April Update: Essential News

Barclays banked?
Barclays is in talks with the Treasury and the Financial Services Authority as it mulls joining the Asset Protection Scheme – but maintains that it will “continue to perform well” and that it saw a strong start to 2009. It said any decision to join “would be based on the economic merits to shareholders.”

Lloyds seeks protection
Lloyds Banking Group may seek to access the government’s Asset Protection Scheme for funds of around £250bn, in an agreement that could increase the state-owned stake in the group from its current level of 43% to a majority of 70%, the BBC reports. Neither the government nor Lloyds have yet confirmed any deal.

25 still in
Financial Director celebrates its 25th year in business in 2009 – and what better time to look back at the good old days than in the worst recession in memory? See financialdirector.co.uk/25years as we’ll be regularly adding the best FD interviews and articles from our archives, and publishing our latest coverage there, too.

Tax on tax
HM Revenue and Customs’ second tax amnesty for holders of offshore accounts will impose penalties significantly higher than the first, according to Financial Director’s sister title Accountancy Age. The first amnesty in 2007 raised £400m, after HMRC targeted 100,000 people with overseas accounts in five major retail banks.

One lady owner
There is now just one female FD in the FTSE-100 – Cairn Energy’s Jann Brown – after the quarterly shuffle saw venture capital group 3i demoted to the FTSE-250, taking FD Julia Wilson with it. Evelyn Bourke becomes FD at Friends Provident in May. Read about Julia Wilson’s remit with 3i.

Thiam is Pru CEO
Prudential FD Tidjane Thiam will become its CEO this October when Mark Tucker departs, the company said in March, having only been in the finance role since March 2008. Commenting on his appointment, Thiam said he was “delighted” and that the Pru is “an outstanding organisation”. He is not a qualified accountant.

Satyam sale
A 51% stake in Indian outsourcing company Satyam will be sold to an as-yet undisclosed buyer, following an auction in which it says Indian and international bidders, including private equity groups, expressed an interest. Bidders had to prove in their Expression of Interest submissions to the company that they have $290m in funds.

Rate cut again
The Bank of England cut interest rates half a percent to 0.5% in March and started its quantitative easing scheme. Some questioned whether rate cuts make any difference. The Bank expects further easing in monetary policy will be needed as it sees a “serious risk” of undershooting the 2% CPI inflation target.

Hovis sells stake
Premier Foods has sold a 10% stake in the company to private equity group Warburg Pincus, which will become a “long-term” shareholder, the company says, and will see a board member selected by Warburg join. The Hovis owner also said it would seek to raise £404m in a rights issue offered to existing investors.

HSBC slips
HSBC has announced that its pre-tax profits have more than halved, reporting a 62% fall to $9.3bn for 2008. The bank added that, excluding goodwill impairments, pre-tax profits fell to $20bn (£14bn), an 18% decrease. The bank will aim to raise $18bn (£12bn) in a rights issue through existing shareholders.

Can he spend? Yes he can
US president Barack Obama has set a $3.6 trillion (£2.5 trillion) budget for 2010, according to the BBC, and predicts that the country’s budget deficit for the current year will be $1.75 trillion – 12.3% of annual output and the biggest since World War II. President Obama will earmark $634bn for healthcare reform.

Fraud crackdown
The government launched its first ever ‘National Fraud Strategy’ – developed by the newly-established National Fraud Strategic Authority, an executive agency of the Attorney General’s Office – to tackle fraud in the UK. It will establish a National Fraud Reporting Centre and National Fraud Intelligence Bureau, extend Crown Courts’ powers in fraud cases and seek to punish more offences.

IMF damnation
Global output could shrink by 0.5%-1% in 2009, the first such fall in 60 years, and advanced economies will suffer “deep recessions” this year, says the International Monetary Fund. It said that finance chiefs from the biggest developed and emerging economies pledged “sustained effort to end the global recession and to cleanse banks of toxic assets.”

TECHNICAL UPDATE
Financial services
The FSA published the Turner review which promises a much tougher and more globally active regulatory regime for the banking industry. Proposals relating to liquidity and capital are complemented with regulation that will tackle “shadow banking” – activities that ought to be regulated, notwithstanding their legal form. There will be greater focus on both company strategy and system-wide risks, and credit rating agencies will fall under the regulator’s remit.

Corporate governance
The Financial Reporting Council says it will review the Combined Code and calls for evidence to be submitted to it. The review was prompted in part by the Walker review, which is looking at governance issues in bank boardrooms. The two reviews will be conducted separately, but will “work closely” and share resea rch and other evidence. The FRC has asked for comments to be submitted by 29 May.

Data protection
The Information Commissioner says it is to prosecute a firm that collected and sold personal data on more than 3,000 construction workers, who were vetted and possibly blacklisted by the “household name” construction companies that paid thousands of pounds for the data. The Work Foundation says, “These blacklists have always been compiled using eccentric criteria and are often based on little more than hearsay and prejudice.”

Directors’ duties
The Court of Appeal has ruled that, where a director commits fraud, fellow directors are in breach of their own duties to the company in allowing the fraud to happen, and cannot defend themselves on the grounds that the fraudster would have deceived them if they had tried to prevent the fraud, say lawyers at CMS Cameron McKenna. The case reiterates an earlier judgment where it was said that it is also a breach of duty by directors “to allow themselves to be dominated or bamboozled by one of their number”.
www.law-now.com

Correction
In our piece on Satyam in February, we quoted Nigel Walder, CEO of BCP. The name of the company is BCS. We apologise.