-The euro is once again under pressure as the impasse over the Greek debt crisis continues, putting even greater importance on key decisions within and outside the country for the path of the single currency.

Investors are still holding out for Greece's funding problems to be resolved, a factor which is shoring up the currency. But expectations that crisis negotiations over the weekend would yield a firm solution were dashed. Instead, European Union authorities have put off the decision, hoping for a mid-July end to protracted talks.

The euro succumbed to an early bout of selling Monday, slipping to a session low of $1.4191 against the dollar before coming back above $1.42. But while the outlook for the currency looks uncertain, the prevailing sentiment is still relatively sanguine. Most investors are betting that there is too much at stake for the euro zone as a whole to let Greece default on its loans.

Athanasios Vamvakidis, a currencies strategist at Bank of America Merrill Lynch, said the cost of allowing Greece to fail is too high, which should in the end help support the euro. "The baseline is we expect a 'V shape' for the euro's exchange rate versus the dollar."

Key tests for the common currency ahead include a confidence vote for the new Greek government Tuesday. If there is a vote of no-confidence in the new governmment that all bets are off, as the country would struggle to concoct the cost-cutting measures needed in return for international aid. A further Greek budget vote is scheduled for June 28.

"The internal dynamics of Greek politics inject uncertainty into the whole process, and from the perspective of financial markets threaten fresh volatility as well as the risk of contagion, with the worst case scenario being a Lehman-style [event] for the euro zone," said Neil MacKinnon, strategist at VTB Capital.

"Whatever short-term compromises might be reached in the next few weeks, they are unlikely to mark the end of the euro zone's debt and banking crisis."

That in turn means a period of volatility for the single currency.

These developments are dominating currency market movements, especially as the week starts very slowly on the data front. But another reason for the euro's resilience could be the U.S. Federal Reserve's rate verdict and press conference, due Wednesday.

Analysts at BNP Paribas noted that U.S. rate setters are likely to stick to a less aggressive stance on inflation, a factor that will weigh on the dollar especially against the yen.

What happens in Greece may also have repercussions outside Europe, affecting wider confidence levels. Minutes of the Australian central bank's last rate-setting deliberations Tuesday may give a hint whether markets are correct in scaling back rate-rise expectations.

Elsewhere, the pound held steady despite the continued flow of soft U.K. economic data. The focus will be on the minutes of the Bank of England's June meeting Wednesday, to see if the recent run of data has weakened the resolve to lift interest rates.

Markets fear a Greek default could spark heavy losses among European banks holding Greek government bonds, which may lead to a possible contagion through the global banking system and financial markets.

A year after European officials authorised a bailout package for Greece, European finance ministers, meeting in Luxembourg on Monday, decided to make the next 12 billion euro- ($A16.25 billion) tranche of Greece's 110 billion euro ($A148.99 billion) loan, in early July.

But the funds will flow only if Greece's parliament passes new spending cuts and reforms by the end of June.

"They're still a long way from a permanent solution," CMC Markets chief market strategist Michael McCarthy said.

"Ultimately they have to go towards fiscal union or they have to break up the EU - that's the only choices they have."

"They will live from temporary fix to temporary fix until they can gather the political will to make the structural changes in Greece that are required."

The UAE Central Bank has instructed banks operating in the country to freeze the assets of 19 Libyan individuals and entities in line with the two United Nations Security Council resolutions on Libya, a senior bank official said here on Monday.
"We have implemented UN Security Council’s Resolutions on Libya and are in the process of preparing a report. We are expecting with the next week or so to complete the report for onward submissAon to the Ministry of Foreign Affairs,” said Abdul Rahim Al Awadi, executive director at the UAE central bank’s anti-money laundering and suspicious cases unit.
Al Awadi was speaking on the sidelines of a conference in Abu Dhabi on methods to detect and combat money laundering.
Al Awadi said banks have been instructed to search for and freeze any accounts or investments or deposits or safe deposit boxes in the names of the individuals and entities which appeared in the two UN Security Council resolutions on Libya, one of which has 12 names and the other seven.
The banks have also been told to stop any fund transfers linked to the names mentioned in the two resolutions.

 

An Iranian government-owned shipping line that the United States believes is integral to Iran’s efforts to obtain banned technology for its nuclear and missile programs has illegally funneled tens of millions of dollars in financial transactions through the American banking system over the past three years, evading sanctions by cloaking itself in corporate alter egos and falsifying records, according to an indictment that the Manhattan district attorney plans to unseal on Monday.

The 317-count indictment charges the Islamic Republic of Iran Shipping Lines and 15 other defendants with a conspiracy to set up shell companies in Singapore, the United Arab Emirates and the United Kingdom to trick major clearing banks in New York, like JPMorgan Chase, Bank of America and Citibank, into sending and receiving more than $60 million worth of payments.

The subterfuge was necessary, prosecutors said, because the Iranian company, also known as Irisl, needed access to United States banks to compete in a shipping industry that primarily does business in dollar denominations. American sanctions imposed in 2008 require United States banks to block and seize the proceeds from any transactions made in the names of Irisl or its known affiliates.

