India Cotton Trader Boosts Buying to Help Suffering Farmers

Pratik Parija Bloomberg March 6, 2020


(Bloomberg) -- An Indian state-run cotton buyer is boosting purchases from farmers to prevent them from making distressed sales as the spreading coronavirus curbs demand in key export markets and causes prices to slump.

Cotton Corp. of India Ltd. has bought about 7.5 million bales (170 kilograms each) from farmers so far in 2019-20, and will buy more if growers offer supplies, Chairman P. Alli Rani said in a phone interview.

Transport of the fiber across China is being delayed, and concern is mounting that factory closures will weigh on demand. Logistical issues mean mills are finding it hard to take delivery of cotton and ship yarn products to buyers.

Cotton futures in New York have fallen about 12% from their Jan. 13 high, while local Indian prices have dropped 7% since Jan. 22.

For Arun Sekhsaria, a top executive at one of the biggest cotton exporters, the virus has meant that he can’t risk selling abroad, though he notes that the support of the state buyer means cotton producers are better off than most.

“I am just keeping quiet,” said Sekhsaria, managing director of D.D. Cotton. “I am not booking any cargoes for exports as I can’t travel overseas now if there is any issue with the shipments for any reason. Everything is uncertain and nobody knows where prices will go.”

Cotton Corp.’s purchases are its biggest on an annual basis since 2014-15, when it bought 8.7 million bales. The company, which acquires fiber at government-set minimum prices, bought about 30% of total market arrivals so far this year and is currently purchasing about 50% of daily arrivals, Rani said.

The company has separately bought about 8,000 bales of long staple cotton from ginners at market rates this year through its commercial business, she said. It bought 7,700 bales in 2018-19, according to Cotton Corp.

“All my infrastructure has been engaged in minimum support price operations,” Rani said. “I am not really concentrating on commercial purchases.” About 65% of total expected production has already arrived in the market, with the remainder set to arrive in the next two to three months.

Read: Coronavirus Causing ‘Big Slowdown’ in Chinese Cotton Factories

Demand for Indian cotton has fallen from most buyers, including Vietnam and China, Sekhsaria said. That leaves Bangladesh as its only export option, and the nation may buy as much as 2.5 million bales in 2019-20, he said.

The current domestic cotton price makes it attractive as it’s lower than the government-set minimum support price, said Vinay Kotak, a director of Kotak Commodity Services Pvt., one of India’s biggest cotton exporters. “Imports are also becoming costlier due to a depreciation in the rupee.”

Some cotton ginners will lose money because of their expensive stockpiles, Kotak said. “We are seeing a new low every day. There is still uncertainty in the market. If the virus settles, the prices will shoot up.”

“International prices are falling because of fear psychosis,” Kotak said. “We are yet to start business with Chinese buyers.”

Cotton, yarn prices fall as coronavirus brings exports to China to a halt
Indian exporters aren't pursuing the Chinese market either, as travel to that country to address quality or quantity issues post shipment will be difficult

Dilip Kumar Jha & T E Narasimhan | Mumbai/Chennai Last Updated at March 6, 2020 

Cotton yarn lost 2-3 per cent over the last one month, while synthetic yarn declined by 4-5 per cent during the past one month, following a fall in crude prices.

ALSO READ
Coronavirus prompts India's top cotton trader to stop sales to China

Cotton and yarn prices have declined by up to 10 per cent during the past one month on a domestic supply glut that emerged after exports to China came to a grinding halt. The cessation of shipments to that country was caused by the lockdown of shops and factories there, following the coronavirus outbreak.

Raw (unginned) cotton in the Gondal (Gujarat) market shed almost 10 per cent to trade at Rs 4,280 a quintal on Wednesday from a level of Rs 4,755 a month ago. Cotton yarn lost 2-3 per cent over the last one month, while synthetic yarn declined by 4-5 per cent during the past one month, following a fall in crude prices.

Atul Ganatra, president of Cotton Association of India, said globally cotton yarn prices have dropped to 60.50 cents on the Intercontinental Exchange on February 28 from 71.5 cents. This has also impacted exporters margins.

The lockdown in China of retail shops and factories has hit India’s cotton and yarn exports hard with shipments came to an abrupt halt. “India’s cotton and yarn exports to China have halted due to lack of orders from there. Even Indian exporters have not evinced any interest in pursuing with export orders. In case any quality or quantity issue arises after shipment, travelling to China for clearing the cargo will be difficult,” said Arun Sakseria, a city-based cotton exporter.

Price of cotton and yarn is taking a beating due to poor sentiment in the market due to the outbreak of coronavirus in China and deterioration of quality in the present kapas arrivals.
Looking at the decline in cotton prices, the government owned Cotton Corporation of India (CCI) has offered a discount of Rs 3,200-5,000 per candy (1 candy = 356 kg) for old stock purchased in bulk.

The decline in raw material prices is likely to benefit textile mills and their profit margins may go up in the coming quarters.

“Raw material costs have started moderating due to the outbreak of coronavirus which has impacted demand / production in China. Disruption in supply chain or production of polyester yarn in China is likely to provide greater export opportunities to Indian polyester manufacturers later,” said Madhu Sudhan Bhageria, chairman and managing director, Filatex India Ltd. In the Budget last month, the government had removed anti-dumping duty on purified terephthalic acid (PTA), a raw aterial for synthetic yarn.

The abolition of anti-dumping duty on key raw material input PTA has changed the landscape of synthetic textile manufacturers. The Indian textile industry has been stagnating in spite of the slowdown in China.

According to Icra, the coronavirus outbreak has started exerting pressure on yarn realisations, which have corrected by 2-3 per cent since the beginning of February 2020. This follows a brief recovery seen in India’s cotton yarn exports in the month of January 2020 when the exports touched an estimated 100 million kg, in line with India’s historical monthly average, following a weak performance for nine consecutive months earlier.

The domestic cotton spinning industry is highly dependent on exports, particularly to China, with around 30 per cent of the cotton yarn produced in the country being exported, and China accounting for nearly one-third of the exports in recent years.

Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, Icra, said, “Even though domestic cotton fibre prices continue to be competitive vis-a-vis international cotton prices at present with a price spread of about 4 per cent (down from 9 per cent in Feb-20), a further correction in international cotton prices amid demand-side uncertainties could render domestic spinners uncompetitive in the international markets, similar to the situation which was witnessed in H1 FY2020.”

For synthetic yarn, Raw material cost has started moderating because the outbreak of coronavirus is likely to impact demand for polyester yarn in China, which accounts for around 65 per cent of global demand. As a consequence, the price of PTA, a key raw material that accounts for more than half of the sales price of polyester yarn, is expected to be under pressure in the near term.

