Sensitive issues may crop up in promotion of social integration

Sensitive issues may crop up in promotion of social integration

By Hoe Yeen Nie

SINGAPORE: The National Integration Council (NIC) has called for arts groups to help promote interaction between locals and new immigrants.

But on Friday, some in the arts community said sensitive issues like race and religion will crop up, and they are concerned about how these matters will be handled by the authorities.

Since 1994, drama company TheatreWorks has organised a programme called “Flying Circus” where arts practitioners from Asia engage residents in communities. It said this approach can help Singaporeans and new immigrants understand one another better.

Tay Tong, managing director of TheatreWorks, said: “It’s really more about that, rather than say, ‘Oh, let’s do a play and please, integrate!’. I don’t think that’s going to work.

“I’m kind of curious what it means by integration. I think when we’re dealing with cultural differences, it should primarily be more about the celebration of differences, rather than trying to be homogeneous.”

An arts space, whether it is a theatre or something more informal, has always been seen as a neutral space where social issues can be explored. Arts practitioners are also of the view that there is always a need for the arts to remain relevant to its audience.

However, some cautioned that using it as a tool to facilitate social integration requires understanding and careful consideration.

Nominated Member of Parliament Audrey Wong, who is also artistic co-director of Substation, said: “The thing is, we don’t want to do propaganda art. In fact, the public cannot be duped. They are suspicious of anything that smacks of propaganda. So there needs to be an understanding of how art works and how art functions in society, in order for the initiative to be successful.”

One group uses painting to break down barriers between youths and migrant workers. It also uses what is called “forum theatre” to explore issues of the day.

Shaun Teo, president of Migrant Voices, said: “We are not talking about issues in a hypothetical or ideal situation. The characters act out certain situations that will happen at home, so the solutions that they’ll find from forum theatre are the solutions that they are most probably able to apply at home.”

But practitioners said challenges remain.

Ms Wong said: “If there are projects which the council wishes to support, but where issues of race and religion are brought up and discussed and debated, will the council want to put a stop to it? Will the authorities want to put a stop to it? Or will they allow healthy debate of these sensitive areas?”

The NIC is also exploring other avenues, such as game shows and current affairs programmes, to encourage social interaction.

- CNA/so

Source : Channel NewsAsia - 19 September 2009

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Hotels receiving last-minute bookings ahead of Singapore F1 race

Hotels receiving last-minute bookings ahead of Singapore F1 race

By Patwant Singh

SINGAPORE: Despite the poor economy, hotels in Singapore are receiving last- minute bookings ahead of next week’s Singapore Formula 1 night race.

The year started with a slow demand for rooms during the F1 period, but measures such as a cut in government levy and reduction of hotel rates by as much as 30 per cent are reversing the situation.

In fact, some hotels are hitting higher occupancy figures than last year and some trackside hotels are now seeing accelerated demand.

“We have seen a lot of last-minute bookings and the occupancy will be higher than last year,” said Ian Wilson, general manager of Fairmont Singapore.

A 10 per cent increase in bookings achieved by Fairmont Singapore is partly due to the F1 Rocks event, which is bringing in more guests.

As for other hotels within the same vicinity, Ritz Carlton is expecting another full house this year, mainly due to its proximity to the track.

Another trackside hotel – the Marina Mandarin – said its occupancy is now at 80 per cent, and it may increase room rates over the next few days as demand picks up.

Meritus Mandarin, which is not located near the F1 track, said its 90 per cent occupancy is due to the timely public holidays.

“F1 weekend this year is immediately after the Hari Raya holidays and what is typically known as ‘Lebaran’ in Indonesia and Malaysia. That does help to lengthen the entire week for people to come because of ‘Lebaran’ and to stay on for the F1 races as well,” said Tan Kim Seng, general manager of Meritus Mandarin Singapore.

Competition among the hotels could be greater next year when more hotel rooms come on board at the integrated resorts, which should be completed by the next Singapore F1 season.

