Swiss Banks Said Ready to Reveal Clients

By David Voreacos, Klaus Wille and Giles Broom - Oct 24, 2011 9:27 PM GMT+0700

Swiss banks will probably settle a sweeping U.S. probe of offshore tax evasion by paying billions of dollars and handing over names of thousands of Americans who have secret accounts, according to two people familiar with the matter.

U.S. and Swiss officials are concluding negotiations on a civil settlement amid U.S. criminal probes of 11 financial institutions, including Credit Suisse Group AG (CSGN), suspected of helping American clients hide money from the Internal Revenue Service, according to five people with knowledge of the talks who declined to speak publicly because they are confidential.

Switzerland, the biggest haven for offshore wealth, wants an end to new U.S. probes while preserving its decades-old tradition of bank secrecy, the people said. The U.S. seeks data on Americans who have dodged U.S. taxes and a pledge by Swiss banks to stop helping such clients, according to the people. The Swiss reached accords this year with Germany and the U.K. on untaxed assets.

“The Swiss would like to get out of this by paying money, and they’ve done that with other countries,” said tax attorney H. David Rosenbloom of Caplin & Drysdale Chartered in Washington, who isn’t involved in the talks. “For the U.S., it’s not primarily a money question. It’s a matter of making sure the laws apply fairly among taxpayers.”

Final Accord

The Swiss government seeks to outline a final accord for the Foreign Affairs Committee of its Parliament’s upper house on Nov. 10, according to a person familiar with the matter. The number of banks that will pay to resolve the U.S. negotiations may extend beyond the 11 under criminal investigation, the people said.

“We are aiming for an all-encompassing solution that will apply to all the banks,” Finance Minister Eveline Widmer- Schlumpf said in an Oct. 4 interview in the Swiss capital Bern. “We don’t want to be confronted with the same issues time and again.”

Under accords this year with Germany and the U.K. on untaxed assets, the identity of clients remained secret. The U.S. insists that the Swiss disclose client account data, and the banks may end up handing over data on 5,000 to 10,000 accounts, the people said. A final determination hasn’t been made, they said.

Criminal Charges

The U.S. Justice Department also may bring criminal charges or civil enforcement actions against any of the 11 financial institutions. They could avoid prosecution by separately paying fines, admitting wrongdoing and disclosing data, the people said. On Aug. 30, the Justice Department requested statistical data from the 11 about their U.S. accounts, which the U.S. has received and is analyzing, the people said.

Credit Suisse, the second-biggest Swiss bank, said July 15 that it was a target of U.S. prosecutors. On July 21, seven Credit Suisse bankers were indicted on a charge of conspiring to help U.S. clients evade taxes through secret accounts.

The group of 11 also includes HSBC Holdings Plc (HSBA), the biggest European bank, Basler Kantonalbank, Wegelin & Co., Zuercher Kantonalbank, and Julius Baer Group Ltd. (BAER), the people said. Three Israeli banks -- Bank Leumi Le-Israel BM (LUMI), Bank Hapoalim BM (POLI), and Mizrahi-Tefahot Bank Ltd. (MZTF) -- are on the list, as well as Liechtensteinische Landesbank AG and an asset manager, NZB AG, according to the people.

U.S. Crackdown

The U.S. crackdown against offshore tax evasion has led to charges against UBS AG (UBSN), the largest Swiss bank; at least 21 foreign bankers, advisers and attorneys; and at least 36 U.S. taxpayers.

UBS, which isn’t one of the 11 banks now under scrutiny, avoided prosecution in 2009 by paying $780 million, admitting it fostered tax evasion and handing over details on 250 secret accounts. It later disclosed another 4,450 accounts.

UBS made 10.75 billion francs ($12.1 billion) in revenue in the U.S. in 2010, or 34 percent of the group’s total. Credit Suisse made 12.84 billion francs in revenue in the Americas in 2010, or 41 percent of the total. HSBC’s Swiss private bank and Julius Baer declined to disclose information on revenue from U.S. clients. A spokesman for HSBC in Geneva declined to comment on the settlement talks.

Credit Suisse gained 2.4 percent to 24.42 Swiss francs, at 3:09 p.m. in Zurich. Baer was unchanged at 34.70 francs. Basler Kantonalbank and Liechtensteinische Landesbank dropped 0.4 percent and 2.8 percent, respectively.

Statistical Data

Urs Rohner, chairman of Credit Suisse, last month told newspaper NZZ am Sonntag that the bank has transferred statistical data sought by the U.S. Marc Dosch, a spokesman for the Zurich-based bank, declined to comment further.

Basler Kantonalbank (BSKP) spokesman Michael Buess said it also gave such data to the U.S.

Wegelin & Co. spokeswoman Albena Bjoerck said it will show “Swiss and U.S. authorities that the bank has not breached either Swiss or U.S. law.” The bank is cooperating with authorities “within the scope of Swiss law.”

After a U.S. indictment of two Julius Baer bankers this month, the bank said it “is one of a number of Swiss financial institutions supporting the ongoing tax negotiations between the U.S. and Switzerland” and is cooperating with the U.S. probe. Spokesman Martin Somogyi declined to comment further.

Youval Dichovski, Zurich-based head of internal audit at Bank Leumi Switzerland Ltd., said the bank is cooperating.

Bank Hapoalim Switzerland is complying with its legal and regulatory duties in cooperating with Swiss authorities, said Chief Executive Officer Michael Warszawski. He said the bank “has only a limited number of American clients whose holdings with the bank are very small.” The bank, he said, “is not aware of any violations of U.S. law by the bank or its employees.”

Few Employees

Cyrill Sele, a Vaduz, Liechtenstein-based spokesman for Liechtensteinische Landesbank AG (LLB), said it sent statistical data to the U.S. A man who answered the phone Oct. 20 at NZB said it is closing and has only a few employees.

Zuercher Kantonalbank spokesman Urs Ackermann said the bank was informed in September of the U.S. investigation. A spokesman for Mizrahi Bank had no immediate comment.

The UBS turnover of 4,450 names, in the face of Swiss laws barring most disclosures of client data, set a precedent for the current talks. The U.S. agreed to submit a request for specific accounts under a 1996 tax treaty and a follow-up agreement in 2003. Under that accord, Swiss bank secrecy doesn’t protect accounts if the owner engaged in “tax fraud or the like,” which is a narrower definition of tax evasion than U.S. law provides.

Turned Over Accounts

The Swiss directed UBS to turn over accounts to the Swiss Federal Tax Administration for review before handing them to the IRS. Negotiators are determining how to apply the 1996 tax treaty and one adopted in 2009 that still needs ratification by the U.S. Senate, the people said.

“Switzerland is continuing talks with the U.S. authorities on administrative assistance in cases of tax fraud and tax evasion,” said Norbert Baerlocher, spokesman for the Swiss embassy in Washington, in a statement. “Any exchange of client data can occur only within the scope of the current legal system, in accordance with the procedures provided for in the existing or the new double-taxation agreement with the USA.”

The Swiss agreed in March 2009 to meet international standards to avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development. The London-based Tax Justice Network this month ranked Switzerland at the top of its financial secrecy index.

‘A Big Issue’

“This is a big issue for these banks,” said C. Evan Stewart, an attorney at Zuckerman Spaeder LLP in New York, who isn’t involved in the settlement talks.

“These are no longer small institutions catering to wealthy people in a small part of central Europe,” he said. “These are multinational institutions now that have a reach that’s all over the world. This has a huge impact on the banking system in Switzerland. Another issue is the sovereignty in Switzerland and whether that will be given deference by other governments.”

The IRS has said 30,000 U.S. taxpayers with offshore accounts avoided prosecution since 2009 by entering a limited amnesty program, paying back taxes and saying who helped them hide their accounts from authorities. Hundreds of taxpayers in the program have given information to prosecutors that have helped them build criminal cases against bankers and advisers.

‘Wide Net’

“The DOJ and IRS are casting a wide net as they try to identify Americans guilty of offshore tax evasion,” said Aaron D. Schumacher, a Geneva-based wealth planning attorney, with Withers LLP.

“They obtained a lot of information about various Swiss banks from the participants in the voluntary disclosure programs and that has likely enabled the recent indictments we’ve seen,” he said. “More people than we saw previously have come to us looking to renounce their citizenship.”

Attorney Robert Katzberg, who represents clients in criminal tax cases, said U.S. taxpayers with Swiss accounts don’t understand that the IRS and Justice Department will get a trove of new data on secret accounts.

“There are thousands of Americans, who are the functional equivalent of residents of New Orleans on the eve of Hurricane Katrina, who have no idea that Katrina is about to happen,” said Katzberg, of Kaplan & Katzberg in New York.

To contact the reporters on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net; Klaus Wille in Zurich at kwille@bloomberg.net; Giles Broom in Geneva at gbroom@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Craig Stirling at cstirling1@bloomberg.net; Frank Connelly at fconnelly@bloomberg.net

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Treasury Eyes First New Debt Type Since TIPS

By Liz Capo McCormick - Oct 24, 2011 6:26 PM GMT+0700

The U.S., seeking to attract investors who might otherwise avoid Treasuries amid a $1.3 trillion budget deficit, is considering the sale of floating- rate notes in what would be its first new security since it began offering inflation-linked debt 14 years ago.

