Guest view: Why bank investors have it the hardest 21 Apr 2023 Lenders were supposed to be boring after 2008. Recent collapses exposed that vision as a fantasy. Shareholders grapple with high leverage, opacity, erratic regulators and intangibles like trust. Seemingly low valuations may not be low enough, argues former analyst Rupak Ghose.
Tough love is best fix for energy cash crunch 7 Sep 2022 Utilities and power traders face a $1.5 trln surge in collateral demands due to swings in gas futures. The answer could be bailouts, halts in trading and collateral tweaks. Yet radical changes may increase risk. And government help, if properly priced, needn’t be a freebie.
CATL’s woes will sap others’ batteries too 6 May 2022 The $130 bln battery maker goofed in the first quarter: net profit fell 24% and it revealed a 1.8 bln yuan derivative liability. Shrinking margins suggest its size isn’t a protection against supply chain chaos and commodity price hikes. It’s even worse news for smaller rivals.
Wall Street awaits Chinese oil crash post-mortem 29 Apr 2020 The country’s fourth-largest lender fumbled a crude product, leading to $1.4 bln in losses. Regulators have pushed wealth management assets onto commercial bank balance sheets, with uneven results. Foreigners mulling market entry should watch how watchdogs tackle the mess.
Hadas: Vatican asks the right financial questions 21 May 2018 A new document approved by Pope Francis criticises speculative trading in derivatives and provides helpful guidelines for reform. It’s not just Catholics who see that finance needs to serve the common good. A moral commitment to restrain financial excess could help curb populism.
Chancellor: Beware the volatility bubble’s popping 8 Feb 2018 Shorting volatility has been one of the most prevalent and conspicuous features of the markets since the financial crisis. A crack has now appeared in the so-called "short vol" boom. Investors should take note. The froth wasn't just confined to speculators trading XIV notes.
Volatility good and bad for Europe’s bank chiefs 7 Feb 2018 For the past two years Deutsche Bank’s John Cryan, Credit Suisse’s Tidjane Thiam and Barclays’ Jes Staley have been able to blame poor performance on becalmed markets. Higher volatility undermines that excuse. Trading revenues must grow or they risk shareholder revolt.
Volatility shock knocks Credit Suisse’s new image 6 Feb 2018 The value of an exchange-traded fund set up by the Swiss bank to benefit from calm markets has collapsed due to recent turbulence. Though the financial damage to Credit Suisse is minimal, it’s an unwelcome reminder of past mistakes. The reputational fallout could be more severe.
CDO cousin thrives a decade after the crisis 11 Oct 2017 The subprime-mortgage fiasco killed the business of pooling debt securities but not its commercial-lending relative, the collateralized loan obligation. CLO issuance has surged on the back of solid credit and investors’ hunger for yield. The bonanza has plenty of life left.
Etihad’s airlines fail, but odd CDO remains aloft 17 Aug 2017 Air Berlin and Alitalia are insolvent. Their debt is probably worthless, except for an unusual collateralised debt obligation that part-owner Etihad used to fund them. It is trading at a price that suggests Etihad might bail it out. Fuzzy guarantees often end badly.
EU rethink of bank debt better late than never 22 Jun 2016 The European Commission wants to harmonise rules for bank bail-inable debt. The current patchwork of different national regimes is confusing and impedes resolution. A single model would be simplest, but could limit flexibility. At the very least more standardisation is desirable.
Wall Street’s P2P folly reverts to reckless form 1 May 2015 Traders want to link derivatives to the fledgling peer-to-peer loan market. Such lenders don’t need to reduce balance sheet constraints like banks do, however. A hedging tool may have marginal utility, but the securities will mainly create unnecessary and dangerous speculation.
Solving Too Big to Fail just got a lot easier 8 Oct 2014 The main dealers in the $700 trillion derivatives market have agreed not to close out contracts in failing global lenders. Getting other players to sign up may be harder. But it’s a key step in the drive to resolve swollen cross-border banks without using taxpayer cash.
Guest view: The risks of European derivatives reform 6 Oct 2014 The CEOs of London Stock Exchange and LCH.Clearnet worry that Europe’s new MiFID II rules for financial markets will “lose their teeth.” But crude implementation of complex regulation could damage market liquidity, innovation and stability, warns Paul Swann of ICE Clear Europe.
Guest view: U.S. swaps need clearer reform 25 Jul 2014 Four years after the Dodd-Frank law passed, the derivatives market is still reeling. The changes made swaps cheaper for some and enhanced transparency. But the market is prohibitively expensive for others, Chatham Financial’s Luke Zubrod says, and some rules are still fuzzy.
Clearers have yet to shake off TBTF menace 8 May 2014 Post-crisis reforms shifted the lion’s share of banks’ derivative risk to clearing firms. Critics say this has just moved too-big-to-fail threats to opaque, undercapitalised behemoths. Regulators and clearers have made good progress tackling the problem. But both could do more.
Banks swap rewards for risk on public deals 9 Apr 2014 Deutsche Bank and UBS are now loath to offer long-dated swaps to municipalities. New capital rules make the business less attractive. But after legal tussles and bad publicity in Milan and Detroit, bankers are turning away business on grounds of reputational risk.
The synthetic CDO returns humbled and tame 2 Dec 2013 Mere mention of the complex derivative induces ire and laughter for its role in the crisis and JPMorgan’s whale fail. Citi’s latest iteration of the CDO, though, is less of a monstrosity. It shows that while there’s no way to eradicate greed, buffers for it can at least be built.
Speculation isn’t always a dirty word 13 Nov 2013 The U.S. derivatives regulator wants to curb market manipulation by capping some commodities trading. It’s the wrong approach, not least because it could reduce liquidity with limited benefits. Transparency and stronger policing of large positions are enough to do the job.
Banks dodge a bullet with transatlantic swap deal 15 Jul 2013 A deal between U.S. and European regulators will allow transatlantic swaps to be booked outside America. The CFTC seems to accept Brussels’ own reforms could help stop another AIG-style blowup. Just as well: a tougher U.S. line could have wrecked business at all global banks.