plus 4, Breaking News: UK report says territories should broaden tax base - the Royal Gazette

Breaking News: UK report says territories should broaden tax base - the Royal Gazette
UPDATE 4-Lloyds finalises $33 bln capital plan, shares jump - Forbes
March 27: St. Thomas student's death in Mexico ruled an accident - Minneapolis Star Tribune
ALL BUSINESS: Credit-card rates up before new law - WTVF
Statement at the Conclusion of an IMF Article IV Consultation with ... - International Monetary Fund

Breaking News: UK report says territories should broaden tax base - the Royal Gazette

Posted: 29 Oct 2009 09:18 PM PDT

Breaking News: UK report says territories should broaden tax base

LONDON (Reuters) - Britain's overseas financial havens should bump up taxes to wean their economies off credit crunch hit banking, insurance and funds services, a government commissioned report said today.

Michael Foot, a former Bank of England director who helped to set up the Financial Services Authority, was asked by the British government to see how the economies of nine of the country's overseas territories and crown dependencies can be made more sustainable and resilient to shocks like the financial crisis.

"The smallest economies are particularly exposed to the downturn, but none of the nine jurisdictions I have reviewed can afford to be complacent," Foot said in his report.

"Some now face difficult decisions and will need to look afresh at options for controlling public expenditure and increasing revenue," Foot said.

Deloitte, a consultancy which contributed to the report, said there was a compelling case for the jurisdictions to introduce value added tax on goods and services as part of efforts to broaden out revenue.

Some of jurisdictions reviewed, such as Bermuda, have no taxes on income, profits and capital gains, with income coming from import duties and licence fees.

The UK Government signalled its backing for the report.

"This report sends a strong signal to overseas financial centres that they must ensure that they have the correct regulation and supervision in place, while also ensuring their tax bases are more diverse and sustainable to withstand economic shocks," Stephen Timms, a junior UK finance minister, said.

Read the full story in tomorrow's Royal Gazette

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UPDATE 4-Lloyds finalises $33 bln capital plan, shares jump - Forbes

Posted: 29 Oct 2009 09:51 AM PDT

By Myles Neligan and Douwe Miedema

LONDON, Oct 29 (Reuters) - Lloyds Banking Group Plc inched closer to plugging a capital gap of more than 20 billion pounds ($33 billion), boosting the British bank's shares on prospects a deal could happen before the year end.

In a sign it is getting more confident, Britain's biggest retail bank said it was in 'advanced discussions' with regulators to stay out of a government-backed scheme to insure bad debts, sending its stock up 8 percent.

The bank for the first time confirmed widely reported details of its ambitious plans -- including one of the world's largest-ever rights issues and a debt swap -- to help it avoid harsh European Union anti-trust sanctions.

'The comments today provide comfort that the group will not be broken up and that any restructuring initiatives will not be particularly material to group earnings or capital,' said Joe Dickerson, an analyst at brokerage Execution.

The bank is keen to announce its plans to raise capital at the same time as any sanctions it faces from the EU, after the UK scooped up a stake of 43 percent in the bank in last year's bailout, sources close to the situation have said.

Sky News reported that the bank was close to agreeing a deal with the EU to to sell its Cheltenham & Gloucester branch network. The deal would also involve Lloyds TSB Scotland and internet bank Intelligent Finance, Sky said.

Lloyds's comments came as Ireland's finance minister sought to downplay worries about a delay to his 54 billion euro bad bank plan, saying it could still proceed on schedule unless parliament gets bogged down in a lengthy debate.

Lloyds shares had lost ground this week as the market feared an order from Europe's anti-trust regulators for Dutch bancassurer ING to break up its business after receiving state aid set a harsh precedent for the British bank.

By 1309 GMT, Lloyds stock was up 7 percent at 85.62 pence, outperforming a 3.5 percent rise in the DJ Stoxx European banking sector index and rebounding from Wednesday's lowest close in more than three months.

