Goldman/Espirito Santo mess raises valid question 31 Dec 2014 The U.S. bank may take a hit after a loan to failed lender Espirito Santo was moved by Portugal’s regulator into BES’ bad bank. Goldman has fallen foul of Portuguese law, and its own complex business. The fiasco highlights the need for greater clarity over bank resolution.
Banks will make asset managers pay for regulation 31 Dec 2014 Persistently low returns are spurring investment banks to re-price products like repo financing and prime broking. In 2015, expect firms to get serious about passing on the pain of capital and liquidity rules. Higher costs could in turn force some money managers to consolidate.
Accounting fraud is ripe for fresh scrutiny 30 Dec 2014 Dodgy numbers will replace insider trading as U.S. watchdogs’ preferred prey in 2015. New auditing and analytics arms give the SEC a head start, even if SarbOx reforms make cases harder to track down. With the likes of SAC chastened, it makes sense to refocus on the next Enron.
Bitcoin’s defects will hasten its demise in 2015 26 Dec 2014 The leading crypto-currency’s economies of scale in mining and its transaction system’s vulnerability to subversion by a dominant miner make it unsound. As seignorage declines it will become cost-uncompetitive for transactions. Flaws may cause its price to lose further altitude.
Uncle Sam stoked to hash out marijuana in 2015 24 Dec 2014 Now that four U.S. states and D.C. have legalized recreational cannabis, commerce and safety warrant better regulation. But federal rules prohibiting the drug create obstacles. For the fledgling industry to mellow, Washington needs to tweak laws to consent to states’ will.
Research reform starts here for Europe’s investors 19 Dec 2014 Regulators are to unbundle charges for financial analysis and trading in Europe. Greater transparency is welcome. But buyside and sellside alike will be cheered that asset managers can still charge research to clients. Determining value for money may be tricky for end-investors.
ECB sours QE plans to keep Germany sweet 19 Dec 2014 The central bank will buy sovereign debt – but each national government may have to set aside provisions in line with their own risks, Reuters says. It may secure German approval. But it would also weaken quantitative easing, and highlight a fragmenting euro zone.
Deutsche strategy rejig may presage CEO succession 19 Dec 2014 The German bank is set to review its direction in 2015. Its bet on capital markets remains unproven. Likely regulatory settlements in the coming months could raise further doubts. Recent executive moves suggest Deutsche is keeping options open for strategy and leadership change.
U.S. bank watchdog judging cost cuts just right 18 Dec 2014 The FDIC’s latest belt tightening means its budget is now 42 percent lower than at its peak. With the OCC warning of lower lending standards, that might sound worrisome. But the FDIC’s actually shifting resources to where they’re needed most – a sign it’s learned from the crisis.
Europe could edge past U.S. in race to courthouse 17 Dec 2014 New rules and bank scandals boost financial fraud and class-action filings in Britain. Patent combatants flock to German judges. And spats over failed investments clog EU courts. The upshot: a lawsuit boom that may topple America as the world’s business litigation capital.
M&A "clear day" defenses can cloud investor rights 17 Dec 2014 Anti-takeover protections adopted before threats arise are more apt to weather legal scrutiny. It’s one reason Allergan was able to resist Valeant’s $52 bln bid. When triggered reactively, they’re considered unfair surprises. Either way, shareholders often get unneeded cover.
EU insurers’ solvency is shakier than it looks 16 Dec 2014 A quarter of Europe’s insurers would fail to meet a basic gauge of capital health if Japan-style low-yield conditions were to persist, recent stress tests found. But actual euro zone yields are even lower. With the bloc on the brink of deflation, that’s not a reassuring sign.
U.S. budget spat puts bankers, lawmakers to shame 12 Dec 2014 Wrangling over a change to Dodd-Frank has delayed a deal to keep the government open. The amendment may only weaken financial reform slightly. But it smells bad that Wall Street wrote and lobbied for it. Allowing it to slow a $1 trln bill is another sign of Congress’s dysfunction.
Review: "Forgotten Depression" worth remembering 12 Dec 2014 James Grant’s new book on the U.S. government’s response to the 1921 crash is a timely reminder that our forebears knew of other, apparently more efficacious, remedies to cure financial hangovers than the hair of the dog.
Overreaching enforcers redraw insider trading line 10 Dec 2014 A U.S. court tossed convictions of two hedge fund managers, sharply narrowing the law on improper dealings. Prosecutors should expect more embarrassing reversals. The silver lining is that the ruling gives Wall Street clarity on what’s forbidden and should curb government excesses.
FCA boss has lucky escape in briefing fiasco 10 Dec 2014 Martin Wheatley keeps his job but loses his bonus after the UK regulator botched a media briefing on insurance in March. The report into the debacle sets out his weak response to the unfolding crisis. If he wasn’t doing a good job otherwise, he would have paid a higher price.
Citi boss etches a dangerous line 9 Dec 2014 The mega-bank is taking a surprise $3.5 bln charge mainly for Libor, forex and money laundering legal costs. CEO Michael Corbat says it should mostly put the issues to bed. That’s a bold call, especially given Citi’s approach to reserves. The words may yet come back to haunt him.
Bank misdeeds show lack of "should we" 26 Nov 2014 A Citi analyst settlement and a probe into an HSBC hedge fund leak aren’t about grey areas. The alleged transgressions break clear rules. As in a recent experiment reported by Nature, they betray bankers’ tendency to eschew what they should do for what they can get away with.
Wells Fargo: first big bank simple enough to fail 26 Nov 2014 The $1.6 trln lender secured a provisional stamp of approval from regulators for its living will. Less credible plans from 11 other titans suggest size isn’t the issue. Wells ranks fourth in assets and first in market cap. The real problems are complexity and interconnectedness.
Rob Cox: American banking has its own Tea Party 25 Nov 2014 Like the anti-establishment wing of the GOP, the Independent Community Bankers of America has emerged as a highly vocal opponent of all things Wall Street, including a Lazard banker’s nomination for a Treasury role. These are the plaintive cries of a dying breed of banker.