- CNA/sc/so

Source : Channel NewsAsia - 19 September 2009

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Bids show developers still hungry for land

Bids show developers still hungry for land
But future offers may be more restrained as more land is released
By Joyce Teo

THE results of a government land tender for a suburban location show how hungry developers are for building sites, say analysts.

A dozen developers have lodged bids for a 2.1ha plot at the corner of Yio Chu Kang and Seletar roads - a site that is not near an MRT station. A land tender ordinarily draws six to eight bidders.

Analysts say demand for land is expected to stay strong, but they expect most developers to be more cautious in their bids in the months ahead, given that more land will be made available for sale soon.

The Government said on Monday that it will reinstate the confirmed list of sale sites for the first half of next year, among other measures aimed at tempering exuberance in the market.

Under the confirmed list, sites are pushed out for sale according to schedule, regardless of developers’ interest.

The latest site was the third put up for tender by the Government this year to attract very strong interest. The first and second land tenders each drew 13 bids.

Developers might have been expected to turn cautious for the site, in the Seletar Hills area, but Far East Organization gamely topped the tender with an aggressive bid of $376.29 per sq ft per plot ratio (ppr) - 35 per cent higher than the second bid.

It reportedly plans to build 150 to 200 apartments and a Holland Village-style shophouse cluster. There could be a supermarket, restaurants, pubs and wine bars.

‘Far East’s bid is very optimistic, but the area does have its charms. It is not congested, and it gives off village-like vibes,’ said Colliers International director of investment sales Ho Eng Joo.

However, developers are likely to be slightly more cautious going forward in terms of the number and value of bids, said Mr Ho.

‘You know the confirmed list will be out, but you don’t know how many sites will be put on it, how big the plots are and where they will be located.’

He added: ‘Now, developers’ thinking is: ‘If I miss this plot, I can try my luck next year’.’

DMG & Partners Securities said in a report yesterday that competition for upcoming sites should subside to ‘possibly normalised levels of six to eight bids’ given the recent cooling measures.

But sites with strong attributes will still attract strong demand, experts said.

‘Developers’ demand clearly outweighs the stock of land. The buying momentum will carry on as the outlook remains positive,’ said Credo Real Estate managing director Karamjit Singh.

‘Interest in well-located sites will still be hotly contested because the completed project will be easy to market.’

A developer who declined to be named said: ‘Despite the measures, developers would definitely remain competitive when the market is good. Developers know the Government will introduce more land, but it is likely to be sensible in its approach.’

The government sales list is likely have a range of plots with different sizes to suit different developers’ appetite, he said.

The next land tender to watch out for is for a parcel at Serangoon Avenue 3 next to the Lorong Chuan MRT station and near the Australian International School.

DMG said the response should form a ‘more accurate barometer of developers’ outlook on land/selling prices and demand for mass projects’ sustainability in the wake of the cooling measures’.

Mr Ho expects bids to be at the lower end of $350 to $400 psf ppr.

But DTZ South-east Asia research head Chua Chor Hoon still expects more than 10 bidders, with a top bid of about $450 psf ppr. There is even a chance the top bid could be up to $500 psf ppr, based on the strong response for recent sites, she said.

In high demand

Chestnut Avenue site

No of bids: 13

Trigger bid: $62 million/$121 psf ppr

Top bid (Hong Leong): $143.7 million/$280 psf ppr,

11% above second-highest bid

Dakota Crescent site

Number of bids: 13

Trigger bid: $130 million/$201 psf ppr

Top bid (UOL): $329 million/$508 psf ppr, 5% above second-highest bid

Yio Chu Kang/Seletar Road site

Number of bids: 12

Trigger bid: $40.5 million/$128 psf ppr

Top bid (Far East): $119 million/ $376 psf ppr, 35% above second-highest bid

Source : Straits Times - 19 September 2009

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US households start to regain wealth

US households start to regain wealth

Home mortgages down; stocks rally, effects of govt stimulus being felt

A newly built house in Colorado put up for sale last month. The housing market remains weak but appears to be bottoming out. — PHOTO: REUTERS

WASHINGTON: The net worth of American households grew between April and July, the first quarterly gain in nearly two years, boosted largely by rising stock and home prices, the United States Federal Reserve said.

