Fraud Probe Into Foreign Exchange Market

The Serious Fraud Office has opened a criminal investigation into allegations of fraud in the foreign exchange market.

Britain's financial watchdog Financial Conduct Authority (FCA) in October joined other regulators around the world in investigating whether traders at some of the world's biggest banks rigged the £3trn-a-day market in Britain.

Some 40% of world's foreign exchange trading is done in London.

The SFO has refused to confirm which City institutions may be under investigation, but has told Sky News a range of individuals and banks will be subject to the inquiry.

Earlier this year, Martin Wheatley, the FCA head, said the allegations were "every bit as bad as they have been with Libor".

Only last week, the boss of Royal Bank of Scotland said an investigation into alleged manipulation of foreign exchange markets could pose a bigger problem for the industry than the Libor interest rate-rigging scandal.

RBS paid out £358m last year to settle claims it manipulated Libor rates.

It was one of several banks hit with large fines for rigging financial benchmarks.

Asked if the foreign exchange probe could be a bigger problem than Libor, RBS chief Ross McEwan said: "Unfortunately, it has then hallmarks."

He added: "We're still doing a lot of investigation.

"We're going through just millions and millions of emails, chatrooms, conversations to see what actually went wrong.

"Unfortunately, I have the feeling that this is a sort of Libor case again.

"The difference this time is that we haven't sat back and denied it. We've gone into it and are doing the investigation hand-in-hand with the authorities."

He said it was another problem from the past that banks had to deal with in order to move on.

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China Chicken Scandal Hits Fast Food Chains

A growing number of fast food and cafe chains are becoming embroiled in a scandal linked to a single supplier accused of passing off "toxic meat".

Starbucks, McDonald's and Burger King are among the outlets that have taken action since a video came to light which was said to show staff at Shanghai Husi Food Co using expired meat and picking up meat from the floor to sell on to stores in China.

The supplier, which was shut down after the TV report was shown, is a unit of US-based OSI Group.

McDonald's said meat from the supplier had even been sold to its branches in Japan, where it was used in the firm's McNuggets.

The hamburger chain and KFC's parent firm Yum Brands apologised to Chinese customers while Starbucks said some of its stores previously sold products containing chicken originally sourced from Shanghai Husi.

KFC's owner has apologised to diners

Burger King and Dicos, China's third-ranked diner owned by Ting Hsin International, said they would remove Shanghai Husi food products from their outlets.

Pizza chain Papa John's International said on its Weibo blog that it had taken down all meat products supplied by Shanghai Husi and cut ties with the supplier.

Food safety is one of the top issues for Chinese consumers after a scandal in 2008 where dairy products tainted with the industrial chemical melamine led to the deaths of six infants and made many thousands sick.

Other food scandals have hit the meat and dairy industries in recent years, and many Chinese look to foreign brands as offering higher safety standards.

Starbucks said on its Chinese microblog site that it had no direct business relationship with Shanghai Husi but that some of its chicken acquired from another supplier had originally come from Husi for its "Chicken Apple Sauce Panini" products.

Burger King said in a Weibo statement that it had taken off its shelves all meat products supplied by Shanghai Husi and had launched an investigation.

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BBA In Talks About Payments Council Merger

By Mark Kleinman, City Editor

The banking industry's main lobbying group is considering proposals to merge with at least two of its peers amid pressure from leading members to reduce costs levied by trade organisations.

Sky News understands that the British Bankers' Association (BBA) discussed potential mergers involving the Payments Council and the UK Cards Association at a board meeting last week.

The talks were preliminary and it is unclear whether either idea will progress to a more formal stage, according to one person familiar with the talks.

The discussions come at a time of significant structural change in the banking industry and associated sectors, with a new payments industry regulator introduced by next April to oversee the infrastructure which processes £75 trillion in annual payments.

"There are lots of conversations taking place about what the future will look like and how the industry organises itself," said one insider.

It is not the first time the BBA has examined a combination with one of its peers.

In 2012, it looked at a possible tie-up with the Council of Mortgage Lenders (CML) but the idea did not progress.

That followed the loss of the BBA's revenues from administering the Libor benchmark rates, a role it gave up in the wake of the manipulation scandal which cost the chairman and chief executive of Barclays their jobs.