The Treasury Department said this month it asked Wall Street’s biggest bond dealers for recommendations on structuring securities with coupons that rise or fall with benchmark rates. Officials are scheduled to gather with the 22 primary dealers, who include Goldman Sachs Group Inc. and JPMorgan Chase & Co., on Oct. 28 as it decides whether to go further during their regular meeting that precedes each quarterly refunding.

While the government’s interest in offering a new type of bond may signal that it doesn’t expect deficits to diminish anytime soon, the securities would likely appeal to investors concerned that the Federal Reserve’s pledge to keep the federal funds rate at a record low through mid-2013 and other stimulus will spark inflation.

“It’s an opportunity for the Treasury to expand its base of securities, at a time when there is a need for more floating- rate notes,” Ira Jersey, an interest-rate strategist in New York at Credit Suisse Group AG, said in an interview on Oct. 18. The firm is one of the primary dealers of U.S. government securities that were required to fill out the Treasury’s survey.

Falling Yields

The Treasury has had little problem generating demand at its bond auctions even with the amount of marketable U.S. debt outstanding rising to $9.625 trillion from $4.339 trillion in mid-2007 and Standard & Poor’s cutting the U.S.’s credit rating on Aug. 5 to AA+ from AAA. Yields on 10-year notes fell to as low as 1.67 percent last month from 5.32 percent in mid-2007.

There is still a large group of investors who are spurning Treasuries, including Leon Cooperman, the chairman of hedge fund Omega Advisors Inc., who said last week during a presentation at the Value Investing Congress in New York that he “wouldn’t be caught dead owning a U.S. government bond.”

There are signs that foreign demand may be diminishing. Fed data show its holdings of Treasuries on behalf of central banks and institutional investors outside America plunged $76.5 billion in the seven weeks ended Oct. 12, the steepest drop since 2007, to $2.69 trillion.

“If rates go up it could cause problems for the government because they will have to pay a higher interest rate,” Campbell Harvey, a finance professor at Duke University’s Fuqua School of Business in Durham, North Carolina, said in an interview on Oct. 19. He’s also a researcher for the National Bureau of Economic Research, which determines when recessions begin and end.

Yield Forecast

Yields on 10-year Treasuries fell 3 basis points, or 0.03 percentage point, to 2.19 percent at 7:24 a.m. New York time, Bloomberg Bond Trader prices show. The benchmark 2.125 percent note maturing in August 2021 rose 9/32, or $2.81, to 99 14/32.

The weighted average estimate of more than 60 economists and strategists surveyed by Bloomberg is for yields to rise to 2.48 percent by June 2012 and 2.86 percent by the end of next year. A separate survey shows inflation may accelerate to 3.1 percent this year, before slowing to 2.1 percent in 2012.

The Treasury Borrowing Advisory Committee, the group of bond dealers and investors that meets quarterly with the Treasury to share insights on the debt market, suggested the idea of floating-rate notes in February. The securities would likely increase demand from banks, pension funds, insurers and individual investors, while reducing the government’s dependence on foreign buyers, the Committee said at the time.

‘Convenient Product’

A floating-rate note whose coupon is reset at a rate that matches that of the six-month Treasury bill twice a year “would be a ‘convenient’ product” for which “demand will likely increase if rates are expected to rise,” TBAC wrote in its February presentation to the Treasury.

Treasury officials were intrigued enough that they asked the dealers this month how such notes might be structured, if they would affect the overall cost of borrowing, and whether there would be “robust market demand for such a product.” Treasury officials didn’t immediately respond to telephone and e-mail requests for comment on the possible floating-rate notes.

Buyers of such notes may see stable interest payments for several years as the Fed tries to lower unemployment, which has held at or above 9 percent every month except two since May 2009. The central bank has kept its benchmark rate in a range of zero to 0.25 percent since December 2008 and said in August it will stay low through at least mid-2013.

‘Snapped Up’

The notes “would very likely be snapped up by investors, as many now buy fixed-rate Treasuries and use the swaps market to convert them into floating-rate debt anyway, to hedge the risk exposure to changing interest rates,” Moorad Choudhry, the head of business treasury, global banking and markets at Royal Bank of Scotland Plc in London, said in an Oct. 18 interview.

Capital and liquidity requirements from the 2010 overhaul of financial regulation in the Dodd-Frank Act, and from the Basel III global rules have increased demand for short-term, high-quality debt at a time when supply has diminished. Treasury data show the amount of bills outstanding has fallen to $1.478 trillion from a peak of $2.068 trillion in August 2009.

“There is enormous demand for high-quality, short-term assets now,” Lou Crandall, the chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, said in an Oct. 19 interview. “The Treasury would be very reluctant to meet that demand through traditional short-term instruments that have to be rolled over at a high frequency. Floating-rate notes bridge that gap.”

Average Maturity

The Treasury could sell $20 billion of three-year floating rate notes each month through 2014 to meet this demand, boosting the supply of liquid securities by $720 billion, Crandall estimated in an Oct. 17 report. To provide the same amount of short-term liquid securities, bill sales would have to be increased by $150 billion or more a month, causing the amount of debt rolling over each month to jump by about 30 percent.

Instead of issuing the debt, the government should continue to take advantage of low rates by extending the average maturity of its debt, which has risen to 62.5 months from 49.4 in March 2009, according to Harvey, who recommended 18 years ago that the Treasury sell the securities when 10-year yields were at 6.58 percent and the Fed’s target rate was 3 percent.

“The Treasury should be lengthening the maturity of their fixed-rate obligations even further,” Harvey said.

Government-run entities such as mortgage financiers Fannie Mae and Freddie Mac already sell the debt, as do countries from France to Australia. About $117 billion of the $813 billion investment grade corporate bonds issued in the first nine months of this year pay variable interest, according to the Securities Industry & Financial Markets Association.

TIPS Debut

The last time the government started selling a new type of bond was in 1997, when it began offering Treasury Inflation- Protected Securities, or TIPS, as a way to lower U.S. borrowing expenses and allow Americans’ retirement savings to keep pace with inflation.

Championed by then Treasury Secretary Robert Rubin, the market for TIPS has grown to about 7.3 percent of the $9.6 trillion of marketable U.S. debt outstanding. They have returned 11 percent this year, compared with 7.6 percent for Treasuries, according to Bank of America Merrill Lynch indexes.

“Floating-rate notes would add to the Treasury’s armory given the scale of their funding needs,” said Neil Mackinnon, an economist at VTB Capital in London and a former U.K. Treasury official, in an interview on Oct. 20. “With rates at such low levels it is advantageous for the Treasury.”

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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U.S. Stocks Rise Amid Takeovers, Caterpillar

By Rita Nazareth - Oct 24, 2011 10:33 PM GMT+0700

U.S. stocks rose, following the longest weekly rally since February in the Standard & Poor’s 500 Index, amid takeover deals, as Caterpillar Inc.’s earnings beat estimates and Europe made progress taming its debt crisis.

Gauges of technology, raw material and financial shares had the biggest gains in the S&P 500 among 10 groups, rising at least 1.9 percent. Caterpillar, the largest construction and mining-equipment maker, climbed 5.2 percent. RightNow Technologies Inc. surged 19 percent, while Healthspring Inc. soared 34 percent on acquisitions. Alcoa Inc. added 3 percent as commodities rose on signs of growth in China and Japan.

The S&P 500 rose 1.2 percent to 1,253.10 as of 11:31 a.m. New York time, paring its 2011 drop to 0.4 percent. The gauge has rallied for three straight weeks. The Dow Jones Industrial Average added 94.80 points, or 0.8 percent, to 11,903.59.

“It’s green lights here,” Philip Orlando, the New York- based chief equity market strategist at Federated Investors Inc., said in a phone interview. His firm oversees about $355 billion. “I’m optimistic that the market recognizes that Europe has developed a sense of urgency. Companies continue to report better-than-expected earnings. The fact that there’s an M&A cycle going on is telling us that the economy is growing, companies are flush with cash and stocks are cheap.”

The S&P 500 has risen 11 percent so far in October, following five months of losses. It rose from the threshold of a bear market early this month amid steps by European leaders to support banks and higher-than-estimated corporate earnings. The rebound brought the index above a price range where it had traded for more than two months.

Complete Blueprint

European leaders outlined plans to aid banks and ruled out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund. Europe’s 13th crisis-management summit in 21 months also explored how to strengthen the International Monetary Fund’s role. The complete blueprint won’t come together until a summit in two days.

“Let’s hope this is decision time in Europe,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a telephone interview. “Maybe this time we’ll actually hear something that we can say, ‘OK, now we know and let’s go from there.’ We need to put this crisis behind us and get back to looking at U.S. corporate earnings.”

The Morgan Stanley Cyclical Index of companies most-tied to the economy rallied 2.7 percent. The Dow Jones Transportation Average, a proxy for the economy, gained 2.1 percent. The KBW Bank Index added 2.7 percent.

Earnings Season

This week, 191 companies in the S&P 500 are scheduled to report quarterly results. Profit for all companies in the index climbed 16 percent during the third quarter, and will increase 18 percent to a record $99.32 a share for all of 2011, according to analyst estimates compiled by Bloomberg. About three quarters of the S&P 500 companies that reported results since Oct. 11 beat analysts’ projections, the data showed.

