Janet Yellen: Federal Reserve Boss Is Revealed

Federal Reserve vice chair Janet Yellen will be the new head of the world's most powerful central bank - the first woman to hold the position.

The 67-year-old was Barack Obama's choice and she earned cross-party support in the bitterly divided chamber.

"The American people will have a fierce champion who understands that the ultimate goal of economic and financial policymaking is to improve the lives, jobs and standard of living of American workers and their families," the President said in a statement.

"As one of our nation's most respected economists and a leading voice at the Fed for more than a decade - and vice chair for the past three years - Janet helped pull our economy out of recession and put us on the path of steady growth."

However, the 56-26 vote was still among the closest in the 100-year history of the institution.

"Americans should feel reassured that we will have her at the helm of the Fed as our nation continues to recover from the Great Recession," said Senate Banking Committee chairman Tim Johnson.

"Dr Yellen's leadership will also be critical as the Fed completes Wall Street reform rulemaking and continues to enhance the stability of our financial sector."

Dr Yellen was President Obama's choice

Dr Yellen will replace Ben Bernanke, who steps down on January 31 after eight years in the job.

She has built a strong reputation as an academic economist, and as a veteran policymaker at the Fed she is not expected to veer far from the central bank's existing policies.

She has a long-term interest in the impact of joblessness on the economy, and has helped keep Fed policy focused on bringing down the unemployment rate.

She has also been closely identified with the Fed's opening up of its policy thinking, with the central bank communicating what it sees in the economy and the expected direction of monetary policy far more openly than 10 years ago.

Her nomination was contentious even among some Democrats.

Joe Manchin of West Virginia had been "troubled by the unchecked quantitative easing policies" of the Fed.

"In light of recent news that the Fed will begin to taper its easing by $10bn a month starting in January, I now feel comfortable supporting vice chair Yellen's nomination," he said.

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Swiss Central Bank Loses £10bn On Gold Plunge

Switzerland's central bank has revealed losses of £10bn in its gold holdings, after prices for the precious metal plunged 28% last year.

The Swiss National Bank (SNB) said the value of its reserves dropped by 15bn francs and as a result would not pay dividends to local ruling cantons - the members of the federal state - or the capital Bern.

The dramatic loss has shown that it is not only small-time investors in gold who have been hit by the metal's slide from nearly $1,700 (£1,038) an ounce in January to just under $1,200 (£732) before Christmas.

Bullion's slump in 2013, the biggest annual decline since 1981, was prompted in part because central banks' quantitative easing failed to stoke inflation and the economy globally strengthened.

The deep Swiss gold loss was offset slightly though gains of 3bn francs (£2bn) on the banks' foreign currency positions, and another increase of 3bn francs on a stabilisation fund it put in place in 2008 to save Switzerland's largest bank, UBS, from collapse.

As a result SNB said it expected to report a total loss of 9bn (£6bn) in 2013, according to provisional figures.

But since SNB needed to put aside 3bn Swiss francs as a provision for its currency reserves, it said it expected to end up with a total loss of about 12bn francs (£8.1bn) in the red.

"As this loss will be substantially larger than the 5.3bn Swiss francs (£3.6bn) in the distribution reserve, the SNB cannot make a profit distribution," the bank explained.

Switzerland's central bank usually hands out dividends to the Swiss confederation and regional cantons.

Last year, SNB reported a 6.9bn franc (£4.66bn) profit and redistributed 2.4bn francs (£1.62bn) of its profit to the Swiss confederation, cantons and other shareholders.

The bank said it would announce its full results on March 7.

Global demand for gold is driven in large part by South and South East Asia, and in particular China.

Chinese buyers have rejoiced at the price drop ahead of the traditional peak purchase period before the lunar new year.

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Scottish Power To Cut Dual-Fuel Energy Prices

Energy firm Scottish Power is to reduce dual-fuel prices by 3.3% from January 31, as it passes on savings from the Government's green levy shake-up.

The change will benefit 2.2 million households and reduce typical bills by around £42 to £1,199 a year for those paying by direct debit.

There will also be a £12 rebate to all customers for the Warm Home Discount, which the Government has said will be funded through general taxation instead of through levies on energy bills.

The tariff cut will only partly reverse increases of 8.5% and 9% for gas and electricity respectively that Scottish Power hit customers with a month ago.

And 97% of customers on fixed-price products will not see their bills fall as the company said they were already protected from the rising cost of green levies.

The cut comes a week after Labour called on Scottish Power and rivals npower and SSE to immediately reduce prices for households after the Government cut the cost of the Energy Company Obligation.

It also asked electricity distribution companies to take action to reduce network costs.