The BBA previously generated millions of pounds each year from selling licences to data providers to allow them to publish Libor benchmark data.

Sources said that Libor accounted for roughly 20% of the BBA's revenue before oversight of the benchmarks switched to third parties last year.

Fees for membership of the BBA are paid on a sliding scale dictated by a bank's size, with major high street lenders such as Barclays and Royal Bank of Scotland paying the largest sums.

Last year, the BBA received just over £7.5m in subscription fees, up from £6.2m in 2012.

Bank executives say they are anxious to keep a lid on the cost of trade body memberships at a time when their businesses are under myriad other cost pressures.

The BBA and Payments Council declined to comment.

A spokesman for the UK Cards Association said: "The UK Cards Association is the independent trade association for the card payments industry. We have had no merger discussions with any organisations, and are continuing to provide independent representation for our members across issues concerning card payments."

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Tesco Chief Philip Clarke To Step Down

Tesco's chief executive Philip Clarke is to quit after a string of poor results for the supermarket giant.

The group, which is seeing its worst sales performance in four decades, announced Mr Clarke's departure as it issued a fresh warning on profits.

He will stand down on October 1 and will be replaced by Dave Lewis from Unilever, who is a non-executive director of BSkyB, owner of Sky News.

The retailer is battling to stop a decline in sales figures

Tesco's sales fell by 3.7% in the three months to May 24 on a like-for-like basis, an acceleration of the 3% slide in the previous quarter.

Mr Lewis will receive a basic salary of £1.25m, plus "standard" benefits. He will also receive £525,000 in lieu of his current year cash bonus from Unilever

Mr Clarke, who earned £1.14m in the role, will get a payoff worth 12 months salary.

When Mr Clarke took over from Sir Terry Leahy in March 2011, the Tesco share price stood at 400p, but are now trading at 291p - equating to a shareholder loss of £8.8bn.

Dave Lewis is to bag a salary of £1.25m in his new role

Tesco chairman Sir Richard Broadbent said: "Having guided Tesco through a substantial re-positioning in challenging markets, Philip Clarke agreed with the Board that this is the appropriate moment to hand over to a new leader with fresh perspectives and a new profile."

He added: "Dave Lewis brings a wealth of international consumer experience and expertise in change management, business strategy, brand management and customer development."

Mr Clarke said: "Having taken the business through the huge challenges of the last few years, I think this is the right moment to hand over responsibility and I am delighted that Dave Lewis has agreed to join us.

"Dave has worked with Tesco directly or indirectly over many years and is well-known within the business. I will do everything in my power to support him in taking the company forward through the next stage of its journey."

Tesco's market share has fallen by more than two percentage points

But Sky's City Editor Mark Kleinman said the appointment of Mr Clarke's successor represents a gamble.

He said: "Dave Lewis, a 25-year veteran of Unilever, the consumer goods giant behind Dove, Lynx and Marmite, is the first outsider to take the helm of Tesco in its 95-year history."

Mr Clarke, who had worked his way up from the shop floor to head Tesco, admitted last month the chain's sales figures were the worst he had known in 40 years.

But a trading update said conditions were more "challenging" than predicted.

The group said: "The overall market is weaker and, combined with increasing investments we are making to improve the customer offer and to build long-term loyalty, this means that sales and trading profit in the first half of the year are somewhat below expectations."

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Glenfiddich Eyes £100m Drambuie Scotch Merger

By Mark Kleinman, City Editor

The family-owned business behind Glenfiddich and Grant's is examining a £100m takeover of Drambuie, the liqueur reputed to be made from a recipe concocted by Bonnie Prince Charlie.

Sky News understands that William Grant & Sons is among an initial crop of bidders for Drambuie, which has been put up for sale by the MacKinnon family.

Other suitors for the brand include Remy-Cointreau, the French maker of Remy Martin cognac, according to insiders.

News of William Grant's interest comes just weeks before the referendum on Scottish independence, and would facilitate the combination of some of the drinks industry's most prestigious brands.

The Balvenie Single Malt and Hendrick's Gin are also part of William Grant's portfolio, and analysts say that Drambuie would fit well alongside its other brands.

Drambuie's owners are reported to be seeking £100m for the business, a price that puts it within easy reach of all of the major spirits companies with a desire to acquire another heritage brand.