India’s Chaotic Bank Seizure Sends Shockwaves Through Markets

India Seizes Troubled Yes Bank and Limits Withdrawals

RBI draft plan: SBI to invest in reconstructed YES Bank up to 49%

Suvashree Ghosh and Siddhartha Singh Bloomberg March 6, 2020



(Bloomberg) -- India’s attempt to buttress its financial system by taking control of the country’s fourth-largest private lender has instead triggered widespread confusion and signs of investor panic, adding a fresh layer of risk to an economy that’s already headed for its weakest expansion in more than a decade.

The seizure of Yes Bank Ltd. by India’s central bank late Thursday was the country’s biggest such intervention in at least 13 years. Speculation of a government rescue had been swirling for months, but the announcement unnerved markets by leaving several key questions unanswered, including the fate of depositors, creditors and shareholders.
Also unclear was how Yes Bank clients and counterparties would cope with government-imposed caps on individual withdrawals and a 30-day moratorium on new loans and payments. A Walmart Inc.-backed Indian payments service that relies on Yes Bank to process transactions for more than 175 million users went down late Thursday, underscoring the far-reaching consequences of halting major portions of the bank’s operations.

Investors responded by dumping Yes Bank’s bonds and shares as well as those of other smaller lenders. State Bank of India, which has been tapped to inject new capital into Yes Bank, suffered its biggest intraday tumble since 2012. India’s benchmark Sensex index plunged as much as 3.8%, one of the biggest declines in Asia, and the rupee weakened toward a record low. Lines to withdraw money at one of Yes Bank’s branches in Mumbai were larger than usual around midday on Friday, with security officers telling customers they would have to wait one and a half hours to get cash after ATMs ran out of bills.

“The market was expecting a solution,” said Nilesh Shah, chief executive officer and managing director of Kotak Mahindra Asset Management Co. “People are bound to react the way they have this morning, but the panic can easily be controlled if the government announces the contours of the revival plan.”

The flight from Indian assets persisted even after Reserve Bank of India Governor Shaktikanta Das said the nation’s banking system was “sound” and a proposed resolution plan for Yes Bank would be released quickly.

The RBI, smarting from the failure of a small lender last year, took the decision to seize Yes Bank after noticing a surge in withdrawals by depositors, people with knowledge of the matter said. Policy makers were concerned that the outflows would accelerate once the bank releases its earnings on March 14, which could show a jump in bad loans, the people said, asking not to be identified as the matter was private. The decision came as a surprise to most Yes Bank executives.

The hashtag #YesBankCrisis was trending worldwide on Twitter. Many users shared their worries about possibly losing their deposits, even after Finance Minister Nirmala Sitharaman told reporters on Friday that the money was safe. The RBI has placed a 50,000 rupee ($679) limit on individual withdrawals from Yes Bank accounts.

“I have about 150,000 rupees in savings here,” said Amit Shinde, a 28-year-old construction contractor, as he waited in line to take out cash. “I will be withdrawing it as soon as its possible. I don’t have confidence in the institution any more.”

Regulators’ failure to provide a detailed road map for Yes Bank’s rescue was criticized by some analysts and investors, who said the uncertainty could disrupt the smooth functioning of India’s financial system and crimp funding to non-state banks. Private lenders accounted for about 60% of the nation’s new loan growth over the past 12 months, according to Credit Suisse Group AG.

More financial turbulence is the last thing India’s economy needs. While it expanded at the fastest pace among large countries worldwide about a year ago, it has since been battered by a shadow-banking crisis, waning consumer demand and the global coronavirus outbreak. Growth is projected by the government to slow to 5% in the fiscal year ended March, an 11-year low.

Yes Bank’s troubles are rooted in the rapid expansion under its former Chief Executive Officer and co-founder Rana Kapoor. In his last year in charge (the fiscal year to March 2018), Yes Bank had the fastest loan growth of any bank in India. But it was also piling on risk. The RBI forced Kapoor out last year after challenging Yes Bank’s accounting, saying the lender was downplaying the scale of its spiraling bad loans.

The shadow banking crisis that erupted in September 2018 added to Yes Bank’s woes. A Credit Suisse report last year said the company had the biggest proportion of outstanding loans to large stressed borrowers, including to Anil Ambani group companies and Dewan Housing Finance Corp., which was seized by the RBI in November.

Kapoor’s successor, Ravneet Gill, a former Deutsche Bank AG executive, embarked on a prolonged quest for new capital last year as provisions against bad debt mounted. Gill received expressions of interest from investors including JC Flowers & Co., Silver Point Capital and even a mysterious Canadian lumber tycoon. But the money never materialized.

Read more: The Puzzling Canadian Behind a Bid to Save India’s Yes Bank

State Bank of India, the nation’s largest lender, has been selected to lead a consortium that will inject new capital into Yes Bank, people familiar with the matter said on Thursday. The government-owned lender was slowly cajoled by policy makers into agreeing to take a stake as Yes Bank’s situation became more dire, one person said.

The rescue is unlikely to result in forced haircuts for depositors and senior creditors, according to Ashish Gupta, an analyst at Credit Suisse.

Still, a prolonged period of uncertainty while policy makers finalize the plan could have ripple effects on the economy, Gupta noted. It has already weighed on investor perceptions of other private lenders, sending a gauge of their share prices down more than 4% on Friday, the most in about five years. Yes Bank’s stock tumbled as much as 85%.

“The delay in bailout creates an unnerving precedent and uncertainty for deposit holders and debt providers,” Gupta wrote in a report to clients. “This would also likely further aggravate the credit crunch in the economy as private banks have been the primary loan growth driver.”


India Seizes Troubled Yes Bank and Limits Withdrawals

Siddhartha Singh and Suvashree Ghosh Bloomberg March 5, 2020

(Bloomberg) --

India’s stock and currency markets tumbled after the central bank seized control of beleaguered Yes Bank Ltd., raising concerns about the knock-on effects on the financial system.

The Reserve Bank of India capped withdrawals at 50,000 rupees ($682) and imposed strict limits on operations at the country’s fourth-largest private lender, while a rescue plan is devised. In a statement late on Thursday, the regulator said it was forced to step in after Yes Bank’s latest effort to raise new capital failed to materialize and as the lender “was facing regular outflow of liquidity.”

Yes Bank shares fell as much as 25% on Friday morning in Mumbai, with the Bankex index dropping more than 5%. The rupee fell more than 1%, approaching a record low reached in October 2018. The S&P BSE Sensex index of shares lost as much as 3.8%.

The move to rescue Yes Bank illustrates the widening damage from India’s shadow banking crisis, which has left the lender with a growing pile of bad loans. Indian authorities have been struggling to contain the turmoil that has choked credit to consumers and small businesses, slowing economic growth to an 11-year low.

“In the absence of a credible revival plan, and in public interest and the interest of the bank’s depositors, it had no alternative,” but to seize Yes Bank, the RBI said in the statement.

