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Brazil: Petrobras and VisaNet under investigation

Petrobras Probe Starts as Gabrielli Faces ‘Crisis’

Aug. 6 (Bloomberg) — Petroleo Brasileiro SA, struggling to meet output targets and finance a $174 billion spending plan, faces a new challenge today as Brazil’s Senate probes claims it evaded taxes and funneled cash to government allies.

The investigation, prompted by opponents of Brazilian President Luiz Inacio Lula da Silva, focuses on allegations Rio de Janeiro-based Petrobras evaded 4.4 billion reais ($2.4 billion) of taxes, overpaid for goods and may have favored the president’s supporters when it made charitable donations. Chief Executive Officer Jose Sergio Gabrielli denies the claims.  Read full article by Bloomberg here

VisaNet Faces Antitrust Probe by Brazilian Justice

Aug. 6 (Bloomberg) — Cia. Brasileira de Meios de Pagamento, the credit-card company known as VisaNet, is being investigated for possible anti-competitive practices by the Brazilian Justice Ministry.

The probe also involves Visa do Brasil Empreendimentos Ltda. and Visa International Service Association, the ministry said in an e-mailed statement today. The ministry, through its Economic Law Department, or SDE in the Brazilian acronym, will assess the exclusive right of VisaNet to accredit businesses to accept cards carrying the Visa logo.

This “practice” is against consumer interests and “substantially” reduces competition in the industry, the ministry said in the statement. Read full article by Bloomberg here

Source: Bloomberg, 06.08.2009

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Filed under: Brazil, Latin America, News, Risk Management, , , , , , , , , , ,

Mexico Central Bank prohibit some Lender/Credit/Banking Fees

July 21 (Bloomberg) — Mexico’s central bank said it will prohibit commercial banks from applying some fees in a bid to make charges more transparent and bolster competition.

Starting Aug. 21, banks won’t be able to charge fees for depositing checks that are returned, for exceeding debit card limits or for canceling deposit accounts, credit cards, debit cards or online banking services, the central bank said today in an e-mailed statement.

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The measures may force Mexican banks to issue more loans to compensate for revenue they currently get from fees, which may open up credit channels that seized up amid the global financial crisis, said Gabriel Casillas at UBS AG in Mexico City. Fees and commissions accounted for 20 percent of the Mexican banking industry’s operating revenue in 2008, Standard & Poor’s says.

“This is an important blow to one of the biggest sources of revenue for Mexican banks,” said Casillas, who is chief economist for Mexico and Chile. “This should give them an incentive to increase credit and obtain revenue from there.”

Banco Bilbao Vizcaya Argentaria SA, which controls Mexico’s largest lender BBVA Bancomer SA, fell 1.4 percent to 9.675 euros at 12:15 p.m. New York time from 9.81 euros at 10 a.m., when the measures were announced.

Banks will also be unable to charge customers for opening or managing accounts that were opened in order to receive a loan, the bank said.

Antitrust Chief

Mexican antitrust chief Eduardo Perez Motta said in a July 17 interview that authorities needed to make it easier for customers to switch banks so they could more easily shop for low-cost services, which would in turn boost competition.

“When you tell your bank you want to leave, they make your life difficult,” Perez Motta said.

Still, Angelica Bala, an S&P credit and banking analyst in Mexico City, said increased regulations won’t improve competition or transparency.

“The central bank is doing this because there has been a big political push against banks charging so much for fees and commissions,” Bala said in a telephone interview. “But putting a cap on fees and commissions is not a good thing. It has to be driven by competition.”

Source: Bloomberg, 21.07.2009 by : Jens Erik Gould in Mexico City at jgould9@bloomberg.net.

Filed under: Banking, Latin America, Mexico, News, Services, , , , , , , , , , , , , ,

Brazil’s Antitrust Chief says ‘Irrational’ Rate cuts may hurt Brazilian banks

July 21 (Bloomberg) — Brazilian antitrust agency chief Arthur Badin said a move by state-owned banks to cut interest rates in a bid to force others to match lower borrowing costs threatens to hurt the banking industry.