The sector has seen a further wave of consolidation this year, led by the Japanese group Suntory, which paid $16bn to buy Beam, the US-based maker of Jim Beam whisky in January.

Whyte & Mackay, another spirits group, was sold to Emperador, a Filipino brandy producer, for £430m in May, and other deals are said to be brewing.

Drambuie says its origins date back to July 1746, when Bonnie Prince Charlie was on the run following his defeat at the Battle of Culloden.

He was so impressed by the bravery of those who assisted him in his escape from the Isle of Skye that he gave John MacKinnon, the chief of one of the Clans, the secret recipe for his personal liqueur.

In the 1930s it became a popular drink in the US after the end of prohibition, and is now examining further international expansion.

William Grant is run by Stella David, a former executive at Bacardi, who took the helm in 2009.

A number of other major drinks groups, including Diageo and LVMH, are understood to have opted not to make offers for Drambuie, which is being auctioned by bankers at Rothschild.

A William Grant spokesman declined to comment.

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Royal Mail Warns Of Lower Parcel Revenues

Royal Mail has warned of a hit to its full-year revenue expectations because of growing competition for parcel deliveries.

In its first quarter results statement, the postal operator said that while total revenues had risen 2% - thanks to a 3% increase in cash from letters - UK Parcels revenue fell 1%.

It blamed growth among rivals for the performance and said it would have to rely on cost control measures and letters sales to meet full-year expectations.

The revenue growth from letters was put down to stamp price increases.

Letter volumes declined by 3%.

Its share price fell by 4% in early trading on the FTSE 100 in the wake of the trading update - taking the Group's value to its lowest level since its highly controversial privatisation last year.

Chief executive Moya Greene said: "In the first three months of our financial year we have delivered low single digit revenue growth in line with our strategy.

"Trading has been characterised by a good performance in letters, with the decline in addressed letter volumes better than our expected range, but a weaker than expected performance in UK parcels, largely driven by the intensifying competitive environment in the account, consumer/SME and export channels.

"On costs, performance is better than expected. Given the increasing challenges we are facing in the UK parcels market, our parcels revenue for the year is likely to be lower than we had anticipated.

"However, through cost control measures and with continued good letters performance we expect to be able to offset the impact on profit such that our overall performance would remain in line with our expectations for the full year.

"Our parcels revenue will be dependent on our performance in the second half, which includes the Christmas trading period, and on no further weakening in our addressable UK parcels market."

The results were released 24 hours before Royal Mail's AGM and four days after it warned it faces a possible fine in France for anti-competitive behaviour.

Ms Greene is now able to firmly focus on the day-to-day business following the company's flotation last autumn.

A critical report by MPs earlier this month prompted the Government to announce a review of how state assets are sold in future amid accusations the listing did not deliver taxpayer value.

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Gadgets 'Cost Hundreds Of Pounds More In UK'

Consumers in the UK are paying hundreds of pounds more for some gadgets than US shoppers, a watchdog says.

Which? compared the prices - excluding tax - of 13 products ranging from televisions to computer applications, and found Britons were getting a "raw deal".

The prices were calculated on June 18 and show that a Samsung television was £402 more expensive in the UK.

Meanwhile an Apple MacBook Pro 13-inch laptop cost £194 more here than in the US.

The Microsoft Xbox One and the Sony PlayStation 4 were both £57 more expensive in Britain.

The increased prices also apply to digital goods, Which? said, with a 12-month subscription to imaging software Adobe Creative Cloud costing £114 more here than in the US.

The Xbox One is £57 more expensive in Britain than in America

Which? said manufacturers should "play fair" and explain why technology products are more expensive in the UK in comparison with the US.

It is also calling on the Government to raise the threshold for import duty on goods bought online to the same level as that placed on goods brought back from abroad.

The current threshold for customs duty for technology products bought online from a country outside the EU is £135, but travellers can bring home goods worth up to £390 without having to pay duty.

Which? executive director Richard Lloyd said: "UK consumers are getting a raw deal by paying up to hundreds of pounds more for the same tech products on sale in the US.

"Manufacturers should play fair and explain why consumers are paying more for buying in the UK."

Which? said that import tariffs, as well as companies protecting themselves against exchange rate fluctuations, are among the reasons prices are higher.

Technology journalist Ella Williamson told Sky News: "It's not fair on consumers.

