Reuters News

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LONDON, Aug 8 (Reuters) - The British Bankers' Association released the following London Interbank Offered Rates (Libor) for dollars, euro and sterling at its daily fixing.


The spread of three-month Libor rates over three-month OIS rates, calculated from Reuters' data, expresses the three-month premium paid over anticipated central bank rates, or Overnight Index Swap rates.


The change from the previous session is indicated in parenthesis.

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LONDON, August 8 (Reuters) - Initial results for a scheme to get more British workers to save for their retirement by automaticaly enrolling them in company pension schemes have been better than the government expected, it said on Thursday.


Over 90 percent of workers enrolled in a workplace pension plan by the 50 biggest British employers are staying rather than electing to opt out, the first figures released on Thursday by the UK's Department for Work and Pensions showed.


The government had expected 30 percent to opt out, based on its own research with workers before auto-enrolment was introduced.


"Seeing our largest employers report such low opt-out rates bodes well for this ambitious programme, which will see millions more putting money aside for the future," pensions minister Steve Webb said in a statement.


Companies with more than 120,000 employees were required to start auto-enrolment in the second half of last year. For small firms employing between 50-89 staff the deadline is July 2014.


The government wants to encourage more workers to start saving for retirement. Only one in three British workers in the private sector were paying into a workplace pension, the DWP said.


Over 1 million workers have been enrolled into a pension by companies such as food chain McDonalds MCD.N , retailer John Lewis JLPLC.UL and supermarkets operator Asda WMT.N , the DWP said in a statement, with 6 to 9 million more people expected to join a company pension plan for the first time by 2018.


(Reporting by Sarah Mortimer; Editing by Greg Mahlich)

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ROME, Aug 8 (Reuters) - Italy's parliament on Thursday approved measures to ease some of the worst prison overcrowding in Europe by cutting pre-trial detentions and using alternative punishments for minor offences.


The upper house of parliament gave final approval to a decree law passed by the coalition government of Enrico Letta.


Italian jails are the most crowded in the European Union, with close to 67,000 detainees held in jails built for 45,000, and some prisons at over 250 percent of the capacity they were built for, according to prison rights group Antigone.


In January, the European Court of Human Rights ordered Italy to address the problem within a year, ruling that overcrowding had violated the rights of 7 inmates who brought a test case.


Chronic overcrowding, which the government declared an emergency in 2010, is caused by Italy's snail-paced justice system and a failure to build new prison cells during a deep economic recession.


Currently, 40 percent of the Italian prison population are awaiting trial, compared to 15 percent in Britain and Germany.


The package approved on Thursday will make pre-trial detention only applicable in exceptional cases for crimes punishable by less than five years in jail.


It also opens up a community service alternative to jail time to repeat offenders, though not in the case of crimes such as mafia association, stalking and child abuse.


(Reporting By Catherine Hornby; Editing by Barry Moody and Raissa Kasolowsky)

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* Dollar broadly weak as Fed policy uncertainty remains
* China data helps riskier currencies, especially Aussie
* Euro hits 7-week high versus dollar, helped by German data
* Sterling stays strong after Wednesday's BoE comments




LONDON, Aug 8 (Reuters) - Strong China trade data lifted the Australian dollar and helped drive the U.S. dollar to a seven-week low on Thursday against a backdrop of uncertainty over when the Federal Reserve will begin reducing stimulus.


The dollar index .DXY , which measures the currency's value against a basket of major currencies, fell 0.15 percent to 81.152, having hit 81.087, its lowest since mid-June. It has lost 4 percent since hitting a three-year high a month ago.


Although most analysts expect the dollar to resume gains towards the end of the year, recent inconclusive economic data and diverse comments from Fed policymakers have raised doubts over when and how fast it will reduce asset purchases.


Forecast-beating Chinese trade data, which could indicate the world's second-biggest economy was stabilising after more than two years of slowing growth, also buoyed growth-linked and riskier currencies against the U.S. dollar.


"Risk appetite got a boost overnight from the China trade data," said Ioan Smith, Managing Director, Knight Capital Group Europe, adding that a drop in dollar/yen helped drive euro/dollar higher.


"Follow through was limited which has kept the dollar within a tight range. The calendar is quite sparse today leaving the emphasis on short-term technical driven moves and risk assets."


The Australian dollar AUD=D4 , which tends to benefit from upbeat Chinese data because China is the main destination for Australia's raw materials exports, rose 0.8 percent to $0.9073.