Read Andy Mukherjee on how authorities dragged their feet over Yes Bank

The takeover will help authorities implement a revival plan after numerous attempts by the lender to raise capital failed. Under a government-backed proposal State Bank of India, the nation’s largest lender, has been selected to lead a consortium that will inject new capital into Yes Bank, people familiar with the matter said earlier on Thursday.

While the RBI works on the rescue plan, there could be uncertainty about the liabilities of smaller Indian banks and shadow lenders, including their deposits and bonds, Manish Shukla, an analyst at Citigroup Inc., said in a report. “Fast clarity on the plan of reconstruction/amalgamation is critical from a system perspective,” Shukla wrote.

Yes Bank had been seeking new capital since last year, to bolster its ratios and quell questions about its stability due to its exposure to shadow banks entangled in a prolonged crunch in the local credit market. That erupted with a series of defaults at Infrastructure Leasing & Financial Services Ltd. in September 2018.

The seizure of Yes Bank is the largest of the government’s moves to stem an erosion of confidence among investors due to the shadow bank crisis. The government took over IL&FS in 2018 in an effort to reassure creditors after the defaults. And last year, the RBI seized control of another struggling shadow lender, Dewan Housing Finance Corp., and said it will initiate bankruptcy proceedings.

RBI Governor Shaktikanta Das pledged this week in an interview with Bloomberg News that no major bank would be allowed to fail. He didn’t comment on the revival plan in an interview to BloombergQuint earlier on Thursday.

State Bank of India has been authorized to select other members of the consortium, the people said earlier Thursday, asking not to be identified as the information isn’t public. In a subsequent filing to the stock exchange, State Bank of India said its board met on Thursday and “an in-principle approval has been given by the board to explore investment opportunity” in Yes Bank.

Yes Bank’s total exposure to shadow lenders and developers -- both caught up in a funding crunch since late 2018 -- was 11.5% as of September, filings show. A Credit Suisse Group AG note in April marked Yes Bank out as the lender with the largest proportion of outstanding loans to large stressed borrowers, including Anil Ambani group companies, Essel Group, Dewan Housing and IL&FS.

Last month, Yes Bank said it has received non-binding offers from foreign investors including JC Flowers & Co., Tilden Capital, Oak Hill Advisors and Silver Point Capital. But the RBI made clear those talks had fizzled.

“These investors did hold discussions with senior officials of the Reserve Bank but for various reasons eventually did not infuse any capital,” the RBI said in its statement.

And it wasn’t the first time the bank had announced names of potential investors. In November, the bank’s board disclosed several other names before rejecting most of the offers

Moody’s Investors Service cut the bank’s credit ratings in December and in January said its “standalone viability is getting increasingly challenged by its slowness in raising new capital

RBI draft plan: SBI to invest in reconstructed YES Bank up to 49%

The draft comes a day after the RBI imposed a moratorium on the bank, restricting withdrawals to Rs 50,000 per depositor till April 3


BS Web Team Last Updated at March 6, 2020

Photo: Kamlesh Pednekar

The Reserve Bank of India on Friday unveiled 'Scheme of Reconstruction' for Yes Bank, saying that the State Bank of India (SBI) has expressed willingness to invest in the crisis-ridden lender. The RBI said that investor bank cannot reduce its holding in Yes Bank below 26 per cent before three years. "Yes Bank's capital stands altered at Rs 5,000 crore and the strategic investor bank will bring in 49 per cent equity," the central bank said in a release.

The draft comes a day after the RBI imposed a moratorium on the bank, restricting withdrawals to Rs 50,000 per depositor till April 3. The RBI has also superseded the board of the bank, which is now being headed by former deputy managing director and CFO of SBI Prashant Kumar.

RBI's rescue plan for Yes Bank:


1. SBI will have to pick up 49% stake

2 SBI cannot reduce holding to below 26% before three years from the date of capital infusion

3. From the appointed date, the authorised capital of the private sector bank would stand altered to Rs 5,000 crore

4. Number of equity shares to 2,400 crore having face value of Rs 2 each

5. The investor bank (SBI) shall agree to invest in the equity of the reconstructed bank to the extent that post infusion it holds 49 per cent shareholding in the reconstructed bank at a price not less than Rs 10 (Face value of Rs 2) and premium of Rs 8

6. "All the deposits with and liabilities of the reconstructed bank, except as provided in the scheme, and the rights, liabilities and obligations of its creditors, will continue in the same manner and with the same terms and conditions, completely unaffected by the Scheme, The instruments qualifying as Additional Tier 1 capital, issued by the Yes Bank Ltd. under Basel III framework, shall stand written down permanently, in full, with effect from the Appointed date."

7. The reconstructed Yes Bank will have six member board, including CEO& MD and non-executive chairman. The investor bank (read SBI) shall have two nominee directors appointed on the Board of the Reconstructed Bank

8. Reserve Bank of India may appoint Additional Directors in exercise of the powers conferred by sub-section (1) of Section 36AB of the Banking Regulation Act, 1949.

9. The Board of directors of the Reconstructed Bank will have the freedom to discontinue the services of the key managerial personnel at any point after following the due procedure.

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India Up for Sale as Modi Offers National Icons to Plug Deficit

Vrishti Beniwal Bloomberg March 5, 2020


(Bloomberg) -- After years of small divestments, Prime Minister Narendra Modi has launched India’s biggest-ever asset sale, a $29 billion privatization drive that would help prop up the economy but could also spark worker protests as some of the nation’s corporate icons go on the block.

Faced with the highest unemployment in 45 years and a shadow-banking crisis that’s crippling lending, Modi needs the money to plug a budget hole and fund spending on infrastructure and reforms. But the plan has roused a storm of protest, even among some of his supporters, over how far he will pursue a policy that could jeopardize millions of livelihoods and dismantle entities that have been a source of pride for citizens in the decades since independence.

“The breadth of the sale program is intended to signal that it is driven by the government’s reformist tendencies rather than just fiscal needs,” said Eswar Prasad, a professor at Cornell University. “A key question is whether Modi is willing to use some of his political capital to push through the privatization and related reforms” to the financial system, labor markets and infrastructure, Prasad said.

Privatization policies the world over have always drawn criticism of “selling the family silver,” but since former British Prime Minister Margaret Thatcher’s historic divestment campaign in the 1980s, governments have defended the strategy as one which brings efficiency and longer-term growth.

Modi’s program likewise has elicited a chorus of disapproval. Affiliates of his Bharatiya Janata Party have labeled it a handover of state assets to “multinational corporations at throwaway prices.”

“The difference is that Thatcher had a comprehensive plan that she backed with income tax, sales tax and so many other things,” said Subramanian Swamy, a lawmaker from the ruling party who has recently been critical of the government’s economic policy. “It was a package to move the country from left to right. Here, there is no comprehensive plan. It’s a horrendous mixture of state control and privatization.”

