• Cypriots fear run on banks as branches prepare to reopen after almost two weeks

    Yiannis Kourtoglou / AFP - Getty Images

    Employees of the Bank of Cyprus frown as they demonstrate outside the main office of the bank in Nicosia on Tuesday.

    By Michelle Caruso-Cabrera, Correspondent, CNBC

    NICOSIA, Cyprus - Anguished Cypriots fear a run on banks when branches on the tiny tax haven reopen for first time in almost two weeks on Thursday.

    Since March 16, customers have only been able to withdraw limited amounts of cash from ATMs after banks closed to allow Cypriot officials and European leaders to hammer out a 10-billion euro ($13-billion) rescue meant to avert a chaotic national bankruptcy.

    The banks in Cyprus are set to reopen after 11 days of being closed as a measure to prevent a run on deposits during the country's financial crisis. Millions in cash is on the move tonight as people camped out in expectation. ITV's Emma Murphy reports

    However, some believe the deal will instead push the country further into economic crisis as thousands of bank employees lose their jobs. The country's unemployment rate is about 14 percent.

    Under the terms of the EU bailout, accounts of more than 100,000 euros ($128,460) at the islands' two biggest banks will be frozen. Depositors with accounts at Laiki Bank, which is being liquidated, won't get paid for years and won't get all of their money back. CNBC sources estimate those with bank accounts in Laiki above 100,000 euros could lose 40 to 70 percent of their deposits.

    Deposits above 100,000 euros with the Bank of Cyprus will be frozen and 40 percent of each account will be converted into bank stock. Accounts in both banks with balances under 100,000 euros will be fully protected.

    Many Cypriots say they do not feel reassured by the bailout deal and are expected to besiege banks as soon as they open their doors Thursday.

    "We have an uncertain future in in Cyprus," said Chris Sofroniou, as he waited in an ATM line in Nicosia. "There's uncertainty in our future in our children, and we are very, very disappointed with the European Union. We are being treated like third-class citizens and we are very, very angry."

    A spokeswoman for the island's central bank said banks would not reopen until 12 p.m. local time (6 a.m. ET) on Thursday, according to Reuters.

    The spokeswoman said banks would open their doors between midday and 6 p.m. (1600 GMT). The Cypriot authorities are expected later on Wednesday to detail the capital controls they plan to impose to prevent a flight of funds. 

    The last-minute deal was reached Monday, just hours before the EU was due to cut off the country’s financial lifelines.

    Katia Christodoulou / EPA

    A woman walking past a boarded up branch of the Bank of Cyprus branch in Nicosia on Wednesday.

    The agreement ended a week of protests in Cyprus, long lines at cash machines, and a tense geopolitical standoff after European officials made the unprecedented demand that ordinary Cypriot savers share in the cost of any bank bailout.

    Cyprus promoted itself as an offshore financial haven by making depositing money there attractive to foreigners. The result? A financial sector that dwarfed the rest of the economy.

    Without that deal, Cyprus’ banks would have collapsed, dragging down the economy and potentially pushing it out of the euro zone.

    'Extremely unfair'
    While the country’s president, Nicos Anastasiades, called the deal “painful” but essential, Nobel laureate economist Christopher Pissarides said the bailout was “extremely unfair to the little guy.”

    “For the first time in the euro zone, depositors are (being) asked to bail out failing banks," he said. "Now that used to be the case in the 1930s, especially United States (and) caused big bank runs. It has been decided since then that we shouldn’t allow that to happen again.”

    As Cyprus celebrates its Independence Day, the  government is defending the last-minute bailout deal it's negotiated with the European Union. This means shutting down the country's second biggest bank, with big savers facing  losses.  ITV's Emma Murphy reports.

    Finance Minister Michael Sarris said that the government was implementing measures to halt a run on the banks when they opened on Thursday, although he did not go into detail, according to Reuters.

    It isn’t only bankers and the wealthy who are angry, however. On Wednesday, around 3,000 high school students protested the plan agreed to with the European Union, International Monetary Fund and European Central Bank.

    "They've just got rid of all our dreams, everything we've worked for, everything we've achieved up until now, what our parents have achieved," a student named Thomas told Reuters. 

    So as Cyprus waited to see what Thursday would bring, citizens mourned what they saw as the end of an era. 

    “It’s the destruction of the country,” Cypriot Aristos Sardi said. “Who they think they are? For this country the colonial days finished in the 1960s.”

    “I am heartbroken,” he added.

    NBC News' F. Brinley Bruton, Reuters and The Associated Press contributed to this report.

