Compromise rescue plan to be adjusted as Lebanon faces the abyss

People line up outside an exchange shop to buy US dollars in Beirut. Lebanon’s financial meltdown has thrown its population into a frantic search for dollars as the local currency’s value evaporates. (AP)
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Updated 18 July 2020

Compromise rescue plan to be adjusted as Lebanon faces the abyss

  • Financial adviser seeks adjustments to meet IMF criteria amid resistance from politicians and central bank, sources say

BEIRUT: Lebanon’s financial adviser Lazard, the US investment bank, will see if a financial rescue plan can be adjusted to reach a compromise workable for the International Monetary Fund, two sources said on Friday. 

The move comes as the proposed rescue plan meets growing resistance from politicians, banks and Lebanon’s central bank.

The plan, which anticipates vast losses in the financial system, has been undermined by objections from Lebanon’s ruling elite, obstructing IMF talks aimed at rescuing the country from a financial meltdown.

Prime Minister Hassan Diab’s government had approved the plan, which would lead to losses of 241 trillion Lebanese pounds in the financial system, or $68.9 billion at the exchange rate applied by the plan, as the basis for talks with the IMF.

The IMF said the losses appeared to be about the right order of magnitude.

But a parliamentary fact-finding committee, backed by all Lebanon’s main parties, objected to the approach taken in the plan. Applying different assumptions, it came up with losses between a quarter and half that amount.

“Lazard will come possibly next week to see if they can adjust the government plan and work on a compromise acceptable to the IMF. They will do any adjustment based on the government plan,” one of the sources said.

The second source said the aim of the Lazard visit is “how we can try to adjust the government plan to see if we can come up with something workable for the IMF and for the Lebanese counterparts.”

Lazard declined to comment.

Lebanon’s legal adviser, Cleary Gottlieb Steen & Hamilton, is also visiting the country, the sources said.

The IMF warned Lebanon on Monday that attempts to lower losses from the financial crisis could only delay recovery.

Alain Bifani, a senior member of Lebanon’s negotiating team with the IMF, resigned as finance ministry director general last month, saying vested interests were undermining the government plan. 

Trump advisers urge delisting of US-listed Chinese companies that fail to meet audit standards

Updated 07 August 2020

Trump advisers urge delisting of US-listed Chinese companies that fail to meet audit standards

  • Growing pressure to crack down on Chinese companies that avail themselves of US capital markets but do not comply with rules
WASHINGTON: Trump administration officials have urged the president to delist Chinese companies that trade on US exchanges and fail to meet US auditing requirements by January 2022, Securities and Exchange Commission and Treasury officials said on Thursday.
The remarks came after President Donald Trump tasked a group of key advisers, including Treasury Secretary Steve Mnuchin and SEC Chairman Jay Clayton, with drafting a report with recommendations to protect US investors from Chinese companies whose audit documents have long been kept from US regulators.
It also comes amid growing pressure from Congress to crack down on Chinese companies that avail themselves of US capital markets but do not comply with US rules faced by American rivals.
“We are simply leveling the playing field, holding Chinese firms listed in the US to the same standards as everyone else,” a Treasury official told reporters in a briefing call about the report.
The US Senate unanimously passed legislation in May that could prevent some Chinese companies from listing their shares on US exchanges unless they follow standards for US audits and regulations.
Democratic Senator Chris Van Hollen, who sponsored the bill described the recommendations as “an important first step,” but said that “without the added teeth of our bill, this report alone does not implement the requirements necessary to protect everyday American investors.”
The administration’s recommendations, if implemented via an SEC rulemaking process, would give Chinese companies already listed in the United States until Jan. 1, 2022, to ensure the US auditing watchdog, known as the PCAOB, has access to their audit documents.
They can also provide a “co-audit,” for example, performed by a US parent company of the China-based affiliate tasked with auditing the Chinese firm. However, companies seeking to list in the United States for the first time will need to comply immediately, the officials said.
A State Department official told Reuters the administration plans soon to scrap a 2013 agreement between US and Chinese auditing authorities to set up a process for the PCAOB to seek documents in enforcement cases against Chinese auditors.
China said on Friday that the two countries have “good cooperation” in monitoring publicly listed firms.
“The current situation is that some US monitoring authorities are failing to comply with their obligations, and what they are doing is political manipulation — they are trying to force Chinese companies to delist from US markets,” foreign ministry spokesman Wang Wenbin told a media briefing.
The PCAOB has long complained of China’s failure to grant requests, giving it scant insight on audits of Chinese firms that trade on US exchanges.
The report also recommends requiring greater disclosure by issuers and registered funds of the risk of investing in China, as well as mandating more due diligence by funds that track indexes and issuing guidance to investment advisers about fiduciary obligations surrounding investments in China.
The moves come amid rising tensions between Washington and Beijing over China’s handling of the coronavirus and its moves to curb freedoms in Hong Kong, among other issues.