Missed Deadlines

There are also concerns over whether the plan is even achievable. In the 2019-2020 fiscal year, the government has fallen short of its divestment target after failing to complete the sale of Air India Ltd. and Bharat Petroleum Corp., a state-owned oil refiner. Having missed its fiscal gap goals for a third straight year, those sales have been carried forward.

In all, the federal government aims to sell stakes in more than two dozen of about 300 state enterprises in the next fiscal year starting April 1. So far, Modi’s reforms to businesses include a steep cut in corporate taxes, the merger of some state-owned lenders and measures to encourage more foreign investment.

If the sales do go according to plan in the upcoming fiscal year, they would bring in almost half the amount India has raised from as many as 283 transactions over the past three decades, stock exchange data show. They would also raise the share of divestment receipts to 7% of government revenue, from a little over 2% five years ago.

The big ticket for the coming year is Life Insurance Corp. of India, or LIC, which is expected to rake in as much as 900 billion rupees for only a sliver of the state behemoth. Investors likened the proposal to the record initial share sale of Saudi Aramco, which in December raised more than $25 billion.

The Mumbai-based insurer has more than a million agents and 300 million policies, together with stakes in hundreds of other companies, including its affiliate IDBI Bank Ltd. and the nation’s largest listed company Reliance Industries Ltd. But LIC is much more than that to many Indians. It’s a symbol of government support since it was formed in the decade after independence to provide universal coverage.

“Why should there be an IPO? This is public money,” said Shiva Nimje, 52, who has worked for the insurer for 27 years and is part of a campaign by workers to derail the plan. “I’m confident we will be able to stop the sale, however hard we need to struggle for this,” he said by phone from the central Indian city of Nagpur.

National Protest

Rajesh Nimbalkar, general secretary of the All India National Life Insurance Employees Federation, the union that represents many LIC workers, said 100,000 of the firm’s employees are protesting. “LIC is a goose that lays golden eggs,” he said. “The government shouldn’t kill it.”


Even without the staff opposition, LIC’s history, size and operations mean the listing won’t be easy, said Mahesh Patil, chief investment officer for equity at Aditya Birla Mutual Fund.

“LIC being the largest life insurance play will no doubt have interest from investors,” he said. “However, they will have to get over a lot of issues like getting their accounts in order, more disclosures in line with listed players, and employee resistance before they can hit the market.”

While LIC is the elephant in the room, its offering would be a minority stake, not a privatization. The companies where the government is selling control -- including Shipping Corp. of India Ltd., the nation’s largest sea-cargo carrier, construction equipment maker BEML Ltd. and Container Corp. of India Ltd. -- are a mixed bag from an investment point of view.

Bharat Petroleum, for example, earned a little over 76 billion rupees last fiscal year, while Air India lost almost as much in the same time and hasn’t made money since 2007. The sale plan also comes against the backdrop of the coronavirus epidemic, which is hammering global confidence. India’s benchmark index lost 7% last week.

Junior Finance Minister Anurag Thakur told lawmakers on Dec. 3 that the divestment strategy is guided by the principle that the state withdraw from sectors where competitive markets have matured, and that profitability is not a criteria.

Air India

India has injected $4.2 billion into Air India since a 2012 bailout, yet the airline still has $8.4 billion in debt and continues to lose money.

“The government has tried for many years to turn the company around, but it hasn’t been able to do this,” said Joshua Felman, a director at JH Consulting and a former International Monetary Fund official.

He said government subsidies that allowed Air India to offer lower fares were among the reasons rival Jet Airways India Ltd. was not able to compete. Jet went into bankruptcy last year leaving more than 20,000 people jobless.

The government expects to complete the $7.4 billion sale of its stake in Bharat Petroleum by September, with some big Middle East oil producers and Russia’s Rosneft PJSC, keen to acquire the asset, according to Indian officials.

Skeptics say the sales could have unitended consequences -- that losing control of Shipping Corp. would affect the nation’s oil supply and listing LIC could make its investments riskier.

Modi’s political opposition has been more forceful.

“These companies were set up by founding fathers of the country to give employment to people who didn’t have work,” said Ashok Singh, national vice president of the Indian National Trade Union Congress, the union wing of the main opposition party. “Now unemployment is rising and the economy has gone into the intensive care unit. In winter you keep a blanket to keep yourself secure and warm. You don’t give it away.”

Government Perks
That idea of the state’s duty to protect citizens goes to the heart of the opposition from employees. In India, working for the government isn’t just a job. Often it carries prestige and benefits such as job security, better health care, a retirement package, even housing. Each year, millions of people apply for government jobs for which they are clearly overqualified.

“State companies provide a decent employment in terms of promotions, annual increments and wages,” said Brijesh Upadhyay, general secretary of Bharatiya Mazdoor Sangh, a trade union connected with the BJP. “After privatization conditions will change for employees and the company taking over may cut jobs.”

The government argued in a Parliament reply on Feb. 11 that companies released from state control would generate higher economic activity, spur ancillary industries and create jobs. Its recent Economic Survey said research showed a “very strong positive effect” on labor productivity and overall efficiency.

Modi has four years to prove that’s the case before the country will judge the success of the program at the polls.

Bank Boardroom Battles Put Powerful Chairmen in Spotlight


Nicholas Comfort and Steven Arons Bloomberg March 5, 2020

(Bloomberg) -- First was the stunning power struggle atop Credit Suisse Group AG. Then cross-town rival UBS Group AG named a new chief out of the blue. Now Standard Chartered Plc is quietly looking for one.

Barely a week passes these days without a European bank chairman ousting a chief executive officer or seeking potential new ones. The turmoil has engulfed the boardrooms of almost all of the region’s top firms, from Germany’s troubled lenders to Switzerland’s large wealth managers, France’s investment banking powerhouses and London’s financial giants.

The turnover speaks to the dire state of European finance more than a decade after the financial crisis and almost six years into the region’s controversial experiment with negative interest rates. But the frequency and the speed at which top executives are being swapped out, at times over the vocal opposition of large shareholders, underscore another key difference with Wall Street: The powerful role of chairmen.

“There’s been a quite a lot of churn,” said Stilpon Nestor, who advises companies on governance at Nestor Advisors. The chairmen “are playing a more active role. The big governance changes after the crisis aimed at exactly that: giving more power to the board.”

Unlike their peers on Wall Street, where CEOs frequently also hold the position of chairman, European banks separate the two roles fairly strictly. Regulators made that a legal requirement after the financial crisis showed the need for more checks and balances, although there are exceptions. The European Central Bank built on that by telling boards that it expects them to challenge management on the implementation of strategy and culture.

