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RBC Among 16 Banks Sued By U.S. Over Rigging Of Key Interest Rate

RBC Among 16 Banks Sued By U.S. Over Rigging Of Key Interest Rate.

 

WASHINGTON (AP) — The U.S. Federal Deposit Insurance Corp. is suing 16 big banks, including the Royal Bank of Canada (TSX:RY), for alleged rigging of a key global interest rate.

The FDIC accuses them of fraud and conspiring to keep the rate low to enrich themselves.

The banks, which also include Bank of America, Citigroup and JPMorgan Chase in the U.S., are among the world’s largest.

The FDIC says it is seeking to recover losses suffered from the rate manipulation by 10 U.S. banks that failed during the financial crisis and were taken over by the agency.

The civil lawsuit was filed Friday in federal court in Manhattan.

The banks rigged the London interbank offered rate, or Libor, from August 2007 to at least mid-2011, the FDIC alleged. The Libor affects trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans.

RBC cuts fixed-rate mortgages by 10 basis points – Business – CBC News

RBC cuts fixed-rate mortgages by 10 basis points – Business – CBC News.

Fixed-rate mortgages at RBC are down by 10 basis points. (Canadian Press)Fixed-rate mortgages at RBC are down by 10 basis points. (Canadian Press)

RBC lowers fixed mortgage rates

RBC lowers fixed mortgage rates 2:15

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RBC has cut two-, three, four- and five-year fixed mortgage rates by 10 basis points after a slide in Canadian bond yields.

Other Canadian banks will be watching the change and could move Monday to follow.

RBC posted the new rates over the weekend on its website. RBC’s discounted five-year fixed rate is now 3.69 per cent, though it may discount that rate for preferred customers.

Five-year fixed mortgage rates rose industry-wide for much of 2013 with an uptick in August helping to cool the overheated housing market.

The five-year rate is an important measure because it is the rate used to qualify borrowers for CMHC financing and for variable and other fixed-rate terms.

The new rate reflects the lowering of Canadian bond yields by 26 basis points in January, which mirrors the slide in yields on U.S. bonds. Bank borrowing costs rest in part on bond yields.

The Bank of Canada has not changed its key overnight lending rates to the banks – it will announce its latest decision on interest rates on Wednesday.

Bond yields rose when the  U.S. Federal Reserve decided in December to taper its bond-buying program to $75-billion US a month, but the market has since absorbed the change. However, further Fed tapering or changes in the U.S. economic outlook could lead to fluctuation in the bond markets later this year.

The small change in rates won’t have much impact on home buyers at a time when rates are so low, says one mortgage broker.

“From a mortgage broker’s perspective and probably from a lot of homeowners’ perspective, the real question is not necessarily interest rates,” said Jason Scott of The Mortgage Group in Edmonton.

“It’s got more to do with what the finance minister and the department of finance will do vis-a-vis making it harder to qualify for a mortgage if they don’t like the fact that rates are low and they’re concerned about a possible housing bubble.”

Finance Minister Jim Flaherty has expressed concern at Canada’srapidly rising housing prices and has taken a series of measures over the last two years to cool them, including demanding higher downpayments and limiting most mortgage terms to 25 years.

Analysis: Canada banks steal quiet march as Wall Street retreats from energy | Business | Reuters

Analysis: Canada banks steal quiet march as Wall Street retreats from energy | Business | Reuters.

The logo for the Bank of Montreal is seen at its branch Toronto, March 5, 2013. REUTERS/Mark Blinch
1 of 1Full Size

By Nia Williams

CALGARY, Alberta (Reuters) – As Wall Street’s giants pull back from the energy business, Canadian banks are stepping forward, aided by booming domestic oil production and a reputation for prudence.

Bank of Montreal (BMO.TO: Quote), Canadian Imperial Bank of Commerce (CM.TO: Quote) and Bank of Nova Scotia (BNS.TO: Quote), long-time niche players in energy trading, hedging and dealmaking, are expanding their operations both north and south of the U.S. border, executives told Reuters.

In total, commodity trading revenues at the three banks rose by 30 percent last year, according to a Reuters review of their annual reports. Executives say it has been a struggle to match that performance this year, but that they are still gaining ground.

“We have been able to pick up market share not only in our home market but able to rapidly grow our business in the U.S. and overseas in places like the North Sea,” said Adam Waterous, a veteran oil banker who heads Scotiabank’s global investment banking team, which is based in Calgary, Canada’s oil capital.