FINAL DETAILS

Lloyds hopes to launch its plans next week, if it gets approval, Reuters reported last week, quoting sources close to the situation. That would enable it to raise the money before Christmas, its preferred time schedule.

On Thursday, sources familiar with the matter gave new details of Lloyd's campaign to stay out of the APS.

It has lined up a mandatory convertible bond of 2 billion pounds and a series of actions agreed with the Financial Services Authority, they said, such as cost cuts and a reduction of risk-weighted assets.

It also plans a rights issue of 12 billion pounds and contingent capital -- 'top up' hybrid capital that changes into equity if the bank hits trouble -- of 7 billion pounds, bringing the total to well over 21 billion pounds.

Lloyds declined to comment.

The bank has yet to receive the green light from regulators to stay out of the APS plan and absorb any further losses on toxic assets without state aid. It said in March it wanted to insure 260 billion pounds worth of assets under the scheme.

'There can be no certainty at this stage that any alternative to (the government insurance scheme) will proceed. All options remain open,' Lloyds said.

A Treasury official likewise said talks with Lloyds were continuing and no decisions had been made.

The Treasury has given Lloyds the go-ahead to explore market sentiment and reassure it that private investors are willing to bear the risk of its massive capital addition, two sources familiar with the matter said on Thursday.

'They have been given the go-ahead (to find out) whether they can get it done and underwriters need to explore whether they can deliver,' one of the sources said.

'The government is conscious of the risk and if they believe it's too high they won't give them the go-ahead ... the second gets answered by the first,' the source said.

The bank has yet to officially mandate the banks it has lined up for the rights issue: UBS, Bank of America Merrill Lynch, Citigroup, Goldman Sachs, JP Morgan Cazenove and HSBC.

Markets have been bracing for wild swings in Lloyds's share price, with stock lending -- an often-used indicator for short-selling -- rising sharply this month.

(Additional reporting by Clara Ferreira-Marques and Daisy Ku; Editing by Erica Billingham and Jon Loades-Carter)

($1=.6081 Pound) Keywords: LLOYDS/

(myles.neligan@reuters.com; +44 207 542 13 73)

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March 27: St. Thomas student's death in Mexico ruled an accident - Minneapolis Star Tribune

Posted: 30 Oct 2009 08:52 AM PDT

The death of Josh Gunderson, a 20-year-old University of St. Thomas student who was vacationing in Mexico, appears to be accidental, an official there said Thursday.

One of Gunderson's roommates found him unconscious in their hotel bathroom early Tuesday, said Manuel Banuelos, a spokesman at the American Consulate General in Guadalajara. There isn't any indication of violence, but Mexican authorities will continue to investigate, he said.

"Josh fell and hit the back of his head, which rendered him unconscious," Banuelos said.

Gunderson, a 2007 graduate of Stillwater High School and a member of the university's club hockey team, went to Puerto Vallarta on Monday during spring break with a college classmate and her companion.

Both of those companions have returned to Minnesota, Banuelos said. An autopsy is pending.

In a written statement, Gunderson's family said they still have questions about his death and hope his traveling companions can help "put all the pieces together ... so our family can start the healing process."

"Our family is still in a great deal of shock," the statement said. "Josh was a bright light in this world and he will be truly missed by so many people. Josh had an extremely kind heart and made everyone feel special and loved."

The family has set up a memorial fund to provide opportunities for less-fortunate kids to play hockey. "We know this would make Josh happy and is a legacy he would be proud of," the family said.

Contributions can be made to the Josh Gunderson Memorial Fund at the Central Bank in Stillwater. For more information, call 651-439-3050.

Visitation will be held from 5 to 8 p.m. Monday at the Bradshaw Celebration of Life Center in Stillwater. Services will be at 11 a.m. Tuesday at St. Michael Catholic Church in Stillwater.

Staff writer Mary Lynn Smith contributed to this report. David Chanen • 612-673-4465

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ALL BUSINESS: Credit-card rates up before new law - WTVF

Posted: 30 Oct 2009 08:45 AM PDT

By RACHEL BECK
AP Business Writer

NEW YORK (AP) - Have you checked the interest rates on your credit cards lately? Odds are they're going way up.