Today, about two-thirds of CEOs at U.S. financial companies are also chairman of the board, most prominently Jamie Dimon, who has run the biggest Wall Street firm for the past 14 years. In Europe, that number is just 1%, according to data from the responsible investment arm of Institutional Shareholder Services.

The strengthening of the board has encouraged chairmen to take a more active role and move more decisively to replace top executives when needed. At Deutsche Bank AG, supervisory board chairman Paul Achleitner is on his fourth CEO in eight years at the lender during which he has overseen a long series of unsuccessful turnaround efforts. Credit Suisse has the third CEO since Rohner took over in 2011.

Achleitner’s Backseat

However, in a sign that a backlash may be brewing, both chairmen are facing mounting opposition from key shareholders unhappy with their performance. Achleitner has become a lightning rod for many long-time Deutsche Bank investors after overseeing a long decline in the stock. Several stakeholders were debating last year whether to push the Austrian out.

Now Achleitner -- one of the best-connected executives in Germany -- is taking a backseat in discussions with some shareholders in an effort to defuse tensions, according to people familiar with the matter. He’s been making fewer public appearances, with CEO Sewing taking a more active role in communicating with backers, the people said, asking for anonymity to discuss private meetings.

Deutsche Bank declined to comment.

“A lot of people actually wonder whether the pendulum has gone too far with the board assuming more and more executive decision-making responsibilities and the CEO becoming less and less responsible,” said Nestor. “This is a real concern in some banks.”

At Credit Suisse, Rohner has draw the ire of David Herro, a major shareholder who supported Thiam and said it was a mistake to replace a CEO over a spying scandal, given that he had just completed a successful turnaround of the lender.

“We think there is great potential in Credit Suisse and we would hate to see it ruined by a chairman who is not on the same page of shareholder value creation as we are,” he said last month. “If he really loved the company, he should step down and resign.”

At UBS Group AG, Chairman Axel Weber recently poached the CEO of Dutch lender ING Groep NV to replace Sergio Ermotti, one of the longest-serving European bank CEOs, as shareholders look for new ideas to maintain the bank’s edge in wealth management. But tensions had been brewing for some time at UBS as well, with Weber saying more than a year ago that the bank was starting to look at potential CEO candidates.


Ermotti’s Move

Weber, who has been chairman of UBS since 2012, has said the search for his own successor will start next year. That search became more complicated after Ermotti, who was seen as a potential candidate for the chairman role, on Tuesday agreed to join reinsurer Swiss Re AG instead -- a move that suggests he wasn’t entirely happy about his departure from UBS.

At Standard Chartered, Chairman Jose Vinals has informally approached banking executives this year to gauge their interest in taking over from Chief Executive Officer Bill Winters, according to people familiar with the plans who asked not to be identified. His search is not currently part of any formal selection process, the people said.

Winters had a public spat with investors last year after some opposed the bank’s compensation policy, saying that shareholders’ criticism of his pension award was “immature.” While Standard Chartered eventually cut his retirement allowance, the chairman was not happy with Winters’s public handling of the situation, some of the people said.

‘Increasingly Complex’

HSBC Holdings Plc, meanwhile, removed CEO John Flint last year, citing an “increasingly complex” environment. Chairman Mark Tucker and Flint clashed over style, with Flint focused on cultural issues at the firm and Tucker taking a more data-driven approach, people familiar with the matter have said.

Tucker named Noel Quinn interim CEO, but he has yet to find on a long-term replacement, a task complicated after UniCredit SpA’s Jean Pierre Mustier dropped out of consideration for the role. Now pressure on the chairman -- the first outsider ever hired for the role at the 165-year-old institution -- is ramping up after a steep share price decline following a Feb. 18 strategy overhaul that failed to impress investors.

The bank chairmen “know that investors are increasingly prepared to vote against them, so there’s a lot of explaining they have to do on the management changes,” said Ingo Speich, head of sustainability and corporate governance at Deka Investment, which holds stakes in European banks.

Whether chairmen are ousted ahead of time or not, the wave of change ultimately won’t stop at the CEO level. At Deutsche Bank, Achleitner’s second five-year term ends in 2022. The current term of HSBC’s Tucker will expire at the bank’s shareholder meeting in 2021.

‘Next Transformation’

Rohner, who has been on Credit Suisse’s board since 2009, will see his term end in April next year. The bank on Thursday denied a report in the Financial Times that he is seeking to extend his tenure, saying there is an orderly succession plan for a replacement.

The chairmen have accompanied banks through far-reaching overhauls but their successors will face another set of challenges. That’s especially true for the necessity to adapt their business to higher environmental, societal and governance standards, a paradigm shift similar to that of the automotive industry, says Speich at Dekabank.

“European bank chairmen have been an anchor of stability in recent years, but they’re getting older and asking themselves about where the journey’s going,” said Speich. “We need to see that generational change in order for banks to manage their next transformation.”

Bankers Are Staring Into the Abyss, Again

AND THE ABYSS STARES BACK AT THEM

Marcus Ashworth and Elisa Martinuzzi Bloomberg March 5, 2020


(Bloomberg Opinion) -- Europe’s lenders are staring at yet another possible crisis, this time not of their own making, and the brutal reality is that the European Central Bank can do very little to help them. That’s bad news for the real economy too.

The economic hit from the rapid spread of the coronavirus will probably mean another spate of loans turning bad, a slump in demand for new borrowing, and falling income from trading and commission. The banking industry has been among the hardest hit in the recent stock-market rout. Little wonder.

There are some minor measures that ECB President Christine Lagarde could try to mitigate the pain, especially if she decides to cut the benchmark deposit rate deeper into negative territory (a nightmare for banks trying to squeeze a profit from lending).

At the very least, the ECB should protect lenders from any increased cost of depositing their excess reserves at the central bank by sweetening the terms of the “tiering” regime that it adopted in September. That change lifted about 800 billion euros ($892 billion) of commercial bank reserves at the ECB out of the -0.50% deposit rate tier — where banks are paying for the privilege of storing their money — and toward a slightly less punishing zero rate.

Separately, the ECB is already considering whether to offer banks even more super-cheap loans — known as targeted long-term repurchase operations, or TLTROs. This is wise. It will be vital for maintaining the liquidity of cash-strapped corporates; about three-quarters of European company borrowing comes via bank loans.

But there are justified doubts about the effectiveness of TLTROs in getting money to the neediest firms. In the fourth quarter of last year, companies’ demand for loans dropped in the euro zone. Even more laser-focused funding is needed specifically for small and medium-sized companies to prevent a credit crunch in the backbone of the region's economy — with even more attractive rates to encourage banks to participate. TLTROs are no magic wand if there’s no demand and banks are hesitant to lend.