British Gas has already reduced prices in response, announcing in early December that it would cut bills by 3.2% on New Year's Day.

British Gas scaled back hikes that saw prices go up by 10.4% for electricity and 8.4% for gas in November.

EDF and E.ON took the levy changes into account in the recent round of price rises, increasing tariffs on average by 3.9% and 3.7% respectively - far less than the increases announced by rivals.

SSE and npower are expected to follow Scottish Power by passing on levy savings.

They have already committed to cutting bills, but have yet to confirm how much or when the changes would take effect.

Scottish Power said it would try to avoid any further price rises in 2014, but said this will depend on whether there are increases in wholesale energy prices or other costs outside of its control.

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Economy: BCC Poll Indicates Stronger Recovery

Fresh evidence has emerged that Britain's economic recovery is set to strengthen further.

The grounds for optimism came in a quarterly poll of 8,000 firms by the British Chambers of Commerce (BCC), raising expectations of continued increasing growth.

However, concerns persist over the ability of businesses to access finance so they can expand.

BCC director general John Longworth said: "It is a fantastic start to the new year with a very positive quarterly survey.

"Confidence is high and our members are resolute in their determination to take the recovery from being good to being truly great.

"Firms across the board believe they can create jobs, invest and export. But businesses have major ambitions and to be able to meet them more support must be provided.

"We must give companies the opportunity to get the finance they need to go out and trade in the world if we are to succeed in rebalancing the economy."

Official figures show gross domestic product (GDP) grew by 0.5% in the first quarter of 2013, rising to 0.8% in the second and third quarters.

The BCC expects, on the basis of its survey results, that the fourth quarter will have seen growth of 0.9%.

It shows most key indicators for the economy over the period better than pre-recession levels in 2007.

In manufacturing, it finds domestic orders, employment and employment expectations, and confidence for turnover and profitability are at all-time highs, allaying fears that third-quarter growth was only temporary.

However, domestic sales and export orders in the sector fell back, though they remained high by historical standards.

Meanwhile, manufacturers' cash flow dropped, underlining the need to improve access to borrowing.

Inflation was also a major area of concern for businesses.

Services - which have led the recovery and represent three-quarters of the economy - saw record employment as well as exports.

David Kern, chief economist at the BCC, said: "It is clear that the UK recovery is likely to continue to strengthen in the short term.

"On the basis of these results, GDP growth in Q4 could well be around 0.9%, and higher full-year growth in 2013 and 2014 could follow."

However, he warned that risks from the eurozone could have an adverse impact on exports.

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Bank Regulators Kick Off Formal Co-Op Probes

By Mark Kleinman, City Editor

Banking watchdogs are poised to kick off formal probes into last year's crisis at the Co-operative Bank in a move which could lead to significant fines or bans for former directors of the lender.

Sky News understands that the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are likely to confirm this week that they are commencing enforcement investigations into the circumstances which led to the Co-op Bank requiring a £1.5bn rescue package.

An insider said that statements confirming the widely-expected decisions by the two regulators could come as soon as Monday, although they could yet be delayed.

The move to begin formal enforcement investigations could result in substantial financial penalties being imposed on the Co-op Bank as well as former directors if they are deemed to have been reckless in their stewardship of the lender.

The recapitalisation of the bank, which was approved by bondholders last month, saw hedge funds take majority ownership and the Co-op Group left with a 30% stake.

The FCA and PRA inquiries are among a host of investigations launched into the crisis at the previously mutually owned bank, which was left saddled by hundreds of millions of pounds of toxic assets, partly as a result of its merger with the Britannia Building Society in 2009.

The Treasury Select Committee will continue to take evidence on Tuesday about the ill-fated effort by the Co-op to acquire 630 Lloyds Banking Group branches.

A separate probe commissioned by the Treasury and undertaken by an as-yet unidentified figure from the world of banking or law will also take place.

In a statement in November, the Treasury said its inquiry would "cover the actions of relevant authorities (regulators and government) and the institution itself, including prudential issues, governance (including the appointment of senior staff) and acquisitions".

That investigation will not, however, begin until after any PRA and FCA enforcement action has been concluded. A shortlist of candidates to oversee the probe has been drawn up with an announcement about the chosen individual expected in the coming weeks.

The FCA said in November that it "fully agrees that the investigation should be led by an independent person, and looks forward to supporting them in their work. The FCA will make its full resources available to support the investigation".

It said: "The timing of the investigation must not prejudice any other criminal or regulatory proceedings. The FCA is already undertaking work to establish whether it should commence a formal enforcement investigation and expects to reach a conclusion shortly."