Caterpillar rallied 5.2 percent to $91.95. It said full- year profit will be $6.75 a share and sales will be at the top end of a previously forecast range of $56 billion to $58 billion. Revenue in 2012 will rise 10 to 20 percent, it said.

Other companies rose after Caterpillar reported earnings. Deere & Co., the world’s largest farm-equipment maker, added 3 percent to $74.40. Joy Global Inc., the maker of P&H and Joy mining equipment, increased 6.4 percent to $87.02.

United Parcel Service Inc., the largest provider of package deliveries and a proxy for the economy, and Texas Instruments Inc., the largest maker of analog chips, are among companies scheduled to report results this week.

‘Armageddon Scenario’

“We need to take the Armageddon scenario off the table,” Kevin Rendino, a money manager at New York-based BlackRock Inc., which oversees $3.3 trillion, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “Companies have done a really good job at managing expectations and then coming in OK because it is not as bad as we think it is.”

Some takeover deals also helped lift equities today.

RightNow Technologies surged 19 percent to $42.86. Oracle Corp., the world’s second-largest software maker, agreed to buy the company for $1.5 billion, gaining customer-service expertise to bolster a new Internet-based product.

Healthspring Inc. jumped 34 percent to $53.63. Cigna Corp. agreed to buy health maintenance organization Healthspring for $3.8 billion in cash to expand the U.S. insurer’s Medicare business.

Sara Lee Corp. was unchanged at $17.77. J.M. Smucker Co., the maker of jams and Jif peanut butter, agreed to buy a majority of the company’s North American coffee and hot-beverage food-service business for about $400 million.

Alcoa Rallies

Alcoa, the largest U.S. aluminum producer, gained 3 percent to $10.54. Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper miner, advanced 6.9 percent to $39.11. The S&P GSCI Index of commodities added 1.9 percent.

China’s manufacturing may expand in October for the first time in four months, snapping the longest contraction since 2009, after a preliminary index of purchasing managers showed a rebound in new orders and output. The Chinese report, along with Japanese data today showing an increase in exports exceeding economists’ forecasts, signaled that Asia’s largest two economies are withstanding Europe’s sovereign debt crisis.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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Jobs Admired Zuckerberg for ‘Not Selling Out’

By Sarah Frier - Oct 24, 2011 9:43 PM GMT+0700
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Steve Jobs, chief executive officer of Apple Inc., waves to the audience before unveiling the iCloud storage system at the Apple Worldwide Developers Conference 2011 in San Francisco. Photographer: David Paul Morris/Bloomberg

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Oct. 24 (Bloomberg) -- Steve Jobs disclosed information about meeting his biological father to biographer Walter Isaacson. Jobs, who co-founded Apple Inc. and died Oct. 5, told Isaacson his opinions on competitors, including Google Inc. and Microsoft Corp., and of his struggles with cancer. The biography, which goes on sale today, was based on more than 40 interviews with Jobs and was previewed on last night’s “60 Minutes,” the CBS television show. Shannon Pettypiece reports on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Steve Jobs, who mentored Silicon Valley technology leaders in the months before he died, said he admired Facebook Inc. co-founder Mark Zuckerberg for “not selling out.”

“We talk about social networks in the plural, but I don’t see anybody other than Facebook out there,” Jobs told biographer Walter Isaacson in excerpts of an interview released online by “60 Minutes,” the CBS television show. “Just Facebook, they’re dominating this.”

“I admire Mark Zuckerberg,” Jobs said of Facebook’s chief executive officer on the recording. “I only know him a little bit, but I admire him for not selling out, for wanting to make a company. I admire that, a lot.”

Jobs, who co-founded Apple Inc. (AAPL) and died Oct. 5, told Isaacson his opinions of competitors such as Google Inc. (GOOG) and Microsoft Corp. (MSFT) and of his struggles with cancer. The biography, which goes on sale today, was based on more than 40 interviews with Jobs and was previewed on last night’s “60 Minutes.” The book is No. 1 on Amazon.com Inc.’s best-seller list and has been in the top 100 for 45 days due to pre-orders.

Google, which competes with Apple in making operating systems for smartphones, had a lot in common with Microsoft, Jobs said. When Larry Page took over leadership of Google, Jobs told him to simplify the company, according to the book, purchased by Bloomberg.

‘Don’t Get It’

“Microsoft never had the humanities and the liberal arts in the DNA; it was pure technology company, and they just didn’t get it,” Jobs said. “Google’s the same way. They just don’t get it.”

Jobs spoke at length about Bill Gates, the Microsoft co- founder who was a competitor for decades and, at times, a partner. He admired Gates for his success and influence. Still, the two men had fundamentally different views of the industry they helped create, said Jobs.

“Bill ended up the wealthiest guy around, and if that was his goal then he achieved it,” Jobs said. “But it’s never been my goal, and I even wonder in the end if it was really his goal. I don’t know.”

Jobs had an unusual relationship with money, he said in interviews with Isaacson. He went from money not mattering because he was young and poor to money not mattering because he had more than he would ever need, shortly after the initial public offering of Apple.

‘Bizarro People’

Jobs kept a home on a normal street in Palo Alto, California, with a gate to the backyard often unlocked. He said he was determined to avoid the negative effects of money after seeing Apple employees get rich, buy Rolls Royces and get their wives plastic surgery, Isaacson said.

“I saw these people who were really nice, simple people turn into these bizarro people,” Jobs said in an audio recording. “And I made a promise to myself. I said: ‘I’m not going to let this money ruin my life.’”

Jobs, who died at age 56, told Isaacson he sometimes believed in God and sometimes felt life was more like an “on- off switch.”

“Click, and you’re gone,” Jobs said, according to Isaacson. “And that’s why I don’t like putting on-off switches on Apple devices.”

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Acer Shares Decline After Computer Maker Reports Wider-Than-Estimated Loss

By Tim Culpan - Oct 24, 2011 9:31 AM GMT+0700

Acer Inc. (2353), the world’s fourth- largest computer maker, fell in Taipei trading after posting a wider-than-expected loss in the third quarter.

Acer dropped 1.1 percent to NT$35.40 as of 10:27 a.m. in Taipei, compared to a 2.4 percent climb in the benchmark Taiex index. Third-quarter loss was NT$1.1 billion, compared to the NT$867 million average loss estimate of 17 analyst estimates.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story: Adela Lin at alin95@bloomberg.net

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Olympus Drops on Report of FBI Investigation

By Norie Kuboyama and Naoko Fujimura - Oct 24, 2011 5:01 PM GMT+0700

Olympus Corp. (7733), under fire from shareholders amid questions about $687 million in payments to advisers, plunged in Tokyo trading after a report the U.S. Federal Bureau of Investigation is probing the maker of optical equipment.

Tokyo-based Olympus plunged 11 percent to 1,099 yen at the 3 p.m. close on the Tokyo Stock Exchange, dropping to its lowest since October 1998. The benchmark Nikkei 225 (NKY) Stock Average gained 1.9 percent.

The FBI is investigating payments by Olympus to advisers on a 2008 acquisition, the New York Times reported, citing two people briefed on the case, without disclosing their names. The paper said the payout was more than 30 times the normal amount for similar deals. Tsuyoshi Kitada, a spokesman for Olympus in Tokyo, said the company had no information on any FBI investigation. Byron Tsao, a spokesman at the U.S. embassy in Tokyo, referred inquiries to the FBI in Washington D.C.

“Uncertain ty about Olympus’ management and the M&A payments has increased,” said Yoshihiro Ito, chief strategist at Okasan Online Securities Co. in Tokyo. “Foreign fund managers and short-term speculators are selling the shares.”

Shareholders including Nippon Life Insurance Co. have called for more information about the adviser payments, which were revealed by Michael C. Woodford, the chief executive officer who was fired on Oct. 14.

Adviser Fees

Olympus on Oct. 19 said it paid $687 million in fees, including a $443 million buyback of preferred shares, in connection with the $2 billion purchase of Gyrus Group Plc in 2008. Chairman Tsuyoshi Kikukawa said on Oct. 18 the amount was only about half that much.

Shares of the world’s biggest maker of endoscopes have fallen by 56 percent, erasing more than $4.5 billion in market value, in the seven trading days since Woodford was fired. Woodford, Olympus’ first non-Japanese CEO, has said he was ousted for challenging the payments to advisers on the Gyrus transaction.

“The situation is still unclear and may take a while to settle,” Mitsuo Shimizu, an analyst at Cosmo Securities Co. in Tokyo, said by telephone. “That’s worrying investors and prompting them to unload their stakes.”

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

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TomTom Shares Jump in Amsterdam Trading After Net Income Exceeds Estimates

By Maaike Noordhuis - Oct 24, 2011 3:22 PM GMT+0700

TomTom NV (TOM2), Europe’s biggest maker of portable navigation devices, climbed as much as 24 percent in Amsterdam, the biggest advance since June 2009, after profit beat analyst estimates and the company raised its forecast.

