Banks To Overhaul Gold-Fix Amid Rigging Fears

By Mark Kleinman, City Editor

The banks which set the global price of gold are to open the process to independent scrutiny amid evidence that it has been subject to the same manipulation as other crucial financial benchmarks.

Sky News can exclusively reveal that the 95-year-old gold fixing mechanism is poised to seek an independent chairman and third-party administrator for the first time, under plans to be unveiled by its current operators.

A new code of conduct for participants in the fixing process is also being finalised and is expected to be published shortly.

An announcement about the changes is likely to be made as soon as Wednesday, according to people close to the discussions.

The reforms will represent a crucial step towards protecting a globally-recognised mechanism set in London and used across the world's gold industry to set a reference price for bullion.

They will come during a period of intense scrutiny of financial benchmarks such as Libor and amid a string of scandals which have fines running into billions of pounds.

A quartet of banks - Barclays, HSBC, Canada's Scotiabank and Societe Generale of France - set, or fix, the gold price in twice-daily auctions which establish a level at which the participants will buy and sell the precious metal.

The process is managed by London Gold Market Fixing Ltd, which has been taking advice about the future structure of the gold-fix from Slaughter & May, the law firm, insiders said.

Concerns about manipulation in financial markets led the International Organisation of Securities Commissions (IOSCO), a regulatory body, to set out a series of principles for reform, including a greater emphasis on transaction-based pricing, last July.

Benchmark-setters were given 12 months to demonstrate their compliance with these principles, raising the prospect of announcements from supervisors of other financial indices in the coming days.

LGMFL is expected to say that its proposed reforms will make it broadly aligned to the IOSCO principles.

Approximately $220bn of gold changes hands each day through over-the-counter trades, according to a one-off survey conducted by the LBMA in 2011, with several different gold price benchmarks set in London.

However, the integrity of the gold-fix has, like the Libor interbank borrowing rate and foreign exchange markets, been called into question following allegations that it is susceptible to being rigged.

Critics argue that commodities markets are opaque, do not retain sufficiently detailed historical trading records and are not properly audited, prompting an overhaul of the silver-fix process last week.

The change to the silver-fix will involve CME Group and Thomson Reuters replacing the historical method later this year with an electronic benchmark.

In April, Barclays was fined £26m by the City regulator after one of its traders was found to have sought to manipulate the gold price at the expense of a client, who was reimbursed by the bank.

The banks and FCA declined to comment, while the LBMA could not be reached.

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China GDP Growth Accelerates To 7.5% In Q2

The Chinese economy is showing signs of accelerating again after its slowdown from the double-digit GDP growth of the past decade.

Targeted stimulus measures were being credited by analysts for 2% growth in the second quarter - giving the country a 7.5% increase on an annual basis from the previous quarter's 7.4%.

The government said more than seven million new jobs were created in the first half of the year.

Communist leaders are trying to steer China toward growth based on domestic consumption instead of trade and investment and the unexpectedly sharp slowdown of previous quarters had raised fears of job losses.

Beijing responded with mini-stimulus measures based on higher spending on construction of railways and other public works.

Analysts say Chinese leaders are willing to accept slower growth so long as the economy generates enough new jobs to prevent unrest.

Government spokesman Sheng Laiyun told a news conference: "In the first half of the year, economic growth was stable. Employment was stable".

He added that second-quarter consumer spending rose 12.1% over a year earlier, though that was down 0.3% from the previous quarter, while investment in factories, real estate and other fixed assets rose 17.3%.

In other positive signs, foreign direct investment in China rose 0.2% in June, rebounding from a decline in May.

June bank lending grew faster than expected, suggesting growing business activity.

But despite the latest improvement in GDP growth, China's expansion is expected to cool further over the coming year.

The International Monetary Fund forecasts growth to slow to 7.3% next year and to below 7% in 2016.

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Royal Mail 'Faces French Competition Fine'

Royal Mail has confirmed its French parcels business is under investigation by competition authorities and admitted it may face a hefty fine.

The company said it had been served a notice by the Autorite de la Concurrence in France that it was facing allegations of "breaches of anti-trust laws" by GLS France - an operation it bought in 2000 after purchasing the group's wider European business.

TNT Express confirmed it was also caught up in the probe, which is understood to cover the parcels business across France.

Royal Mail said: "We are currently considering the notice received from the French regulator.

Royal Mail is yet to receive any news on a potential fine

"Given the early stage of this matter, we cannot yet determine the amount or range of potential loss; however, it is possible that it could be material".

Some industry analysts estimated a maximum penalty of up to £160m - equating to 10% of GLS's turnover - if any wrong-doing was uncovered.

Shares in FTSE 100-listed Royal Mail fell 1% in early trading on Wednesday.

While the GLS Group is profitable, the French operation reported a £21m loss for its last financial year.

TNT Express said it had been co-operating with the investigation since it started in 2010 and could also not rule out a "material" fine.

The French regulator said it could not give the names of the companies involved nor details of the alleged practices being investigated.

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Banks Summoned Over 'Doomsday' Stress Tests

By Mark Kleinman, City Editor

Britain's biggest lenders have been summoned to the Bank of England (BoE) as the industry prepares to undergo a searching test of its ability to withstand a sterling and housing market crash.

Sky News has learnt that the eight groups which are being subjected to the new series of annual stress tests have been called in by BoE officials to discuss the exercise in recent days.

The individual meetings with the seven banks and Nationwide, the UK's largest building society, follow the submission of each institution's data under the terms set out by the Prudential Regulation Authority (PRA) in April.

The lenders will have to demonstrate their capacity to cope with a series of economic shocks, including a sharp depreciation in sterling and a build-up of inflationary pressures in the UK; a tightening of monetary policy and a rise in long-term interest rates; a decline in GDP of about 3.5% from its 2013 Q4 levels, and a rise in unemployment to around 12%; and a slump in house prices and commercial real estate prices fall of approximately 35% and 30% respectively.

