Malaysia is following the recommendation of a parliamentary inquiry and taking steps toward winding down troubled investment fund 1MDB. The advisory board is being dissolved, and the ministry of finance is taking ownership of key assets including real estate and subsidiaries. Billions of dollars are missing, and the fund has stopped making payments on its debts. There are worries about whether the fund’s debts could effectively put the government in bankruptcy.
Italy is looking for a new strategy for its banks after a failed stock offering by Banca Popolare di Vicenza. Investors bought €120 million of the bank’s €1.5 billion stock offering. The bank rescue fund ended up owning 92 percent of the bank, and the bank’s stock was delisted. The rescue fund, dubbed Atlante, was too small to begin with and already is depleted of 1/4 of its capital. After the failed stock offering it is not clear if any other bank in Italy would be able to issue new stock, and the news saw bank stocks fall by 6 percent. The Bank of Italy is asking the EU for transition rules that would allow it to rescue the country’s large banks to the extent that their problems are caused by pre-existing loans.
A prosecutor is asking whether Deutsche Bank engaged in illegal market manipulation when, in 2011, it advised its customers to buy Italian government debt while simultaneously selling 90 percent of its position.
The IMF must eventually exit its involvement in the bailout of Greece, and a leaked letter says it is ready to do so now if Greek debt is not restructured to make it sustainable.
Atlantic City met a $1.8 million bond payment, avoiding a default.
Prosecutors and courts have taken action against more top officials in Brazil suspected of involvement in corrupt activities at the state-owned oil company.
A forest fire in Alberta which has all but destroyed the city of Fort McMurray could become the largest insured event in Canada’s history, with a Bank of Montreal analyst estimating damages of C$9.4 billion. That’s much larger the C$3.2 billion in insured losses in the 2013 floods.
The IRS and White House are working on new rules to limit investors’ ability to use shell companies to hide ownership of assets, a technique commonly used to launder money and dodge tax obligations. Among other measures, new rules spell out the degree of care banks must employ when they verify beneficial ownership of shell companies. That has been an unfortunate gray area in anti-money laundering rules in the past.
Tonight Pennsylvania state regulators closed First CornerStone Bank, which had six locations in the western suburbs of Philadelphia. The FDIC has transferred the deposits and assets to North Carolina-based First-Citizens Bank & Trust Company, which has bought a number of small failed banks in the eastern half of the country in recent years. The failed bank had $101 million in deposits. It was the first bank to fail in Pennsylvania in two years.