Third-quarter net income rose 50 percent to 28.9 million euros ($40.1 million) compared with the 16 million-euro average forecast of seven analysts surveyed by Bloomberg. Full-year revenue and earnings per share are predicted toward the upper end of a guidance range for sales of 1.23 billion euros to 1.28 billion euros and earnings per share of 25 cents to 30 cents, the Amsterdam-based company said in a statement today.

The results are “much better than I expected thanks to a strong euro, and more services and content revenue,” Martijn den Drijver, an analyst at SNS Securities, said by phone.

TomTom started a restructuring plan in the third quarter, including job cuts, which is intended to deliver savings of about 50 million euros in 2012. Chief Executive Officer Harold Goddijn has been trying to increase sales of built-in navigation systems for cars as well as electronic maps and other software. The company announced deals this month to install its products in Ford Motor Co. cars and Iveco SpA trucks.

The shares traded 18 percent higher at 3.61 euros as of 10:20 a.m., giving the company a market value of about 801 million euros.

Automotive Growth

“We need to be faster and less complex,” Goddijn said in a telephone interview today, adding that the number of job cuts has yet to be determined. The company currently employs more than 3,500 people.

The plan “will focus our organization on the areas where we see the greatest potential for growth,” Goddijn said in the statement, citing the automotive and content and services businesses as examples.

Before today, the stock declined 61 percent this year as the company slashed its sales forecast after U.S. demand for portable devices fell faster than anticipated and consumers opted for cheaper navigation systems.

“We’re in continued talks with carmakers,” Goddijn said today, adding that clients such as Renault SA are implementing TomTom systems in more car models.

Total revenue declined 10 percent to 336 million euros in the quarter. Automotive sales rose 43 percent to 59 million euros, while revenue from content and services advanced 19 percent to 107 million euros. Consumer sales declined 23 percent to 225 million euros.

To contact the reporter on this story: Maaike Noordhuis in Amsterdam at mnoordhuis@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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U.S. Stock Futures Gain on Crisis Talks Progress

By Adria Cimino - Oct 24, 2011 5:47 PM GMT+0700

U.S. stock futures erased their gains, leaving the benchmark Standard & Poor’s 500 Index little changed.

Caterpillar Inc. (CAT) advanced and Texas Instruments Inc. (TXN) slipped in Germany before reporting earnings. Garmin Ltd. (GRMN) rallied after rival TomTom NV raised its forecast.

S&P 500 futures expiring in December lost less than 0.1 percent to 1,235.1 at 6:45 a.m. in New York. Futures on the Dow Jones Industrial Average slipped 2 points, less than 0.1 percent, to 11,755.

The S&P 500 ended last week at the highest level since Aug. 3, two days before S&P stripped the U.S. of its AAA credit rating, amid optimism Europe’s leaders would announce a plan to contain the debt crisis. The stock index has surged 13 percent since Oct. 3, when it closed within 1 percent of a bear market, or a plunge of 20 percent from its high in April.

Euro-area leaders ruled out tapping the European Central Bank to boost the region’s rescue fund as they inched toward a revamped strategy to contain the debt crisis. The 13th crisis- management summit in 21 months excluded a forced restructuring of Greece’s debt, sticking with the policy of enticing bondholders to accept “voluntary” losses to help restore the country’s finances. The complete blueprint will be formed at a second summit Oct. 26.

‘Decision Time’

“Let’s hope this is decision time in Europe,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a telephone interview. “Maybe this time we’ll actually hear something that we can say, ‘OK, now we know and let’s go from there.’ We need to put this crisis behind us and get back to looking at U.S. corporate earnings.”

The S&P 500 rose 9.4 percent this month through Oct. 21, following five months of losses. Gauges of commodity, consumer discretionary and industrial companies, which are most-tied to economic growth, added at least 11 percent. The U.S. economy probably grew in the third quarter at the fastest pace this year, economists said before a report this week.

This week, 191 companies in the S&P 500 will report quarterly results. Profit for all companies in the index climbed 16 percent during the third quarter, and will increase 18 percent to a record $99.32 a share for all of 2011, according to analyst estimates compiled by Bloomberg. About three quarters of the S&P 500 companies that reported results since Oct. 11 beat analysts’ projections, the data showed.

Caterpillar Earnings

Caterpillar, the biggest construction and mining-equipment maker, rose 0.5 percent to $87.80 in Germany. The company may say third-quarter profit rose to $1.58 a share from $1.22 a share a year earlier, according to a Bloomberg survey of analysts.

Texas Instruments, the largest maker of analog chips, slipped 0.1 percent to $30.43 in Germany. The company may report third-quarter earnings of 58 cents a share versus 71 cents a share, a Bloomberg survey showed.

Caterpillar will report earnings before the stock market opens and Texas Instruments will report after the close.

Garmin, the biggest maker of mobile navigation systems in the U.S., rallied 0.7 percent to $34.84 in Germany. TomTom, Europe’s biggest maker of portable navigation devices, reported third-quarter profit that beat analyst estimates and raised its forecast.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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China Officials Jailed for Data Leaks as Government Fights Insider Trading

By Bloomberg News - Oct 24, 2011 4:26 PM GMT+0700

China jailed two officials for leaking classified economic data in its highest profile crackdown on selective disclosure linked to insider trading in the world’s third-biggest equities market.

Wu Chaoming, a researcher with the People’s Bank of China, was sentenced to six years in prison for willfully revealing secret information to 15 people in the securities industry, Li Zhongcheng, a state prosecutor said in Beijing today. Sun Zhen, a former secretary in the country’s statistics bureau, received five years on similar charges.

Four suspects employed in the securities industry have also been indicted, Li said, without naming them.

The punishments were the toughest measure yet in a government campaign to stop selective disclosures that undermine China’s stock markets and give an unfair edge to some investors. Authorities will continue to “strike hard” against such cases, Li said.

“A message is being sent as a deterrent,” said Sean Callow, a Sydney-based senior currency strategist at Westpac Banking Corp. who had previously called for China to address the issue. “It’s for anyone who doubts the seriousness with which the issue is being taken.”

‘Handsome’ Lecture Fees

Some of those who leaked information got “handsome” lecture fees for speaking to securities brokerages, while others traded stocks for profit, said Du Yongsheng, a spokesman for the National Administration for Protection of State Secrets.

The government began public efforts to combat the challenge in April and in July brought forward the monthly release dates for some figures to reduce the chance of early disclosure. It followed a series of leaks of inflation numbers, a statistic that can move markets as China battles to control price rises that hit a peak of 6.5 percent in July.

“It is a crime that seriously harms society,” Li said at a press conference in the Chinese capital. “The leaking harms economic operations, prevents fair market competition and affects government credibility.”

Wu, a researcher with the central bank’s Finance Institute, leaked 25 items of classified statistical data 224 times to 15 people in the securities industry between January and June 2010, Li said. Wu learned of the data legally at an advisory meeting of outside experts on price monitoring and analysis, the prosecutor said.

Toughest Punishments

Sun, who was secretary to a director in the National Bureau of Statistics, violated provisions of the law on Guarding State Secrets by leaking 27 items of classified statistical data to employees of the securities industry between June 2009 and January 2011, Li said. The data leaked included numbers on gross domestic product, consumer price inflation, retail sales, new loans and M2, the broadest measure of money supply.

Wu and Sun were both sentenced by the Xicheng District People’s Court of Beijing and neither appealed his sentence, Li added.

The jail sentences are the harshest punishment the government has handed down to date for such violations, said Yang Xiaojun, a law professor at the Chinese Academy of Governance.

The severity is a surprise, said Frances Cheung, a Hong Kong-based strategist at Credit Agricole CIB.

“I think they did the right thing in order to maintain credibility, especially when you relate that to how Chinese data nowadays are market-moving and influential,” she said.

The punishments go beyond safeguarding national data to ensuring the healthy development of China’s securities markets, Ye Qing, deputy head of the provincial statistics bureau in Hubei, said in a telephone interview.

‘Killing the Chicken’

“It’s like killing the chicken to scare the monkeys,” he said, using a Chinese idiom. “It’s also aimed at those who dig for information and manipulate the stock market.”

The consumer-price index figure was accurately circulated in the market or in the press before the official release for at least five of the six months through April this year.

Such early disclosure has helped move markets in the world’s second-biggest economy.

After rumors circulated on the Internet in February that inflation for the previous month would be a lower-than-forecast 4.9 percent, China’s benchmark Shanghai Composite Index rose 2.5 percent, the most in two months, on speculation China wouldn’t need to raise interest rates further to cool rising prices. After the statistics bureau’s official release a day later, which matched the number, the market ended almost unchanged.

Leaks ‘Dried Up’

China in July brought forward the release date for some key economic data, aiming to reduce the potential for leaks by adopting a new schedule that cuts the time-lag between finalizing data and releasing it. The statistics bureau said it was following the lead of efforts by nations including the U.K.

The measures appear to be working, says Westpac’s Callow.

“It is very telling that data leaks dried up in the past few months,” he said. “People are still asking for whispers, but I no longer expect leaks.”

The bureau now seeks to publish monthly indicators including the producer price index, consumer price index, industrial production, fixed-asset investment, real estate development and retail sales, within 24 hours of the data being produced.

Du, of the state secrets office, said it would continue to clear up the “chronic” problem of classified data being leaked.