The BoE has requested that each of the major lenders presents its data to a group of PRA and Bank officials.

It will then scrutinise the submitted information for up to two months, during which it may challenge the banks or request re-submissions, according to insiders.

The stringency of the stress tests has raised concerns among senior bankers that some lenders could be forced to raise billions of pounds of new capital.

However, City analysts have played down that prospect, arguing that the five big listed banks would have to incur total losses of £112bn before slipping below the BoE's minimum capital threshold.

"Much has been achieved in recent years to put the UK banking system on a sounder footing, so that it can support the UK recovery," Mark Carney, the Bank of England Governor, said in April.

"The challenge now is to secure a strong, sustainable and balanced economic expansion. The Bank's annual stress test will help ensure our banks support that expansion by remaining resilient."

In addition to Nationwide, the institutions participating in the stress tests are Barclays, Co-operative Bank, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander UK and Standard Chartered.

The PRA declined to comment.

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Watchdog Warning On Price Comparison Sites

Some price comparison websites are failing to meet regulatory standards, according to the Financial Conduct Authority (FCA).

The City regulator found operators in the general insurance sector, which includes property and vehicle cover, were not meeting consumers' expectations and did not always ensure that people were given appropriate information to help them make informed decisions.

The FCA said it was particularly concerned that consumers' focus on headline price and brand when using such sites could distract from crucial product features, such as policy coverage and terms.

As a result, the websites were increasing the risk that consumers bought products without understanding key features such as level of cover or excess levels.

Clive Adamson, FCA director of supervision, said: "Price comparison websites have increased in popularity among consumers, with an estimated one third of consumers buying their motor insurance policy through them.

"They provide an important service for millions of consumers bringing convenience and simplicity to buying financial products online.

"However, our review found that they were not meeting our requirements in delivering fair and consistent outcomes for consumers. 

"We also found, through our consumer research, that consumers had a number of misconceptions about the services they provided.

"We expect price comparison websites to take on board the findings of the review.

"It is also important for consumers to understand that not all products are the same and the cheapest product may not always be the best for their needs".

The review's survey also found some people mistakenly believed that a price comparison website had provided them with quotes on the best policy for their individual needs and had assessed the suitability of the policy for them. 

The FCA said too that not all comparison sites, that were part of a larger group of an insurer or broker, disclosed this potential conflict of interest, which was against FCA rules.

The watchdog declined to name any firm found to be at any fault.

Hayley Parsons, the chief executive and founder of Gocompare.com, told Sky News it had contributed to the review and supported efforts to improve standards though it had "always strived" to operate in its customers' best interests.

She said: "Gocompare.com fully supports measures to promote best practice in the PCW industry.

"Although we regularly update our services to reflect our customers' evolving needs, we will be reviewing the findings of the FCA's report".

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Ashley U-Turn On 'Big' Sports Direct Bonus

Mike Ashley, the founder of Sports Direct, has announced he will not be eligible for a big bonus after all, despite winning a two-year battle for it with investors.

The billionaire - who owns Newcastle United - confirmed on Wednesday he was withdrawing from the £200m employee incentive plan because of speculation over his share allocation.

The scheme had been put to shareholders four times before getting final approval earlier this month - despite continuing criticism from lobby groups including the Institute of Directors.

The four-year plan - which is due to vest in 2019 - has the potential to grant 25 million shares worth more than £180m to 3,000 employees.

Mr Ashley, who holds a 58% stake in the retailer, has never taken a salary or bonus but netted more than £900m in its 2007 flotation and has raised more cash since through block share sales.

The company had fought a bitter battle with other investors for Mr Ashley to be rewarded in the bonus scheme round after a previous plan recently netted some 2,000 staff shares worth around £68,000.

But Sports Direct chairman Keith Hellawell confirmed his withdrawal in a statement, which read: "Following recent unhelpful speculation surrounding his potential allocation, (Mr Ashley) is determined to ensure that there is the maximum number of shares available for the eligible employees."

The Local Authority Pension Fund Forum was among those who had levelled criticism at the plan, claiming it was inappropriate to establish an incentive plan with a single board member in mind.

Forum chairman Kieran Quinn had said: "This arrangement creates a bias in favour of Mr Ashley as well as the impression that he is creating the scheme for himself."

To achieve the payout in 2019, the firm's earnings will have to hit £480m at the end of the 2016 financial year and rise to £750m by 2019.

In results due this week, Sports Direct is expected to report earnings of around £327.1m.

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One-Time Bitter Rivals Apple And IBM Team Up

One-time bitter rivals Apple and IBM have teamed up to target iPhones and iPads at business users.

Apple's famous 1984 advert depicted itself as an insurgent, targeting the then-dominant IBM.

The fortunes of the two companies changed over the next three decades, with Apple now a leading computing giant.

As a result of the deal, IBM will start selling its business clients Apple's mobile devices pre-installed with the new software.

Apple will provide hardware support for devices through a special AppleCare program designed for big businesses buying Apple gadgets in bulk. It includes benefits like 24/7 assistance.

It appears to signal a move by Apple to sweep up customers from the business world, who are turning away from struggling Blackberry and want an alternative to Microsoft products.

IBM already creates social network, email, and chat software for the iOS platform.

It has also released apps for devices running Google's Android operating system.

Apple chief executive Tim Cook said: "We've come from 30 years ago being competitors to today being incredibly complementary and I think that the people that will really benefit from this are the enterprise customers who can be more productive running their businesses."

Tuesday's move boosted both companies, with Apple shares rising by 1.5% in after-hours trading, and IBM's up 1.8%.

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