Banks need to take the guesswork out of Libor 15 Mar 2012 Probes into alleged manipulation of the benchmark interest rate have exposed a crucial flaw: sometimes it’s based on an educated guess. That won’t restore confidence in a figure that underpins $360 tln of loans and derivatives. A better approach would be to use real transactions.
Bank stress tests renew dividend-buyback debate 14 Mar 2012 JPMorgan and Wells Fargo are doing both after passing the Fed’s exam with flying colors. But in an industry suffering from slow growth, increasing the dividend payout ratios back to, if not above, 2007 levels may make more sense for shareholders than repurchasing stock.
Goldman’s omerta loses force – along with brand 14 Mar 2012 A banker’s public resignation has revived accusations the bank puts its interests ahead of clients, or “muppets.” Though the complaint is familiar, it’s usually kept private. The worry for Goldman is some employees are no longer scared of the firm nor take pride in its pedigree.
Greek banks face six month battle for survival 14 Mar 2012 The merger of Alpha and Eurobank EFG has collapsed, deepening the capital hole at Greece’s four big lenders. If they can each fill a chunk of their deficits privately by September, shareholders could yet escape total nationalisation. But it won’t be easy to attract new investors.
Fed strikes right balance with latest stress test 13 Mar 2012 Unlike the last look under the hood, investors have been given reams more useful data to separate sheep from goats in U.S. finance. At the same time, the Fed’s acting prudently to ensure capital adequacy across the system. It’s a sensible way to head off another financial crisis.
Citi, time to hand Smith Barney to Morgan Stanley 13 Mar 2012 The firm led by James Gorman should get Fed approval this week to buy another 14 pct of the stockbroker it owns with Citi. But acquiring it all would make more sense and unlock capital for Citi. Assuming they can agree on price, of course - and convince regulators of the plan.
Big banks don’t face daunting new world alone 12 Mar 2012 Though U.S. lawmakers aimed much of their firepower at institutions deemed too big to fail, smaller lenders were caught in the crossfire. As the nation’s legions of community bankers gather in Nashville, they’ll grapple with similar regulatory and economic challenges.
M&A lawyers lob stones at Goldman from glass house 9 Mar 2012 At the dealmaker jamboree in New Orleans, debate over how the bank played both sides of the El Paso sale drowned out other hot topics. Bankers and CEOs took beatings over other conflicts, too. And yet for an event mainly devoted to legal issues, there was little self-reflection.
Executives could still carry can for HBOS disaster 9 Mar 2012 The UK regulator has stopped short of fining the lender for risk failures that led to its 2008 collapse and rescue. But the Financial Services Authority is still pursuing the individuals responsible. Judging by its damning report, they could yet face big fines or lengthy bans.
Bankers behaving badly are no black swans 8 Mar 2012 Job stress and simple statistics mean it shouldn’t be too shocking to hear of Wall Streeters stabbing a cabbie or defecating in public. More surprising is that such tales are relatively rare. After all, unlike their poor on-the-job decisions, such risks cannot really be managed.
Investment bankers complete Deutsche Bank takeover 8 Mar 2012 The latest management reshuffle at the German-based group has elevated several investment bank executives. That’s partly new co-CEO Anshu Jain picking his own team. But it’s also confirmation that, despite the crisis, trading and risk management nous are still crucial.
Lehman is back! Is the financial crisis over? 6 Mar 2012 If only. Sure, the worst may be history as the ghost of the Wall Street firm finally emerges from bankruptcy. But uncertainty still obscures new rules and how another Lehman meltdown will be avoided. Worse, governments look far more enmeshed in financial markets than before.
Hugo Dixon: LTRO was a necessary evil 5 Mar 2012 The ECB’s decision to pump 1 trln euros into European banks could reduce the pressure on governments to reform, while allowing undeserving banks to make bumper profits. But the bailout prevented an even worse outcome. The priority now is to limit the bad side-effects.
Citi steals governance march as Parsons quits 5 Mar 2012 The recovering megabank is keeping the split at the top when the current chairman leaves in April. That’s an example other Wall Street firms should follow. After sitting on Citi’s board for 16 years through several crises, it’s finally a decent legacy for Parsons’s reputation.
ECB handout carries risks of renewed bank backlash 2 Mar 2012 Barclays says the profit from 8.2 bln euros of cheap central bank loans won’t be included in bonuses. But benefits of the rally triggered by the ECB’s largesse will be harder to strip out. Unless the broader economy shares in the recovery, banks will become targets again.
ING victory may be game-changer for 2008 fall guys 2 Mar 2012 An EU court has found in favour of the Dutch bank in its battle against the European Commission over state aid penalties imposed after its 2008 bailout. That’s good for ING. But it could also ease the burden on other crisis casualties like RBS, Lloyds and Commerzbank.
Brazilian banking star puts $15 bln value to test 1 Mar 2012 In three short years, André Esteves has dealt his way to a six-fold increase in the price of his BTG Pactual. Wall Street can only dream of such riches. Former owner UBS must be quietly weeping. But the planned IPO will reveal just how solid the investment bank’s foundations are.
Kinder deal conflicts deserve a second hearing 1 Mar 2012 A judge was right not to block the pipeline owner’s $21 bln acquisition of El Paso over the skewed motives of Goldman, Morgan Stanley and the target’s CEO. But it’s also a good idea for shareholders to keep the fight going. Penalizing misaligned incentives is the best way to stop them.
Don’t penalize money funds for the sins of banks 1 Mar 2012 The SEC wants to step up regulation of money market funds. But their losses have been relatively trivial and mostly non-systemic, while providing savers with diversification from insured deposits. A better idea would be to clearly delineate their risks from those of banks.
Fed’s mortgage sales tighten Volckerian knots 29 Feb 2012 The central bank offloaded the last $6 bln of housing dreck from the AIG rescue. The deals can be construed as prop trading, but also show how big banks work well as market-makers. Maiden Lane exemplifies the conundrum confronting regulators as they draft the final Volcker Rule.