"I think a precedent has been set that you can charge more in the UK - and I think that something does need to be done about it."

However she added that rigorous EU testing standards partly contributed to the increased cost.

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UK Tops 'Dirty 30' EU Power Plants League

The UK has been ranked joint first for Europe's most polluting coal-fired power stations by a coalition of environmental and health campaign groups.

The "Europe's Dirty 30" study ranked nations according to carbon emissions in 2013.

The UK topped the report alongside Germany with nine of the 30 dirtiest coal plants - many built in the 1960s and 1970s with low generation efficiency.

The study also suggested that while the plants produced just under a third of the country's UK electricity supply last year, they were responsible for nearly two thirds of the carbon emissions produced by the power sector.

It said that in addition to carbon dioxide, the plants in the UK also produced nitrogen dioxide, sulphur dioxide, particulates and mercury - pollutants that affect human health and the environment.

According to one of the groups, the Health and Environment Alliance (Heal), air pollution caused by coal power stations in the UK was responsible for an estimated 1,600 deaths a year.

While the report praised Government efforts to support renewable energy sources, it also demanded more was done to phase out coal-fired electricity power generation.

A spokeswoman for the Department of Energy and Climate Change said: "We are moving to a low-carbon energy supply and any new coal-fired power stations must be built with Carbon Capture and Storage technology which will reduce carbon dioxide emissions while keeping fossil fuels in the UK's electricity supply mix.

"Our low carbon policies are working - emissions are 23.6% lower than in 1990 and renewables now produce 15% of all electricity generation."

The study identified the UK's largest coal plant, Drax, as the sixth-worst for pollutants in the EU.

Europe has increased its use of existing coal power stations as a result of the low price of coal compared to gas, with many of the EU's coal-fired plants now running at or near full capacity - a move, the campaigners argued, was against the bloc's efforts to tackle climate change.

The report was released as the European Commission prepares to announce a decision on whether the UK's "capacity market", which will provide payments to generators to ensure there is enough power available to meet peak demand, meets EU subsidy rules.

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Banks Face £1.5bn Hit From PPI Claims Deluge

By Mark Kleinman, City Editor

Britain's largest high street banks will announce next week that they are setting aside more than £1bn in additional provisions to compensate customers who were mis-sold payment protection insurance (PPI).

Sky News can exclusively reveal that Barclays, Lloyds Banking Group and Royal Bank of Scotland (RBS) will use their half-year results statements to the City to disclose that the big four lenders' combined bill for the PPI scandal has soared to well over £20bn.

The new provisions are understood to be being driven by an acceleration in the number of claims which relate to PPI policies sold before 2005, and have prompted urgent talks among bank executives about the conduct of claims management companies (CMCs).

Insiders said that the new top-ups could reach close to £1.5bn between the biggest banks.

To date, the PPI scandal has seen Lloyds allocating £9.8bn for compensation; Barclays has set aside £3.95bn; RBS has provided £3.1bn; and HSBC's bill has reached £2.1bn.

The sizeable new top-ups may revive calls for a so-called time-barring exercise, which would involve imposing a cut-off point for consumers to submit compensation claims.

Banking sources said on Tuesday that Barclays would account for the largest percentage of the additional compensation bill but pointed out that that was largely because it had not taken a new provision since last July, whereas some of its rivals had done so earlier this year.

The total PPI bill for Lloyds, which is 25%-owned by taxpayers, is expected to pass £10bn as a result of its new provision.

The final numbers are still being worked out with each lender's auditors, which are understood to be pushing board members to take a conservative approach to the issue by setting aside substantial sums.

The scale of the new bill will surprise many in the City, particularly after the Financial Ombudsman Service (FOS) said on Monday that new complaints fell by more than 50% during the last three months, prompting it to say that the worst of the scandal had passed.

The FOS said it had received just under 57,000 PPI-related complaints in the second quarter of the year, compared with just over 132,000 in the same period last year.

The latest wave of claims is understood to be particularly concerning to banks because many date back to before 2005, which was the reference point for an unsuccessful judicial review brought by the major banks three years ago.

Executives at major banks argue that the cost of administering even fraudulent or otherwise invalid claims can reach £1000 each, eroding their capital at a time when they are facing political demands to lend more money to small businesses.

