Receiving Wide Coverage ...
In Cyprus, Patrolling Borders, Pointing Fingers: Cyprus is trying to tighten its borders against attempts by some depositors to bypass capital controls on banks and move money off the island, the FT reports. Police have upped patrols in the southern town of Limassol in an effort to frustrate efforts to extract money from the island by boat. Rules in place since Thursday prevent depositors from taking more than 1,000 euros a day out of the country. At least three people trying to leave the island with more than 200,000 euros in cash on them have been stopped by authorities, according to the FT. Officials are said to be investigating withdrawals from both the Bank of Cyprus and Laiki Bank in the early morning house of March 16 before the country's first bailout package was inked.
Meanwhile, recriminations about who may be to blame for the meltdown in the country's financial sector have begun, according to the FT. The governor of the central bank, Panicos Demetriades, who was appointed by the former prime minister's communist party, has refused an "unofficial request" by conservative President Nicos Anastasiades to resign over the bailout, foreshadowing "further political tensions in the rough economic years ahead," according to the publication. On Tuesday, the country's supreme court will launch an investigation into possible wrongdoing in the run-up to the crisis that the FT notes could lead to jail time for some.
The demand by European Union and Internal Monetary Fund that Cyprus shrink the size of its banking sector in exchange for the $12.8 billion bailout the country received has spurred fears the country will be left "without an obvious growth engine," the Journal reports. The island, which relied mostly on its offshore banking business and tourism to fuel its economy, has "never had much manufacturing" while agriculture "has withered," according to the publication, which notes that 77% of Cypriots work in services, compared with 3% who work in farming. One 80-year-old widow worries about the younger generation. "What are they going to do?" she asked the Journal. "Come back to work in the vineyards?"
Cyprus' misfortune may be Malta's gain, according to the Times. Law firms and financial advisors from alternative financial centers throughout Europe are pitching their services to wealthy Russians and others who currently have their funds tied up in Cyprus. An unsolicited offer to financial advisors in Cyprus from a law firm in Malta touts that country's "flexible yet robust regime" for financial services, reports the Times, which notes that similar offers are rolling in from "well-known havens like Switzerland, Luxembourg and the Cayman Islands, as well as in a host of other locations, including Dubai and Singapore."
Anyone trying to assess whether losses on depositors in Cyprus' two largest banks might spur depositors in Slovenia and Italy to withdraw funds from "second-tier" banks in those countries might consider the failure of IndyMac Bancorp, the Times notes. The Los Angeles-based institution failed five years ago after placing big bets on the eve of the subprime crisis, while Bank of Cyprus invested heavily in Greek bonds that later collapsed. The biggest depositors at IndyMac accepted a loss of half their savings in excess of $100,000 after the thrift declared bankruptcy, while the biggest depositors at Bank of Cyprus stand to lose 60% of their deposits. "Just as you did not see mass panic and deposit runs in the U.S. after IndyMac, what happened in Cyprus is not going to spill over into Europe," Jacob Funk Kirkegaard, a banking specialist at the Peterson Institute for International Economics in Washington, tells the Times, which notes that problems of non-performing loans in Slovenia and investor wariness over Italian bank bonds persisted before the Cypriot crisis. "If, as a result of Cyprus, bond investors and depositors become more discerning about where they put their money, European officials will see that as more positive than negative for the future of the euro zone," the Times writes.
Wall Street Journal
The Journal looks at the trend toward branch consolidation as transactions move online. Banks shuttered 2,267 branches last year, putting total branches in the U.S. at roughly 93,000, the lowest count since 2007, reports the publication, which notes the total is expected to fall by another 10,000 during the next decade. Though Bank of America, PNC, RBS, U.S. Bank and Wells Fargo closed the most branches in 2012, banks of all sizes are cutting back their physical outposts according to the Journal, which notes that nearly a fifth of branch closings over the past year occurred in towns outside major population areas. The exodus of bricks-and-mortar banking from small towns worries some observers. Banks are "a symbol of economic health and a vibrant community," Jennifer Tescher, who heads the Center for Financial Services Innovation, a research group that focuses on people who lack a banking relationship, tells the Journal.
Financial Times
The incoming chief of one of the U.K.'s two new financial regulators tells the FT that banks should be required to disclose their individual capital requirements so investors can know which ones have garnered regulatory concerns and why. Andrew Bailey, a former Bank of England director who will helm the newly formed Prudential Regulation Authority starting Tuesday, says individual banks should publish additional requirements regulators demand in addition to information the banks already publish about conditions for capital and liquidity. "I think we have to be more transparent," says Bailey, whose suggestions, the FT notes, would reverse "decades of tradition" that have seen regulators work to make individual institutions safer without telling the public of their concerns.
An editorial in the FT calls on companies to do more to protect themselves from cyberattacks, including taking such basic precautions such updating software. Still, the editors note the British government needs to "think harder" about how to confront China and Russia over what the paper terms "cyber espionage conducted by their militaries and proxies."
Concerns over whether banks conspired to manipulate the London interbank offered rate known as Libor are spurring the new head of the Japanese banking lobby to bolster the reliability of the Tokyo interbank offered rate known as Tibor. Takeshi Kunibe, who takes over the Japanese Bankers Association today, tells the FT he will convene a committee of specialists to assess procedures followed by banks whose estimates factor into Tibor and the association's role in calculating the benchmark.
New York Times
Dealbook reports that compensation of directors at the nation's biggest banks has continued to rise since the financial crisis even as the banks themselves take steps to harness executive pay. The Times runs through some numbers for what the publication notes is essentially a part-time job: Citigroup paid directors $315,000 last year, up 64% from 2008; directors at Wells Fargo received $299,429, up 18% from four years earlier; directors at JPMorgan Chase received $278,194 in 2012, an 8% hike from 2008; while Bank of America directors were paid $275,000 last year, 10.6% more than four years ago. Better to be a board member at Goldman Sachs, which paid directors $488,709 apiece in 2011, up more than 50% from 2008. A Goldman spokesman tells Dealbook that most director pay takes the form of stock that aligns the interests of directors and shareholders. Compensation experts say companies need to pay higher pay to lure qualified people to serve on boards. Though companies are getting set to host annual meetings of shareholders, director pay is unlikely to spark much of an outcry. As Dealbook notes, shareholders vote on directors, but the board itself sets director pay packages in consultation with outside experts.
Washington Post
The Post excerpts a forthcoming book, "The Alchemists: Three Central Bankers and a World on Fire," by Neil Irwin, a Post reporter who covered the Federal Reserve and other central banks for five years starting in 2007. The book, which is expected to be released Thursday, "tells of how the central bankers came to exert vast power over the global economy, from their 17th century beginnings to the present, and tells the inside story of how they wielded that power from 2007 on as they fought a global financial crisis."