The euro EUR= was up 0.15 percent at $1.3358, having hit a seven-week high of $1.3370, helped by figures showing an above-forecast German trade surplus and Wednesday's much stronger-than-expected German factory data.


"There are uncertainties about the timing of Fed tapering, whether it will be September or later, and about how fast they will start reducing their bond-buying programme," said Niels Christensen, currency strategist at Nordea in Copenhagen.


"The Australian dollar is firmer on the back of China data, sterling is doing quite well on yesterday's message from the Bank of England Inflation Report, dollar/yen is maintaining a downward trend, and all this is giving headwinds to the dollar."


The dollar hit a seven-week low of 96.085 yen JPY= , maintaining its recent downward trend, and was last at 96.33 yen. The yen showed no immediate reaction after the Bank of Japan kept its policy on hold, as expected.


Some Fed policymakers have suggested this week the central bank could scale back easing as soon as September, but this will depend on a further improvement in the jobs market.


However, last Friday's weaker-than-expected U.S. jobs data introduced further uncertainty.


Sterling GBP=D4 rose 0.1 percent to $1.5506, near a seven-week peak of $1.5534 hit on Wednesday after "forward guidance" on monetary policy from the Bank of England prompted investors to bring forward expectations of when interest rates will rise.


The BoE said rates would not rise until unemployment fell to 7 percent, something it saw as unlikely for at least three years. But the market took the view an improving UK economy may see rates rise sooner than previously thought.


(Additional reporting by Spriha Srivastava; Editing by Ruth Pitchford)

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MUMBAI, Aug 8 (Reuters) - The Reserve Bank of Bank of India will auction 120 billion rupees ($1.97 billion) of treasury bills on Aug. 14, including 70 billion rupees of 91-day t-bills and 50 billion rupees of 182-day t-bills, it said in a release on Thursday.


($1 = 60.9 rupees)


(Reporting by Neha Dasgupta; Editing by Anupama Dwivedi

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* Bank of Italy extends scrutiny before ECB takes on role

* Bad debts expected to climb for at least another year

* Banks' stocks of Italian sovereign debt highest on record

* Mid-sized lenders seen most in need of bolstering capital

By Silvia Aloisi

MILAN, Aug 8 (Reuters) - With bad debts set to climb for at least another year and the central bank intensifying its scrutiny of the sector, Italy's banks may be forced to tap investors or even the state for a capital fix.

Italian lenders have raised more than 26 billion euros ($35 billion) since the 2008 financial crisis, cut 20,000 jobs, sold assets and closed branches to strengthen their balance sheets.

But that is unlikely to be enough as an entrenched recession depresses profits and their large stock of Italian government bonds exposes them to the risk of a resurgent euro zone crisis.

Under pressure from the Bank of Italy, banks are cleaning up their balance sheets before a health check-up on asset quality by the European Central Bank (ECB) expected in early 2014, before it takes over supervision of euro zone lenders mid-year.

That may force them to turn to the market or the state for cash.

"If done properly, the asset quality review should result in loan losses spiking in the second half, dividend cuts and potential capital increases," analysts at Berenberg said in a note to clients.

Monte dei Paschi, the country's scandal-hit No. 3 lender, and a string of mid-sized banks look particularly vulnerable.

"Italian mid-tier lenders are among the weakest in Europe," Royal Bank of Scotland chief credit strategist Alberto Gallo said.

He estimates that Monte dei Paschi, which posted its fifth straight quarterly loss on Wednesday, may need up to 5 billion euros over the next three years, on top of a 4.1-billion-euro state bailout it received in February.

The bank will find it difficult to lure private investors for such a sizeable amount - more than twice its market capitalisation, potentially requiring more support from Italy's cash-strapped government, Gallo said.

Assuming a worst-case scenario of a 50 percent increase in non-performing loans in the next three years and a one percent widening in sovereign bond yields, Gallo sees another six Italian banks on top of Monte dei Paschi falling short of European capital requirements.

Among them is Genoa-based Carige CRGI.MI , which like Monte dei Paschi is controlled by a charitable foundation with close ties to local politicians and is desperately trying to avoid a cash call to plug a capital shortfall of 800 million euros.

Other banks that may need more capital are Banca Popolare di Milano, Banca Popolare di Vicenza, Banco Popolare BAPO.MI , UBI

UBI.MI and Banca Marche.

Popolare Milano is expected to launch a 500 million euro cash call in the autumn, while Banca Marche has approved going to market for 300 million this year, with the possibility of raising another 100 million next year.