The increase suggests that households may have begun to recover from record losses of wealth since the recession began in December 2007.

A Fed report in March showed that since the start of last year, falling housing and stock values wiped out US$11 trillion (S$15.5 trillion) in Americans’ net worth. The losses erased four years of gains, decimated retirement savings and college funds, and upended life plans for millions of people.

Many leading economists, including US Federal Reserve chairman Ben Bernanke, now think the economic downturn, one of the worst since the Great Depression, is probably over.

Forecasters say the economy has probably begun growing again as public works projects funded by the US$787 billion stimulus package get under way. And businesses, after months of cutting back, are being forced to place new orders to replenish inventories.

The biggest boon to household wealth has been an extended rally on Wall Street. US stock markets pounced on early signs that the economy’s slide was slowing, and they have rebounded by as much as 50 per cent since March. The value of stock holdings jumped 21.7 per cent during the second quarter, the Fed report showed.

A smaller boost to household wealth has come from an improving, albeit still weak, housing market, which appears to be closer to bottoming out.

A Commerce Department report released on Thursday showed that housing starts rose 1.5 per cent last month, to a seasonally adjusted annual rate of 598,000. Sales of previously owned homes also increased in August for the fourth consecutive month.

The Fed report showed, however, that prices have not increased enough to substantially lift home-owner equity. Home owners had only slightly more equity in their homes in the second quarter compared with the first quarter.

Meanwhile, household debt shrank at an annual rate of 1.7 per cent, the fourth straight quarterly contraction. Home mortgage debt decreased at an annual rate of 1.4 per cent. Consumer credit decreased at an annual rate of 6.5 per cent. The declines were also because of tighter credit conditions and banks writing off credit-card debt, analysts said.

The recovery in household wealth will probably continue into the current quarter, which ends on Sept 30, because stock prices have kept rising, home prices for existing homes have firmed up and consumers have not taken huge amounts of new debt, said Mr Bernard Baumohl, chief global economist for The Economic Outlook Group.

Analysts have blamed the loss of wealth for the sharp pull-back by American consumers, which in turn has hurt economies around the globe.

NEW YORK TIMES

Source : Straits Times - 19 September 2009

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HDB flats: Prices and quantity

HDB flats: Prices and quantity

The affordability and availability of HDB flats were concerns raised by several MPs. This is an edited excerpt of the replies from National Development Minister Mah Bow Tan.

Cash over valuation

•MP Lim Wee Kiak (Sembawang GRC): Is the practice of cash over valuation - the additional amount that buyers are willing to pay in cash above the bank value of a flat - a barrier to cash-poor Singaporeans buying resale HDB flats? Can a loan be provided?

Cash over valuation is not an HDB invention or imposed by the Government, but part and parcel of any property transaction. The additional amount has to be paid in cash because the banks and HDB lend up to only 90 per cent of the valuation.

Buyers can choose not to pay cash over valuation. Latest data shows that almost one-third of transactions are transacted at or below valuation.

Be prepared to shop around, do your homework and remember that not all cash over valuations that buyers ask for are realistic ones.

The Government will not ban cash over valuations, but leave it to the market of willing buyers and sellers.

Providing a loan is not prudent as it will cause flat prices to go up further, such that when they fall, buyers will get seriously hurt.

Supply of new flats

•MP Liang Eng Hwa (Holland-Bukit Timah GRC): Are there enough new flats to meet the demand of first-time buyers? Is the current waiting time acceptable? Are there ready-made flats that HDB can sell to soon-to-be married couples?

HDB factors in the number of people who will buy resale flats when building new flats, to avoid over-building. It also takes into account such factors as marriage and immigration rates, and population growth.

Most new flats are on the Build-To-Order system, in which the flats are built in about three years after people commit to buying them.

Couples unable to wait so long can book a flat under the Fiance/Fiancee Scheme first, and submit their marriage certificate within three months of taking possession of the flat.

