Kuwait residents believe their savings not enough for future Page 22
Japan’s US-bound exports overtake China shipments Page 23
THURSDAY, DECEMBER 20, 2012
Republicans put squeeze on Obama
All-new BMW 650i engine now available in Kuwait Page 26
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ATHENS: A woman shouts slogans while marching with others towards the Greek Parliament in Athens yesterday as Public services in Greece are hit by a 24-hour strike called by unions in protest at damage to the sector caused by sweeping austerity measures. — AFP
UBS fined $1.5bn in growing Libor scandal Second-largest fine ever levied on a bank ZURICH: Swiss bank UBS admitted fraud and accepted a $1.5 billion fine yesterday for its role in manipulating global benchmark interest rates. Dozens of UBS staff rigged the Libor rate, which is used to price trillions of dollars worth of loans, in collusion with brokers and traders at other banks, according to an investigation by authorities in multiple countries. The controversy is expected to ensnare other big lenders and spark criminal and civil lawsuits against individuals involved. The penalty UBS agreed with US, UK and Swiss authorities far exceeds the $450 million levied on Britain’s Barclays in June, also for rigging Libor, and the second largest ever imposed on a bank. “This is an endemic banking industry problem and shows how far the industry has fallen, failing itself and its customers,” said Neil Dwane, chief investment officer for Allianz Global Investors. “For the future it shows that without strong regulation and strong and new management throughout most of the biggest banks, there can be no reasonable expectation that they will improve their behaviour substantially - at least UBS now has strong new management.” Shares in the Swiss lender rose 1.6 percent to hit a 17-month high of 15.5 francs ($16.97) in early trade as investors judged the worst was over. “You can see from the stock movement that the fine is already baked in,” said Markus Jordi, principal at Zurich-based investment manager Cosmos Capital. “The bank has already kicked out some traders, apologised, said it will shut down parts of the investment bank and overhauled management.”
The UBS fine comes a week after Britain’s HSBC agreed to pay a record $1.92 billion to settle a probe in the United States into laundering money for drug cartels. UBS’s unit in Japan pleaded guilty to one count of fraud relating to manipulation of benchmark rates, including the yen Libor. The Libor benchmarks are used for trillions of dollars worth of loans around the world, ranging from home loans to credit cards to complex derivatives. Tiny shifts in the rate, compiled from daily polls of bankers, could benefit banks by millions of dollars. But every dollar a bank benefited meant an equal loss by a bank, hedge fund or other investor on the other side of the trade raising the threat of a raft of civil lawsuits. The Libor settlement caps a torrid 18 months for UBS during which it lost $2.3 billion in a rogue trading scandal, underwent a management upheaval and made thousands of job cuts. “We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of this firm,” UBS Chief Executive Sergio Ermotti said in a statement. The reputational impact of the controversy may only emerge next year. “The only thing shareholders can do is keep a very close eye on the money flows on the wealth management side,” said Neil Wilkinson, portfolio manager at Royal London Asset Management. “We may not see until the first quarter of next year whether they have lost any clients as a result of this.” Ermotti said around 40 people had left UBS or had been asked to leave as a result of the investigation.
Emaar signs $500m Turkey property loan
ZURICH: Two Swiss flags flying by a logo of UBS on the top of the Swiss banking giant headquarters in Zurich. — AFP The bank will pay $1.2 billion to the US Department of Justice (DoJ) and the Commodity Futures Trading Commission (CFTC), 160 million pounds to the UK’s Financial Services Authority (FSA) and 59 million Swiss francs from its estimated profit to Swiss regulator Finma. The UK penalty is the largest in the history of the FSA and more than double the 59 million pounds paid by Barclays. UBS said the fines would widen its fourth quarter net loss but it would not need to raise new capital. Britain’s FSA said attempts to manipulate Libor and Euribor, its European equivalent, were so widespread that every submission UBS
made over a six-year period from 2005 to 2010 was suspect. At least 45 people at UBS were involved in the rigging, which was discussed in internal chat forums and group emails but never detected by compliance staff, despite five audits. The FSA said the manipulation was considered to be “normal business practice” by a wide pool of people within UBS. In addition to traders trying to move the Libor rate up or down to make money for themselves, senior managers at the Swiss bank directed dealers to keep Libor submissions low during the financial crisis to make the bank look stronger.——Reuters
Booming Philippines’ missing link: Foreign investors MANILA: The gathering had the air of a postmortem. About 100 executives and government officials listened quietly as Guillermo Luz poked holes in the Philippines’ fairytale economic revival. Luz, head of the Philippines’ National Competitiveness Council, projected a deck of slides onto two pull-down screens that showed the fast-growing Philippine economy slipping in the World’s Bank’s “Ease of Doing Business” index to 138 out of 185 countries, near Tajikistan and Sudan. “It’s a lousy neighborhood,” he said of the two-notch fall this year. “I do not want to live with that ranking.” As the Philippines gallops ahead with the strongest economic growth in Southeast Asia and one of the world’s bestperforming stock markets, its shortcomings are being laid bare, including stubborn problems that have already started to undermine its economic renaissance. While foreign funds have poured into Philippine assets this year, driving the main stock index up around 30 percent to a succession of record highs and lifting the peso cur-
