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Catalan banks react to independence crisis; ECB drafts new NPL rules


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Catalan banks react to independence crisis; ECB drafts new NPL rules

S&P Global Market Intelligence offers our top picks of banking news stories and more published throughout the week.

Catalonia crisis

* Banco de Sabadell SA has decided to move its headquarters to Alicante from Catalonia, amid concerns that the region may secede from Spain. Meanwhile, CaixaBank SA will take advantage of an emergency revision of the law expected to be made by Spain's government to move its headquarters out of Catalonia, possibly to Mallorca. Analysts said the lenders are coming under increasing shareholder pressure to relocate given escalating tensions amid political uncertainty in the region.

* Catalonia may declare independence from Spain after holding a parliamentary session on Oct. 9 to evaluate the results of the Oct. 1 referendum. A significant short-term challenge to the country's banking sector could come from the economic slowdown that would inevitably accompany a protracted conflict. As investors pummel Spanish bank shares over political uncertainty in Catalonia, lenders and the authorities in Spain have been seeking to quell concerns, but an escalation of events could have a long-term negative impact.

ECB's rules for nonperforming loans

* The European Central Bank will launch a public consultation on new guidelines that will force banks across the eurozone to set aside more cash to cover bad loans. Under the draft addendum, banks will be given two years to reserve enough money to cover 100% of their nonperforming unsecured debt and seven years to cover all their secured bad debt.

* The Bank of Italy is calling on the ECB to ease new rules for banks to set aside more capital to cover newly classified bad loans.

U.K. rules

* The Bank of England laid out updated rules on its approach to resolving failing banks, building societies and certain investment firms, and proposed indicative loss absorbency capital requirements that must be met by large foreign banks with significant British operations. Additionally, the Prudential Regulation Authority is proposing additional checks and balances for U.K. banks with large global footprints to ensure that they are properly capitalized across all geographies and protected from the risk of contagion.

Deal table

* French bank Crédit Agricole Group unit Crédit Agricole SA agreed to acquire more than 95% of Italian lenders Cassa di Risparmio di Cesena SpA, Cassa di Risparmio di Rimini SpA and Cassa di Risparmio di San Miniato SpA.

* Russia's B&N Bank and Otkritie Holding JSC unit Otkritie Financial Corp. Bank are very likely to merge in the future.

* Sweden-based Nordea Bank AB (publ) and Norway's DNB ASA completed the combination of their banking activities in Estonia, Latvia and Lithuania following receipt of regulatory approvals.

Debt redemptions and swaps

* Novo Banco SA secured the approval of bondholders for a discounted debt buyback.

* Italy's Unipol Gruppo SpA plans to take up Banca Carige SpA's debt swap offer as it approves of the efforts made by the troubled lender to strengthen its capital base. Struggling Genoa-based Carige has warned that if its plan to strengthen capital does not work it may be wound down by European regulators.

In other news

* Technological advances in banking could result in UBS Group AG reducing its workforce by about 30% in 10 years' time.

* French telecommunications firm Orange SA has rescheduled the launch of its online banking service Orange Bank SA to Nov. 2.

* PKO Bank Polski SA's consolidated net profit could exceed 3 billion Polish zlotys in 2017.

* The central bank of Iceland reduced its key interest rate by 0.25 percentage point to 4.25%, saying inflation has decreased in the past two months, with measures of underlying inflation also declining.

Featured during the week on S&P Global Market Intelligence

Sabadell relocation, CaixaBank's mooted move fueled by shareholder pressure: Sabadell agreed to move its headquarters to Alicante, while CaixaBank is reportedly poised to shift to the Balearic Islands, in response to what analysts described as shareholder pressure brought about by escalating tensions in Catalonia.

Monte dei Paschi plans listing amid restructuring, customer confidence worries: The government and analysts are optimistic the market will welcome the world's oldest extant bank back to the stock market despite a weak customer deposit base and lingering reputation damage after its near-collapse in 2016.

BoE: 'Geofinance' to be the defining challenge of the next few years: The impact of geography on financial regulation, or "geofinance," will be "the defining challenge of the next few years," according to Bank of England deputy governor Sam Woods.

Portuguese bank plan no quick fix, but will hasten bad-loan reduction: The plan of three Portuguese banks to join forces in managing bad debts is "a minor positive," but an upturn in Portugal's economy is key to reducing NPLs across the country's banking sector, experts said.

Jury still out on capital benefits of blockchain settlement technology: A quarter of the world's largest banks have joined UBS' distributed ledger-based Utility Settlement Coin, but the extent to which the new technology will allow them to free up capital is not yet clear.

The best and worst performing global bank stocks for Q3: Global bank indexes broadly gained ground during the third quarter, led by a strong rebound in Latin America. Major European banks, however, were among the strongest performers, while China had some of the best and worst performers.