A more controversial measure would be to adapt the ECB’s 190 billion-euro ($211 billion) corporate bond-buying program to allow the purchase of bank debt too. That might lower banks’ funding costs, which have risen since the virus hit Europe.

Unfortunately, there are huge conflicts of interest in directly financing banks, which are regulated by the ECB. Germany would certainly balk. Last decade’s euro crisis was exacerbated by the doom loop, where certain banks held too many of their nation’s bonds — intensifying the riskiness of the sovereign debt and the country’s banking system. A move that established new ties between a supranational authority and large lenders would bring its own fears.

In the wake of the virus outbreak, the Italian lenders’ association is already pleading for forbearance to allow the nation’s banks not to record past bad loans. But the ECB should stand firm. Such a move might help shield the lenders’ profit and capital in the short term but it would undermine confidence in an industry that’s still trying to win back investor trust. It never works to let banks sweep bad debt under the carpet.

European lenders are only recently emerging from a post-crisis cleanup that took years, getting bad debt levels back to more manageable levels (they’ve dropped by almost half to 543 billion euros). Banks have also steadily built capital buffers. Regulators could let them eat into these ratios, but such hard-fought improvements mustn’t be reversed lightly.

The continent’s banks were already in for an unhappy time before the virus hit, given the euro-area economy’s struggles. Now the industrial heartland of Italy has ground to a halt, the bloc’s frailties will be more exposed. A Europe Commission briefing note, seen by Bloomberg News, has warned that the virus could plunge Italy and France into recession. The paper spoke specifically of a possible increase in bad loans “to leveraged companies operating on a tight cash flow” and a decline in the bank asset values that “may trigger a vicious sovereign-bank loop.”

There’s no easy fix and the ECB has limited ammunition. The most dangerous temptation will be to unwind the progress made on improving banks’ resilience.

Canada’s LNG Dreams Fade as Blockades Add New Costs to Industry

Kevin Orland Bloomberg March 6, 2020

(Bloomberg) -- Hopes that Canada could turn into a gas export powerhouse seem to be waning fast.

The current climate for energy investments in the country and the global market for liquefied natural gas are a far cry from October 2018, when a Royal Dutch Shell Plc-led group announced plans to build a massive LNG terminal on British Columbia’s coast and Prime Minister Justin Trudeau hailed the project as “a vote of confidence” in Canada.

The latest sign of disenchantment came this week as a C$9 billion ($6.7 billion) LNG project in Quebec lost a large potential investor, which the Canadian Broadcasting Corp. identified as Warren Buffett’s Berkshire Hathaway Inc. That follows announcements last year that Chevron Corp. is planning to sell its 50% stake in an LNG project in British Columbia, and its partner in the venture is seeking to trim its stake as well.

While LNG projects across the globe grapple with the outlook for an oversupplied market in the coming years, growing environmentalist opposition is adding insult to injury in Canada. An indigenous protest against a pipeline that will supply Shell’s LNG project not only delayed construction of the conduit but also spiraled into nationwide blockades of key economic infrastructure that have hampered the country’s economy.

“Delays like this add to the risk associated with projects,” said Jackie Forrest, senior director at the ARC Energy Research Institute in Calgary. “It adds a headwind for sure in terms of the economics.”

The pipeline that sparked the recent blockades -- TC Energy Corp.’s Coastal Gaslink -- had previously been a non-controversial project, hailed as a model for engagement with indigenous communities because it had garnered the approval of all 20 First Nations along its route, including the elected leadership of the Wet’suwet’en indigenous group behind the recent protests. The opposition from that group is coming from some of its hereditary chiefs.

More broadly, opponents of liquefied natural gas projects point to the industry’s emissions of methane, a more potent greenhouse gas than carbon dioxide, and say that locking in dependence on any fossil fuel will thwart efforts to avoid catastrophic global warming. Proponents of Canadian natural gas in particular say that exporting the fuel to markets in Asia could reduce global emissions by displacing dirtier fuels, such as China’s use of coal for electricity generation.

Canada is the world’s fourth-largest natural gas producer and already is the fifth-largest exporter of the fuel. While the country only ranks 17th globally in natural gas reserves, that’s still enough to maintain current production levels for as many as 300 years.

An advantage the country has in the development of an LNG industry is that its gas is relatively cheap. Natural gas traded at Alberta’s AECO hub has declined for four out of the past six years and ended 2019 at $1.62 per million British thermal units, down from a record $12.92 in 2000.

Those lower prices, along with short shipping distance to Asia, help make Shell’s LNG Canada project a potentially cheaper supplier to Asian markets than similar projects in the U.S. and Australia, Forrest said. While LNG Canada’s supplies would be slightly more expensive than projects in Russia and Egypt, the added benefits of energy security keep Canadian projects competitive, she said in a February 2019 analysis.

The industry seemed poised to capitalize on those advantages when LNG Canada’s investors, which also include Malaysia’s Petroliam Nasional Bhd., Mitsubishi Corp., PetroChina Co. and Korea Gas Corp., announced they’d proceed with the project. The C$40 billion ($29.8 billion) facility in Kitimat, B.C., represented the largest private-sector investment in the country’s history, and, given the support that it had received from all levels of government, the decision sparked optimism that more facilities may follow.

Canadian Natural Resources Ltd. vice chairman Steve Laut, whose company is the country’s largest gas producer, said at the time that LNG Canada’s decision gave “confidence to other proponents” and made it more likely other plants would be built in British Columbia. In an interview on Thursday, he struck a more cautious tone.

Other projects “still could happen,” Laut said. “But LNG prices are quite depressed, so companies are taking a pause and reevaluating. Canada has another disadvantage, and that’s our regulatory environment, which makes it harder for projects to go through.”



Canadian Natural has been reducing its own gas output because of the recent low prices, and other producers may follow suit. The Canada Energy Regulator expects production to fall 1.8% this year to 15.95 billion cubic feet a day and to keep declining until hitting a low of 14.99 billion in 2023.

The global market for oil and gas investments is facing challenges as well, with the coronavirus outbreak dealing the latest blow to demand forecasts. Several LNG shipments are being canceled worldwide, and U.S. developers are being hammered in the equity and bond markets. The glut is poised to worsen, with BloombergNEF estimating that 71 million tons of new annual LNG production was sanctioned last year, with all of it scheduled to come online between 2023 and 2026.

But Michel Potvin, a councilor in Saguenay, Quebec, who leads the town’s promotion agency, blamed the investor pullout there on Canada’s handling of the rail blockades after the Wet’suwet’en protests, saying that “if this project doesn’t happen in Saguenay, it will happen in Massachusetts, in Texas or wherever.”

ARC’s Forrest said she wouldn’t be surprised if Canada falls out of favor for similar projects in the future.