rency about 7 percent, foreign direct investment (FDI) remains embarrassingly low. Total FDI is on course to hit around $1.5 billion this year about half its level in 2007 and less than the average $1.7 billion received every month in remittances from Filipinos overseas. That is only about 3 percent of the total that flowed last year to a group of five peer economies including the Philippines in the 10-member Association of Southeast Asian Nations (ASEAN). In his presentation in Manila’s Makati business district, Luz highlighted the Philippines’ lowly ranking in a range of categories, from “paying taxes” (143rd), to “starting a business” (161st) and “resolving insolvency” (165th). Since coming to power in 2010, President Benigno Aquino has made headway against long-standing problems of corruption, shaky public finances and low infrastructure investment that earned the country the unwanted sobriquet of the “sick man” of Asia. But he has yet to show his government can translate the torrent of hot money and improved market confidence that is also
fuelling a property boom into real gains such as an expansion of higher-paying jobs and better transport links. Calls by congressional leaders to loosen constitutional restrictions on foreign ownership have met with a lukewarm response from Aquino, a scion of an elite family whose mother, democracy icon Corazon Aquino, passed the 1987 constitution as president. “I do not believe that foreigners would be that foolish to come here and put their money in business,” Juan Ponce Enrile, the Senate president who is calling for the constitution to be revised, told Reuters. “They are at the mercy of local people who are not quite familiar to them. That is to me the reason why we lag in investment attractiveness in Asia.” The absence of FDI is a missing link that raises doubts over how much has really changed in the nation of 96 million people, where many an investor has been stung by copious red tape, unpredictable policymaking and graft. Aquino has vowed to change the country’s tarnished reputation among foreign
investors, billing himself as the country’s “salesman in chief”. But to do so he needs to tackle vested business interests who benefit from a protected domestic market. So far, there are few signs he is doing so. The constitution and current rules allow foreign investors to own no more than 40 percent in most industries and bars foreigners entirely in areas such as media and the practice of licensed professions such as engineering, law and medicine. From 2000 to 2011, net FDI to the Philippines totalled $18.9 billion, according to United Nations Conference on Trade and Development, less than a third of what Singapore attracted in 2011 alone. As a proportion of the economy, the Philippines’ net FDI stood at 0.6 percent last year, compared with 2.2 percent in Indonesia and 6.2 percent in Vietnam. Strong foreign investment has been a vital ingredient in the rise of better-off Asian neighbours like Malaysia and Thailand, boosting job creation and deepening technological capabilities.—Reuters
DUBAI: Emaar Properties signed a $500 million loan to finance its project in Turkey, as a gradual recovery in Dubai’s battered property market helps the developer revisit stalled developments and international growth plans. The loan facility, which runs for seven years, was provided by a consortium of banks, including Emirates NBD, HSBC and Standard Chartered, Emaar said in a statement yesterday. The Turkish development, called Emaar Square, will host residential and commercial real estate as well as Turkey’s largest shopping mall, the statement added. “With the current positive growth outlook of Emaar in all its key markets, we are exploring new opportunities to strengthen our project portfolio and create long-term value for our stakeholders,” Mohamed Alabbar, chairman of Emaar Properties, said in the statement. The builder of the world’s tallest tower, the Burj Khalifa, has announced a series of new projects and restarted stalled developments this year as sentiment in Dubai’s battered property market turned positive. It has also looked to shift focus to retail projects and developments outside its home base of Dubai, where property prices plunged by over 60 percent from the 2008 peak. The developer recently announced plans to set up a new joint venture with the Iraqi government to develop housing in the war-torn country. It also plans to build a retail and entertainment complex in Egypt. Emaar Properties and an arm of Dubai Holding, the ruler’s conglomerate, also launched the first project in the planned multi-billion dollar Mohammed Bin Rashid (MBR) City development earlier this month. — Reuters
US home building recovery stalls WASHINGTON: US home construction fell in November, as the recent recovery paused in the troubled sector, the Commerce Department said yesterday. Privately owned housing starts last month dropped 3.0 percent below the revised October estimate of 888,000 to a seasonally adjusted annual rate of 861,000. The monthly drop was below the average analyst forecast of 875,000. However, the results are 21.6 percent above the November 2011 pace of 708,000. New building permits for privately owned housing units, which signal potential future homebuilding, rose 3.6 percent compared to October’s revised 868,000, coming in at a seasonally adjusted rate of 899,000. On average, analysts had expected 876,000. The results are also 26.8 percent above the estimate for the November 2011 estimate of 709,000. “Despite the decline, housing starts... stand at their second highest level since July 2008,” said analysts with Barclays Research. “Permit activity suggests the upward momentum in the pace of start activity can continue in the months ahead.” In recent months, data has indicated the US housing recovery from the 2006 collapse of a price bubble is gaining traction, with sales and prices picking up.— AFP