If they cannot afford to pay the 10 per cent down-payment in cash, they can tap on a scheme where they pay 5 per cent first and the other 5 per cent when they take possession of the flat.

But do not expect HDB to provide a flat in a mature estate at a comfortable price, as there is not enough land in the mature estates to build the number of flats that people want.

Under-building of flats?

•MP Low Thia Khiang (Hougang): From the minister’s answer, it seems that HDB is under-building flats to meet the demand of new flat buyers. Will it not push up the price of resale flats?

There is no basis to say that the HDB is under-building.

The Build-To-Order system is responsive to demand. In 2007, HDB built about 2,400 flats because there were still flats available. Last year, it built 8,000 flats when demand increased. This year, it will build about 8,000 flats as well.

Affordability

•MP Lim Biow Chuan (Marine Parade GRC): Prices of HDB flats today are much more expensive compared with previous generations, and have risen more quickly compared with increases in income. How would today’s generation be able to afford that dream home?

New flats are affordable. While HDB flat prices have been going up much faster than incomes over the years and are much higher than those a generation ago, the flats today in Punggol, Sengkang and Bishan are different.

First-generation HDB flats had to be built quick and cheap, so there were no lifts on every floor, no facilities and no MRT.

Homes have also appreciated in value over the years in tandem with the growth of Singapore.

Source : Straits Times - 15 September 2009

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SMEs get design boost with new centre

SMEs get design boost with new centre
By Jonathan Kwok

MORE than 300 small- and medium-sized enterprises (SMEs) are exploring ways to use strategic design to increase their competitiveness.

The companies have made use of the Design for Enterprises (DFE) programme over the past 10 months, seeking advice in employing design concepts. Design, in this context, is a broad term which refers to tailoring market strategies, business practices and physical products to meet the individual needs of companies.

The process went a step further yesterday with the opening of the Design for Enterprises Centre, which teaches bosses on the value of strategic design and how to make use of it. Consultants at the centre can also help companies analyse their business needs before advising them on design services.

Design concepts, when applied to business processes and physical products, allow firms to distinguish themselves in the marketplace, Acting Minister for Information, Communications and the Arts, Rear-Admiral (NS) Lui Tuck Yew, said at yesterday’s opening. ‘Design is also recognised for its value in improving everyday lives and the environment, resulting in better products, services and developments.’

Although launched only in November last year, the DFE initiative has seen companies seeking help with revamping their business models and product designs.

Ah Nan Optical, which produces eyewear products, is one such firm.

‘The consultants assigned to us taught us new ways of looking at our business. They taught us to cater our designs to the lifestyles of our target customers,’ said chief branding officer Chia Geok Lian.

Pro-Pack Materials, a semi-conductor company, also acted on the advice of DFE consultants by diversifying its core business. After studying options in various industries, Pro-Pack’s owners moved into the medical devices market by setting up a new company, said marketing director Angeline Koh.

Golden Mile owners try backdoor route to en bloc sale

Golden Mile owners try backdoor route to en bloc sale

They hope 20 per cent of units will be sold to single buyer so there would be fewer parties to deal with

Property owners at the Golden Village Mile Complex have roped in property agents, who have been instructed to set a reserve price pf $1,300 psf for apartments and offices, and S$1,500 psf for shops.

PROPERTY owners at the Golden Mile Complex who have failed twice to sell the property collectively are trying again - using a novel but risky backdoor approach.

exceptionally high reserve prices
The group is dangling exceptionally high reserve prices to tempt owners into selling. The property agents… are promising to scout for offers of no less than $1,300 psf for apartments and offices.

A group of them have chosen, for now, to avoid obtaining the usual approval from owners of 80 per cent of the 705-unit mixed development in Beach Road required in collective sales.

Instead, they hope to persuade a number of owners there, as well as those at the Golden Mile Tower next door, to appoint a property agent to sell their individual offices, apartments or shops.