“There are still weak links that need to be strengthened” in terms of restricting how widely data is distributed and designating levels of secrecy, he said.

--Dingmin Zhang, Kevin Hamlin, Wenxin Fan. Editors: Neil Western, Nick Wadhams.

To contact Bloomberg News staff for this story: Dingmin Zhang in Beijing at +86-10-6649-7576 or dzhang14@bloomberg.net Kevin Hamlin in Beijing at +86-10-6649-7573 or khamlin@bloomberg.net; Wenxin Fan in Shanghai at +86-21-6104-3045 or wfan19@bloomberg.net

To contact the editors responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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European Stocks Erase Gains as Greek Lenders Slide; BHP Billiton Advances

By Sarah Jones - Oct 24, 2011 6:05 PM GMT+0700

European stocks erased gains as Greek lenders and oil companies retreated, offsetting signs of stronger growth in China and Japan. Asian shares rallied, while U.S. futures were little changed.

BHP Billiton Ltd. (BHP) and Rio Tinto Group both jumped more than 2 percent as base metals surged. TomTom NV (TOM2) soared 19 percent after reporting better-than-estimated net income. Greek banks tumbled amid reports that creditors may have to write down as much as 60 percent of their holdings in Greek debt.

The benchmark Stoxx Europe 600 Index advanced less than 0.1 percent to 238.97 at 12:04 p.m. in London after earlier climbing as much as 0.8 percent. The MSCI Asia Pacific Index jumped 2.7 percent, while futures on the Standard & Poor’s 500 Index expiring in December slid 0.2 percent.

Leaders at yesterday’s summit in Brussels ruled out tapping the European Central Bank’s balance sheet to boost the euro area’s rescue fund, the European Financial Stability Facility, and excluded a forced restructuring of Greece’s debt. The politicians looked at strengthening the International Monetary Fund’s role and outlined plans to aid banks.

The complete blueprint for the rescue fund won’t come together until a summit in two days. Like yesterday, it will start with all 27 European Union leaders before the 17 heads of the euro-area economies gather on their own.

The Stoxx 600 has rallied for four consecutive weeks, its longest stretch of weekly gains since December, as investors speculated leaders will find a solution to Europe’s debt crisis that has Greece teetering on the edge of a default. The gauge has still tumbled 18 percent from this year’s high on Feb. 18.

Stocks rallied in Asia today and U.S. futures erased earlier losses after a report showed that China’s manufacturing may expand in October for the first time in four months, snapping the longest contraction since 2009. A separate release showed Japan’s exports increased in September more than economists had forecast.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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Deutsche Bank May Join UBS in Accelerating Cuts as Debt Crisis Hits Profit

By Elena Logutenkova and Aaron Kirchfeld - Oct 24, 2011 3:04 PM GMT+0700

Europe’s biggest investment banks, caught between worsening earnings prospects and demands for more capital, may have little choice but to accelerate asset reductions and job cuts.

UBS AG (UBSN), Deutsche Bank AG (DBK), Barclays Plc (BARC) and Credit Suisse Group AG (CSGN), which all report third-quarter results over the next eight days, may eliminate more jobs, speed disposals and scale down some businesses to slash costs and build up reserves amid the region’s sovereign debt crisis, said JPMorgan Chase & Co. analyst Kian Abouhossein.

The four banks have disclosed plans to shrink their combined risk-weighted assets by as much as $415 billion to prepare for stricter capital requirements under Basel III rules. As the euro area’s sovereign debt crisis erodes earnings, the banks may have to speed up reorganization plans at their securities units, which will be most affected by the changes in Basel rules, if they want to avoid selling new shares.

“Everybody is trying to reduce risk-weighted assets as soon as possible,” said Abouhossein, who is based in London. “They’ve already all started, but they’ll probably find it harder than expected because the environment is clearly getting tougher.”

European Union leaders met in Brussels yesterday, seeking a breakthrough in efforts to resolve the Greek sovereign debt crisis without triggering a default, beef up the euro bailout fund, shield banks from the fallout and ensure Italy and Spain don’t succumb to the contagion. They will hold a second summit on Oct. 26 to complete their plans.

Capital Demands

EU banks may need about 100 billion euros ($139 billion) in capital after marking sovereign-debt holdings to market values, said a person familiar with the weekend discussions. This amount would be needed to reach a core tier 1 capital level of 9 percent based on a European Banking Authority test, said the person, who declined to be identified because the talks are private. The Swiss regulator has been urging UBS and Credit Suisse to build up high quality capital as quickly as possible.

Zurich-based UBS will probably report an 83 percent drop in third-quarter net income tomorrow to 285 million Swiss francs ($322 million), according to the mean estimate of 9 analysts surveyed by Bloomberg, after announcing a $2.3 billion loss from unauthorized trading last month.

Deutsche Bank of Frankfurt may report profit of 343 million euros, according to analyst estimates, after a net loss of 1.21 billion euros in the year-earlier period on writedowns related to the acquisition of Deutsche Postbank AG.

Earnings Forecasts Cut

Barclays of London releases third-quarter results on Oct. 31, and Zurich-based Credit Suisse on Nov. 1. Spokespeople at all four banks declined to comment before the publication of earnings.

UBS gained 1.6 percent to 11.17 francs by 9:52 a.m. in Swiss trading, while Deutsche Bank rose 1.4 percent to 28.23 euros. Barclays advanced 1.6 percent to 184.9 pence, and Credit Suisse rose 2.3 percent to 24.41 francs. Before today, UBS had declined 28 percent this year, while Deutsche Bank fell 29 percent, Barclays slid 30 percent and Credit Suisse tumbled 37 percent.

Europe’s investment banks may be seeking to cut assets, and therefore their capital needs, by outright sales, hedging and netting of exposures, as well as by reducing the volume of business they do in fixed-income trading, interbank lending and lending to companies, analysts said. This may become a priority as efforts to build up reserves by retaining earnings founder. Analysts lowered profit forecasts for the four banks by an average of 36 percent for 2011 and 29 percent for 2012 since the beginning of this year, data compiled by Bloomberg show.

Missed Profit Goals

“We see capital generation forecasts as increasingly at risk, along with future dividend payments,” UBS analyst Philipp Zieschang said in a note on Oct. 18. “No surprise that most of the investment banks are in the process of reducing costs and further cuts beyond those already announced seem likely.”

Deutsche Bank, Europe’s biggest investment bank by revenue, said this month it won’t meet its profit target for the year after earnings at the securities unit were “significantly lower” than expected in the third quarter. UBS, Switzerland’s biggest bank, abandoned its mid-term profit targets in July, while Credit Suisse cut its return-on-equity goal in February to more than 15 percent from more than 18 percent previously, citing stricter regulation and challenging markets. Barclays set an ROE target in February of 13 percent for 2013, down from an average of 18 percent over the past 30 years.

Investors would probably prefer safety over returns in banking stocks at the moment, said Christian Gattiker, head of research at Bank Julius Baer & Co.

Premium for Safety

“For a more continuous and more stable income stream, by now investors would except a discount in terms of dividends, or would pay a premium to own a share that provides that in the financial industry,” Gattiker said.

The banks have taken some measures to adjust to the environment that Deutsche Bank Chief Executive Officer Josef Ackermann, 63, described as “very challenging” earlier this month. He said the bank doesn’t have any plans to raise capital and will focus on improving ratios by retaining earnings and reducing risk-weighted assets.

The German lender said on Oct. 4 it will cut 500 jobs, or 4.7 percent of staff at its securities unit. UBS said in August it will eliminate 3,500 jobs, with about 1,575 of those at the investment bank, while Barclays and Credit Suisse announced plans to reduce staffing by 3,000 and 2,000, respectively.

More job cuts are likely to come as the ones already announced were in response to weak business in the first half of the year and markets have deteriorated since, said Matthew Clark, a London-based analyst at Keefe, Bruyette & Woods Ltd.

Compelled to Act

“A lot of banks that were adopting wait-and-see strategies are now compelled to take further action because of the lower revenue environment currently,” Clark said. “There are businesses that will be borderline under the new regulatory environment. Now that the market environment has turned down, it will serve as a catalyst to restructure.”

UBS may tell investors in November that it will slash an additional 70 billion francs of risk-weighted assets on top of cuts already announced and eliminate 1,700 more jobs at the investment bank, Abouhossein estimated. The bank may shrink its rates and structured credit businesses to one-third of their current size, exit the commodities business and slim the credit trading unit by about 20 percent, he said.

Shrinking Industry

UBS, which has been struggling to rebuild its investment bank after the subprime crisis, is under more pressure to reorganize faster, while Deutsche Bank may have some more time, he said.

UBS Chairman Kaspar Villiger told journalists following the resignation of Chief Executive Officer Oswald Gruebel, 67, last month that the bank had started a strategy review even before it discovered the trading loss. “It became clear a few months ago that a change, which is probably here to stay, is taking place” in investment banking, said Villiger, 70.

“The investment banking industry is an industry that is due to shrink, and is not due to expand,” Sergio Ermotti, 51, UBS’s interim CEO, said on the call.

