The Star Online: Business
The Star Online: Business |
- Bank of England appoints foreigner as chief, first time in 300 years
- Privacy groups ask Facebook to withdraw proposed policy changes
- CIMB expands investment bank in Hong Kong
| Bank of England appoints foreigner as chief, first time in 300 years Posted: 26 Nov 2012 07:14 PM PST LONDON/OTTAWA: Britain named Canadian central bank chief Mark Carney on Monday to head the Bank of England, springing the surprise choice of a foreigner to push reform of its troubled financial system. A former Goldman Sachs investment banker who at the Bank of Canada guided the Canadian economy through the global economic crisis, Carney will succeed Mervyn King who retires in July. Carney, who already plays a leading role in setting global banking rules, defended his departure from Canada and signaled that bigger problems awaited him in London. "I'm going to where the challenges are greatest," he told an Ottawa news conference, stressing the need to "rebalance" the economy which has relied heavily on a financial services sector hit by huge losses and scandals. "It's very important for the global economy that the UK does well, that it succeeds in this rebalancing of their economy, that the reform of the British financial system is completed," he said. Carney will become the first non-British head of the central bank in its 300-year history, beating hot favorite BoE deputy governor Paul Tucker to the post, which will pay a salary of 624,000 pounds ($1 million). The Bank of Canada does not disclose Carney's exact salary but says he is paid in a range equivalent to US$436,200-$513,000. During the crisis, Carney helped to make Canada's recession one of the shallowest of the world's richest nations. No Canadian bank needed government help, and the country recovered all the jobs it lost in the downturn relatively rapidly. By contrast, Britain had to bail out Royal Bank of Scotland and Lloyds Banking Group, and the world's sixth-largest economy is still struggling to achieve growth four years after the crisis broke. Carney, 47, will remain as head of the Financial Stability Board (FSB), a Basel-based body that sets global banking rules, when he moves to London next year, although the Bank of Canada itself does not regulate the country's banks. "I believe he will bring the strong leadership and external experience that the Bank (of England) itself needs as it takes on its heavy new responsibilities for regulating our banking system," Chancellor of the Exchequer George Osborne, the finance minister, told parliament in announcing the appointment. Carney will stay at the Bank of Canada through May, and starts at the Bank of England in July. He will serve a five-year term, rather than the eight years that had been expected for the next BoE governor. From next year the BoE will take charge of British financial regulation, almost doubling its size. This boosted the case for a governor with strong management skills and financial market experience, rather than someone in King's academic mould. Carney's past as a Goldman Sachs investment banker has been a double-edged sword, as he fought to prove his loyalties lie with ordinary citizens, not his high-flying banker ex-colleagues. He clashed memorably last year with JPMorgan Chase & Co Chief Executive Jamie Dimon in Washington, when the U.S. banker argued against new regulations for the financial sector. DEAD MONEY Carney also courted controversy in August when he accused Canadian firms of sitting on piles of "dead money", rather than investing it. Large British companies also have money to invest, but little appetite to do so at a time of strong economic risks. How Carney's monetary policy experience will translate to Britain is less clear. Although the Bank of Canada has raised interest rates, unlike the BoE, economists said this reflected Canada's strong economy rather than a bias on Carney's part. "Pragmatic is how I'd describe him," said Derek Burleton, an economist at Toronto-Dominion Bank. "He doesn't come across as an ideologue one way or the other." Under King, the BoE has poured 375 billion pounds into the economy by buying government bonds. The Bank of Canada has not used this policy of "quantitative easing" largely because its economy never weakened enough to warrant it. Until now, Carney had strongly played down the possibility of heading the British central bank. "(It's a) surprise, huge surprise," said Peter Dixon, an economist with Commerzbank. "That was the one guy I didn't have in the running. Carney said he did not apply for his new job as part of the formal process, and discussions intensified only in the last two weeks. He has already spent a decade in Britain as a postgraduate student at Oxford and at Goldman Sachs - where European Central Bank President Marin Draghi also once worked. Carney, whose wife is British, will apply for citizenship, Osborne said. Carney pointed to the steady state of Canadian banks, which also contrasts to some of those in Britain that have been sucked into scandals over rigging the Libor interest rate and mis-selling financial products to people who didn't need them. "We have a system that works very well. It's been tested under the biggest economic shock and financial shock that any of us will ever see in our lifetime, and it has passed that test," he said. His job has been helped in recent years by booming prices for Canada's commodities exports from oil to gold and grain. The still-athletic