The group is dangling exceptionally high reserve prices to tempt owners into selling. The property agents it has roped in are promising to scout for offers of no less than $1,300 per sq feet (psf) for apartments and offices, which is double what they are fetching now.

Their plan is to pull together enough sellers to make up 20 per cent of owners in the two developments. The agent would then announce a public tender to sell those units jointly.

Once a single buyer picks up all these units, there would be fewer parties to deal with when negotiating over a future en bloc deal.

Still, even if they were able to consolidate 20 per cent of the ownership, they would face a significant hurdle in any eventual collective sale bid to secure the additional 60 per cent approval needed.

The secretive group behind this scheme has so far refused to say who the potential buyers are, or if, in fact, there are willing buyers prepared to pay a premium for the units.

Property agents from C.H.Tan Associates, a team under PropNex, have been approaching owners in these two complexes to persuade them to sell. Its team leader, PropNex group division director Tan Chee Hwang, declined to comment when contacted by The Straits Times.

When The Straits Times contacted Ms Jessie Ong, a businessman who had earlier this year circulated pamphlets proposing both developments be torn down to make way for the tallest building in Asia, she acknowledged that she was one of the owners behind the proposal.

Ms Ong, who is in her mid-50s, said this first phase of the scheme will ’save (us) the trouble’ of going through the full work of a collective sale.

Unlike an en bloc sale, ‘we will not have any steering committee’, she said. ‘The agent talks to the owner direct.’

She would not say how big the group of owners is nor how many properties she owns in the two developments.

But she revealed that the property brokers have been instructed to set a reserve price of $1,300 psf for apartments and offices, and $1,500 psf for shops. The group is hoping eventually to sell both buildings - which she says stand on 300,000 sq ft of land - for an estimated $2 billion.

The reserve prices for individual units have raised eyebrows, given that a 926 sq ft Golden Mile Complex apartment changed hands in June for just $565,000, or about $610 psf.

Properties sold through en bloc deals could attract double the price of properties sold individually, but consultants contacted doubt that the premium would apply in the Golden Mile case given the uncertainty of when - if at all - an en bloc sale would take place.

The collective sale market is also barely out of the doldrums after being battered in last year’s financial storm.

Golden Mile’s most recent bid at a collective sale was mounted in 2006.

A commonly cited objection was the fear the sale proceeds would not cover similar replacement units - some with sea views. Another objection involved its feted design, which conservationists wanted to be preserved.

Commenting on this latest attempt, Mr Ho Eng Joo, Colliers International’s executive director for investment sales, said: ‘I think it is quite ambitious. It is a lot of risk for investors.’

Complicating the situation: Both Golden Mile Complex and Tower stand on sites with 59 years left on 99-year leases.

A developer who buys the sites will have to pay millions to top up the leases if his plans are approved by the Government.

Mr Shaun Poh, a senior director at property consultancy DTZ Debenham Tie Leung, wondered how the balance of power would swing should the first stage of the Golden Mile plan result in a sale.

The investor who ends up owning a major chunk of the developments, he said, could be held to ransom by other owners who might refuse to allow redevelopment to take place unless they are paid sky-high prices for their units.

Conversely, that investor could demand a disproportionate share of proceeds in a future en bloc deal in return for his approval of the sale.

For the time being, however, the secretive approach of the group has made some owners there uneasy.

Golden Mile Complex apartment owner Dinesh Naidu, 35, said the PropNex agents seemed evasive when they approached him last week.

When he asked them who were behind the plan, ‘they said it was a group of investors’.

‘When I asked them who they were, they said it was confidential.’

But Ms Ong was optimistic: ‘Every owner here is very keen to sell.’

Source : Straits Times - 19 September 2009

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Thai army denies coup amid tensions

Thai army denies coup amid tensions

Troops on high alert with 30,000 expected at pro-Thaksin rally today

Policemen unloading helmets near the home of Gen Prem Tinsulanonda. The red shirts accuse him of masterminding Thaksin’s ouster. — PHOTO: REUTERS

BANGKOK: Thailand’s army chief denied yesterday that the military was about to stage a coup, as tensions rose ahead of protests to mark the third anniversary of a putsch that ousted former premier Thaksin Shinawatra.