For years, the United States has warned that the state-owned shipping line engages in deceptive practices to aid the Iranian regime in its proliferation activities. Its ships, which operate throughout the world, have been caught smuggling a virtual bazaar of weapons in violation of a United Nations arms embargo.

But the grand jury indictment, the result of a 14-month investigation, represents the first time Irisl has faced criminal charges.

It may not be possible for the district attorney’s office to convict the 11 corporations and 5 individuals charged in the indictment, as all are based outside the jurisdiction of the United States. But prosecutors hope the case will compel foreign banks, which have allowed companies linked to Irisl to open accounts using corporate aliases and then move money from those accounts into and out of the United States, to scrutinize their customers.

“There are banks giving them access and turning a blind eye,” said Adam Kaufmann, executive assistant district attorney and chief of the investigation division. Mr. Kaufmann noted that the office’s investigation was continuing and said the indictment sent “a clear message that this is criminal conduct and could expose banks to criminal liability.”

The indictment comes after an investigation last year by The New York Times, which found that Irisl was setting up shell corporations across multiple continents in an attempt to make it appear as if its ships were under new ownership and management. In fact, nearly all of the new companies were wholly owned by Irisl, run by Irisl officials or set up at their behest.

The district attorney’s investigation into whether Irisl shell companies were gaining access to New York banks began when a confidential source provided officials with a suspicious bank account number. Using subpoenas as well as open-source information, investigators followed the trail to other, related accounts. 

District Attorney Cyrus R. Vance Jr. said the indictment demonstrated to Iran that his office would not remain idle while New York banks, “which stand at the forefront of international commerce,” were abused.

Sanctions enforcement is primarily the responsibility of the Treasury Department, but the district attorney’s office has a history of working closely with the federal government in this arena, claiming criminal jurisdiction because international dollar-denominated transactions are cleared through New York banks.

Mr. Vance’s predecessor, Robert M. Morgenthau, took on some of the world’s largest international banks for stripping information from wire transfers that would have shown the transactions originated from sanctioned countries like Iran and Sudan.

 

Financial institutions across the Continent share a terrifying trait with Lehman Brothers before its 2008 collapse: they rely too much on borrowed money, especially the cheap, short-term loans that are vulnerable to a market shock.
That's not exactly a handy characteristic when a Greek default seems almost inevitable. European policymakers this weekend failed to agree to terms on a 12 billion-euro ($17 billion) bailout loan due next month to Greece, warning that the Greek government must first show it is taking austerity seriously. Apparently mere riots aren't enough for these guys.
What's notable is that the most reckless banks, by these measures at least, reside not in gonzo Greece or profligate Portugal, but in the allegedly responsible states at the so-called core of Europe, Germany and France – the very banks that are most exposed to a Greek default, with some 90 billion euros ($129 billion) at stake.
Though it's hard to open the business section lately without finding a story about Germany's economic renaissance, thrift and prudence don't seem to characterize German banks. They hold 32 euros in loans for every euro of capital they have on hand, according to International Monetary Fund data. Lehman's leverage at the time of its collapse was 31-1, if you're keeping score at home. Either way it means a 3% loss leaves the taxpayers picking up the tab. Yes, that again.
The Germans aren't alone in Lehmanville: Belgian banks are using 30-1 leverage and French ones 26-1, the IMF numbers (see chart, right) show. All told, banks across the 17-country euro area average 26-1 leverage – double the ratio in the United States. Against all odds, European institutions have managed the nifty trick of making U.S. banks look good.
If the European leverage numbers sound familiar, it's because they are in line with the leverage ratios seen at the big U.S. investment banks before the financial markets started their nervous breakdown in 2007. Lehman and Bear Stearns, the smallish investment banks that gorged on real estate during the bubble,  were both leveraged at more than 30-1 while Goldman Sachs (GS), Morgan Stanley (MS) and Merrill Lynch were well into the 20s.
And in another similarity, the European banks are heavily reliant on short-term market funding, from sources such as the U.S. money funds that are among the biggest wholesale lenders on the planet. History shows that a market panic can make those funds suddenly unavailable, potentially putting an already stretched European Central Bank even more on the spot.
Yet it's not clear the Europeans have picked up just yet on how this year might come to rhyme with 2008. While Germany has backed away from its demand that private sector lenders be forced to accept reduced repayment terms, there is still no sign that Europe's leaders will soon come to their senses and hammer out a package that ends the siege once and for all.
All this tightrope walking is unnerving the staff at the IMF, which warned last week that "though there has been progress on banking system repair, the pace is too slow."
For now, there is no reason to believe a default is imminent or that the banks would be unable to handle the Greek storm. Liquidity is still ample and the financial system isn't as hyped up as it was three or four years ago. But the sight of overextended banks in the middle of a crisis is never reassuring, no matter how familiar it may be.