“Now that an investor looks at the situation and the potential for delay, they may apply a higher cost of capital, which may make our projects more expensive,” ARC’s Forreset said. “That is one of my concerns. Certainty is very important.”

Sovereign Bond Yield Collapse Shows 

the World Is in Crisis Mode

Stephen Spratt, Ruth Carson and John Ainger Bloomberg March 6, 2020

(Bloomberg) -- Sovereign bonds are emphatically demonstrating their appeal as a last refuge for investors spooked by another global crisis, this time sparked by the economic fallout of the coronavirus.

Government debt racked up further historic milestones on Friday, with 30-year U.S. yields sliding through 1.3% for the first time and China’s 10-year rates falling to the lowest since the country was battling deflation in 2002. German yields closed in on record lows and those on short-dated U.K. debt neared 0% as the market braces for more stimulus from central banks.

The moves were so powerful they risk stoking alarm in other markets, from equities to credit. The unusually large swing in Treasuries sent S&P 500 Index futures tumbling, and pulled down equity benchmarks across Asia and Europe. Where yields bottom from here is anyone’s guess.

“Zero percent yields are no barrier to any bond market in the developed world right now,” said Shaun Roache, chief Asia-Pacific economist at S&P Global Ratings. “It’s an insane market -- investors are re-defining the idea of risk distribution.”

News on the coronavirus epidemic and policy makers’ responses -- including the Federal Reserve’s emergency 50-basis-point interest-rate cut Tuesday -- have swung stocks one way and the other. But for bonds it’s essentially been a one-way street.

Ten-year Treasury yields, arguably the single most powerful global financial-market metric, have cratered in the past three weeks, down about 80 basis points. That’s a scale unprecedented since the aftermath of the bankruptcy of Lehman Brothers Holdings Inc. in 2008.

They were at 0.73% as of 9:58 a.m. in London, with 30-year Treasuries at 1.31%. China’s 10-year notes yielded 2.63%, against about 3.15% at the start of the year. Australian 10-year bonds have lost about half the nominal yield they had just weeks ago, as that market anticipates the introduction of quantitative easing.

Sharp gains in U.S. long-bond futures have caused circuit breakers to kick in on three separate occasions, briefly halting trading.

Roache said investors are now discounting a return of QE by the Fed and an expansion in Bank of Japan asset purchases. Money markets are pricing about a 90% possibility that the European Central Bank will lower its deposit rate by 10 basis points next week, or boost asset purchases.

But the trend has been as inexorable as the spread of the coronavirus itself, with new waves of infections and markdowns in growth forecasts driving fresh inflows to risk-free securities.

It’s driven the global supply of bonds with negative yields to $14.4 trillion, up by well over $3 trillion since mid-January, before the epidemic became apparent in central China.

Last August’s record -- almost $17 trillion amid a rough patch in the U.S.-China trade war -- stands to be blown away should a swathe of the Treasury market see nominal yields drop below zero for the first time. Two-year rates have less than half a percentage point remaining.


Race to Zero

In the U.K. too, two-year yields at one point Friday morning hovered just 10 basis points above 0%.

“The race to zero is just flying off the handle,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. “Trying to draw a line in the sand for 10-year yields when markets are slammed by fanatical hopes of Fed action and pandemic fears in turn may be a fool’s errand.”

It’s all been a dramatic showcase for the benefits of bonds as a hedge in portfolios, after that traditional allocation strategy faced questions less than two years ago. The Bloomberg Barclays Global Aggregate index of bonds has returned 3.3% since the year began, versus about minus 7% for the MSCI All Country World Index of stocks. Gold, another once-maligned hedge, is up 11%.

CRIMINAL CAPITALISM
Tea Boy to Tattooed Trader: A Secret Tipster’s Life and Death

Franz Wild, Gaspard Sebag and Alan Katz Bloomberg March 5, 2020


(Bloomberg) -- The coroner ruled it “death by misadventure.”

By the time the concierge reached James Harris last June, he was lying in the hallway outside his apartment, arms and legs shaking, gasping for air. Although an ambulance crew raced in and administered an antidote for opiate overdoses, Harris’s pulse returned only briefly. Three minutes later, the 42-year-old British trader was dead.

Harris had been troubled for months, behind on his rent, drinking and using copious amounts of cocaine in his apartment not far from London’s Buckingham Palace, witnesses said in statements read at his inquest. While searching his apartment, police found crack pipes, sedatives and a mobile phone. When they lifted his body to wheel it to the ambulance and drive it to the morgue, a second phone dropped out of the dead man’s pocket.

Mobile phones were Harris’s main work tools. The one that fell out of his pocket was one of probably dozens he had used over the years and then discarded to avoid being traced. Through calls, texts and encrypted messaging apps, Harris plugged into a loose network of day traders on two continents who cultivated sources at banks and companies to procure an edge on large deals. They exchanged secrets on corporate takeovers, profit warnings and medical trials, trading on the information to generate what prosecutors say were hundreds of millions of dollars in profit.

Since Harris’s death, more details about different parts of the network have emerged in court proceedings. A few days after he died, his friend Walid Choucair was convicted of insider trading in London. Marc Demane Debih, a Geneva-based trader arrested in Serbia and extradited to the U.S., pleaded guilty and testified in a New York court in January that he got tips from a Goldman Sachs Group Inc. banker and from other insiders via a French art dealer. Telemaque Lavidas, son of a pharmaceutical-company director who wasn’t implicated in the scheme, was convicted of leaking company secrets to one of Demane Debih’s trading partners, who prosecutors say was also part of the insider-trading network.

A reconstruction of Harris’s life, based on interviews with people who knew him, helps fill in some missing pieces of the puzzle. More than a trader, Harris was a middleman, trafficking in information for a slice of future profits. He jealously guarded his sources, often exaggerated and sometimes provided false information, the friends say.

Harris had been tripped up long before Choucair, Demane Debih and Lavidas. He was arrested in the U.S. in 2012, pleaded guilty to securities fraud and agreed to go back to the U.K. rather than face prison in New York. He promised the judge that his days of trafficking inside information were over. In his decision, the judge said he was sure Harris had changed his ways.

But it didn’t take long for Harris to fall back in with his old crowd. The lure of money and the things it could buy — a vintage red Ferrari, expensive cigars and cocaine — was apparently too hard to resist for an optician’s son who started out as a tea boy at the London Stock Exchange. It had been a wild ride from that lowly beginning to the high-flying trader’s life, according to people who knew Harris and requested anonymity to speak about their dead friend.

At some point, Harris started mingling with a group of traders who shared tips, made millions and partied at glamorous clubs or on yachts docked off Monaco. He enjoyed the life, his friends said, and had a magnetic personality. He also had a dark side: One trader described him as an aggressive lout. Covered in tattoos strategically placed to be hidden by a dress shirt and pants, he was an odd figure among the traders who frequented celebrity hangouts like the Chiltern Firehouse and members-only Tramp in London, or Les Caves du Roy in Saint Tropez, people who knew him said. While others talked about financial markets long into the night, Harris preferred to discuss music and art, introducing friends to hip-hop records produced by the Salazar Brothers and street artists Paul Insect and Banksy.

