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Bank of Japan Makes Monetary Regime Change, More Bad News for Barclays

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Bank of Japan Fights Deflation: The Bank of Japan took steps toward a "monetary regime change" this Monday, announcing plans "to enact an ambitious program of further monetary easing" and raise its inflation target to 2%. The plan is intended to end "years of corrosive deflation" and was enacted under pressure from Japan's new Prime Minister Shinzo Abe. It involves (and this will sound familiar) "open-ended" asset purchases and a near-zero interest rate policy "as long as it is deemed necessary to achieve its price target." Asset purchases, however, are not set to begin until January 2014. The delay is one reason some analysts are ambivalent about whether this move will help curb deflation and bolster the economy. And, according to the Post, "popular magazines are already forecasting an 'Abe bubble' in share and real estate prices, driven by the money being pumped into the economy through government spending and monetary easing."

Wall Street Journal

Here's a story that will sound familiar to American Banker readers: Shelter Insurance Co. is closing its small bank, citing Dodd-Frank regulations as the reason. The closure, as American Banker noted earlier this month, marks a trend in which insurers, including Hartford Financial Services Group, Prudential Financial, MetLife and Allstate are bailing on banking rather than dealing with expensive Dodd-Frank accounting principles. The Journal writer acknowledges this trend, but expresses doubt about whether the problem will affect community banks that are not owned by an insurance company. Additionally, "an immortal law of finance states that the next crisis will erupt somewhere different from the previous one, so investors and regulators should train their sight on the entire financial landscape," he writes.

Financial Times

The paper reports what amounts to more bad news for Barclays. A High Court judge rejected a plea from 106 current and former employees seeking anonymity during the first British damages claim trial over the manipulation of Libor. Additionally, the bank's wealth management unit's chief operating officer Andrew Tinney resigned a week ago, following allegations he suppressed a critical report on the unit's culture in the U.S. The report, written by consultancy Genesis Ventures, cited a "revenue at all costs" strategy and "fear and intimidation" culture at the bank, which is already trying to revamp its tarnished reputation following its involvement in the Libor scandal.

Andrew Haldane, the Bank of England's financial stability director, has proposed tougher bank bonus rules that would defer payouts for five to ten years in an effort to promote the long-term health of financial institutions.

New York Times

A few Dealbook articles over the weekend, previewed the World Economic Forum set to take place in Davos, Switzerland, this week. One addresses how the bankers scheduled to attend may be received, and the takeaway is a bit of a mixed bag. According to the author, the recent Basel III concessions indicate some regulators feel "the banks have taken enough abuse," but fresh consequences surrounding all-too-frequent missteps, including JPMorgan's decision to hold CEO Jamie Dimon accountable for the London Whale via a 53.5% pay cut and UBS' $1.5 billion Libor settlement, may make it hard for others to welcome bankers with open arms. In other words: Stay tuned.

Private equity firms are grudgingly accepting that lower taxes on "so-called carried interest income, the profits partners receive as part of their compensation" may be history as Congress moves to balance the budget. Should a proposal to raise taxes on this type of income re-emerge, lobbying groups are expected to focus on softening transition rules and delaying their implementation. "That would give partners more time to pocket capital gains or restructure funds before the rate increase took effect," the author writes.

Washington Post

The paper profiles Treasury Secretary nominee Jack Lew and analyzes more than just his loopy signature. The overarching takeaway appears to be that while Lew is generally in favor of programs that help the poor, he's also willing to make unpopular compromises. "What makes Jack, 'Jack,' and not a caricature of a big government liberal who believes that all spending is good is that he also believes you also need to make sure that every dollar is spent as effectively as possible," one source tells the paper.

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