    Related: 

    In Cyprus deal, Russia may have the last laugh

    Cypriots: Hope, but also fear they 'will be like slaves' to Russia

    EU to Cypriots: Let us raid your savings or no bailout

     

    This story was originally published on Wed Mar 27, 2013 11:00 AM EDT

  • Italy's Berlusconi sentenced to year in prison over newspaper report

    Remo Casilli / Reuters, file

    Italy's former Prime Minister Silvio Berlusconi, seen last month in Rome, is involved in a number of court cases, including one over allegations he paid an under-age teen for sex.

    By Colleen Barry, The Associated Press

    MILAN – A court on Thursday convicted former Italian Premier Silvio Berlusconi of breach of confidentiality for the illegal publication of wiretapped conversations related to a failed bank takeover in a newspaper owned by his media empire.

    The court sentenced him to one year in jail, but issued no orders on the carrying out of the sentence.

    In Italy, it is rare for anyone to be put behind bars pending a possible appeal except in the case of very serious crimes such as murder.

    Berlusconi's brother, Paolo Berlusconi, was convicted of the same charge and sentenced to two years and three months. Paolo Berlusconi is the publisher of the Milan newspaper Il Giornale, which printed the transcript of the conversation.

    Silvio Berlusconi's defense team had accused the court of seeking a speedy verdict for political impact.

    The verdict does not directly affect Berlusconi's eligibility to participate in a new government because Italy — despite several attempts to pass such legislation — has no law banning those convicted of minor crimes from parliament.

    His center-right coalition last week finished third in parliamentary elections that saw no clear winner. Talks on forming a new government are expected to begin March 20.

    Daniel Dal Zennaro / EPA

    Italian judge Oscar Maggi (center) declares that Berlusconi has been found guilty at the end of the trial Thursday.

    The charge relates to the 2005 publication of a wiretapped call that was part of an investigation into the Unipol financial services company's failed bid to take over the Banca Nazionale del Lavoro.

    Faces four-year sentence
    The bid was blocked by Italy's central bank, contributing to the forced resignation of then-Bank of Italy chief Antonio Fazio.

    Wiretapped conversations are widely published in Italian media, despite the risks of prosecution.

    In a potentially more damaging case, a verdict is also nearing in Berlusconi's appeals trial on a conviction of tax fraud. Prosecutors have demanded the court uphold the October conviction and four-year sentence. They also are seeking a five-year ban from public office.

    Berlusconi also is on trial in Milan for allegedly paying an under-age teen for sex and lying to cover it up, with a verdict likely this month.

    And prosecutors in Naples are investigating him for corruption for allegedly paying an opposition lawmaker 3 million euros (about $3.9 million) to join his party, a move that significantly weakened the previous center-left government of Romano Prodi.

    Related:

    Italy's comeback kid Berlusconi defends wartime fascist Mussolini

    Italy's 'bunga bunga' man Berlusconi, 76, unveils girlfriend, 27

    Witness: Italian ex-PM Berlusconi hosted strippers dressed as nuns

    © 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

  • Swiss bank UBS hit with $1.5 billion fine after admitting fraud, paying bribes

    By Reuters

    ZURICH - Swiss bank UBS was hit with a $1.5 billion fine on Wednesday, admitting to fraud, paying bribes to brokers and "pervasive" manipulation of global benchmark interest rates by dozens of staff in a deal with international authorities.

    The penalty agreed with U.S., UK and Swiss regulators is more than three times the $450 million fine levied on Britain's Barclays in June, also for rigging the Libor benchmark rate used to price financial contracts around the globe.

    It is the second-largest fine paid by a bank and comes a week after Britain's HSBC agreed to pay the biggest ever penalty - $1.92 billion - to settle a probe in the United States into laundering money for drug cartels.

    Michael Buholzer / Reuters

    A logo of Swiss bank UBS is seen on a building in Zurich.

    'Unethical behavior'
    The revelations are another blow to UBS, which has had a tough 18 months after suffering a $2.3 billion loss in a rogue trading scandal, management upheaval and thousands of job cuts.

    "We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity," UBS Chief Executive Sergio Ermotti said in a statement disclosing the extent of the wrongdoing, which took place over six years from 2005 to 2010.

    UBS said it will pay $1.2 billion to the U.S. Department of Justice (DoJ) and the Commodity Futures Trading Commission (CFTC), 160 million pounds to the UK's Financial Services Authority and 59 million Swiss francs from its estimated profit to Swiss regulator Finma.

    Full business coverage from NBC News

    "The core thing is it compares very poorly with Barclays' fine as it's three times the scale. It suggests there's more egregious behavior," said Chris Wheeler, analyst at Mediobanca in London

    The bank said the fines would widen its fourth quarter net loss but said it would not need to raise new capital as a result and traders said the fines were largely priced into the bank's shares, which were expected to open slightly higher in Zurich.