Morgan Stanley analyst Huw van Steenis estimated that European wholesale banks may have to shrink their balance sheets by a cumulative 1 trillion euros to 2 trillion euros in the next year in response to funding pressures and a worsening market outlook. UBS may be looking to cut about 100 billion francs of risk-weighted assets at its investment bank, he estimated.

Fast Forward

The Basel III rules, which come fully in effect in 2019, make some of the riskier businesses like proprietary trading and securitization less profitable for banks because of higher capital requirements and risk weightings assigned to those assets. Requirements for the highest-quality of capital, including a buffer for systemically important firms, are set to almost quintuple for the four lenders to 9.5 percent to 10 percent.

Credit Suisse, which said in March it will seek to optimize returns at its securities unit and realign businesses to higher capital requirements, this month informed about 50 employees that it’s shutting the unit responsible for making commercial mortgages and that their jobs will likely be eliminated, said two people with knowledge of the matter who declined to be identified because the matter isn’t public.

“Pressure is rising on investment banks to change their business model,” said Lutz Roehmeyer, who helps manage about 11.5 billion euros at Landesbank Berlin Investment in Berlin. “The market expected several years to boost capital and to spare shareholders. Now, in the matter of a weekend, Basel III has been moved forward.”

To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net; Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net;

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net;

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Thai Floods Spill Into Northern Bangkok After Armed Men Prevent Levee Work

By Daniel Ten Kate and Anuchit Nguyen - Oct 24, 2011 2:22 PM GMT+0700

Thai floodwaters spilled into northern Bangkok today after armed men stopped workers from building a sandbag levee and a water gate broke, elevating concerns the deluge will spread to inner parts of the capital.

Water surged onto a major street near Bangkok’s northern border, inundating passenger cars and a hospital, according to images broadcast on military-owned Channel 5 television station. Bangkok Governor Sukhumbhand Paribatra last night warned residents of six northern districts to move belongings to higher ground as the water approached.

“There is a huge amount of water coming into Bangkok,” Prime Minister Yingluck Shinawatra told reporters today. “From the models, there will be low-level areas that will be flooded. There is some difficulty in diverting the water into the sea.”

The levees protecting Bangkok, which sits on a river basin the size of Florida that drains into the Gulf of Thailand, have slowed the dispersal of floodwaters that have swamped farmland and forced Honda Motor Co. and Canon Inc. to shut factories. The deluge has spurred tensions between residents in areas north of the capital who want the water drained quickly to the gulf, and Bangkok inhabitants aiming to protect the city.

‘Move’

Yingluck blamed a "technical problem" for the malfunctioning of a water gate on the city’s edge and ordered Irrigation Department officials to fix it quickly. She urged state agencies and companies to close offices to help alleviate traffic congestion.

“If you have a choice to move to other provinces, you should do it,” Yingluck said.

Flooding in the districts, which represent about 10 percent of Bangkok’s land area, “is very imminent and inevitable,” the governor said in a statement issued late last night. He urged the young, old and ill to evacuate to city shelters and for others to move belongings to higher ground.

The six districts immediately at risk are Don Mueang, Lak Si, Bang Khen, Chatujak, Bang Sue and Sai Mai, Sukhumbhand said. Chatujak is home to the city’s biggest weekend market, one of two places where the elevated train line intersects with the subway. Estimates of Bangkok’s total population vary, with the U.S. State Department putting the figure at 9.7 million.

‘Men With Weapons’

Two nights ago, “a few men with weapons” from areas north of the city where floodwaters are as high as three meters (10 feet) confronted Bangkok officials building a sandbag levee at a low-lying junction, spokesman Jate Sopitpongstorn said by phone today. The men destroyed the barrier, he said, allowing the water to flow from Pathum Thani province into Bangkok.

Outside the city’s center, more than 100,000 people are living in about 1,700 government evacuation centers, which can handle as many as 800,000 people. Toxic water was found in Pathum Thani, the government said.

Conflicting official warnings about the severity of the three-month-old crisis sparked panic buying of water and food in the capital, and banks and hotels have built walls of sandbags to guard against the deluge.

Nirut Hongprasith, head of the Royal Thai Navy’s Hydrographic Department, told reporters yesterday that “Bangkok will definitely be safe.”

Hours earlier, Yingluck said floodwaters throughout the capital may reach more than one meter and expressed concern about water levels in Saen Saeb canal, which runs close to shopping districts such as Central World and Sukhumvit Road.

Apple, Toyota Disruptions

The government will consider providing a “soft loan” of about 25 billion baht to help repair damage and rebuild infrastructure at seven industrial estates that have been shut down by flooding, Deputy Prime Minister Kittiratt Na-Ranong told reporters today. Army chief Prayuth Chan-Ocha over the weekend ordered soldiers to strengthen levies around two industrial estates in Eastern Bangkok that are home to factories operated by Honda Motor Co., Unilever and Cadbury Plc.

Companies including Apple Inc. (AAPL) and Toyota Motor Corp. (7203) are facing the worst supply disruptions since the March earthquake that struck Japan. Thailand makes about a quarter of the world’s hard-disk drives and serves as a production hub for Japanese carmakers and electronics firms.

“The rising flood waters have hurt all Japanese auto manufacturers and many electronics firms, either directly at flooded plants or via affected parts suppliers,” Moody’s Investors Service said in a report today, adding that it’s “credit negative.” The floods will cost Thailand 2 percent of its gross domestic product this year, it said.

Rate Cut Possible

Thailand’s central bank, which left the benchmark interest rate unchanged last week at 3.50 percent, signaled Oct. 20 it may consider cutting rates as the disaster threatens to slow growth. The benchmark SET Index fell 4.1 percent last week. The exchange is closed today for a holiday.

The damage caused by the floods cost as much as 120 billion baht ($3.9 billion), Bank of Thailand Governor Prasarn Trairatvorakul said Oct. 14. Barclays Capital cut its forecast for Thai economic growth this year to 2.9 percent from 3.7 percent because of flood-related losses, it said in a report. Official data last week showed exports rose 19.1 percent in September from a year earlier, the least since June.

Thailand may lose 6 million metric tons of unmilled rice as floods damage key plantation areas, Apichart Jongskul, secretary-general of the Office of Agricultural Economics, said in a phone interview Oct. 21. Communities in parts of Southeast Asia face “serious food shortages,” the United Nations said in a report.

Food Runs

Residents in the capital are stocking up on water, canned food and instant noodles even as downtown shopping malls remained filled with people. Yingluck has vowed to protect the city’s airports, power plants and major transport routes from floodwaters sitting north of Bangkok that she said may take six weeks to drain through the city’s 1,682 canals.

Suvarnabhumi, Bangkok’s main international airport, was operating normally. The city will experience a high tide from Oct. 28 to Oct. 30, Yingluck said. Sukhumbhand on Oct. 22 warned 27 communities along the Chao Phraya river to head to government shelters after water levels unexpectedly rose at the weekend before stabilizing.

Elsewhere in Bangkok, major hotels in downtown areas Silom, Sukhumvit and Sathon were operating normally, even as they took precautions. Sandbags were piled near office buildings and hotels, including the St. Regis owned by Minor International Pcl (MINT), the nation’s biggest hotel operator.

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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Swiss Banks May Pay Billions to U.S., Disclose Client Names

By David Voreacos, Klaus Wille and Giles Broom - Oct 24, 2011 2:04 PM GMT+0700

Swiss banks will likely settle a sweeping U.S. probe of offshore tax evasion by paying billions of dollars and handing over names of thousands of Americans who have secret accounts, according to two people familiar with the matter.

U.S. and Swiss officials are concluding negotiations on a civil settlement amid U.S. criminal probes of 11 financial institutions, including Credit Suisse Group AG (CSGN), suspected of helping American clients hide money from the Internal Revenue Service, according to five people with knowledge of the talks who declined to speak publicly because they are confidential.

Switzerland, the biggest haven for offshore wealth, wants an end to new U.S. probes while preserving its decades-old tradition of bank secrecy, the people said. The U.S. seeks data on Americans who have dodged U.S. taxes and a pledge by Swiss banks to stop helping such clients, according to the people. The Swiss reached accords this year with Germany and the U.K. on untaxed assets.

“The Swiss would like to get out of this by paying money, and they’ve done that with other countries,” said tax attorney H. David Rosenbloom of Caplin & Drysdale Chartered in Washington, who isn’t involved in the talks. “For the U.S., it’s not primarily a money question. It’s a matter of making sure the laws apply fairly among taxpayers.”

The Swiss government seeks to outline a final accord for the Foreign Affairs Committee of its Parliament’s upper house on Nov. 10, according to a person familiar with the matter. The number of banks that will pay to resolve the U.S. negotiations may extend beyond the 11 under criminal investigation, the people said.

‘All-Encompassing Solution’

“We are aiming for an all-encompassing solution that will apply to all the banks,” Finance Minister Eveline Widmer- Schlumpf said in an Oct. 4 interview in the Swiss capital Bern. “We don’t want to be confronted with the same issues time and again.”

Under accords this year with Germany and the U.K. on untaxed assets, the identity of clients remained secret. The U.S. insists that the Swiss disclose client account data, and the banks may end up handing over data on 5,000 to 10,000 accounts, the people said. A final determination hasn’t been made, they said.