Thousands of troops and police took up positions in Bangkok ahead of today’s rally by the pro-Thaksin ‘red shirts’ movement, which wants embattled current Prime Minister Abhisit Vejjajiva to step down and call elections.

Mr Abhisit is heading to New York at the weekend for the United Nations General Assembly - and it was while Thaksin was out of the country to attend the same event that the military overthrew him in 2006.

‘I can reassure everyone that there will be no coup. Absolutely no coup,’ said army chief Anupong Paojinda.

‘To stage a coup is a big issue for the country and its repercussions would affect everybody. It’s not something that anyone wants to do and it would not be in the interest of the country.’

The last time he denied that the army was about to intervene in politics was in December when the previous government - led by Thaksin’s allies - was trying to end a blockade of Bangkok’s airports by the royalist ‘yellow shirts’ group.

General Anupong, however, disobeyed government orders to crush the airport protests, and within days the fatally weakened administration was toppled by a court ruling that cleared the way for Mr Abhisit to come to power.

The Abhisit government itself is now on edge, caught in a rift with coalition partners over the choice of a new police chief and keen to avoid a repeat of angry red-shirts protests in April which left two dead and scores injured.

Deputy Prime Minister Suthep Thaugsuban warned that if today’s protests become violent, the government would impose emergency rule, as it did in Bangkok during the riots earlier this year.

‘If the normal law cannot cope and the situation is out of control, I will declare a state of emergency,’ said Mr Suthep, who will be Acting Prime Minister in Mr Abhisit’s absence.

Dozens of soldiers armed with riot gear set up barbed wire and concrete blast walls yesterday outside Government House, where Mr Abhisit’s offices are located. Others were posted outside the house of General Prem Tinsulanonda, the chief adviser to Thailand’s King. Gen Prem is accused by the red shirts of masterminding the coup against Thaksin.

More than 9,000 army, navy and air force personnel, along with the police, would be mobilised to handle the coup anniversary protests, said army spokesman Colonel Sunsern Kaewkumnerd.

Crowd control measures would start with negotiations, and then proceed to pushing back protesters, arresting leaders, using water cannon and tear gas and finally, shooting rubber bullets, if necessary, he said.

Red-shirt leader Nattawut Saikua told The Nation newspaper that there was a plot to frame and blame them for any violent acts today.

‘We insist any violence taking place at those locations is not the act of the red shirts. We urge police to arrest the perpetrators immediately,’ Mr Nattawut said.

Gen Anupong said he feared that troublemakers would try to incite clashes between protesters and police.

‘What we worry about is the acts of ill-intentioned people. That’s why I have given orders that troops and police will not use weapons and ammunition or any explosive devices,’ he said.

Troops fired into the air during the red-shirts riots five months ago, when Thaksin supporters stormed a regional summit in the seaside resort of Pattaya and then rampaged through Bangkok.

The authorities expect around 30,000 protesters to turn up today and then disperse around midnight, deputy government spokesman Watchara Kanikar said. ‘They cannot mobilise a large number of protesters because of rifts among their leaders,’ he told reporters.

AGENCE FRANCE-PRESSE

Source : Business Times - 19 September 2009

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Google gunning for Yahoo’s display ads

Google gunning for Yahoo’s display ads

(San Francisco)

SELLING POINT
Google says the new system will greatly simplify the process of buying and selling display advertising on the Web
GOOGLE is pushing for a second act.

The company has built its fortune almost entirely on the back of small text ads, which appear alongside its search results and on sites across the Web. Now it is stepping up efforts to make inroads into graphical display ads, a business long dominated by Yahoo.

Google yesterday introduced a long- awaited new version of an ad exchange, like a stock market, where advertisers and publishers can buy and sell advertising space, filling spots in Web pages on the fly. Google CEO Eric Schmidt has said repeatedly that display advertising offers one of the company’s best prospects for expansion, now that growth in its text ad business has slowed significantly. The new ad exchange is a cornerstone of Google’s display strategy, and one of the main reasons Google bought the ad company DoubleClick last year for US$3.1 billion.