    Britain's financial regulator said at least 45 people were involved in the rigging across three continents, which took place across a range of Libor currencies. It involved senior managers at UBS directing traders to keep Libor submissions low in order to give the impression that the bank was able to borrow more cheaply than it would actually have been able to do so.


    The British FSA said that after August 2007, when the U.S. sub-prime crisis raised doubts about the financial health of banks, UBS told its staff to "protect our franchise in these sensitive markets".

    The extent of the wrongdoing was highlighted in documents released by the FSA which showed that in January 2007, a trader asked a manager who supervised the submitter for Yen Libor and asked him to "...try to keep 6m and 3m libors up".

    The manager responded: "standing order, sir".

    The FSA said "the manipulation was conducted openly and was considered to be a normal and acceptable business practice by a large pool of individuals".

    'Done ... for you big boy': How emails nailed Barclays

    The Libor benchmarks are used for trillions of dollars worth of loans around the world, ranging from home loans to credit cards to complex derivatives.

    Tiny shifts in the rate, compiled from daily polls of bankers, could benefit banks by millions of dollars. But every dollar a bank benefited meant an equal loss by a bank, hedge fund or other investor on the other side of the trade - raising the threat of a raft of civil lawsuits.

    In a memo to staff on Wednesday, Ermotti said it was too early to determine whether or how clients were affected, pending further regulatory probing of the rate fixing.

    The steep fine for UBS is despite the bank, since 2011, cooperating with law-enforcement agencies in their probes. The bank said it received conditional immunity from some regulators.

    A similar admission by Barclays in June touched off a political firestorm that forced its chairman and chief executive to quit. Ermotti said around 40 people had left UBS or been asked to leave the bank as a result of the investigation.

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  • UK 'rogue' bank faces off with angry N.Y. regulator

    New York regulators are accusing British banking giant Standard Chartered of hiding at least $250 billion in illegal transactions with Iran, reports CNBC's Courtney Reagan. Steven Feldman, Herrick, Feinstein LLP partner, weighs in.

    By John W. Schoen, NBC News

    For Standard Chartered Bank, the loss of its New York banking license could be the least of its worries.

    If a New York bank regulator can make his case that the UK-based bank laundered money for Iranian bank clients, criminal charges could soon follow, and bank executives could go to jail, according to Steven Feldman, a white-collar defense attorney at Herrick, Feinstein.

    "There are other law enforcement folks out there, and those people are well within their power to look for individuals to go after,” he told CNBC. “The company can’t go to jail, but the people who do these crimes if proven, those people can go to jail. Money laundering is a serious offense if the government can prove it.”

    The case pits a little-known regulator against a little-known bank -- although the bank is a global powerhouse and the regulator holds potentially enormous power over it.

    The New York State Department of Financial Services, created less than a year ago in the merger of two state departments, accused Standard Chartered Monday of being a "rogue institution" that "schemed" with the Iranian government to hide 60,000 secret transactions to generate hundreds of millions of dollars in fees over nearly 10 years.

    The bank's actions "left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes," Benjamin Lawsky, superintendent of the department, said in an order calling on the British bank to show up at his office next Wednesday to explain why it’s state banking license shouldn’t be revoked.

    Alothough Standard Chartered has no retail operations in the United States, the company is among the largest in Britain with a market capitalization of some $46 billion, even after shedding 20 percent of its value on the news. The bank generates 90 percent of its business in Asia, Africa and the Middle East whilse serving mainly as a wholesale bank in the United States.

    The bank is under fire over allegations of a practice known as wire "stripping" that involves altering payment messages sent through a global interbank network to remove references to Iran or other entities under U.S. sanctions. To circumvent efforts to freeze or block international transfers, a foreign bank pretends to be the originating party, hiding the identity the true originator. A Manhattan-based bank handling such a transfer may unwittingly process a prohibited payment in violation of U.S. regulations.  

    Standard Chartered is apparently preparing a strong legal response. On Tuesday, the bank fired back in a public statement that it “strongly rejects the position or the portrayal of facts” and does "not believe the order issued by the (New York state regulator) presents a full and accurate picture of the facts."

    Related: 'Rogue' bank hid billions in Iran dealings, NY says

    Standard Chartered may yet face complaints from other U.S. agencies. The bank said Tuesday that the probe, begun in 2010, also involves the Department of Justice, the Office of Foreign Assets Control, and the District Attorney of New York. Since 2009, those agencies have targeted several major British and European banks over similar allegations, penalizing them to the tune of more than $2.3 billion.

    The White House said  Tuesday that the Treasury Department is in close contact with New York authorities.

    "Sanctions violations are something that this administration takes extremely seriously and has a strong record of action to this end. The Treasury Department remains in close contact with both federal and state authorities on this matter," White House Press Secretary Jay Carney told reporters when asked the London-based bank. Carney said that he would not comment further on what is considered an ongoing investigation.