The Justice Department also may bring criminal charges or civil enforcement actions against any of the 11 financial institutions. They could avoid prosecution by separately paying fines, admitting wrongdoing and disclosing data, the people said. On Aug. 30, the Justice Department requested statistical data from the 11 about their U.S. accounts, which the U.S. has received and is analyzing, the people said.

A Target

Credit Suisse, the second-biggest Swiss bank, said July 15 that it was a target of U.S. prosecutors. On July 21, seven Credit Suisse bankers were indicted on a charge of conspiring to help U.S. clients evade taxes through secret accounts.

The group of 11 also includes HSBC Holdings Plc (HSBA), the biggest European bank, Basler Kantonalbank, Wegelin & Co., Zuercher Kantonalbank, and Julius Baer Group Ltd. (BAER), the people said. Three Israeli banks -- Bank Leumi Le-Israel BM (LUMI), Bank Hapoalim BM (POLI), and Mizrahi-Tefahot Bank Ltd. (MZTF) -- are on the list, as well as Liechtensteinische Landesbank AG and an asset manager, NZB AG, according to the people.

The U.S. crackdown against offshore tax evasion has led to charges against UBS AG, the largest Swiss bank; at least 21 foreign bankers, advisers and attorneys; and at least 36 U.S. taxpayers. UBS avoided prosecution in 2009 by paying $780 million, admitting it fostered tax evasion and handing over details on 250 secret accounts. It later disclosed another 4,450 accounts.

Bank Comments

A spokesman for HSBC in Geneva declined to comment.

Urs Rohner, chairman of Credit Suisse, last month told newspaper NZZ am Sonntag that the bank has transferred statistical data sought by the U.S. Marc Dosch, a spokesman for the Zurich-based bank, declined to comment further.

Basler Kantonalbank (BSKP) spokesman Michael Buess said it also gave such data to the U.S.

Wegelin & Co. spokeswoman Albena Bjoerck said it will show “Swiss and U.S. authorities that the bank has not breached either Swiss or U.S. law.” The bank is cooperating with authorities “within the scope of Swiss law.”

After a U.S. indictment of two Julius Baer bankers this month, the bank said it “is one of a number of Swiss financial institutions supporting the ongoing tax negotiations between the U.S. and Switzerland” and is cooperating with the U.S. probe. Spokesman Martin Somogyi declined to comment further.

Youval Dichovski, Zurich-based head of internal audit at Bank Leumi Switzerland Ltd., said the bank is cooperating.

Bank Hapoalim

Bank Hapoalim Switzerland is complying with its legal and regulatory duties in cooperating with Swiss authorities, said Chief Executive Officer Michael Warszawski. He said the bank “has only a limited number of American clients whose holdings with the bank are very small.” The bank, he said, “is not aware of any violations of U.S. law by the bank or its employees.”

Cyrill Sele, a Vaduz, Liechtenstein-based spokesman for Liechtensteinische Landesbank AG (LLB), said it sent statistical data to the U.S. A man who answered the phone Oct. 20 at NZB said it is closing and has only a few employees.

Zuercher Kantonalbank spokesman Urs Ackermann said the bank was informed in September of the U.S. investigation. A spokesman for Mizrahi Bank had no immediate comment.

4,450 Names

The UBS turnover of 4,450 names, in the face of Swiss laws barring most disclosures of client data, set a precedent for the current talks. The U.S. agreed to submit a request for specific accounts under a 1996 tax treaty and a follow-up agreement in 2003. Under that accord, Swiss bank secrecy doesn’t protect accounts if the owner engaged in “tax fraud or the like,” which is a narrower definition of tax evasion than U.S. law provides.

The Swiss directed UBS to turn over accounts to the Swiss Federal Tax Administration for review before handing them to the IRS. Negotiators are determining how to apply the 1996 tax treaty and one adopted in 2009 that still needs ratification by the U.S. Senate, the people said.

“Switzerland is continuing talks with the U.S. authorities on administrative assistance in cases of tax fraud and tax evasion,” said Norbert Baerlocher, spokesman for the Swiss embassy in Washington, in a statement. “Any exchange of client data can occur only within the scope of the current legal system, in accordance with the procedures provided for in the existing or the new double-taxation agreement with the USA.”

Swiss Agreement

The Swiss agreed in March 2009 to meet international standards to avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development. The London-based Tax Justice Network this month ranked Switzerland at the top of its financial secrecy index.

“This is a big issue for these banks,” said C. Evan Stewart, an attorney at Zuckerman Spaeder LLP in New York, who isn’t involved in the settlement talks.

“These are no longer small institutions catering to wealthy people in a small part of central Europe,” he said. “These are multinational institutions now that have a reach that’s all over the world. This has a huge impact on the banking system in Switzerland. Another issue is the sovereignty in Switzerland and whether that will be given deference by other governments.”

The IRS has said 30,000 U.S. taxpayers with offshore accounts avoided prosecution since 2009 by entering a limited amnesty program, paying back taxes and saying who helped them hide their accounts from authorities. Hundreds of taxpayers in the program have given information to prosecutors that have helped them build criminal cases against bankers and advisers.

‘Wide Net’

“The DOJ and IRS are casting a wide net as they try to identify Americans guilty of offshore tax evasion,” said Aaron D. Schumacher, a Geneva-based wealth planning attorney, with Withers LLP.

“They obtained a lot of information about various Swiss banks from the participants in the voluntary disclosure programs and that has likely enabled the recent indictments we’ve seen,” he said. “More people than we saw previously have come to us looking to renounce their citizenship.”

Attorney Robert Katzberg, who represents clients in criminal tax cases, said U.S. taxpayers with Swiss accounts don’t understand that the IRS and Justice Department will get a trove of new data on secret accounts.

“There are thousands of Americans, who are the functional equivalent of residents of New Orleans on the eve of Hurricane Katrina, who have no idea that Katrina is about to happen,” said Katzberg, of Kaplan & Katzberg in New York.

To contact the reporters on this story: David Voreacos in Newark, New Jersey at dvoreacos@bloomberg.net; Klaus Wille in Zurich at kwille@bloomberg.net; Giles Broom in Geneva at gbroom@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Craig Stirling at cstirling1@bloomberg.net; Frank Connelly at fconnelly@bloomberg.net

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Stocks Pare Gains, Euro Weakens After Summit; Copper Leads Commodity Rally

By Rob Verdonck and Shiyin Chen - Oct 24, 2011 6:17 PM GMT+0700

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Oct. 24 (Bloomberg) -- Ryoji Musha, president of Musha Research Co., talks about the outlook for Japan's economy, currency and stock market. Japan’s exports increased more than expected in September, a sign the recovery in shipments is withstanding a weakening global economy. Musha also discusses Federal Reserve monetary policy and Europe's sovereign debt crisis. He speaks from Tokyo with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

The euro weakened, two-year German note yields fell the most in a week and stocks pared gains as European leaders inched toward a resolution of the region’s debt crisis. Industrial metals led a jump in commodities amid signs of growth in China and Japan.

Europe’s single currency depreciated against all but three of its 16 major peers at 7:02 a.m. in New York. The two-year German note yield declined six basis points. The MSCI All Country World Index climbed 0.4 percent after advancing as much as 0.8 percent earlier. Standard & Poor’s 500 Index futures fell 0.2 percent. Copper and zinc rallied more than 3 percent. Oil rose 0.4 percent in New York.

European leaders yesterday held their 13th crisis summit in 21 months, debating how to cut Greece’s debt burden, boost the firepower of the region’s bailout fund and bolster banks ahead of a further meeting on Oct. 26. Reports today showed China’s manufacturing may grow in October for the first time in four months and Japanese exports rose more than expected last month.

“It was encouraging that there was no clear sign of divisions among European leaders, but there is also some disappointment that nothing concrete was announced at the weekend,” Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., said in a telephone interview.

Euro Weakens

The euro weakened 0.5 percent to $1.3833. Foreign-exchange strategists have ceased cutting forecasts for the currency, drawing the line at $1.34, according to estimates compiled by Bloomberg since Oct. 6.

Spanish 10-year yields rose four basis points today, widening the spread over similar-maturity German bunds to 347 basis points. Italian 10-year bonds also declined. The cost of insuring European sovereign debt increased, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments climbing five basis points to 329.

The Stoxx Europe 600 was little changed. BHP Billiton Ltd. and Rio Tinto Group added more than 3 percent. Nobel Biocare Holding AG surged 9.5 percent in Zurich following a report that buyout firms are looking at the maker of dental implants.

Chemical, metal and agricultural companies around the world have fallen to valuations whose only precedent came in the last recession. Commodity producers in the MSCI All-Country World Index lost 21 percent since the second quarter and trade for 10.6 times reported income, cheaper than 96 percent of days since 1995, according to data compiled by Bloomberg.

National Bank of Greece SA and Alpha Bank SA tumbled more than 18 percent today as a Greek government official said the euro area is committed to seeking deeper losses for holders of Greek bonds. The official spoke on condition of anonymity.

U.S. Earnings

S&P 500 futures erased an earlier advance of as much as 0.6 percent. The gauge last week closed at its highest level since Aug. 3 amid speculation that the Federal Reserve may seek further monetary easing. Seventy-four percent of the 106 companies in the index that have reported earnings since Oct. 11 exceeded analysts’ profit estimates, Bloomberg data show.