“Public banks fulfill an important role in helping the economy recover,” Badin said in an interview in Brasilia. “It’s also important that, under the pretext of increasing competition, you don’t achieve the opposite in the long term, with irrational pricing of interest rates when there exists the possibility for effective competition.”

Brazilian officials, including President Luiz Inacio Lula da Silva, have urged banks to increase lending and cut borrowing costs after the credit crunch last year. Banco do Brasil SA, the nation’s largest federally controlled bank, Caixa Economica Federal and state development bank BNDES have all slashed borrowing costs over the past year.

“Decisions by public banks to lower rates were mainly political and don’t solve structural problems, such as default rates and future rate expectations,” Andre Perfeito, an economist at brokerage Gradual CCTVM Ltda, said in a telephone interview from Sao Paulo. “It may produce results in the short term, but in the long term it will cost more and won’t be very effective.”

Aldemir Bendine, who was made Banco do Brasil’s president in April, on May 25 announced he expanded credit to individuals by 13 billion reais ($6.8 billion), reduced rates on consumer loans and mortgages and extended the maturity of car loans in a bid to revive consumer spending. The boost to personal loans benefited 10 million clients, about a third of the bank’s total.

Brazil also cut its Long Term Interest Rate, used by state development bank BNDES, to a record 6 percent last month.

The share of outstanding credit from public banks rose to 37.8 percent in June from 34.2 percent in September last year, according to central bank figures.

Source: Bloomberg, 21.07.2009 by Iuri Dantas in Brasilia at idantas@bloomberg.net

Filed under: Banking, Brazil, Latin America, News, Risk Management, Services, , , , , , , , ,

Credit Card Crisis: Banks rush to emergency rescue of credit card trusts/securitisation vehicles

Credit card issuers have had to resort to extreme measures to keep their businesses alive as US consumers buckle under the weight of the recession. Record credit card losses are pushing big US banks to come to the rescue of off-balance sheet vehicles they use to transform hundreds of billions of dollars in consumer loans into securities sold to investors.

The support provided by Citigroup, Bank of America, JPMorgan Chase and American Express underscores how the deteriorating health of the US consumer is opening new fronts in the financial crisis.

Losses on US credit cards as measured by Moody’s Credit Card Index rose beyond 10 per cent of total loans outstanding in May, a new high in the 20-year history of the index and the sixth consecutive monthly record.
Most credit card loans are placed into pools – structured as trusts – that are used to back bonds sold to investors. Banks rely on such “securitisations” to fund their huge levels of credit card lending while keeping most of the risk off their books.

Although they are not obligated to support the pools of credit card receivables when losses mount, banks have done so to ensure investors continue to buy such securities.

The doomsday scenario facing banks is that credit card losses will rise to levels that force the vehicles to repay bondholders early.

Banks have been supporting card trusts by issuing – and then buying – bonds that would absorb the first layer of losses in the underlying loans. This is designed to provide a protective buffer for existing bondholders.

BofA bought $8.5bn of junior debt from one of its trusts in the first quarter and put aside $750m to cover losses on the investment.

Citi bought $265m of so-called junior debt from one of its credit card trusts in October and an additional $2.3bn of junior debt from the same trust in April, according to a regulatory filing. JPMorgan and Amex also have issued new junior debt for their credit card trusts.

In addition, JPMorgan has supported credit card bonds issued by Washington Mutual – the troubled lender bought by JPMorgan last year – by substituting its own credit card loans for WaMu’s lower quality ones.

The loss rate on the WaMu pool was 14.8 per cent in October. By comparison, a JPMorgan credit-card pool had an 8.1 per cent loss rate in May.

Source: Financial Times, 24.06.2009 by Saskia Scholtes and Francesco Guerrera in New York

Filed under: Banking, News, Risk Management, Services, , , , , , , , , , , ,

Is Mexico’s New Banking Bill a sign of worse things to come in International Banking Regulations?

A proposal to regulate fees charged by banks operating in Mexico won’t put a big dent in Bank of Nova Scotia’s (BNS) bottom line, but it could be a sign of worse things to come, as banking rules around the world begin to tighten in the wake of the financial crisis.