    Lawsky’s New York state order may prompt other foreign banks to take notice of a newly energized bank regulator that may not have been on their radar.


    Established 10 months ago to crack down on financial malfeasance, the new Department of Financial Services combined the state's former banking and insurance departments. New York Gov. Andrew Cuomo tapped Lawsky, then his chief of staff, to run the agency.

    Lawsky’s resume includes more than five years as a federal prosecutor in New York and  a stint as in the New York state attorney general's office, where he played a key role in its probe of kickbacks and deceptive marketing in the $85 billion student loan industry.

    "Ben Lawsky didn't take this job to be a quiet, unnoticed back-office regulator," said Steve Cohen, a partner at the law firm Zuckerman Spaeder who was chief of staff for Cuomo when Cuomo was state attorney general. "And Gov. Cuomo didn't give him the job so that he could have a quiet, unnoticed existence."

    Beyond its legal headaches, Standard Charted and its shareholders face a big financial hit. The company’s stock price has already lost nearly a quarter of its value.

    The loss of its New York banking license would take a big bite out of its profits, effectively cutting off direct access to the U.S. banking market. Standard Chartered processes $190 billion every day for global clients, according to Lawsky’s order.

    And if the New York state regulator can make his charges stick, the bank faces the prospect of paying hundreds of millions of dollars to settle the case.

    Other recent settlements include:

    • Lloyds Bank of Britain agreed in January 2009 to forfeit $350 million for payments tied to Iran, Libya and Sudan between 2002 and 2007.
    • Switzerland's Credit Suisse agreed in December 2009 to pay a $536 million fine to settle allegations it disguised activity that involved customers from Iran, Sudan and other U.S.-sanctioned countries.
    • Britain’s Barclays agreed in August 2010 to forfeit $298 million to settle charges that it allowed banks in Cuba, Iran, Libya, Sudan and Burma to engage in U.S. dollar transactions.
    • Dutch bank ABN AMRO, now part of Royal Bank of Scotland, agreed in 2010 to pay $500 million to settle claims concerning transactions linked to sanctioned countries between 1995 and 2007.
    • Netherlands-based ING Bank agreed in June to pay a record-setting $619 million to settle allegations that it violated U.S. sanctions against Cuba, Iran and other countries.

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  • Barclays chief executive Bob Diamond quits over banking scandal

    Dylan Martinez / Reuters, file

    Bob Diamond waits to pose for photographs after he was named chief executive of Barclays in September, 2010. Diamond resigned on Tuesday.

    By Alastair Jamieson, msnbc.com, and Reuters

    LONDON - Bob Diamond, the chief executive of Barclays, resigned early Tuesday over the lending rate-rigging scandal that last week saw the bank fined a record amount by U.S. and U.K. regulators.

    The move deepens the latest crisis to hit the financial services industry, with observers suggesting investigations into the manipulation of inter-bank lending rates could soon implicate banks in the United States.

    Diamond’s resignation comes a day after the company’s chairman Marcus Agius announced his own departure. Despite also being implicated in the issue, Agius will stay on to lead the search for a replacement chief executive, according a statement early Tuesday.

    It came as fresh details about the case showed how Diamond and other senior executives played a role in the affair, according to a story in The New York Times.

    In 2007 and 2008, Diamond’s top deputies told employees to report artificially low rates in line with its rivals, deflecting scrutiny about the health of Barclays at the height of the financial crisis, according to several people close to the case, the report said.

    Diamond’s statement said he was stepping down because political pressure on Barclays risked "damaging the franchise." Britain’s prime minister on Monday announced a public inquiry, describing the issue as "a scandal."

    "I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth," Diamond said in the statement.

    He will still appear before U.K. lawmakers on Wednesday to answer questions about the affair. "I look forward to fulfilling my obligation to contribute to the [U.K.] Treasury Committee's enquiries related to the settlements that Barclays announced last week without my leadership in question," he said.

    'Arrogance'
    Barclays is one of a handful of international banks under investigation for rate-rigging misconduct and the first to reach a settlement with regulators.

    Last week, regulators in the U.S. and U.K. fined Barclays $450 million for attempting to rig Libor and Euribor, the interest rates at which banks lend to each other and which underpin trillions of pounds worth of financial transactions.

    Staff did this over a number of years, trying to raise them for profit and then, during the financial crisis, lowering them to hide the level to which Barclays was under financial stress, according to a BBC report. Britain’s Serious Fraud Office is also considering whether to bring criminal charges, the BBC said.

    John Mann, an opposition Labour Party lawmaker and member of parliament's Treasury Committee, told Sky News that Barclays executives were guilty of "arrogance," saying the bank had "systematically defrauded homeowners and customers."

    Reuters contributed to this report.