VICIOUS CIRCLE

With Italy stuck in its longest recession since World War Two, souring loans on Italian banks' balance sheets have nearly tripled since 2007 to 249 billion euros in March, or about 14 percent of total loans, according to Bank of Italy data.

Bad loans are set to keep rising throughout 2014, with Italy expected to return to only modest economic growth next year, as they tend to lag economic activity by 12 to 18 months.

Banks have responded by scaling back lending, which in turn is delaying economic recovery. The latest data from the central bank shows loans to businesses fell four percent in June, the 14th consecutive monthly decline.

Instead, lenders have increased their stock of Italian sovereign debt by nearly 7 billion euros to 402 billion euros, the highest level since 1998, central bank data shows.

Banks load up on Italian bonds because yields are high and they can be used as collateral for ECB refinancing operations. They are also encouraged to do so by the Italian treasury, which sees them as longer-term investors than non-Italians.

But that risks futher tightening the "doom loop" between the Italian state and its banks.

"It's a pernicious circle in which persistent economic weakness, growing bankruptcies among small and mid-sized firms and cumbersome foreclosure laws that make it difficult for banks to write off their bad loans are all feeding on each other," said Nicholas Spiro of Spiro Sovereign Strategy, a consultancy firm focusing on sovereign credit risk.

Defending its own oversight of the industry, the Bank of Italy says it has strict criteria on non-performing loans, and that if it adopted the same definition used by leading European banks, excluding loans fully guaranteed by collateral, Italian lenders would look in much better shape.

Still, it is worried enough to have forced some 20 Italian lenders to increase their loan loss charges by some 3.4 billion euros in 2012, and last month it extended its inspection to the entire loan book of eight banks.

A source close to the matter said none of Italy's top five banks - Intesa Sanpaolo ISP.MI , UniCredit CRDI.MI , Monte dei Paschi, Banco Popolare and UBI - were among those being more closely scrutinised, but the central bank will keep up "strong pressure" on the sector throughout 2013.

($1 = 0.7471 euros)

(Editing by Louise Ireland)

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SHANGHAI, Aug 9 (Reuters) - China is set to revise rules on the setting up of new banks in the country, aiming to tighten requirements for foreign firms while easing regulations for local entities, a draft of revised rules published by the banking regulator showed on Friday.

Foreign financial institutions that want to establish new commercial banks in China or become strategic investors in Chinese banks must meet new requirements on capital adequacy.

Their regulatory capital level must meet the standards set by their home country governments and also not be below 10.5 percent, compared with the current requirement of 8.5 percent.

The maximum equity stake in a Chinese bank that foreign institutions may own is still capped at 20 percent for a single foreign investor and 25 percent for all foreign investors.

But the calculations of such stakes must now include indirect holdings by foreign institutions, according to the draft published by the China Banking Regulatory Commission (CBRC) on its website, www.cbrc.gov.cn.

The draft rules will be open for public comment until Sept. 9.

Chinese regulators typically issue final rules published within a month after the public comment period ends.

China attracted a wave of foreign investment in its banks from 2004 to 2008 when the country conducted a sweeping reform of its banking system, as it tried to convert its state-owned banks into commercial entities.

Foreign firms helped Chinese banks become more market-oriented in those years, but many Western investors have sold their stakes at huge profits in recent years.

That sparked criticism in some Chinese circles that state assets had been sold too cheaply, leading to calls to limit fresh foreign investment in the sector.

On the domestic front, the CBRC draft, which revises rules promulgated in 2006, plans a general relaxation of regulations on Chinese banks and companies, including:

-- Removing a provision banning local governments from investing in banks or taking part in daily operations of banks;

-- Removing a provision requiring that a financial institution wanting to establish a bank must also meet certain capital adequacy requrements itself;

-- Removing a provision that says a Chinese bank may only apply for one new branch opening at a time in a single city;

-- Removing a provision that restricts establishment of ATM branches.

(Reporting by Lu Jianxin and Gabriel Wildua; Editing by Jacqueline Wong)

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* Contraction driven by lower food and energy production

* Industrial output still up 1.4 pct quarter on quarter

* Recent economic data gives picture of fragile recovery



By Natalie Huet

PARIS, Aug 9 (Reuters) - French industrial output unexpectedly shrank in June, contrasting with recent more positive data and indicating that any recovery in the euro zone's second-largest economy may be fragile.

