Entries Tagged 'Finance' ↓

On Tuesday President Barack Obama will appoint Ben Bernanke to a second term as chairman of the Federal Reserve, to continue efforts to combat the crisis that grounded the world’s biggest economy.

Obama will stop his vacation and will announce the appointment at around 13:00 GMT (9:00 local time), official sources from White House said Monday.

“Ben approached with wisdom and calm a financial system that was on the brink, with bold action and innovative thinking that have helped efforts to break the free fall of the economy”, says a preview of the speech published by Reuters.

“Legacy” Bernanke’s first term included lowering key interest rates to near zero and flooding the financial markets with hundreds of billions of dollars to combat the credit crisis.

By giving Mr. Bernanke a second term, Obama signals that he has confidence in the Fed chairman’s ability to strengthen the economy in a period when unemployment and bankruptcies are increasing rapidly, notes Reuters.

On Friday, bank regulators closed Texas Guaranty Bank, the latest in a series of bankruptcies throughout the sector. The closure of Texas Guaranty brings the number of bank bankruptcies this year to 81.

Texas Guaranty Bank had assets of $12 billion and deposits from customers of $11.5 billion. Texas Guaranty’s banking activities will be taken over by the second largest Spanish bank, BBVA, through its American subsidiary BBVA Compass for an unspecified amount.

The Federal Deposit Insurance Corp. (FDIC), which administers the deposit-guarantee plan in the U.S., insures deposits of customers up to $250,000 per account.

Last year, 25 banks were closed by the U.S. government, compared to only three in 2007. The largest U.S. bank failure this year was Colonial Bank which closed on August 14. Colonial had assets of $25 billion.

The anonymity os Swiss bank accounts is quickly becoming a thing of the past. U.S. authorities recently hammered out an unprecedented agreement with the Swiss bank UBS to allow access to personal date of 4,500 accounts held by Americans. Authorities suspect these customers of tax evasion.

Analysts said the agreement – one of the first of its kind – marks a significant step in the fight against tax evasion.

Under the agreement, authorities in Washington will initially have access to the accounts of 4,500 American customers of UBS, but the investigation led by the Treasury Department could unearth the identity of over 10,000 customers may have evaded tax authorities.

In total, the account have a value of over $18 billion. A representative of the Treasury said these customers have the option to present themselves to the authorities until September 23.

The Swiss Minister of Justice stated that this agreement does not violate the country’s bank secrecy law. The law is not intended to protect criminals the minister said. UBS will notify customers before their bank data will be made available to the U.S.

It is the second agreement between UBS and the U.S. this year. To avoid a justice case, the bank admitted in February that it helped Americans to avoid paying taxes. UBS has agreed to pay a fine of $780 million and will make available the names of 250 customers suspected of tax evasion.

At the end of last week French President Nicolas Sarkozy issued a warning to French banks about the return of outsized employee bonuses. The warning came after news reports that BNP Paribas – France’s largest bank in terms of market capitalization -has allocated almost one billion euro or 14% of revenue in the first half of this year for bonuses. BNP Paribas had received 5.1 billion euro from the government to get through the credit crisis.

In contrast to Sarkozy’s statement, the chief of France’s central bank, Christian Noyer, said that the package allocated by BNP for bonuses are within the guidelines for banks established by G20 nations in April.

A political conflict was triggered last week after opponents on the left said that the BNP Paribas bonus plan proves that Sarkozy and the govenment have not managed to bring the banking sector under control following the collapse of the credit markets.

G20 Reshaped the Culture of Bonuses

In April, leaders of the largest economies of the world came together to reform the so-called “culture of bonuses” of the banks considered to have generated a wave of risky transactions with derivatives that triggered the crisis on the credit markets worldwide. The G20 agreement states that multi-year guaranteed bonuses should be eliminated that that employee incentives should be closely linked to the overall performance of the bank.

Ukraine has paid the invoice value of $605 million for Russian gas, announced Premier Iulia Timosenko. Ukraine must accumulate gas stocks during the summer, saving it for the winter season. Stocks would allow Russian gas transit intended for the European Union.

“Today, the government paid 605 million dollars for Russian gas” stored in underground tanks, said Timosenko.

Last Friday, international financial institutions and the European Commission reached agreement with Ukraine to help this country to pay bills on Russian gas and to accumulate stocks, allowing avoiding a new gas crisis.

The agreement will allow funding of approximately 800 million dollars (570 million euro) from the World Bank and the European Bank for Reconstruction and Development in October 2009, explained a spokesman of the EC.

In addition, the IMF unblocked 3.3 billion dollars, the third installment of a credit line of 16.4 billion dollars granted to Ukraine for two years. Part of these funds will be used to help Ukraine to buy gas for the accumulation of stocks.