Maybe SAC should forget about other people’s money 15 Mar 2013 Steve Cohen’s $15 bln hedge fund firm is paying $616 mln to settle SEC insider trading charges. It would be an ignominious time to follow legends like Stan Druckenmiller, but he is already losing a quarter of outside investor funds. It could be time to manage only his own cash.
Senate’s JPM roast also singes failed watchdog 15 Mar 2013 Whacking the bank led by Jamie Dimon over last year’s $6.2 bln trading loss was a given - and deserved. Many of the subcommittee’s claims that JPMorgan misled the OCC smack of political grandstanding. But the portrayal of the regulator as a bumbling fool looks spot on.
Fed harder to grade than banks on stress tests 15 Mar 2013 Rapped knuckles for Goldman and JPMorgan - and an “F” for Ally and BB&T - suggest the regulator is being tough. A blessing for BofA suggests a rigorous but fair system. Yet keeping both its math and many of the results secret make some of the Fed’s discipline seem more for show.
Hong Kong experiments with new bubble-busting tool 14 Mar 2013 Two big banks raised mortgage rates after Hong Kong’s Monetary Authority hiked capital requirements for property loans. It’s the first time the activist watchdog has publicly tweaked lenders’ risk models. For western regulators seeking similar powers, it’s an important test case.
U.S. swap rules bring two steps forward, one back 11 Mar 2013 As Dodd-Frank changes take effect, some formerly opaque derivatives are reappearing as futures. That’s a regulated and fairly transparent market. But capital and disclosure requirements aren’t quite as tight as lawmakers intended for swaps. It’s regulatory arbitrage in action.
UK should accept its counsel on bank reform 11 Mar 2013 A group of MPs has attacked the government for diluting banking reforms proposed by an earlier commission. The recommendations and their emphasis on ring-fencing are no panacea. That’s all the more reason they should be implemented robustly. Sadly, the government isn’t listening.
Fed flunks crucial part of bank stress tests 8 Mar 2013 The watchdog is happy enough saying what might happen to big banks if the economy tanks: they could lose up to $462 bln. But it’s inexplicably shy about revealing the effects of a sharp rise in interest rates. That’s just as real a risk that the Fed should disclose to investors.
Financiers failing own version of Hippocratic Oath 7 Mar 2013 Client money isn’t being kept safe, a Wall Street watchdog warns. It’s a failure as basic as doctors not washing their hands, despite repeated reminders from the likes of Refco and MF Global. The extent and severity of the problem should worry customers and investors alike.
Accounting U-turn on loans will make banking safer 7 Mar 2013 The severity of the crisis owed much to accounting rules that force an ostrich-in-the-sand approach to loan losses. So it’s heartening that rule makers have proposed sensible fixes for a broken system. International agreement may still be a chimera, but it’s progress nonetheless.
Securitization clan condemned to repeat history 5 Mar 2013 Banks and investors are abandoning the American Securitization Forum over a pay and governance brouhaha. As Washington puts final touches on new industry rules, the timing couldn’t be worse for the trade group. Like the pre-crisis MBS market, arrogance is trumping common sense.
QInvest-EFG Hermes deal tests new Egypt 4 Mar 2013 Ten months have passed and the Qatari firm is still waiting for regulatory approval for its deal to carve up the region’s top investment bank. Criminal allegations against EFG’s co-CEOs make this a political hot potato for Egypt. But both firms may be weaker if nothing is done.
SEC goes where Chesapeake board feared to tread 1 Mar 2013 The watchdog has launched an investigation into the gas company’s disgraced CEO Aubrey McClendon. Shareholders suing the company will welcome the news. But Chesapeake’s directors should have set up a more impartial inquiry themselves. That oversight could prove costly.
Time to think of salaries for performance 28 Feb 2013 The EU is curbing the ratio of bonus to salary for bank staff. In most businesses, such a rule would simply capture economic reality. If pay reflects performance, salaries should usually comprise most of the package. Banks are different - because their business models are flawed.
EU bonus lesson: self-regulate or worse follows 28 Feb 2013 Caps on the ratio of fixed to variable banker pay are being imposed at just over 1:2 depending on how much bonus is deferred. Regulating income is an unwelcome post-crisis milestone. It is also a warning to banks and big business: self-regulate or get misguided rules from above.
Supreme Court unanimously orders SEC off its duff 27 Feb 2013 The U.S. justices denied the watchdog more time to sue investor Marc Gabelli, ruling it had the means to pounce sooner. That highlights a chronic problem. Rather than aim ample firepower at financial crisis cases, the SEC stuck with one a decade old. Investors deserve better.
Illumination alone won’t slow China shadow banks 27 Feb 2013 With non-bank finance over 40 pct of GDP, a mooted plan to disclose and limit off-balance sheet lending is welcome. Yet growth will continue, and it’s still not clear that investors will be on the hook for losses. The economic imperative to keep credit flowing is pre-eminent.
Bank firewalls: a guide for the perplexed 19 Feb 2013 The UK, U.S. and Europe have different ideas about partitioning their banks. The Vickers, Volcker and Liikanen plans reflect divergences in the regions’ pre-crisis banking systems, and how badly taxpayers suffered. Breakingviews mulls over whether their lack of agreement matters.
Riposte: Bank bonuses deserve to be capped 19 Feb 2013 The question on bankers’ pay is not whether it’s too high, but how best to make it lower. Ideally, market forces and capital regulations will do the job, but progress is slow. Bonus limits are crude, but likely to be effective. A new EU rule could start a downward race.
New U.S. TBTF plan is too big to succeed 15 Feb 2013 In theory, a Republican proposal for a new capital cushion at the largest banks could minimize too-big-to-fail and justify desired lighter regulation. But the plan would mean banks issuing $2 trln of junior debt. Other flaws aside, that just doesn’t square with today’s markets.
AB InBev moves fast to keep Mexico prize 14 Feb 2013 The world’s top brewer has quickly rejigged the $20 bln takeover of Grupo Modelo. If U.S. regulators now approve, the deal still makes sense for AB InBev, both financially and strategically. It will get bigger in Mexico and can still try to make Corona beer a global smash.