Brad Smith, Blackmont Capital analyst said:

As of the year-end 2008, Scotia’s Mexican operations were responsible for 9% of total earnings and while this legislation could impact on Scotia’s total operations to be marginal at this time.

The greater concern, in our view, is that this is merely an initial step in increased international regulation of the financial industry, thereby putting increased strain on future profits.

The new banking bill passed by the Mexican Senate, but still required to pass through the lower house, proposes ceilings on credit card and loan interest rates and also seeks to regulate deposit rates and eliminate certain banking fees.

Mr. Smith continues to rate Scotiabank shares a “hold” and left his C$36 price target unchanged.

Source: SeekingAlpha, 23.04.2009

Filed under: Banking, Latin America, Mexico, News, Risk Management, Services, , , , , , , , , , , ,

Mexican Senate to limit Excessive Credit Card charges by foreign banks, observed by U.S. Senate

[16.04.2009] Mexico’s Senate banking committe approved changes to the financial services law. The Central Bank will be allowed to set limits on the rates that commercial banks can charge on loans.

Banco de Mexico will not set of specific limits to rates; instead, the central bank will set references as to how much banks should be charging for the loans and also have the ability to highlight to the public which banks are charging more than others. “Banco de Mexico will ensure that institutions give loans or credit in accessible and reasonable conditions, and it will take corrective measures so that operations are offered under those terms,” the bill says.

The initiative will now move to the floor of the Senate. The bill doesn’t specify a maximum interest rate. Instead, it calls for policy makers to cap interest rates if they are deemed to be too high or if they prevent low-income Mexicans from obtaining credit.      The legislation would prohibit banks from charging fees that “distort healthy banking practices,” according to the initiative. Banks wouldn’t be able to charge fees for consulting account balances under the measure.

Source: IXE 16.04.2009

[26.03.2009] Two Mexican Senate committees approved proposals to overhaul financial sector regulations that if passed into law would give authorities greater scope to limit the interest rates and commissions that banks charge their customers.

Mexico is not alone. The U.S. Senate Banking Committee will meet on March 31 to consider pro-consumer credit card legislation.

The current credit cards comissions and interest rates in Mexico, charged by foreign banks are the higest in the World and cause to great concern for social instability, for example:

HSBC                 charges 72% p.a. in Mexico  vs.  16%  in the UK

ScotiaBank     charges 61% p.a. in Mexico vs.  18%  in Canada

BBVA                 charges 80% p.a. in Mexico vs. 25% in Spain

Citi/Banamex charges 77% p.a. in Mexico vs.   9% in the US

According to Mexico Bankers Association (ABM) in 2008 there where  26.2 milion credit card holding individuals, which spend  478 Bn pesos ( 33.7 bn US$).

Credit cards might as well be the next bubble to burst, see the Reuters special on consumer credit concerns.

The Finance Commission and the Legislative Studies Commission approved the bill late Wednesday with the backing of senators from the three largest political parties. The commissions said they hope to submit a final draft to the full Senate as soon as possible, according to a Senate press release.

The measure would then be sent to the lower house. The plan would give the Bank of Mexico greater power to regulate commissions and interest rates, ban fees for checking balances at bank branches and require lenders to offer a basic credit card product without “excessive charges.”

Fees and commissions of close to 56.3 bn pesos (3.97 bn US$) last year accounted for about 27% of banks’ operating income, according to National Banking and Securities Commission data.

Five of Mexico’s top seven banks are owned by foreigners. Banco Bilbao Vizcaya Argentaria SA (BBV) and Banco Santander SA (STD) of Spain, Citigroup Inc. (C) of the U.S., HSBC Holdings PLC  ( HBC) of the U.K., and Canada’s Bank of Nova Scotia (BNS) control 68% of bank loans and 69% of deposits.

Source: El Financiero, El Economista,Dow Jones,Reuters,AFP  26.03.2009

Filed under: Banking, Mexico, News, Risk Management, , , , , , , , , , , , , , , ,