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Cityam 2011-06-15

Cityam 2011-06-15

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Published by: City A.M. on Jun 15, 2011
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09/03/2011

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News
2
CITYA.M.
15 JUNE 2011
Teachers votefor walk outs
 TEACHERS have become the latestgroup of public sector workers to votefor strike action, threatening to bringBritain to a halt over the summer.Members of the National Union of  Teachers (NUT) and the Association of  Teachers and Lecturers (ATL) are threat-ening to stage walkouts on 30 June.NUT general secretary ChristineBlower said: “The government’s unnec-essary attack on public sector pensionshas convinced NUT members thatthere is no alternative but to supportstrike action.” Tube drivers in London are due totake industrial action next week, in a wave of strikes that could bring thecapital to a halt during the popular Wimbledon tennis season. The CBI hit out at union leaders overthe industrial action, attacking the vot-ing process that secured the walkoutdecision and calling for a change in thelaw.“This strike is an attempt to causemaximum disruption for Londonerson a minimal turnout,” said Katja Hall,CBI chief policy director.“It can’t be right that just 29 percent of the balloted workforce voted infavour of this strike.“We are calling for the law to bechanged so strikes can only go ahead with the backing of a significant pro-portion of the workforce,” she added.
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POLITICS
RBS TAKES CONTROL OF 42 MARRIOTTHOTELS
Royal Bank of Scotland has taken con-trol of a £1bn property portfolio of Marriott hotels after failing to securea debt-for-equity restructuring of oneof its largest individual real estateloans made during the property  boom. RBS on Tuesday night appoint-ed Ernst & Young as receivers to theportfolio of 42 hotels across the UK.
BANK CHIEFS’ PAY RISES BY 36PC
Bank chiefs’ average pay in the USand Europe leapt 36 per cent last yearto $9.7m, according to data compiledfor the Financial Times. Two of theindustry’s biggest names – JamieDimon, the JPMorgan Chase chief executive, and Goldman Sachs’ LloydBlankfein – were paid more than 15times their 2009 earnings. Mr Dimonreceived nearly $21m in 2010, toppingthe FT’s survey of the salary and bonus packages awarded to 15 top bankers. Mr Blankfein earned $14.1m,including a $5.4m cash bonus – upfrom $863,000 in 2009.
IMF WARNS RUSSIA OF REFORM ORRECESSION
Russia has dashed hopes that the2008-2009 economic crisis would spurneeded economic reforms aimed atmodernising the economy, a missionfrom the International Monetary Fund has concluded.
US DERIVATIVES REFORMS TO BEDELAYED UNTIL END OF 2011
Derivatives rules are set to be delayed by six months in an effort to quelllegal uncertainty around financialreform that some worry could roilmarkets. Gary Gensler, chairman of the Commodity Futures TradingCommission, said officials wouldmiss a July 16 deadline to finaliserules stemming from the sweepingDodd-Frank financial reforms passedlast year.
NETWORK RAIL FAILED TO ADDRESSSAFETY RISKS SAYS REGULATOR
Network Rail must take urgent actionto improve its safety procedures, therail regulator said yesterday after theprivate maintenance company missedeight out of ten of its performance tar-gets. It failed a string of targets forpunctuality and serious delays inEngland, Scotland and Wales, withlong-distance services on the East and West Coast Main Lines suffering the worst of the disruption.
TO GO OR NOT TO GO . . . UNION SAYSTHAT IS THE QUESTION
 The owner of a call centre and a lead-ing union are locked in a legal battleover how long staff take to go to thelavatory. The CWU has called for a day of action to protest at the BirchwoodIndustrial Park in Warrington today and has pledged to dress up in Victorian clothes to make its point.