Other economic data and business confidence surveys have suggested that France may be pulling out of recession, but that muted domestic demand is still holding back the economy.

Industrial output fell 1.4 percent in June from the previous month after a revised 0.3 percent drop in May, data from the INSEE statistics agency showed on Friday, missing expectations in a Reuters poll for a 0.1 percent rise.

Highlighting a divergence between the euro zone's two largest economies, German industrial output rose by 2.4 percent in June, its fastest pace in nearly two years, data showed on Wednesday.

The contraction in French industrial output was driven by a decrease in the production of food and agricultural goods as well as in energy and mining.

Industrial output was nevertheless up 1.4 percent quarter on quarter.

"We still believe that the outlook for the industrial sector has brightened lately, on the back of a moderately more positive external outlook - particularly in Germany - and rising business confidence at home," Diego Iscaro, economist at IHS Global Insight, wrote in a note.

"Nevertheless, still difficult domestic conditions mean that any improvement is likely to be gradual and prone to relapses."

Higher readings in business and consumer confidence and a rise in industrial output in April have prompted French President Francois Hollande to drum up optimism over the health of the economy in recent weeks, even saying "recovery is here".

However, businesses and economists are sceptical, pointing out that data is still too fragile to help the Socialist government fulfill its pledge to reverse by year-end a rise in unemployment, currently stuck above 10 percent.

Statistics office INSEE has estimated that France's 2-trillion-euro ($2.66 trillion) economy has likely grown 0.2 percent in the second quarter, which would lead it out of a shallow recession, but not enough to keep the economy from shrinking by 0.1 percent overall this year.

It will publish GDP data for the second quarter on August 14.

France's budget deficit widened in June although tax intakes increased, a separate set of data showed on Friday.



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French industrial output http://link.reuters.com/huq57s

Budget balance http://link.reuters.com/mud56s

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(Reporting by Natalie Huet; Editing by Ingrid Melander and Susan Fenton)

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OSLO, Aug 9 (Reuters) - OSLO, Aug 9 (Reuters) - Norway's sovereign wealth fund, one of the world's biggest investors, returned 0.1 percent on its portfolio in the second quarter of 2013, beating its own benchmark index by 0.3 percentage point, it said on Friday.

The fund increased the share of equity holdings to 63.4 percent of its portfolio from 62.4 percent three months ago and cut its ownership of government bonds.

"Equity markets were boosted by a strong market in the U.S. and Japan while emerging markets pulled in the other direction," Yngve Slyngstad, the fund's chief executive said.

"Fixed income returns were undermined by a rise in global yields," he added.

Among the biggest changes in its portfolio, it cut is British government debt holdings by 26 percent from three months earlier and increased its Japanese government bonds by 30 percent.

The fund's investments totaled 4,490 billion Norwegian crowns or $760 billion on Friday. The fund holds about $150,000 for each of Norway's 5.1 million residents.

(Reporting by Gwladys Fouche in Oslo; editing by Balazs Koranyi)

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Position: Bank of Japan Governor

Incumbent: Haruhiko Kuroda

Date of Birth: October 25, 1944

Term: April 9, 2013 - April 8, 2018

Key Facts:

- Prime Minister Shinzo Abe picked Kuroda to lead the BOJ, signalling a dramatic shift to a more aggressive easing stance to end 15 years of nagging deflation.

- Kuroda stunned global financial markets after his first policy meeting, by launching quantitative easing on a unprecedented scale. The BOJ agreed to double the amount of government debt it holds to achieve 2 percent inflation in two years.

- Kuroda, a longtime critic of the BOJ, demonstrated his powers of persuasion in convincing four holdouts on the 9-member board to support his overhaul of monetary policy. The resulting unanimous vote sent a strong signal that the BOJ had broken with its more cautious past.

- A former career bureaucrat at Japan's finance ministry, Kuroda has experience influencing financial markets from his days leading Japan's currency policy, when he was regularly ambushed for comments on possible yen intervention.

- Kuroda was appointed head of the Asian Development Bank in 2004 and used his position at the development lender to push for closer economic integration in Asia.

- Kuroda has a bachelor's degree from Tokyo University's prestigious Faculty of Law and a master's degree in philosophy and economics from Oxford University.

- Known for his soft-spoken demeanour and analytical bent, one of Kuroda's former associates has said Kuroda is like a Japanese version of the Mr. Spock character from the U.S. TV show "Star Trek".

(Reporting by Stanley White; Editing by David Cutler)