The PRA, the arm of the Bank of England which is responsible for maintaining financial stability, issued an identical statement.

Euan Sutherland, the Co-op Group chief executive, has also paved the way for two further reviews.

One, led by Sir Christopher Kelly, will examine historical events at the mutual, while Lord Myners, the former City minister who recently joined the group's board, will assess the need for future corporate governance reforms.

Neither the FCA nor PRA would comment on Monday.

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Oil Services Group Plots Giant Sale Bonanza

By Mark Kleinman, City Editor

One of the biggest private equity casualties of the global financial crisis is drawing up plans to offload its biggest-remaining investment in a multibillion pound deal.

Sky News has learnt that Arle Capital Partners, which manages companies bought by Candover before 2009, is preparing to put Expro, an oilfield services giant, up for sale.

Insiders said on Monday that Arle and its fellow shareholders in Expro, the private equity arm of Goldman Sachs and Alpinvest, a fund manager, had appointed advisers from Goldman and Deutsche Bank to evaluate exit options.

A deal involving either a sale or stock market flotation could take place as soon as this year although Expro's investors have not set a formal timetable for selling the company.

Expro works with the world's biggest oil explorers to assist with production, often in difficult locations. It produced the first oil for Exxonmobil in Russia in 2005, and has grown through a string of acquisitions, including that of PowerWell Services in 2006.

Founded in Great Yarmouth in 1973, Expro is now based in Reading and is said to be worth at least £3 billion by analysts.

In results published recently for the six months to the end of September, Expro said it had made nearly $180 million (£108m) in adjusted operating profit during the period and insisted that it had excellent long-term growth prospects.

"As regards to the next six months, the Group remains cautiously optimistic and expects to see a continued improvement in performance, reflecting the continued strengthening in the international oil and gas sector and the benefits of our capital expenditure programme," Expro said.

"This anticipated near term improvement is, however, subject to the timing of significant offshore oil and gas developments, which in turn are subject to the decision making processes of both International and National Oil Companies."

Candover, Goldman and Alpinvest took Expro private in the summer of 2008 following a fierce £1.8bn bidding war with Halliburton, the US-based oil services group.

Expro is likely to be examined again by other industry players amid ongoing consolidation of the sector, with oilfield services firms' expertise sought after by big producers keen to squeeze more oil out of existing fields and to curb the decline in older ones.

Candover was one of the biggest names during the private equity boom which preceded the financial crash but made a series of poor investments. Arle was subsequently set up to manage the residual investments after it ceased to make new ones.

Among Arle's other holdings is Innovia, the banknote producer which was last month named the preferred producer of a new generation of polymer banknotes for the Bank of England.

Arle is in talks to sell Innovia to Pamplona Capital Management, another buyout firm. The currency provider is the final investment in Candover's 2001 fund to be sold.

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Pay Cap Triggers Shares For Top 1000 At HSBC

By Mark Kleinman, City Editor

HSBC is to hand new share awards to around 1,000 of its top managers as Europe's banks finalise plans to cope with new rules that will restrict the level of bonuses they can pay to senior staff.

Sky News has learned that HSBC is putting the finishing touches to a scheme that will oblige employees to retain the share allocations, which will be paid in quarterly instalments, for five years in order to align their interests more closely with those of external shareholders in the bank.

Fund management sources said that HSBC had been discussing the proposals in recent weeks with leading shareholders including Blackrock, Legal & General Investment Management and Standard Life Investments.

HSBC's plans come in the wake of proposals drawn up by Barclays to pay monthly cash allowances to hundreds of senior staff.

Sky News disclosed at the weekend that it is considering modifying the scheme so that more of the eligible executives receive the payments in stock following complaints from some investors.

Banks are attempting to work out how to deal with rules that will cap variable pay at a maximum of twice an employee's fixed salary.

City insiders said that HSBC's plans had been well-received by shareholders.

Managers included in the scheme will only be able to immediately sell the component of the share awards which allow them to meet personal tax obligations.

One investor added that he was satisfied that the proposals would not lead to significant inflation in the overall sums HSBC paid to top managers.

He pointed to the paradox of the new rules which meant that because the new allowances were fixed and were part of employees' basic pay, they would not be subject to clawback provisions.

Douglas Flint, HSBC's chairman, has spearheaded the development of the initiative, having warned last year that the European rules would damage the bank's competitiveness in countries where non-EU rivals will not be subject to the ratio restrictions.

Mr Flint had said last summer that increasing the salaries of its bankers was under consideration, but another investor said the proposals eventually settled upon by HSBC were preferable to a straight increase in salary.