At his trial, Choucair described how the traders operated, and others in the group confirmed their methods. They were careful to avoid detection, speaking on burner phones that they replaced after a few months. They bought contracts for difference, or CFDs, a leveraged bet on a stock’s movement that meant gains and losses could be far higher than the initial investment. The group, a loose association more than a ring, became expert at ferreting out mergers and acquisitions.



Demane Debih’s testimony shed light on the value of intermediaries. He said he paid $12 million to French art dealer John Dodelande for tips from London investment bankers to insulate him from their source. Dodelande hasn’t been charged with any wrongdoing.

Once they’d built their positions, Harris, Choucair, Demane Debih and others would call journalists, including some at Bloomberg News. They were betting that if the reporters wrote a story, the stock would move and the traders could cash out. Bloomberg’s policy is not to publish any information without confirming it with people who have direct knowledge of the matter. The policy also prohibits telling sources if or when a story will be published.

In 2011, Harris left London, flew to New York and took up residence at the swanky Mercer Hotel. Seeing him whiz off in a flashy car one day, a 22-year-old American woman named Michelle Gomolin slipped the doorman her number and asked him to pass it along. Six months later they married and moved into an apartment in SoHo, embarking on a roller-coaster ride that even then Harris said he wanted to turn into a movie, Gomolin wrote in an Instagram tribute after he died.

“You took me on this ride for years and years, a ride that I could never get off of,” Gomolin, who eventually divorced Harris, wrote. “You were the highest highs and the lowest lows. The best of times and the worst of them too. You were the most lavish, insane, larger than life human I have ever met. You walked as if you owned the world, and to me you were my entire existence. Your quirks and oddities never ceased to amaze me.”

Within a year of their marriage, Gomolin was posting $20,000 bail to get Harris out of jail. He had been arrested by FBI agents for securities fraud, but he’d also become entangled in an international scandal involving the son of a former president of Kyrgyzstan.

Harris had been providing trading tips to Eugene Gourevitch, who ran a $45 million securities account for the former leader’s son, Maksim Bakiyev. Gourevitch was arrested in 2011 and agreed to cooperate with the Justice Department to dismantle the insider-trading network.

Gourevitch said in an interview that he was introduced to Harris by friends who told him he had access to insider information. “Harris bragged he knew lawyers and bankers but never mentioned specific names to protect his source of income,” Gourevitch said. “Sometimes Harris’s information was spot on, at other times it was completely wrong.”

To help U.S. investigators, Gourevitch began recording conversations with suspects, including Harris and his friend Tayyib Ali Munir, then a trader at Brown Brothers Harriman & Co. During one conversation in early 2012, Munir told Gourevitch he could provide corporate earnings reports ahead of publication if Bakiyev agreed to pay $122,000 for previous tips, according to court documents. Munir also boasted that some of the information came from a former director of the New York Stock Exchange.

Munir didn’t supply the promised releases, and it’s unclear if he had a source at the exchange. But Harris came through a few weeks later. A day before Russian wireless company VimpelCom Ltd. reported a net loss, he gave Gourevitch the statement the company was planning to publish. He told Gourevitch to short VimpelCom and pay him half the profit, which would have netted Harris about $1 million. Gourevitch didn’t make the trade, but he paid Harris $50,000 anyway.

Harris and Munir were both arrested and pleaded guilty. Harris was sentenced to two years of supervised release, and Munir three. Harris was ordered to forfeit the $50,000 and a Ducati motorbike he bought with proceeds from the securities fraud. Gourevitch got five years. Charges against Bakiyev were dropped a few months later without explanation. Munir and a lawyer for Bakiyev didn't respond to requests for comment.

“No fines were imposed because the defendant does not have any assets, and it is unlikely that he will have any in the foreseeable future to pay a fine,” Judge Jack Weinstein wrote about Harris in his decision. “It is unlikely that the defendant will engage in further criminal activity in light of his sincere remorse.”

Harris returned to the U.K. and rented an apartment in St. James’s, an exclusive neighborhood between Buckingham Palace and Piccadilly Circus that is home to some of London’s finest tailors. Choucair testified during his trial that he was still exchanging tips with Harris in late 2013, and call logs between the two presented to the jury showed they spoke frequently before Choucair bought CFDs for property group BRE Properties Inc. The jury found Choucair’s friend Fabiana Abdel-Malek, a compliance officer at UBS Group AG at the time, guilty of leaking confidential information about an acquisition of BRE to Choucair. No one alleged Harris did anything wrong.

Harris resurfaced again in London’s day-trading scene in 2016, according to two people who interacted with him, then went silent during a spell in the Caribbean. He got back in touch early last year, touting stocks and asking old friends to invest on his behalf as a way of circumventing margin limits or disguising bets.

He claimed to have information about an alleged takeover of French chemical company Arkema SA, showing what turned out to be a forged offer document, one of them said. In what would turn out to be his last trade, in mid-May, he persuaded some of the same people to buy derivatives on his behalf linked to the share price of At Home Group Inc., a U.S. home-decor retail chain.

With At Home, Harris again showed what he said was a detailed copy of a takeover offer, according to one of the people. That document, too, turned out to be doctored, though it wouldn’t become apparent until a few days after Harris’s death, when the company slashed its profit outlook and shares lost more than half their value. Because the trades were done informally, Harris’s friends who suffered losses on his bet had no claim on his estate.

A few days after Harris died, his red Ferrari was parked outside the Greek Orthodox Saint Sophia’s Cathedral in London, where his family and friends gathered in a haze of incense. His body lay beneath a gold mosaic dome with an image of Jesus crouching before a rainbow. His coffin was decorated with images of skyscrapers. Friends and family filed past, leaning in to kiss him, hold his hand or caress his cheek. Those who spoke described a mischievous prankster, a restless soul filled with energy and tenderness, on a mission to sample the best the world had to offer.

“Only you, James, could live in a five-star hotel,” a former girlfriend, Olcay Gulsen, dressed in a broad-brimmed white hat and lace suit, said between sobs. “So lavish. The cool cars, the cigars, everything. But that’s not what made you so special. It was your heart, James.”

In October, in a coroner’s court above a bustling food market in West London, authorities said they found nothing suspicious about Harris’s demise: He had been alone at home that Monday morning, and video surveillance footage showed no one coming or going. His sister Emily wept as the coroner found that an overdose had killed her brother. The coroner called it death by misadventure – not a suicide, not an accident, not at the hands of someone else, but the result of a risk taken voluntarily.