15/07/2014 Asia Business Report

Citigroup agrees to pay a fine of $7 billion over risky mortgages.

And we take you to Shanghai to find out why the group's leaders want to

set up a new financial institution there.

`` BRICS leaders. Thank you for joining us. I'm Rico Hizon. The 2008

global economic crisis didn't just wreck entire economies, it destroyed

lives as well. Citigroup has now agreed to pay out billions of US

dollars to authorities to settle an investigation into the sale of

risky, sub`prime mortgages. Citigroup has announced they will

pay out $7 billion. More than half will be going to the Department of

Justice, while $2.5 billion will be paid in consumer relief, for some of

the Americans who lost their homes. Our New York business reporter

explains what this means to the US bank. The bank has been forced to

acknowledge that there were misdeeds. It actually mis`sold some

sort of mortgage related instruments during the financial crisis. As a

result of that, it has been forced to reach an agreement with US

authorities and pay a huge fine. This isn't the first time we have

seen a big bank being penalised for this sort of business. In fact, it

is almost becoming routine on Wall Street these days. We heard from the

US attorney general, who described the egregious behaviour. He has said

in the past that no bank is too big to jail, and he warned there are

others who would also face potential fines in the future. This action is

the latest step in our ongoing activities to see who defrauded the

American people and damaged markets. Citigroup is not the first financial

institution to be held accountable by this justice department, and it

certainly will not be the last. JP Morgan is one big American firms

that's been forced to pay huge fines before. The Bank of America is

another bank that is currently being investigated. Citigroup has a large

presence. Will this huge fine of about $7 billion have any impact on

its global operations? We are certainly talking about a global

bank with operations in Asia, Europe, all around the world. I

suspect the staff have been waiting to hear what the outcome will be.

What is interesting is that the chief executive of the firm has come

out with a statement, saying they believe the settlement is in the

best interests of shareholders, allowing them to move forward and

focus on the future not the past. Clearly the shareholders feel the

same, because the share price actually rose.

For more on that and all business news, go to the BBC News website.

There are two global organisations tasked with stabilising finances and

funding major projects in the developing world, the World Bank and

the IMF. But the countries most affected by their policies have

often felt shut out of the decision`making process. That's

because it's the large Western economies and Japan that holds the

pursestrings. A BRICS meeting will try to set up an alternative, as our

Shanghai reporter tells us. Rumour has it Shanghai has been

chosen to host the headquarters of the new BRICS development bank,

widely seen as the developing world's on set the perceived

unfairness of the existing global financial institutions. With the

BRICS economy sailing in choppy waters, with a concern about a

slowdown, the bank's job will be to find big infrastructure projects and

keep the economy is going. To be fair, you can't find many on the

streets of Shanghai who have heard of it BRICS summit, but its key

focus, concern about growth, strikes a chord with anyone you talk to.

It's getting worse, this delivery man tells me. There is so much more

competition in business nowadays. TRANSLATION: The economy is pretty

bad compared to last year. People just aren't spending is not. `` as

much. This BRICS summit is also expected to pledge another large sum

of money, up to 100 billion US dollars to a kind of alternative to

the IMF. An emergency pot of money to protect emerging countries from

the volatility of international capital. It is, on the one hand, a

sign of the growing cloud and confidence of the BRICS members, but

on the other the need for such a fund underlines their vulnerability.

The World Trade Organisation has ruled against the US, saying it

broke regulations by imposing duties on Chinese steel products, solar

panels and other goods. It found that Washington went too far in its

response to alleged government subsidies to Chinese countries. In a

similar case, another panel ruled in support of claims by India in

support of tarrifs from steel exports of three of its major

carriers. Air Asia says its first half`year earnings have fallen, and

they put that down to the depreciating Chinese economy.

Air China has warned of a $180 million for the first half yearly

loss. They say that stupid the weaker currency.

Chinese telecommunications equipment maker ZTE has cited improving

margins in its global business and revenues from new contracts to build

the next generation of telecommunications. They expect ``

expect first half net profit of more than $160 million.

Standard Chartered has begun proceedings against the head of the

commodities trading form, suspected of loans fraud. The bank is the

fourth company to start legal action to recoup losses since Chinese

authorities launched an investigation into whether a private

metals training company and its related companies used fake

warehouse receipts as collateral to secure loans. `` trading company.

A British man and his American wife will be facing the courts in China

next month in connection with bribery allegations involving the

pharmaceutical giant GlaxoSmithKline. It's part of a

broader Chinese anticorruption push. But it's China's attempt to end the

process, and do the multinationals have anything to see if they follow

the rules? The process looks very politicised,

because that is what it the headlines, but you have to see that

behind the political process is an economic reform agenda that drives

the process, and that will in the end decide how this process will

unfold. There will be continuing headlines, as the leadership

struggles out who retains power. In the long run, there will be

continuing reforms. What the Chinese call anticorruption is a

regularisation of government processes. How would you rate, so

far, the anticorruption campaign of the new government? I think what one

has to see is that the anticorruption campaign is China's

way of phrasing things. Actually, it is part of the government programme.

The person who was put in charge of the anticorruption campaign was one

of the economic leaders under the previous leadership, who was brought

in to push the anticorruption campaign as part of a largely de

regularisation and marketisation of the ranking system and the state

enterprise system. `` banking system. That is where the fights are

happening, because you have basic interest sitting there in the

leadership, which still controls state`owned enterprises, who are

being pushed out in favour of a more regular and government controlled

process. It's a very entangled web of corruption that has to be

untangled at the moment. How do you think this will impact multinational

companies in China? Do they have anything to fear if they follow

rules? No, in the end, it will go in the interests of multinational

companies, because they are the ones who want regular process. What will

happen in the short term certainly is that companies who have a network

of contacts in China might see that upset by people leaving and new

people coming in, but overall, the process is very much in line with

what will be national companies have. `` have been asking for.

Before we go, a quick look at the markets. Asia is rising in

mid`morning trade after US equities rose overnight, lifted by strong

results from Citigroup and more results from Citigroup and more

deals in the healthcare to the Dow Jones industrial average hit a

record high but investors are waiting for the congressional

testimony by Janet Yellen on US market policy. Thank you for

investing your time with us. Sport Today is up next.

This is BBC News. The headlines: The United States has welcomed an

Egyptian call for a ceasefire in Gaza. Israel and the militant

Palestinian group Hamas say they are considering the proposals.

The Libyan government has said it may ask for international help to

end fighting between rival militia groups after a new attack at Tripoli

airport. The Church of England has voted to

allow women to become bishops for the first