Treasury 30-year bonds snapped a four-day decline, pushing the yield down four basis points to 3.23 percent.

U.S. gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual rate after advancing 1.3 percent in the previous three months, according to the median forecast of 68 economists surveyed by Bloomberg News before the Commerce Department’s Oct. 27 release. Orders for business equipment increased in September and new-home sales stabilized, other data may show this week.

Asian Stocks

Japan’s Nikkei 225 (NKY) Stock Average added 1.9 percent after the Ministry of Finance said exports rose 2.4 percent last month from a year earlier. The median estimate of 26 economists surveyed by Bloomberg was for a 1 percent increase after a 2.8 percent gain in August.

Hong Kong’s Hang Seng Index climbed 4.1 percent and the Shanghai Composite Index gained 2.3 percent after HSBC Holdings Plc and Markit Economics reported a preliminary October reading of 51.1 for a index of Chinese purchasing managers, the highest in five months.

Zinc jumped 3.3 percent, copper rallied 3.5 percent and aluminum advanced 2.7 percent. China is the biggest buyer of industrial metals. The S&P GSCI index of 24 commodities gained 0.6 percent after rising 1 percent on Oct. 21. Oil in New York traded as high as $88.65 a barrel.

The MSCI Emerging Markets Index added 2.2 percent, the most in two weeks, as the Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong jumped 4.9 percent, while benchmark indexes in South Korea and Taiwan climbed at least 3 percent. Russia’s Micex Index advanced 0.7 percent and Hungary’s BUX Index rose 1.2 percent.

Turkey’s lira was 0.6 percent higher against the dollar while the ISE National 100 Index of shares fell 0.8 percent. Turkey was struck yesterday by the most powerful earthquake in more than a decade.

To contact the reporters on this story: Rob Verdonck in London at rverdonck@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net

To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net

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EU Outlines Bank Plan as Summit Reaches Halfway

By James G. Neuger and Tony Czuczka - Oct 24, 2011 3:18 PM GMT+0700

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Oct. 24 (Bloomberg) -- Andrew Balls, head of European portfolio management at Pacific Investment Management Co., discusses the role of the European Central Bank in resolving the euro-zone debt crisis. He talks from London with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)

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Oct. 24 (Bloomberg) -- Paul Donovan, deputy head of global economics at UBS AG, talks about efforts to aid European banks to weather the Greece-fueled debt crisis. Ralph Silva, a strategist at Silva Research Network, also speaks with Linzie Janis on Bloomberg Television's "First Look." (Source: Bloomberg)

European leaders reached the halfway mark of their marathon to end the debt crisis, outlining plans to aid banks and ruling out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund.

Stocks advanced and the euro rose after Europe’s 13th crisis-management summit in 21 months, which also explored how to strengthen the International Monetary Fund’s role. The leaders excluded a forced restructuring of Greek debt, sticking with the tactic of enticing bondholders to accept losses to help restore the country’s finances. China said today that it had “faith” in the European Union’s ability to tackle the crisis.

“It seems that progress has been made over the weekend to get to a ‘comprehensive package,’ but it is unlikely to be a bold one,” said Juergen Michels at Citigroup Inc. in London. “There remain many open questions.”

Greece’s deteriorating finances have narrowed Europe’s room for maneuver in battling the contagion, which threatens to pitch the country into default, rattle the banking system, infect Spain and Italy and tip the world economy into recession.

The complete blueprint won’t come together until a summit in two days, giving German Chancellor Angela Merkel time to go back to Berlin to brief her lawmakers and seek their approval for the next steps. Like yesterday, it will start with all 27 EU leaders before the 17 heads of euro economies gather on their own.

‘Options are Converging’

“Work is going well on the banks, and on the fund and the possibilities of using the fund, the options are converging,” French President Nicolas Sarkozy told reporters at the Brussels summit yesterday. “On the question of Greece, things are moving along. We’re not there yet.”

The euro rose as much as 0.4 percent to $1.3951, trading at $1.3897 at 9:49 a.m. in Berlin. The benchmark Stoxx Europe 600 Index advanced 0.5 percent to 240.12, its second day of gains.

The mayhem began in Greece in October 2009, when an unexpected cash shortfall left the new government unable to pay for its election promises. Since then, 256 billion euros of bailouts have failed to stem the tide, which rattled France this month, prompting Standard & Poor’s to warn the country may lose its top sovereign credit rating.

Expressing concern over the potential impact on their nations, world leaders including President Barack Obama and Chinese Premier Wen Jiabao have stepped up calls for Europe to defuse the risk to the global economy.

‘We Have Faith’

China is ready to cooperate with the EU on investment, finance and trade, Jiang Yu, a Foreign Ministry spokeswoman, told reporters in Beijing today.

“We believe the difficulties of the European countries are temporary and we have faith in the fact that they will be able to join their hands in tackling the financing crisis,” Jiang said.

Europe has claimed victory over the crisis before. A plan in March was billed as a “comprehensive” strategy. A July accord on a second bailout for Greece and more powers for the rescue fund was hailed at the time as the “final package, of course,” by Luxembourg Prime Minister Jean-Claude Juncker.

Bank capital needs -- estimated at 100 billion euros by a person familiar with the deliberations -- will be met first by banks themselves, then by national governments, the European officials agreed.

Only when national efforts fail can governments tap the main rescue fund, the 440 billion-euro European Financial Stability Facility, for cash to channel to banks.

“What I can tell you is that this only will happen under strict conditions,” Dutch Prime Minister Mark Rutte said.

Germany Holds Sway

Germany achieved one of its main summit aims, defeating French efforts to bulk up the rescue fund by enabling it to borrow potentially limitless sums from the independent ECB. Policy makers are headed toward using the EFSF to guarantee government bond sales as a way to extend its reach. A second option is to set up an EFSF-insured fund that would seek outside investment in troubled bonds.

“We have discussed options for increasing the firepower of the EFSF,” European Commission President Jose Barroso said. “I’m sure that progress can be confirmed on Wednesday.”

The goal is to complete the technical details within 24 hours, a European official said. The next summit will consider the two options as well as ways of getting the IMF to boost its involvement, the official told reporters. A separate statement called for “adequate” IMF resources with contributions from surplus countries such as China.

‘Extra Funding’

“Is it possible to get some extra funding from IMF, from BRIC countries for instance,” said Finland’s Jyrki Katainen, using an acronym for Brazil, Russia, India and China.

Italy, with debt of 119 percent of gross domestic product, came under pressure to find more savings to be eligible for European help in fending off speculators.

Merkel made clear that Italy cannot count on unrestricted European support in what she called a “conversation among friends” with Italian Prime Minister Silvio Berlusconi.

“Confidence won’t result merely from a firewall,” Merkel said. “Italy has great economic strength, but Italy does also have a very high level of debt and that has to be reduced in a credible way in the years ahead.”

After a year of wrestling with the ECB over burden sharing for bondholders, Merkel was on the central bank’s side this time, sparing it from a role in financing state deficits.

ECB Role

What wasn’t decided is the fate of bond purchases by the Frankfurt-based ECB. The central bank has bought 165 billion euros of bonds, justifying the purchases as a way of smoothing markets and helping transmit its interest-rate decisions through the economy.

Central bankers have expressed reluctance to step up the purchases, which started with Greece, Ireland and Portugal last year and widened to Italy and Spain in August as those markets came under attack.

“One shouldn’t demand more from the ECB than it can achieve according to its statutes,” Austrian Chancellor Werner Faymann said.

Central bankers are also at the center of the dispute over writedowns for Greek bondholders. A reminder came on Oct. 21 when the ECB put a dissenting footnote into an assessment of Greece’s finances that envisioned writedowns as high as 60 percent.

That report, co-produced by the ECB, EU Commission and IMF, said Greece’s finances have “taken a turn for the worse” and called for bondholder losses that go beyond the 21 percent negotiated in July.

Five Scenarios

Officials are considering five scenarios to update the July agreement on losses for bondholders, people familiar with the deliberations said. The euro area is determined to avoid triggering credit-default swaps and may produce a projection for the overall writedown at the next summit, a Greek official told reporters.

Greece was tided over by an Oct. 21 decision to pay the EU’s 5.8 billion-euro share of an 8 billion-euro loan. It’s the sixth installment of a 110 billion-euro package awarded in May 2010.

“The really important thing is to see a comprehensive solution put out there” for the European crisis, Scott Mather, head of global portfolio management at Pacific Investment Management Co., which oversees the world’s largest bond fund, told reporters in Sydney today. Pimco is “for the most part uninvested” in Portugal, Ireland and Greece, and “underweight” Italian and Spanish bonds, while having at times “taken advantage of some opportunities there,” Mather said.

EU leaders also agreed to look at “limited” changes to the bloc’s governing treaties to improve euro-area management, and designated EU President Herman Van Rompuy as the chairman of euro summits, a role he has played throughout the crisis.

“We have taken major steps to overcome the crisis,” Van Rompuy said. “See you on Wednesday.”

To contact the reporters on this story: Tony Czuczka in Brussels at aczuczka@bloomberg.net; James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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