With their reputation for caution, Canadian banks say they are unlikely to copy their U.S. counterparts and start amassing physical assets such as metal warehouses or oil storage terminals. Big Wall Street banks including JPMorgan Chase & Co. (JPM.N: Quote) and Morgan Stanley (MS.N: Quote) are looking to sell their physical trading desks as regulatory scrutiny increases and returns diminish.

“This is the fourth time in my career I have seen Americans come and go,” Waterous said.

Scotiabank is by far the biggest commodity trader in Canada, due in large part to its long-held ScotiaMocatta precious metals venture. Scotia reported a 26 percent rise in commodity trading revenues to C$425 million ($397 million) last year.

Of the other “Big Five” Canadian banks, Toronto-Dominion Bank (TD.TO:Quote) does not break out commodity trading revenue figures, but Royal Bank of Canada’s (RY.TO: Quote) trading revenues for foreign exchange and commodities climbed by 11 percent last year.

OIL VETERANS

Canadian banks have a long history in the energy sector as a result of their involvement in the expansion of Alberta’s oil sands and the country’s status as the world’s sixth-largest producer of crude.

That opportunity is now expanding as more producers look to hedge output in Canada, which is expected to more than double to 6.7 million barrels per day by 2030. New products, such as CME Group’s Edmonton Sweet oil futures, which was launched this week, open new avenues for trading.

Thanks to a culture of conservative and cautious lending, Canadian banks emerged from the global financial crisis with reputations intact and some of the strongest credit ratings in the world.

“There’s a coming of age. In Canada there is the oil sands and in North America there’s the shale revolution that provides a great opportunity for our skill set and our history,” said Shane Fildes, head of global energy at Bank of Montreal, whose commodity trading-related revenues surged 65 percent to C$66 million in 2012.

Fildes said BMO’s energy trading desk expanded recently to five people from three, and its energy business as a whole employed 65 people in Calgary and 45 in Houston. The bank recently hired Paul Dunsmore from Barclays (BARC.L: Quote) to beef up its commodities derivatives team.

“The counterparty credit of being a Canadian bank is a very smart calling card in this environment,” he said.

At CIBC, commodity trading income rose 20 percent to C$52 last year and headcount has also increased across sales, trading, research and analytics, said Arden Majewski, who joined the bank two years ago to run its global commodities business after working for Swiss-based merchant Mercuria and for Merrill Lynch.

Scotiabank, whose commodity business is the largest and most established, has a history of stepping in when foreign banks pull back. Three years ago it bought much of UBS’s (UBSN.VX: Quote) Canadian commodities trading platform technology, when the Swiss bank exited Canadian energy trading. It bought U.S. energy investment boutique Howard Weale last year.

In September, RBC hired Kathy Kriskey from CIBC as head of commodity investor sales in New York to develop the bank’s commodity index products.

But in the scramble to pick up Wall Street business Canadian banks face competition from foreign banks such as Australia’s Macquarie MQG.AX and Brazil’s Grupo BTG Pactual SA (BBTG11.SA: Quote) as well as from private equity-backed merchants such as TrailStone and national giants such as Russia’s Rosneft (ROSN.MM: Quote).

TRADING OPPORTUNITIES

While many Wall Street banks embraced physical energy trading, Canadian banks have so far shied away.

CIBC, Scotiabank, TD, and RBC do trade physical natural gas, a homogenous product that is easy to value. As well, BMO is in the middle of an approval process to trade physical natural gas, and the bank expects the process to be completed early in 2014.

None of the banks are involved in physical crude trading, however, which would entail greater investment in logistics and storage, Calgary market players said.

That makes them unlikely bidders for businesses such as JPMorgan’s physical commodities desk, which is in the second stage of a sale, or the asset-rich oil and power operations at Morgan Stanley, which has tried in vain for more than a year to find a buyer for that desk.

Instead, the Canadians concentrate on trading financials – crude derivatives contracts, usually based on the U.S. West Texas Intermediate benchmark – that enable clients to hedge their exposure to price swings in oil markets.

Client hedging activity tends to increase sharply in relation to oil market volatility. Bank traders in Calgary said they expect hedging demand to stay strong because of booming North American production and supply bottlenecks that exacerbate the discount on Canadian crude.

“With the U.S. investment banks that have pulled out of Canada, there would be more opportunity for these guys to fill that void,” said Brian Klock, equity analyst at KBW Inc.