Banks are obliged to keep customer records for seven years, meaning that many new claims relate to policies for which neither banks nor customers have an accurate record.

The British Bankers' Association (BBA) had been leading tentative discussions with the City regulator about a cut-off point for claims.

Martin Wheatley, the Financial Conduct Authority's chief executive, told MPs earlier this year that he was sceptical about the prospects of a time-barring exercise.

At the time, the BBA said: "We are working with our members on a number of aspects of PPI complaints. The ongoing work focuses on three issues as a priority: addressing backlogs, making sure that customers can be confident that the offers they receive are right and highlighting that there is no need for them to engage a claims management company.

In January last year, the FCA said it had agreed to talks with the industry about a time limit, but would insist that the banks funded a huge advertising campaign to ensure sufficient awareness of the PPI issue.

The hostility of consumer groups to a deadline appeared to kill any prospect of a deal, and it is unlikely that they would be any more enthusiastic about a deal, analysts suggested.

Barclays, Lloyds and RBS all declined to comment.

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Russia Faces 'Hard-Hitting' Sanctions Over MH17

Russia Only Needs To Create Doubt Over MH17

Updated: 12:50pm UK, Tuesday 22 July 2014

By Katie Stallard, Moscow Correspondent

From a cavernous situation room inside the Russian Ministry of Defence, the Lieutenant-General set out Russia's version of events.

The briefing was carried live on Russian state TV and handed out on DVDs by Russia's ambassador to Malaysia.

They claim to have detected a Ukrainian military aircraft within 3-5km of the Malaysian Airliner on Thursday.

"The SU-25 fighter jet can gain an altitude of 10km, according to its specification," Lt Gen Kartopolov explained (which happens to be the exact altitude at which MH17 was flying).

"It's equipped with air-to-air R-60 missile that can hit a target at a distance up to 12km, up to 5km for sure.

"We would like to get an explanation as to why the military jet was flying along a civil aviation corridor at almost the same time and at the same level as a passenger plane."

They also claim to have detected an unusual increase in Ukrainian radar activity leading up to the incident, and that the airliner came down "within the operating zone" of Ukrainian anti-aircraft missile defences.

He showed satellite images of a Ukrainian base close to Donetsk, pointing out that its surface-to-air missile units were missing on the day of the crash.

He then appeared to claim that one of the units had moved into rebel-controlled territory on the morning of the crash.

Finally, Russia categorically denied supplying the rebels with Buk surface-to-air missile systems, or indeed any other weaponry.

Now, firstly, it's worth saying there is a propaganda war in both directions here, which has been going on for several months, and that both sides are pursuing interests beyond the immediate tragedy of MH17.

But the questions Russia presents "that Kiev must answer" raise a few questions themselves.

The SU-25 "fighter jet" Russia claims to have identified close to the airliner is a ground attack aircraft - according to its manufacturer its maximum service height, without weapons, is 7,000m - 3km short of MH17.

As Russian military analyst Pavel Felgenhauer pointed out, it's also too slow: "They should have at least claimed it was an SU-27," he said.

And if the rebels don't have the Buk missile system, or indeed any other Russian-supplied weaponry - how did they target the dozen Ukrainian military aircraft they have previously boasted of shooting down?

This included an Antonov-26 transport aircraft, flying at an altitude of 6,500m last week.

It is possible of course that the rebels have acquired weapons from Ukrainian military bases, although the government in Kiev insists it can account for all of its missile systems.

And what exactly is the case Russia is setting out? Is it suggesting the Ukrainian SU-25 (despite its technical limitations) shot down the passenger jet in mid-air?

And why? The plane would seem to have been travelling in the wrong direction for Ukrainian forces to have perceived it as a hostile aircraft coming from Russia, and the rebels don't have an air force.

So are they seriously suggesting the Ukrainians deliberately moved their missiles on to rebel-held territory and shot the airliner down as part of some sort of nefarious plan to frame the rebels and turn world opinion against them?

But then Russia doesn't need to prove its case - all it needs is to create one, to insist that there are different versions of events, that there is credible claim and counter-claim.

In much the same manner as a criminal defence barrister, Russia doesn't have to demonstrate that its alleged client is innocent - just to establish enough doubt in the minds of the jury - in this case the international community - that they can't be completely sure.

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