Carney - a sub-four-hour marathon runner - was once described as "un-Canadian" by one Ottawa official because of his sometimes confrontational style. Canadian Finance Minister Jim Flaherty expressed the mixed feelings in Ottawa about Carney's departure. "It's bitter-sweet. It's our loss. His loss will be felt," he said. The foreign exchange market passed a similar judgment with sterling rising against both the U.S. and Canadian dollars. The pound hit to a 2-1/2 week high against the Canadian dollar to C$1.5950 from C$1.5898 beforehand. - Reuters Carney's deputy seen as favourite to take over at Bank of Canada OTTAWA: The Bank of Canada's senior deputy governor, Tiff Macklem, is the early favourite to replace Mark Carney as the head of the central bank, pointing to a steady-as-she-goes policy that points eventually to higher interest rates. The policy picture would be less clear, however, if an outsider were brought in for the top Bank of Canada job, something that the bank has done on the last two occasions. "He's been very involved with the governor since the credit crunch began, and we know that the two see eye-to-eye on many of the dynamics that are occurring in Canada right now," Ian Pollick, fixed income strategist at RBC Capital Markets, said of Macklem. That said, the uncertainty introduced with the surprise appointment of Carney to the Bank of England weakened the Canadian dollar and boosted bond prices as markets bet on a chance, however slight, of a more dovish policy. The Bank of Canada stands apart from other major central banks in that it avoided large bouts of quantitative easing and now insists the next move in interest rates is likely to be up. It presided over a relatively quick recovery from the world economic crisis, with no Canadian bank having needed a government bailout. Canada's resource-rich economy has driven growth as other industrialized countries have struggled, and the country's property market avoided the excesses that plagued the United States, allowing Canada's banks to avoid losses. Arguing in favour of choosing from within the bank for a new chief is the need to maintain morale, after the bank's senior deputy governor was passed over for outside candidates in the last two appointments -- David Dodge in 2001 and Mark Carney in 2008. "Every so often at least you have to go internal just for long-run morale considerations," said Bill Scarth, economic policy expert at McMaster University in Hamilton, Ontario, and at the C.D. Howe Institute in Toronto. "Otherwise, when people get senior they start looking for another job." And given that Macklem became senior deputy governor only in July 2010, it would be "awkward to all of a sudden jump somebody over him unless it's an outside person," Scarth said Macklem, 51, is currently the bank's chief operating officer and has been actively involved at the global Financial Stability Board, where he chairs a committee on standards implementation. He was previously the associate deputy minister at the Finance Department and was Canada's Group of Seven deputy. Under Carney, the Bank of Canada was the first in the G7 leading industrialized nations to raise its reference rate from the rock-bottom level in the global financial crisis. It has held the rate at 1 percent since September 2010. In April it signalled a rate hike might become appropriate, something it now says will happen "over time," making it an outlier in a G7 more focused on continued stimulus. The median view in an October 24 Reuters survey of primary dealers is that the next rate hike will not be until the fourth quarter of 2013. Another possible candidate is insider-outsider Jean Boivin, a respected monetary policy researcher who was deputy governor at the bank from 2010 until last month, when he became the Finance Department's representative at G7 and Group of 20 meetings, the job once held by Macklem. As Boivin was part of the Bank of Canada consensus, his appointment would also signal no change. An outsider floated by Nomura economist Charles St-Arnaud is Don Drummond, a former federal finance official who helped wrestle down Canada's large budget deficit in the 1990s. Other possibilities are the remaining deputy governors at the Bank of Canada: Agathe Cote, John Murray and Tim Lane -- who of course are under Carney and Macklem in the central bank pecking order. McMaster economist Scarth noted that Flaherty praised Carney's service in his announcement on Monday morning, and that suggested Carney would not want to appoint somebody who would be likely to cause change. "We are sort of the envy of the world in financial matters generally. If it ain't broke, don't fix it," Scarth said. - Reuters