One insider said that changes by European banking regulators to the definition of risk-taking staff had reduced the number of employees who would be affected from 3,500 to approximately 1,000.

HSBC is Europe's largest and most profitable bank, with a strong footprint in faster-growing markets in Asia and Latin America. It has, however, encountered significant headwinds in the form of a multi-billion pound fine from US regulators over sanctions breaches, while it remains under investigation by Brussels over alleged interest rate-rigging.

The pay of UK-based bankers is already subject to rules relating to the proportions that can be paid in cash and shares, and much of it has had to be deferred for at least three years under reforms introduced in the aftermath of the financial crisis.

Last summer, the Parliamentary Commission on Banking Standards proposed a 10-year deferral period for senior bankers' pay in order to encourage a greater focus on City long-termism.

The Treasury, which last autumn mounted a legal challenge to Brussels' efforts to impose a maximum two-for-one ratio between variable and fixed pay, is being kept informed about the plans of each of the major lenders.

HSBC, like other UK banks, will ask shareholders to vote at this year's annual general meeting on a resolution to allow it to pay up to twice the level of base salaries to senior staff as annual bonuses.

HSBC declined to comment on Tuesday.

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Car Sales Increased By Almost 11% In 2013

New car sales in the UK last year soared to their highest level since before the recession, according to industry figures.

A total of 2,264,737 cars were registered in 2013, up by 10.8% on 2012, and the highest number since pre-financial crisis 2007.

On average an extra 600 cars were sold each day in 2013 than the previous year.

The motor industry said improving consumer and business confidence, after an extended period of people putting off buying a vehicle and a competitive market place, had helped fuel sales growth.

But a car company boss has also admitted that cheap credit and people using compensation payouts from the mis-selling of payment protection insurance (PPI) as deposits, had played a significant role in the increased sales.

Duncan Aldred, managing director and chairman of Vauxhall Motors, told Sky News: "There's no doubt those two factors have been fundamental in the growth.

"The PPI mis-selling. It's estimated to have given around £3,000 per household in compensation, and in many cases that would have helped fund the deposit towards a new vehicle.

"There's also been some very strong finance offers. Vauxhall do a five-year 0% finance offer at the present time and that's helped stimulate the industry.

But he added: "The third factor is that we have come on the back of some low-levels of industry demand.

"So now there's a replacement cycle happening where new car-buyers are just saying 'I have to get my car replaced now, it's five years old, it's six years old, it's time to get a new one', and that is sustainable and that is something we will see grow into next year as well."

Ford took the top two slots for the best sellers, according to figures published by Society of Motor Manufacturers and Traders (SMMT), with Fiesta topping the chart followed by the Focus.

Vauxhall took third and fourth place with the Corsa, and then the Astra.

Private sales made up 1.07 million of the registrations last year - a rise of 15.6% on the 2012 share.

Both petrol and diesel-engined vehicle sales rose in 2013, but petrol's share of the market grew slightly - from 47.8% in 2012 to 48.8% in 2013 - while diesel's share dipped from 50.8% in 2012 to 49.8% in 2013.

While the number of hybrid and electric plug-in cars rose by 20.5% last year to 32,715 vehicles, their share of the market flat-lined at 1.4%.

The supermini sector was the largest last year, accounting for almost 36% of all sales.

Mike Hawes, SMMT chief executive, said: "With its best year since a pre-recession 2007, the UK new car market has helped stimulate the country's economic recovery.

"The 10.8% increase in 2013 reflects the attractive financial offers available, as well as increased demand for more technologically advanced new cars.

"We expect new car registrations to remain stable in 2014 as customers return to a more regular replacement cycle."

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Co-Op: Regulator Stands By Flowers Decision

A senior City regulator has told MPs he stands by his decision to approve the appointment of disgraced former Co-op Bank chairman Paul Flowers, arguing it was "correct at the time".

Clive Adamson, director of supervision at the Financial Conduct Authority (FCA), said the Methodist minister seemed to be the right person to control the "unruly" board at the bank, despite him later becoming embroiled in a drugs scandal and displaying a lack of knowledge about banking.

He said that Mr Flowers was "not the same individual" as he seemed at a later meeting before the Treasury Select Committee last year, when gave a stumbling performance and seemed unable to give basic facts and figures.

Mr Adamson was quizzed by MPs on the same committee about a 90-minute meeting he and two colleagues at the now-defunct Financial Services Authority held with Mr Flowers ahead of his appointment in 2010.

At the meeting, it was agreed two deputies would be needed to assist Mr Flowers as chairman because of his lack of banking knowledge.