($1=$1.07 Canadian)

(Editing by Jonathan Leff; and Peter Galloway)

 

Canadian Federal Lobbying: Oil, Banking Dominate

Canadian Federal Lobbying: Oil, Banking Dominate.

Oil, gas and mining industry groups were far and away the most active lobbyists in Ottawa over the past year, according to an analysis from Macleans.

The Canadian Association of Petroleum Producers (CAPP), the country’s principal lobby group for oil and gas, made 58 lobbying efforts with the federal government over the past 12 months, the most of any group. In second place is the Mining Association of Canada, with 48 lobbying efforts.

The numbers are based on the federal lobbyist registry, which tracks communications between lobbyists and federal government departments, but offers no detail on how a lobbying effort was received by government officials.

The banking industry has also been prominent in its lobby efforts. The Canadian Bankers Association lobbied the Department of Finance 42 times in the past year, and Royal Bank of Canada alone made 27 efforts.

Check out the Macleans infographic here.

Story continues below

Most Active Lobbyists In Canada

THE CANADIAN PRESS/Larry MacDougal

Among groups that lobbied the Prime Minister’s Office directly, the Mining Association of Canada came first, with 11 efforts, according to Macleans.

The Federation of Canadian Municipalities and Keystone XL pipeline builder TransCanada tied for second, with 10 lobby efforts each. The Small Guys Tobacco Group came in fourth, with nine lobbying efforts.

report from the left-leaning Polaris Institute last year said oil and gas interests outstripped all others when it came to lobbying in Canada in recent years. The analysis of lobby registry entries found more than 2,700 meetings between the industry and government officials — a fact the Institute used to argue Canada is becoming a “petro state.”

 

Canadians’ Non-Mortgage Debt Jumps 21%, Fewer Paying It Off: RBC

Canadians’ Non-Mortgage Debt Jumps 21%, Fewer Paying It Off: RBC. (source)

cent in the past year, and more consumers are running into the red, according to Royal Bank’s debt poll.

Just 24 per cent of Canadians say they are debt-free, compared to 26 per cent in 2012. And those who are in debt have increased their non-mortgage burdens to $15,920 from $13,141 in the same time frame, RBC’s survey found. That’s an extra $2,779 over the past year compared to growth of just $83 in the year prior.

Canadians are taking advantage of the era of super low interest rates to finance more borrowing, a move the government has vocally discouraged.

Debt loads have skyrocketed in the years since the 2008-2009 recession, after the government dropped borrowing rates to near zero in order to stimulate consumer activity, the housing market and the economy.

The RBC poll found that the number of Canadians who are anxious about their debt levels has risen four percentage points in the past year, to 38 per cent. Still, the same number said they are comfortable with the amount they owe.

The household debt-to-disposable income ratio is at an all-time high, around 163 per cent. That means for every dollar Canadians earn, they owe $1.63.

The Bank of Canada and Finance Minister Jim Flaherty have repeatedly warned Canadians about digging themselves into a financial hole while borrowing is cheap. They fear consumers may be unable to climb out of the debt load when interest rates inevitably rise.

However, in its latest monetary policy report, Canada’s central bank slashed its economic outlook for Canada for the next three years and indicated that a troubled global economy may compel it to maintain interest rates at the current near record low rate of one per cent, where it has been since 2010.

The announcement left many observers wondering whether the prolonged low interest rate environment will increase the likelihood of a housing correction or hard landing for borrowers when rates finally rise.

The RBC poll was conducted by Ipsos Reid from Aug. 22 to 27 through an online sample of 2,108 Canadians with an estimated margin of error of plus or minus two per cent, 19 times out of 20.

 

BMO, RBC, TD Hike Mortgage Rates; Economists Wary Of Effect On Housing Market

BMO, RBC, TD Hike Mortgage Rates; Economists Wary Of Effect On Housing Market.

 

RBC Mortgage Rate Hike Could Be Just The Beginning

RBC Mortgage Rate Hike Could Be Just The Beginning.

 

Canada adds 12,500 jobs in modest April rebound – Business – CBC News

Canada adds 12,500 jobs in modest April rebound – Business – CBC News.

 

Harper says foreign worker program is being fixed – Business – CBC News

Harper says foreign worker program is being fixed – Business – CBC News.

 

Temporary foreign workers hired in areas with EI claimants – Politics – CBC News

Temporary foreign workers hired in areas with EI claimants – Politics – CBC News.

 

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