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| Privacy groups ask Facebook to withdraw proposed policy changes Posted: 26 Nov 2012 07:11 PM PST SAN FRANCISCO: Two privacy advocacy groups urged Facebook Inc on Monday to withdraw proposed changes to its terms of service that would allow the company to share user data with recently acquired photo-application Instagram, eliminate a user voting system and loosen email restrictions within the social network. The changes, which Facebook unveiled on Wednesday, raise privacy risks for users and violate the company's previous commitments to its roughly 1 billion members, according to the Electronic Privacy Information Center and the Center for Digital Democracy. "Facebook's proposed changes implicate the user privacy and terms of a recent settlement with the Federal Trade Commission," the groups said in a letter to Facebook Chief Executive Mark Zuckerberg that was published on their websites on Monday. By sharing information with Instagram, the letter said, Facebook could combine user profiles, ending its practice of keeping user information on the two services separate. Facebook declined to comment on the letter. In April, Facebook settled privacy charges with the U.S. Federal Trade Commission that it had deceived consumers and forced them to share more personal information than they intended. Under the settlement, Facebook is required to get user consent for certain changes to its privacy settings and is subject to 20 years of independent audits. Facebook, Google and other online companies have faced increasing scrutiny and enforcement from privacy regulators as consumers entrust ever-increasing amounts of information about their personal lives to Web services. Facebook unveiled a variety of proposed changes to its terms of service and data use polices on Wednesday, including a move to scrap a 4-year old process that can allow the social network's roughly 1 billion users to vote on changes to its policies. If proposed changes generate more than 7,000 public comments during a seven-day period, Facebook's current terms of service automatically trigger a vote by users to approve the changes. But the vote is only binding if at least 30 percent of users take part, and two prior votes never reached that threshold. The latest proposed changes had garnered more than 17,000 comments by late Monday. Facebook also said last week that it wanted to eliminate a setting for users to control who can contact them on the social network's email system. The company said it planned to replace the "Who can send you Facebook messages" setting with new filters for managing incoming messages. That change is likely to increase the amount of unwanted "spam" messages that users receive, the privacy groups warned on Monday. Facebook's potential information sharing with Instagram, a photo-sharing service for smartphone users that it bought in October, flows from proposed changes that would allow the company to share information between its own service and other businesses or affiliates it owns. The change could open the door for Facebook to build unified profiles of its users that include people's personal data from its social network and from Instagram, similar to recent moves by Google Inc. In January, Google said it would combine users' personal information from its various Web services - such as search, email and the Google+ social network - to provide a more customized experience. The unified data policy raised concerns among some privacy advocates and regulators, who said it was an invasion of people's privacy. "As our company grows, we acquire businesses that become a legal part of our organization," Facebook spokesman Andrew Noyes said in an emailed statement on Monday. "Those companies sometimes operate as affiliates. We wanted to clarify that we will share information with our affiliates and vice versa, both to help improve our services and theirs, and to take advantage of storage efficiencies," Noyes said. - Reuters
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| CIMB expands investment bank in Hong Kong Posted: 26 Nov 2012 07:09 PM PST KUALA LUMPUR: CIMB Group introduced its extended investment banking operations in Hong Kong yesterday at a launch event attended by top clients, fund managers and financiers. The launch follows the completion of CIMB's acquisition of the Royal Bank of Scotland's investment banking businesses in Hong Kong and their integration into CIMB's existing investment banking franchise. "We now have the full complement of investment bankers and equities personnel to be competitive in Hong Kong as well as to anchor our entire North Asia operations," said Datuk Sri Nazir Razak, CIMB Group Chief Executive. "I am optimistic about our prospects because the new combined team has a strong onshore track record in Hong Kong and the differentiating proposition of a huge ASEAN based network. Our model is all about intermediating within Asia for Asia, and we have a unique platform for doing that." Matthew Kirkby, CEO for Hong Kong and Co-Head of Investment Banking, will lead the 192-strong team in Hong Kong, providing investment banking advisory services, equity and capital market fund raising abilities, broking services and research. Kirkby has over 15 years of investment banking experience in Europe and Asia, and was the Head of Global Banking Asia Pacific, overseeing the Royal Bank of Scotland's (RBS) corporate and investment banking business in Asia Pacific, including debt capital market, equities capital market and corporate finance. "There is significant potential in Hong Kong, as it is one of the world's top financial centres and the gateway to China. CIMB has a unique understanding of Asia and in ASEAN in particular, and we think clients will appreciate the synergies and strengths of the Group's investment and universal banking platform across the region," said Kirkby. Hong Kong and Australia (which launched operations earlier this month) will be CIMB Group's two largest ex-ASEAN markets. Upon the full completion of the Group's acquisition of RBS' Asia Pacific investment banking business, anticipated in late 2012, the Group will have operations in a total of 18 countries. - BERNAMA
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