Mr Flowers gave a stumbling performance when he appeared before MPs

He told the Treasury Select Committee: "I stand by the decision I made at the time.

"I am as surprised as all of us as to the events that surrounded Mr Flowers' apparent misdemeanours."

Following close questioning by MPs, Mr Adamson eventually agreed that the FSA overall made a mistake, but insisted he stood by the decision on Mr Flowers.

"With the benefit of hindsight, yes we did get it wrong," he said.

But committee member Jesse Norman likened it to a doctor saying: "The operation was a success but the patient died."

The Co-op Bank last year had to be rescued after a £1.5bn hole was discovered in its finances.

Regulators have announced the launch of investigations that could see former senior managers fined or banned from working in the industry.

Mr Adamson told the committee he was surprised by the former chairman's answers during his appearance before MPs last year, and that at his own meeting with Mr Flowers he had been "much more cogent".

But committee chairman Andrew Tyrie told him: "It is an extraordinary state of affairs that you are asking us to believe."

He criticised the decision to put Mr Flowers in place to oversee the board, saying: "Your solution was to put a financial illiterate in charge of it."

Mr Adamson said he was disappointed that no one "in public life or indeed his other associations" who may have "known more about some of his misdemeanours" ever alerted regulators.

But he admitted that he had never before approved a chairman with such little experience, telling MPs: "There was no hiding the fact that he didn't have sufficient experience so the decision was around how that could be mitigated."

Mr Adamson said Mr Flowers' 1981 conviction for gross indecency was disclosed but it was not considered relevant and he was not questioned about it. He said a separate drink-driving conviction was not known.

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'Boss-Napping' Victims Freed After 30 Hours

Two bosses held against their will at a Goodyear tyre plant in France have been freed after police intervened.

Workers had resorted to 'boss-napping' and taken the two men captive on Monday, inside a factory the company wants to close.

But, on Tuesday afternoon, a dozen officers arrived at the factory and emerged with the men minutes later.

Workers chanted "we're not the thugs" as the men were led away.

Union members, furious at the release, set fire to tyres outside the factory and defaced the factory's sign to read 'Badyear'.

Tyres were set ablaze in protest at the release

The seizure of the senior managers at the site in Amiens, which the firm has been trying to sell or shutdown for five years, marks a revival of the once-common hostage-taking tactic.

Regarded as more theatre than actual threat, it aims to put pressure on management.

Police do not normally get involved in the disputes but a judge agreed the action because the plant has seen violent protests in the past.

Sylvain Niel, a labour lawyer who has worked on similar issues, said the 'boss-napping' tactic had largely faded away because any agreements reached under duress were later voided by the courts.

He described it as an act of despair by workers "without room to manoeuvre".

Bernard Glesser is led away as workers chant 'we're not the thugs'

Workers at the site are pressing for better redundancy payouts.

Mickael Wamen, the union president, told French television: "Clearly it was no longer possible to keep fighting for our jobs, so we decided to change tactics and fight for the largest compensation possible."

In exchange for freeing the managers, workers demanded an €80,000 (£66,500) severance package plus €2,500 (£2,000) for each year worked.

The Goodyear plant's director and human resources chief were kept captive for 30 hours, refusing the offer of blankets and mattresses, according to local newspaper Courrier Picard.

The factory's sign is defaced to read 'Badyear'

The plant has a particularly contentious past, and has seen violent protests against the closure, including the burning of tyres and firing of paintballs at police.

Those held captive were Bernard Glesser, director of human resources, and head of production Michel Dheilly.

"Things were sometimes animated, sometimes calm, but without any meanness," Michel Dheilly told reporters.

Evelyne Becker, a union representative, said the two had been prevented from leaving after a stormy meeting with staff.

In a statement, Goodyear said: "This kind of initiative, always to be condemned, is especially inopportune and counterproductive at a time when we should concentrate on the future of employees affected by the restructuring, after several years looking for a solution."

The factory and its nearly 1,200 workers has become symbolic of France's labour issues.

Workers have seized on Goodyear's profitability in their fight against the factory closure, but the company says profit margins have been slipping for years and the business in Europe is not sustainable.

The union said in a statement: "We just want to continue to work and not swell the ranks of the unemployed and marginalised, and if for that we have to resort to extreme methods, we won't hesitate to do that."

In the wake of the global financial crisis back in 2009, a number of large companies in France were hit by 'boss-nappings' including 3M, Sony, Caterpillar and a Hewlett-Packard subsidiary.

The incidents, which usually last from a few hours to a couple of days, are punishable under French law by five years in prison and a €75,000 (£62,000) fine - as long as the boss goes free in under a week, but generally workers are not prosecuted.

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