Credit rating agencies are back in the spotlight, facing a lawsuit from the largest pension fund in the US over what it says are "wildly inaccurate" ratings and heightened scrutiny from regulators. The California Public Employees' Retirement System (Calpers) is suing the three leading credit rating agencies over potential losses of more than $1bn related to structured investments that were rated AAA but contained risky mortgage debt.

Banks must brace themselves for a rash of board-level bureaucracy, if the proposals of the Walker Review on financial sector corporate governance, published on Thursday, are accepted. Sir David Walker, the former chairman of Morgan Stanley International, and author of the report, said financial groups should set up board risk committees, separate from audit committees, to ensure executives are not allowed to run amok.

Plans to reveal the pay and bonuses of City high flyers in a new voluntary code came under attack from opposition MPs, who said the guidelines would be ignored unless they were enshrined in regulation and policed by the main financial watchdog. A government-backed review recommended that some of the best-paid bank staff, who are currently shielded from scrutiny, should be included in annual reports as part of a wide range of measures designed to discourage risky behaviour...The review by former investment bank boss Sir David Walker argued that exposing pay structures for highly paid staff in the City and putting an end to short-term bonuses would help prevent a repeat of the financial crisis. Bonuses would be delayed for between three and five years and put under scrutiny by a beefed-up remuneration committee. Non-executive directors of finance companies would be required to spend more time assessing deals put forward by executive directors, Walker said.

JPMorgan reported record revenues in the second quarter on Thursday as soaring investment banking fees drove profits in spite of swelling loan losses. The US bank's earnings beat analysts' most bullish expectations, jumping 36 per cent and producing net income of $2.7bn, or 28 cents a share, compared with $2bn, or 53 cents, in the same quarter the prior year.

Tel Aviv takes a step closer to war with Tehran as two Israeli warships sail through the Suez Canal within cruise-missile range of Iran. Earlier this week, two Israel Navy gunboats, the Hanit and the Eliat, passed through the Suez Canal and across the Red Sea. In a Thursday interview with the Times, a senior Israeli defense official said the move should be seen as serious preparations for a long-expected attack on Iranian nuclear sites....Tel Aviv, the alleged possessor of the sole nuclear arsenal in the Middle East, accuses Iran of secretly enriching weapons-grade uranium to attack Israel. Iran says it has no such intentions and has asserted that its uranium enrichment is a peaceful drive to produce electricity.

US war planes have killed and injured dozens of civilians in southern Afghanistan in attempted bombings of suspected Taliban militant hideouts. The latest incident happened overnight in southern Kandahar province. Residents in Shah Wali Kot said up to six people were killed and 16 wounded in the air attack in the district. Another two people were reportedly killed and four others were wounded in neighboring Miawand district when US helicopters fired missiles in the region. This is not the first violent US attack on civilians in Afghanistan. More than 140 Afghan civilians were killed in a series of US airstrikes in the western Farah province in early May. Additionally, some 1,000 civilians have lost their lives in the past five months during clashes between US-led troops and insurgents affiliated with the Taliban. US bombing campaigns have drawn sharp criticism from Afghans and the government of President Hamid Karzai.