That's because credit-card companies are rushing to raise rates and tack on extra fees ahead of a law slated to take effect Feb. 22 that is supposed to limit such moves in the future. In some cases, rates are doubling to as high as 30 percent or more, even for people who pay their bills on time.

The current maneuvering by the card companies is serving up another blow to American consumers who are already struggling with their finances. U.S. lawmakers let that happen by giving the card companies nine months to prepare for the rules.

"The delay allowed them to restock their arsenal with weapons," said Lloyd Constantine, an attorney who has spent 22 years litigating cases tied to the credit-card industry and is the author of the new book "Priceless: The Case that Brought Down The Visa/Mastercard Bank Cartel."

It's hardly surprising that banks and other credit-card issuers would use a grace period afforded to them by Congress to their advantage.

The changes required under the Credit Card Accountability, Responsibility and Disclosure Act, or CARD Act, could go a long way to stop deceptive practices in the card industry. But before that happens, card issuers are grabbing what they can from the millions of Americans who are their customers.

Constantine is one of them. The interest rate on his Chase Visa card doubled to 17 percent earlier this month. He got a notice announcing the change and couldn't figure out why. Constantine, who has a high net worth, rarely uses the card, and when he does he pays his bill on time.

Come late February, the CARD Act will prohibit lenders from raising rates on outstanding card balances. In other words, if you have a balance of $1,000 and the company wants to changeyour rate, it only applies to new purchases. It wouldn't be retroactive on old debt.

Card issuers also won't be able to change the terms of a contract so long as the cardholder makes a minimum payment on time.

The rules ban a practice known as "universal default." That's where lenders raise a cardholder's interest rates when that person misses payments to other creditors or takes on new debt like a mortgage or a car loan.

The card companies lobbied Congress hard for the delay. They argued they needed the time to overhaul their computer systems, craft new sales' pitches and rewrite disclosure documents to be sent to customers.

While all that may be true, the facts indicate that they are using the time for something else.

Even though interest rates set by the Federal Reserve are at historic lows - which has let banks and other issuers borrow cheaply - cards have become more costly for Americans, according to research released Wednesday from the Pew Charitable Trusts' Safe Credit Cards Project.

The nonprofit organization found that credit-card companies boosted interest rates on new cards by an average of 20 percent from January to July. That data doesn't include increases over the last four months when many lenders stepped up their pace of raising rates and fees.

The study reviewed nearly 400 cards offered by the largest 12 U.S. card issuers. It found nearly all contracts still allow banks to raise interest rates on outstanding balances. Card companies also have added or raised fees for things like balance transfers, cash advances and overdraft protection.

Representatives of the card business say the increases reflect the realities of the recession, not an attempt to gouge customers. The weak economy means a greater risk that all cardholders could potentially default, said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, an industry group.

Banks and other card issuers have been seeing more late payments, and industry forecasts call for at least 10 percent of cardholders to default on their unpaid bills.

Bank of America's annualized default rate in September was 14.25 percent on its credit cards, while payments more than 30 days past due were about 7.5 percent, according to LowCards.com. Capital One's annualized default rate in September neared 10 percent, while 5.38 percent of cardholders were delinquent.

Now U.S. lawmakers are waking up to what they let the card companies do.

The House Financial Services Committee recently introduced legislation to move up the effective date for the credit card law from February to Dec. 1. But Federal Reserve Chairman Ben Bernanke, while acknowledging that change would benefit consumers, rejected the idea. He said it would force the Fed to implement provisions of the new law without adequate public comment and could lead to "unintended consequences."

There have been bills introduced in both the House and Senate to immediately freeze interest rates on existing balances for the estimated 700 million credit cards in circulation.

"We worked long and hard to enact the safeguards included in the Credit CARD Act," Sen. Chris Dodd, a Democrat from Connecticut who had introduced the bill in 2004, 2005 and 2008 before successfully passing last spring, said in a statement. "But as soon as it was signed into law, credit card companies were looking for ways to get around the protections this Congress and the American people demanded."

