally, the International Swaps and Derivatives Association (ISDA) and data service provider Markit are suspected to have participated in the rigging of the huge credit derivative market with an estimated size of ten times the global GDP.

    (click to enlarge)

    "It would be unacceptable if banks collectively blocked exchanges to protect their revenues from over-the-counter trading of credit derivatives. Over-the-counter trading is not only more expensive for investors than exchange trading, it is also prone to systemic risks," commission Vice President in charge of competition policy, Joaquín Almunia, says in the statement.

    (Download copy).

    The EU says it will prohibit the banks from this kind of trading, and/or impose a fine of up to 10% of their annual global revenue, if the allegations are true.

    Of course it's true. The list of banks above are the same banks suspected, charged and convicted of a series of market violations over the last five years - from lying to investors about their risk exposure, to manipulation of asset prices and fixing interest rates.

    But they will - of course - fight this allegations, too, to the bitter end, seeking to haul out the case as long as possible and eventually agree on a settlement with the EU commission excepting an insignificant fine and another little slap on the wrist.

    Case closed. Se you next time around!

    (click to enlarge)
    More criminal records:

    Jul 03 1:52 PM | Link | Comment!
  • US Spying On EU – A Big Charade?

    Many European politicians have expressed their discuss and anger towards the US global surveillance project called "PRISM" as the German website, SPIEGEL Online, reports on spying, phone-bugging and infecting the EU leaders computers with viruses to monitor them. But this case just keep getting bigger:British news media reports Sunday evening that at least six European member states have shared personal communications data with the NSA, In other words: EU state leaders have knowingly and willingly agreed to let the American intelligence services spy on European citizens.

    "It's clear that the European parliament must intervene at this point through a public inquiry."

    Simon Davies(click to enlarge)According to some "angry" EU politicians are we now faced with prospects of a breaking trade pact between the US and the European Union worth hundreds of billions following allegations that Washington bugged key EU offices and intercepted phone calls and emails from top officials. Some of those top officials are now raising their voices in anger, demanding explanations, apologies, etc., from top US officials. But it seems like they all knew about it, and excepted it.

    The German publication Der Spiegel reported that it had seen documents and slides from the NSA whistleblower Edward Snowden indicating that US agencies bugged the offices of the EU in Washington and at the United Nations in New York.

    They are also accused of directing an operation from Nato headquarters in Brussels to infiltrate the telephone and email networks at the EU's Justus Lipsius building in the Belgian capital, the venue for EU summits and home of the European council.

    Germany's justice minister, Sabine Leutheusser-Schnarrenberger, called for an explanation from the US authorities.

    "If the media reports are true, it is reminiscent of the actions of enemies during the cold war," she was quoted as saying in the German newspaper Bild. "It is beyond imagination that our friends in the US view Europeans as the enemy."

    France later also asked the US authorities for an explanation. France's foreign minister, Laurent Fabius, said:

    "These acts, if confirmed, would be completely unacceptable. We expect the American authorities to answer the legitimate concerns raised by these press revelations as quickly as possible.".

    "Shocked" and "disgusted" are the common (top official) reaction to the SPIEGEL story.

    Well, just a couple of hours ago there was an aftershock.

    The documents, seen by the Observer, show that - in addition to the UK - Denmark, the Netherlands, France, Germany, Spain, and Italy have all had formal agreements to provide communications data to the US. They state that the EU countries have had "second and third-party status" under decades-old signal intelligence (Sigint) agreements that compel them to hand over data which, in later years, experts believe, has come to include mobile phone and internet data.

    Under the international intelligence agreements, nations are categorized by the US according to their trust level. The US is defined as 'first party' while the UK, Canada, Australia and New Zealand enjoy 'second party' trusted relationships. Countries such as Germany and France have 'third party', or less trusted, relationships.

    The data-sharing was set out under a 1955 UK-USA agreement that provided a legal framework for intelligence-sharing that has continued, The Guardian explains.

    It stipulates:

    In accordance with these arrangements, each party will continue to make available to the other, continuously, and without request, all raw traffic, COMINT (communications intelligence) end-product and technical material acquired or produced, and all pertinent information concerning its activities, priorities and facilities.

    Simon Davies, an intelligence expert and project director at the London School of Economics, who writes the Privacy Surgeon blog, suggested the NSA's role had been given a sharper focus following amendments to the US Foreign Intelligence Surveillance Act (Fisa).

    In an interview published in full last night on Davies' blog, former NSA director General Michael Haydensaid: "The changes made to Fisa in 2008 were far more dramatic - far more far-reaching than anything President Bush authorised me to do."

    Davies tells the Observer that confirmation of the secret agreements showed there was a need for the EU to investigate.

    It's clear that the European parliament must intervene at this point through a public inquiry,

    "MEPs should put the interests of their citizens above party politics and create meaningful reforms." Davies says.

    I wish I could say I was "Shocked" or "disgusted," or something…But its just sad….

    The earlier posts below should be read in a new light:

    See also:

    2012 Data Mining Report (Published April 2013 by the Office of the Director of National Security)

    Jul 03 1:37 PM | Link | Comment!
  • Clerk Drained €224 Million From Bank By Momentarily Fell Asleep

    This is another one of those stories that leaves you hanging, not knowing quite what to make of it because some crucial information is missing. But falling asleep and make a transfer of 224 million, without knowing anything about it, is indeed rather strange. But the fact that the claim of one person examining 603 payments in 1,4 seconds is considered completely normal, is undoubtedly disturbing.

    (click to enlarge)

    A German bank employee appeared before an industrial tribunal in the state of Hesse, recently, as a witness in a case of being unfairly dismissed from work. The clerk had gotten of the "mistake" of transferring €224 million instead of €54 with a slap on the wrist, but the bank sacked his college instead - a 48-year-old woman who was responsible for the approval of all outgoing payments.

    While the mistake was eventually noticed and corrected, the on-duty supervisor originally approved the payment request, allowing the funds to go through.

    So she sued the bank, of course. And won. Arguing that when you have to examine more than 600 payments in 1,4 seconds. accidents happens.

    The judges said she was not guilty of willingly damaging the interests of the bank and that although she had made a "serious mistake" she should have been cautioned rather than sacked.

    The clerk "momentarily fell asleep" on the job and accidentally held down the number 2 button on his keyboard for a little too long - think 222,222,222.22 - causing that much money to be transferred out of the bank was merely admonished by the court.


    Just one thing - to where exactly was the money transferred?

    Possible related:

    Jul 03 1:20 PM | Link | Comment!
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