UK ECONOMY REMAINS STEADY ASGLOBAL GROWTH WOBBLES
 The UK’s economic recovery is expect-ed to remain on track over the comingmonths in the face of a deterioratingoutlook for France, Italy and the euroarea as a whole. Britain’s relativeresilience emerged in the closely- watched leading indicators indexcompiled by the Organisation forEconomic Co-operation andDevelopment (OECD).
SURGEON INTERRUPTS CAMERON’SHOSPITAL VISIT
 A senior surgeon interrupted a hospi-tal visit by David Cameron and Nick Clegg to complain that the TV crewsfilming them were not observingstrict hygiene rules. David Nunn leftthe Prime Minister and Deputy PrimeMinister stunned with his angry out- burst during the walkabout at Guy’shospital in London Bridge.
UNIBAIL MAY BE SHOPPING FORSPANISH MALLS
Unibail-Rodamco SA, a leadingEuropean property company, could beon the prowl for property in Spain,according to analysts. An acquisitionof shopping centers in Spain that fitUnibail's business would appear “well-timed and strategically sound,” says John Lutzius, managing director of the European offices of Green Street Advisors, a boutique research firm.
CHINA TIGHTENS, COMMODITIES SHRUG
Fresh monetary tightening by China'scentral bank was largely shrugged off  by commodities, a sign investors aregetting more comfortable with infla-tion-tackling measures from the world's top commodities consumer. The People’s Bank of China said it willlift the amount of capital banks mustkeep on reserve by half a percentagepoint.
WHAT THE OTHER PAPERS SAY THIS MORNING
Broadgate victory is great first step
IT is merely a small, symbolic victory in a much bigger battle against redtape but it is great news that Jeremy Hunt will today announce that he won’t be listing Broadgate Estate, as we reveal on our front page. EnglishHeritage’s indefensible bid to protectthis unexceptional complex aroundLiverpool Street station, built in themid-1980s, has rightly been slappeddown by the culture secretary. A much-needed plan to redevelop theestate and to build a new home forUBS, the bank, will now go ahead.
City A.M.
is delighted to have playeda major role in demonstrating theabsurdly anti-growth and anti-compet-itive implications of listing such adevelopment – and to marshal thegrowing opposition to the decision. Among those who signed up to ourcampaign to dismiss EnglishHeritage’s over-reach were Boris Johnson, Lord Wolfson (the CEO of Next) and a raft of others. What was so infuriating about theattempt to halt the redevelopment was that it took no account of theneed for growth, jobs and regenera-tion. London’s finance hub hasthrived by reinventing itself, as exem-plified by the transformation of theSquare Mile and the emergence of Canary Wharf; if a 26-year old office block can’t be knocked down any-more, then what next? Would every-thing be deemed worthy of preservation, regardless of cost? Downthat road lies stasis, stagnation andthe transformation of a dynamic econ-omy into a fossilised, irrelevant snap-shot of a bygone age. It must becomeeasier to change and adapt to modernneeds in a world where talent and cap-ital are so footloose – not harder.Big firms feel that London is a farless attractive place to do business as aresult of the 52p tax rate (includingnational insurance), a raft of other taxhikes and numerous new labour mar-ket rules. So it is refreshing that they  will at last be sent a strong signal thatthe coalition is trying to reopen theUK for business.Given the good news on Broadgate,let us hope that George Osborne useshis Mansion House speech tonight tointroduce other reforms. He willannounce that he backs the ring-fenc-ing of the retail part of large universal banks, a move which will reduceuncertainty for City firms. But he willface a crowd that is growing increas-ingly worried that the government islosing its reformist