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Monday newspeper roundup: HSBC, Eurofighter Typhoons, Bank of America

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05/11/2012
HSBC faces £1.5bn fine; fighting talk from David Cameron; BofA reaps 'peace dividend'

HSBC is set to face a final bill for fines as high as $1.5bn (£937m) for the “shameful and embarrassing” US money-laundering scandal that has engulfed Britain’s biggest bank. The lender is tomorrow expected to spell out the full financial damage caused by the crisis, which erupted earlier this year.

The bank stands accused of leaving America’s financial system exposed to Mexican drug cartels and rogue nations such as Iran and Sudan, by failing to enforce US anti money- laundering laws. HSBC said at its half-year results in the summer that it had set aside $700m to cover the cost of the scandal.

The bank said at the time that the huge sum was only its “best estimate” for the fines and penalties it would face from US authorities. But Stuart Gulliver, HSBC’s chief executive, admitted the actual total could be higher. The final bill is now expected to have more than doubled to $1.5bn, forcing the bank to make a further provision of up to $800m in its third quarter results tomorrow, according to Sky News, The Telegraph reports.

 

David Cameron has embarked on a major push to sell as many as 100 British-made fighter jets worth billions to Gulf leaders. On a three-day visit to the Middle East, the Prime Minister will promote the new Eurofighter Typhoons – which are partly made in Britain – to the United Arab Emirates, Saudi Arabia and Oman.

Any new contracts would be a significant boost for BAE Systems, the UK’s flagship defence manufacturer, which last month saw merger talks with European EADS collapse after the German Government blocked the tie-up.

It is highly unusual for a Prime Minister to be so open about the need to win defence contracts. His intervention suggests BAE and the Government think they have a good chance of persuading the UAE to buy 60 Typhoon fighter jets, even though it has engaged in protracted negotiations to buy Rafale jets from France’s Dassault, The Telegraph says.

 

Bank of America has moved closer to returning capital to shareholders after last week unexpectedly reaching new international capital standards. Brian Moynihan, chief executive, has long promised the company will reap a “peace dividend” once BofA finishes dealing with the after-effects of the mortgage crisis which cost it tens of billions of dollars.

Last week, BofA received a reprieve when regulators determined it would not have to hold as large a cushion of equity as expected, a ruling which could hasten the return of capital. BofA will still need to receive permission from the Federal Reserve before it can do so. It would be a significant change in fortune less than two years after the company took a $5bn capital infusion from Warren Buffett’s Berkshire Hathaway to stem fears it was undercapitalized, The Financial Times says.

 

One of Britain’s biggest coal plants is preparing to join the fight against climate change, The Times has learnt. Eggborough Power Station in North Yorkshire, which generates about 4% of the country’s electricity, has drawn up plans for a full conversion to burning biomass material such as wood pellets.

The move, costing hundreds of millions of pounds, will transform Eggborough into the country’s leading renewable power plant. It also signals a further retreat for coal-fired power generation in Britain, which as recently as 20 years ago provided two thirds of the country’s electricity. It is understood that more than 1,000 jobs will be created by the overhaul.

The first boiler is set to be converted as soon as early next year, with all 2,000 megawatts of capacity earmarked for completion in 2015. Orders for offshore wind turbines have come to an abrupt halt in the UK, in what some industry figures say is the first clear sign of a long-feared slowdown in renewable energy investment.

The three leading manufacturers of the turbines due to be made for the vast banks of wind farms planned for British seas have taken just one offshore order between them this year, the Financial Times has learned.

This comes amid an “unnecessary investment freeze” triggered by the government’s troubled efforts to change the way it subsidises low-carbon energy, according to Keith MacLean of the SSE power company, which is developing UK offshore farms.

Paul Coffey of RWE Innogy, another offshore developer, said his company was not currently in the market to buy turbines, but if it were, delays in the government’s plans and the “ridiculous” remarks of anti-wind farm energy minister John Hayes last week “would certainly make us think twice”.

 

American companies at the centre of a UK tax avoidance controversy could face a root and branch investigation by the Treasury Select Committee. The Commons committee, headed by Andrew Tyrie MP, is considering whether to lend its weight to the escalating furore over the UK tax affairs of large foreign-based businesses with UK arms – and could call companies to account by early next year.

Such an investigation would look at how tax policy should be recalibrated by the Government to ensure profits are not being siphoned off aggressively to lower tax-paying jurisdictions and away from the exchequer.It would mark an escalation of the campaign against corporate ‘tax evasion’ which is set to see executives from Starbucks, Amazon and Google grilled by MPs within days.

The trio already face a probe from the Public Accounts Committee, and have been asked to be given evidence next Monday, The Telegraph explains. AB

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