Barclays chief executive Antony Jenkins says he was forced to increase bonus payments to senior executives after hundreds of key staff left the investment bank in America and he feared a “death spiral” could grip the organisation, The Guardian reported. Revealing the reasons behind the controversial decision to increase bonuses by £200m in 2013 despite profits falling at Barclays, Mr Jenkins said that he had to act or the investment division would suffer. It is thought that as many as 700 staff left the American investment bank, with the “attrition” rate for resignations among senior directors almost doubling from 5pc a year to nearly 10pc after Barclays cut compensation in 2012. In its annual report published on Wednesday, Barclays will reveal that the number of staff paid above £1m has risen, from 428 last year to between 475 and 500. About half are based in America and a quarter in the UK. The number of people paid more than £5m has risen “by a few”, according to industry estimates. Read more.
Daily Insolvency News Headlines
Thu., March 6, 2014
European Union authorities on Wednesday said Italy's economic woes require strict monitoring and "strong policy action," putting more pressure on Rome to cut its government budget deficit amid record unemployment, The Wall Street Journal reported. But officials at the European Commission, the EU's executive arm, declined to take a similar step for Germany because of its large current-account surplus, the broadest measure of a country's trade and financial flows with the rest of the world. The U.S. and some European countries have criticized the German surplus, saying it is the result of Germany not buying enough goods and services from other countries. The findings are part of the EU's new system for coordinating economic policy, aimed at preventing a repeat of the euro zone's debt crisis. The system requires governments to undergo repeated scrutiny of their economic performance to determine if there are economic trends and policies that are sowing the seeds of future problems. Read more. (Subscription required.)
One thing we can tell you about the Mt. Gox bankruptcy case: It won’t be like any other bankruptcy case you’ve seen, The Wall Street Journal MoneyBeat blog reported. MoneyBeat had a very enlightening and interesting talk with Christopher Mirick, a partner at the international law firm Pillsbury Winthrop Shaw Pittman, operating in the firm’s Insolvency & Restructuring practice. He is also one of two educational directors at American Bankruptcy Institute’s international committee and co-author of the book “Strategies for Creditors in Bankruptcy Proceedings.” One point he made, that seems obvious in retrospect, is that there’s never quite been a bankruptcy case like this one. It involves a new technology, a company that seemed to operate with only a few employees and almost no presence in the countries across the globe where it did business, and questions of cross-border bankruptcy law. Read more. (Subscription required.)
In a related story, Reuters reported that some of those who have lost bitcoins in the collapse of Mt. Gox have turned to internet sleuthing to find out where their money has gone - but they're unlikely to have much luck. That's because the crypto-currency is a lot more complex than it looks, even to those who believed in it enough to invest their savings, bitcoin experts say, illustrating the scale of the challenge facing investigators trying to unravel the multi-million dollar mess at what was once the world's dominant bitcoin exchange. Read more.
Approximately one-fourth of listed Korean companies are on the brink of insolvency, BusinessKorea reported. Consulting firm AlixPartners held a press conference on March 4 at the Westin Chosun Hotel in Seoul, saying that about 17 percent of the 1,600 or so companies it examined corresponded to On-Alert or a worse condition as of the end of the third quarter of 2013. AlixPartners used its own Corporate Distress Index, which considers the financial and stock price data of corporate entities, to obtain the analysis result. In particular, 9 percent of the surveyed companies were given a High Risk mark, which implies that they are likely to go under within the next three quarters. Twenty-six percent of the Korean corporations, in the meantime, were regarded Risky. The percentage dropped by just one percentage point when compared to the last quarter of 2012. “It cannot be denied that most Korean corporations are focusing on their liquidity and bond redemption, rather than future value, in moving ahead with corporate restructuring,” said Jeong Yeong-hwan, representative of the Korean office of the consulting firm. He continued, “Such pursuit can bring just temporary effects and cannot lead to an improvement of their fundamentals, which, in turn, result in the repetition of insolvency in the long term.” Thirty-three percent of the companies in the shipbuilding and maritime transport industries were exposed to insolvency risk, along with 31 percent in the financial sector, 18 percent in construction and real estate, 15 percent in heavy machinery manufacturing, and 14 percent in culture and leisure. Read more.
It’s just over two months since Jose Manuel Barroso stoked controversy when he said that the euro was a victim of the Irish banking crisis at a leaders’ summit in Brussels, just as Ireland had exited its bailout. This evening he will have the first opportunity to return to the topic of Ireland when he addresses an audience at University College Cork, the Irish Times reported. Most significantly, the outgoing European Commission president will say that the “spirit” as well as letter of the infamous June 2012 agreement should be fully respected, which pledged to break the link between banking and sovereign debt and specifically referred to Ireland’s special case. This statement puts him directly at odds with his suggestion in December (though not explicitly said) that Ireland is unlikely to get further retroactive debt relief for its banks. Though the impact of an outgoing Commission president’s views on euro zone policy is questionable - the European People’s Party (EPP) meet tomorrow and Friday in Dublin to select its candidate to succeed Barroso later this year - it nonetheless shows an attempt on the part of the European Commission to show it is “on the side of Ireland” to use Barroso’s words, despite strong resistance from Germany, Finland and the Netherlands for further debt relief. Read more.
China’s leaders spurred speculation they will allow the country’s $21 trillion debt mountain to inflate after refraining from cutting their annual economic-growth target, Bloomberg News reported. Analysts at Australia & New Zealand Banking Group Ltd. and Nomura Holdings Inc. said authorities will need to loosen monetary policy, after Premier Li Keqiang yesterday announced a goal of 7.5 percent growth, the same target as last year. Li said China will seek an “appropriate” increase in credit. Any easing would contrast with leaders’ efforts to rein in a $6 trillion shadow-banking industry and control the build-up of local-government debt that followed stimulus measures unleashed in 2008. Li is seeking to support growth amid three money-market rate surges in eight months and the threat of defaults of high-yield investment products and corporate bonds. Read more.