credentials inmany areas. Tax is a real issue, withserious anger about the raid on NorthSea oil and gas firms. It is also increas-ingly obvious that the UK has one of the highest direct tax burdens of any major economy, as confirmed again by accountants UHY. The research works out the take home pay for work-ers, taking into account personal taxesand social security contributions, andreveals the UK charges the 7th highesttaxes. The calculations are based on asingle, unmarried taxpayer with nokids; the UK would score even worsefor families, as these enjoy tax breaksin other countries. Only Mexico,Estonia, Italy, France, India andGermany take more than the UK froman employee earning $25,000 a year.For a person earning $200,000, only France, Israel, Germany, Ireland, theNetherlands and Italy take more intax. None of this is going to change ina hurry, unfortunately, but Osborneneeds to try and compensate for it by unveiling more pro-growth, supply-side policies. Broadgate is an excellentmove – now we need more from where that came from.
allister.heath@cityam.com Follow me on Twitter: @allisterheath
US banking giant JP Morgan’s mort-gage chief David Lowman has left the bank after it overcharged active USmilitary personnel on their homeloans.His departure comes just fourmonths after another executive wasdrafted in to manage the lender’smortgage unit over him.Lowman, who joined JP Morganfrom Citigroup in 2006, had beenplaced under chief administrativeofficer Frank Bisignano.“Dave Lowman and I have decidedhe will leave the firm,” Bisignano saidin an internal memo.He added that Lowman would takesome “much needed time off”. JP Morgan said in February it hadreturned 10 homes to families pro-tected by a law that entitles thehouseholds of military personnel tocheaper mortgages, after they had been found to have been takenimproperly in foreclosure actions.
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BANKING
JP Morgan loses Lowman
 JP Morgan mortgage chief David Lowman has left the bank
NEWS | IN BRIEF
Price of gold to soar to $5,000
Standard Chartered bank has tipped theprice of gold to soar as high as $5,000(£3,051) per ounce by 2020. The bullishview of the gold market indicates theperceived security of the commodityamong investors, who have rushed to theprecious metal since the financial crisis.The bank says limited gold production,the gold purchasing programmes of cen-tral banks and the increasing demand forthe commodity in India and China willcombine to push up its price. Spot goldprices closed at $1,520 an ounce yester-day.
BIS advising on Southern Cross
Mandarins from the department of health have been advised by the govern-ment’s corporate finance unit - the busi-ness department’s Shareholder Executivebranch - ahead of a crunch meetingtoday with embattled care home opera-tor Southern Cross. The struggling firmwill meet with the government, as wellas landlords and HM Revenue & Customs,to discuss its future today. TheShareholder Executive is best known forhaving advised on plans to save carmaker MG Rover.
EDITOR’S LETTER
ALLISTER HEATH
7
th
Floor, Centurion House,24 Monument Street, London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7283 5334Email: news@cityam.com www.cityam.com
Editorial
Editor
Allister Heath
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News Editor
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Commercial Director
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Editorial Statement
This newspaper adheres to the system of  self-regulation overseen by the Press ComplaintsCommission. The PCC takes complaints about theeditorial content of publications under the Editor’sCode of Practice, a copy of which can be found at www.pcc.org.uk 
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CBI policy directorKatja Hall has calledfor a change in the lawto prevent low ballotturnout strikes
 