His spokesman declined further comment about why Congress is being so aggressive with its actions now. Too bad they couldn't see this coming a lot earlier.

___

Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org

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Statement at the Conclusion of an IMF Article IV Consultation with ... - International Monetary Fund

Posted: 30 Oct 2009 08:52 AM PDT

Press Release No. 09/377
October 30, 2009

An International Monetary Fund (IMF) staff team led by Michel Atingi-Ego, Senior Advisor in the African Department, visited Kenya during October 15-30, 2009, to conduct discussions for the 2009 Article IV consultation. The team held productive discussions with the Prime Minister, Raila Odinga, Deputy Prime Minister and Finance Minister, Uhuru Kenyatta, Central Bank Governor, Njuguna Ndung'u, other senior government and central bank officials, members of Parliament, representatives of the private sector, labor unions, religious organizations, and the donor community. Discussions focused on recent developments, policies to adjust to adverse shocks, and other structural policies to promote a pro-growth environment.

At the end of the mission, Mr. Atingi-Ego issued the following statement in Nairobi:

"Kenya is facing the challenge of adjusting to a series of shocks that have affected its economy since 2008. Shortly after it started to recover in the aftermath of the post-election violence, the economy was buffeted by rising world energy and fertilizer prices, a drought, the global economic recession, and more recently, another drought. The global economic crisis slowed export growth, tourism receipts, remittances, and private capital flows. Against this background, economic growth slowed from 7.1 percent in 2007 to 1.7 percent in 2008, and is projected at 2.7 percent, in 2009. Fiscal and external current account deficits widened. The exchange rate depreciated late in 2008, along with many currencies world-wide, but has since stabilized.

"The authorities' policy response to the crisis was appropriate and timely. Thanks to prudent economic policies that helped reduce public debt as a share of gross domestic product (GDP), Kenya had the necessary space to ease fiscal policy and help sustain domestic demand in the face of slowing economic growth. The Central Bank of Kenya (CBK) adhered to its monetary target, and given the weakening demand for private sector credit, short term interest rates declined, contributing to an easing of budgetary pressures on domestic debt service. CBK's international reserves which accumulated over a long period were used to partly finance the widening current account deficit in the face of mounting depreciation pressures on the exchange rate. Also, strengthened banking supervision helped ensure that the banking sector was well capitalized and liquid, and had adequately provisioned for non-performing loans.

"In the meantime, the IMF provided financial assistance to Kenya to help mitigate the adverse effects of the drought and the global financial crisis and rebuild foreign reserves. In June 2009, in response to the authorities' request for financial assistance, the Fund provided about US$200 million under the rapid access component of the Exogenous Shock Facility (ESF). Later in the year, Kenya received about US$350 million through the general and special allocations of Special Drawing Rights (SDRs) to all IMF members.

"Economic performance is expected to improve gradually, but as risks remains, policies should aim at addressing emerging challenges and promoting sustainable high growth. Growth is projected to reach 4 percent in 2010 and rise gradually to 6.5 over the medium-term. In light of the risks facing the economy, macroeconomic management should remain geared towards achieving the inflation objective and promoting fiscal sustainability. In the structural areas, some progress has been made but more still needs to be done. Stepping up reforms will be important to promote value for money in public finance, enhance the competitiveness of the economy, and attract investment needed to diversify the economy and reduce its vulnerability to adverse shocks. Enacting several pieces of legislation that are still pending—including the banking, new deposit insurance and importantly the anti-money laundering bills—will further strengthen the functioning of the financial sector.

"The team and the authorities look forward to continuing a constructive dialogue on further macro-economic policy and structural reforms to stem any emerging economic challenges facing Kenya. Upon its return to Washington, the team will prepare the necessary documentation for presentation to the IMF's Executive Board for a discussion tentatively scheduled for early December.

"The staff team thanks the Kenyan authorities for their close collaboration and the useful exchange of views during its stay in Nairobi."

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