Google executives say the new system, called the DoubleClick Ad Exchange, will greatly simplify the process of buying and selling display advertising, allowing many more publishers and advertisers to benefit from it. ‘The objective from the outset is to grow the display advertising pie for everybody,’ said Neal Mohan, vice-president for product management at Google.

But both in display advertising and in advertising exchanges, Google finds itself in the unfamiliar role of underdog. As one of the Web’s biggest publishers, and a seller of ads on a network of top sites like eBay and hundreds of newspapers, Yahoo is the king of the display advertising business. In 2007, Yahoo bought Right Media, a pioneering ad exchange whose business has grown steadily since, in part because many of the ads that run on Yahoo are brokered through it.

Still, analysts say Google’s push into the business could shake up the market. DoubleClick has had an ad exchange for some time. But the new system will automatically allow hundreds of thousands of advertisers and publishers who now use Google’s AdWords and AdSense systems to run their ads and ad space through the exchange.

Analysts say that should expand use of the DoubleClick exchange and allow brand advertisers to easily run campaigns that reach virtually everyone on the Internet. ‘Marketers are going to be able to effectively reach 100 per cent of the Internet audience and do so at a high frequency,’ said William Morrison, an analyst with ThinkEquity Partners. ‘That is very difficult to do on the Internet right now, outside of a handful of major websites like Yahoo and a few others.’ — NYT

Source : Business Times - 19 September 2009

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Fed to clamp down on bankers’ pay

Fed to clamp down on bankers’ pay

It will propose wide-ranging rules aimed at curbing excessive short-term risk-taking, says source

(Washington)

THE Federal Reserve is close to proposing wide-ranging rules on bankers’ pay that would apply to any employee able to take risks that could threaten the safety and soundness of the institution, a Fed source said yesterday.

The source, speaking on condition of anonymity, said the guidelines would apply to all firms regulated by the central bank and would be enforceable under its existing supervisory powers.

Massive losses inflicted by risky bets on US subprime mortgage loans last year destroyed some of the oldest names in US banking and pushed the global financial system to the brink of collapse.

The rules would aim to curb excessive short-term risk-taking by any employee, not just bank executives, and would take a two-pronged approach.

Larger firms would be subject to a horizontal review process to compare their practices against rivals, while the compensation review for smaller banks would be part of their regular bank exams, the Fed source said.

The proposal has not yet been voted on by the Fed’s Board of Governors in Washington, the Fed source said.

Earlier the Wall Street Journal reported the move.

‘The Fed’s plan would, for the first time, inject government regulators deep into compensation decisions traditionally reserved for the banks’ corporate boards and executives,’ the Journal said.

‘Bureaucrats wouldn’t set the pay of individuals, but would review and, if necessary, amend each bank’s salary and bonus policies to make sure they don’t create harmful incentives,’ the report added.

A final proposal ‘is still a few weeks from completion and could be revised along the way,’ the report said, citing unnamed persons familiar with the matter. The move does not require a Congressional green light.

‘The US’ largest banks, about 25 in number, would get especially close scrutiny. The central bank intends to compare these banks as a group to see if any practices stand out as unusually dangerous to their firms,’ the Journal added.

In the United States, Wall Street banks rescued in the 2008 financial crisis paid bonuses regardless of their performance, according to a report by New York Attorney-General Andrew Cuomo.

And the report found that some banks bailed out by the US government paid executives bonuses that totalled more than entire company profits last year.

Executive bonuses have generated public outrage and are a flashpoint issue for the G20 leaders to address at a summit in Pittsburgh next week.

On Thursday, European Union leaders agreed to seek curbs on bankers’ bonuses at next week’s G20 summit. France and Germany, Europe’s leading economies, are leading the move for strict limits on executive’s compensation. — Reuters, AFP

Source : Business Times - 19 September 2009

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