   *   E  x  c   l  u  s   i  o  n  s  a  p  p   l  y ,  s  e  e    i  n  s   t  o  r  e    f  o  r   d  e   t  a   i   l  s .
News
3
CITYA.M.
15 JUNE 2011
BRITAIN’S financial watchdog has warned wealth management firmsover the way they invest clientmoney, prompting an angry response from the industry. The Financial Services Authority (FSA) said it had found “significant, widespread failings” in the industry that put the interests of customers atrisk. The regulator warned 260 wealthmanagers in a letter yesterday toimprove the way they advise retailinvestors.But the trade body that represents wealth managers hit out at the watchdog’s intervention, saying it was not aware of any detrimentalimpact on cus-tomers.“There has not, asfar as we are aware, been any consumerdetriment directly asso-ciated with the issue andour firms,” aspokesperson forthe Associationof PrivateClientInvestmentManagerssaid.“We dotake thematter very seriously and arekeen to continue working with the FSA,” thespokesperson for the 184-member-strong body added. The FSA had conducteda survey of 16 wealthmanagers andfound thatalmost80 percent of clientshad beensold atleast one potential-ly unsuitable prod-uct.Of those firms, itsaid 14 had acted ina way that posed a“high or medium-high risk of detri-ment to theircustomers”. It addedthat it was involved in“ongoing regulatory action” with the com-panies. The review rangedfrom small independ-ent firms to the UK  wealth managementunits of global banks. The warning focusedon the ability of wealthmanagers to keep up-to-date records on clients’ wishes, needed to makeinvestment judgments. The regulator said 67 per cent of the files it reviewed were not consis-tent with the firm’s risk models, theclient’s documented attitude to risk and the client’s investment objec-tives. “You should be aware that weconsider suitability - and the ability todemonstrate it - a key area of risk inthis sector and wealth management businesses can expect to see continu-ing and increasing supervisory focuson these issues,” said FSA businessconduct head Margaret Cole (left).FSA IMPOSES FINES: PAGE 14
Greece yields set anotherrecord as ECB stands firm
 YIELDS on Greek debt again set new records yesterday as the major playersin the Eurozone reiterated their oppos-ing stances on the terms of a new res-cue for the struggling sovereign.ECB board member Mario Draghi, who is also its incoming president, voiced his support for the Bank’s posi-tion that non-governmental investorsin Greece’s debt should not be asked totake losses as part of a new bailout, astance that both Germany andHolland firmly oppose.“The ECB is not in favour of restruc-turing or haircuts, we should excludeall concepts that are not purely volun-tary or that have any element of com-pulsion,” he told the EuropeanParliament during a hearing on hisproposed appointment as the ECB’snew president. The ECB is estimated to have
 €
444bn(£392bn) in direct exposure to periph-eral sovereign debt.Draghi added that on the sovereigncrisis: “There are no shortcuts avail-able. The response to the debt crisislies first and foremost in nationalpolicies.” Yields on Athens’ ten-year bondsreached new highs of 17.4 per cent while two-year rates shot to 26.4 percent.
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REGULATION
MAPLE, the rival bidder for theLondon Stock Exchange’s agreedmerger target TMX Group, has said ithas been given regulator approval forthe structure of the company underits control. The Maple consortium of 13Canadian financial firms said it had been given “exemptive relief” fromsecurities regulators in the country.Maple said the development doesnot constitute approval for itsC$3.7bn (£2.4bn) deal for any regula-tory purpose.
LSE rival givenapproval for itsTMX structure
CAPITAL MARKETS
 THE US could lose its prized AAA credit rating if Washington fails toswiftly resolve the row over the gov-ernment’s debt ceiling, FederalReserve chairman Ben Bernanke saidlast night.“Even a short suspension of pay-ments on principal or interest on the Treasury’s debt obligations couldcause severe disruptions in financialmarkets and the payments system,”Bernanke said.Inaction could also “create funda-mental doubts about the creditwor-thiness of the US, and damage thespecial role of the dollar and Treasury securities in global marketsin the long term”, Bernanke added. The government will begindefaulting on its debts, rising over$14.3 trillion (£8.7 trillion), if Congress does not increase its limit by 2 August, the Treasury Department has warned.“We could actually have a repriseof a financial crisis, if we play thistoo close to the line,” PresidentBarack Obama concurred yesterday.
Bernanke: USfaces credit riskfrom debt row
US ECONOMY
EUROZONE
 
 
Diec line: Locl x: Emil: 
14 une 211 
Ou e: ou e: 
De CEO 
his lee equies ou immediae aenion. 
 
ass ou o espond o he SA b  Auus 2011.
 
ealh manaemen eie 
e he ecenl eiee he suibili o clien  poolios in  sm ple o ims in he elh mnemen inus. e he ieniie siniicn, ies pe ilins, hich e e concene m lso be  pelen in ims ousie ou sm ple
. 
n his lee e ex plin he issues e he ieniie n s ou o consie hehe ou im mees –  n cn emonse h i mees –  ou suibili equiemens.
 
esuls om ou eie 
 
14 ou o 1 ims ee  jue o  pose  hih o meium-hih is o eimen o hei cusomes, bse on he numbe o clien iles hich h  hih is o unsuibili o hee he suibili coul no be eemine. 
 
Oell, 9% o iles eiee h  hih is o unsuibili o he suibili coul no be eemine. 
 
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Wealth firmsattacked bywatchdog
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