Bernie Sanders, US Senator and presidential candidate, has introduced legislation to force the biggest banks to break up. It probably won’t pass, but there’s a chance Sanders could still achieve his goal if regulators are assiduous in demanding credible “living wills” — plans systemically important lenders must draw up to show they could be wound down without blowing up the financial system.
When we thought about this piece of the Dodd-Frank Act in the past we were sceptical that, in the heat of the moment, any government would risk an untried plan to impose losses on creditors rather than err on the side of bailouts. Surely the exercise was a waste of time and scarce regulatory resources. But a recent meeting with some senior American financial regulators made us think there could be a deeper logic at work. Read more
Deutsche Bank has long been an unloved stock.
Not only does it trade stubbornly below book-value, a bleak revenue outlook in January led to the promise of a major strategy rethink for the group, including the prospect of job cuts, asset sales and the streamlining of investment banking divisions.
Among options on the table is a sale of the group’s Postbank retail business — a division it acquired in 2008 in the hope of bringing deposit funding to the aid of its investment banking arm. Read more
Here’s a comment to note in the Bank of England’s “fundamental change” section of its One Bank Research Agenda discussion paper:
Technology is potentially transforming the landscape for money and banking. New digital or e-monies and new methods of payment and financial intermediation raise fundamental questions for financial regulation, money demand generally and central bank money in particular. For example, might central banks issue digital currencies and what would be the impact on existing payment and settlement systems? Is the cryptographic technology behind Bitcoin transformational? How will financial regulation need to adapt if new non-bank credit intermediaries emerge in scale?
Talk of official digital money, of course, is not new to FT Alphaville readers. Nor, for that matter is talk of collaborative non-bank credit unions that mint their own currencies for their own network use. Or even talk of digital money solutions that open up the central bank’s balance sheet to more people in a way that eases the safe-asset shortage. Read more
This from Dan Davies is worth a bit of your time — supposedly four minutes of your time according to Medium’s time-thingy.
It makes the very good point that the lack of Greece-dominated headlines over the weekend is most probably good news. As Dan says, we haven’t had stories of deposit flight and bank runs, there haven’t been anymore leaked documents, the ECB hasn’t piled on any more pressure and there has been no grandstanding of note — from Greek or German politicians.
From Davies: Read more
So, this weekend, the Bank for International Settlements released a preview of an upcoming report in which they make a connection between financialisation and the oil market.
Tracy’s written it up here.
But, before you get too excited, two things must be pointed out.
The first, of course, is that a BIS admission about financialisation effects on the oil market is pretty unexpected.
You see, as far as we’ve tracked or heard from BIS economists on this matter, they’ve resisted arguments and models pointing to financialisation effects, embracing instead explanations that link price effects to fundamentals.
Which brings us to the second thing. Yes, the BIS is shifting its view on the financialisation argument, but the paper also shows it doing so in a really convoluted and unconvincing way. Definitely the opposite of Occam’s Razor. Read more
The FT’s Gillian Tett reports from Davos that the Powers that Be may finally have noticed how — while they were busy regulating the banks — the technology companies quietly moved into what was once their unregulated turf.
Via Wednesday’s Davos dispatch:
Large technology companies will experience the same collapse in reputation as banks have endured in recent years unless they rapidly change their policy approach, business leaders cautioned in Davos. Their warning was directed at the influential heads of technology companies, such as the Silicon Valley giants, who were told they needed to recognise that self-regulation will not be sufficient to stave off mounting public alarm about issues such as privacy.
“Self-regulation, no matter what you do, is just not going to be good enough [for tech companies],” said Paul Achleitner, chairman of the supervisory board of Deutsche Bank. He pointed out that a self-regulatory approach had been previously employed by banks — but notably failed to quell a political backlash against their over-reach.
Fascinating what a few months of sub $90 per barrel oil prices can do to the dialogue about the respective merits of cheap energy.
So, whilst three months ago it was all about “trillions in stimulus from cheap oil!!“, today it’s “$50 oil changes everything!” and ARGHH “energy defaults may be the new subprime!”.
As FT Alphaville warned at the start of December:
If it is true that the commodity ecosystem is collapsing, then it is also true that all dependent industries are at risk. On that basis, those analysts who say that low prices will be a boon for many western economies that depend on oil imports, all miss that none of this necessarily guarantees increased demand.
Margins may be temporarily improved for intermediaries, manufacturers and retailers, but if we end up heading towards a price war on all fronts, all we get is a deflationary spiral that threatens contracts, salaries and debt.
The results of the ECB’s Asset Quality Review are in. As ever it was the taking part that counted, we’re all winners here. Were you minded to look for losers, however, here’s the FT:
Italy’s central bank was thrown on the defensive on Sunday as its banking sector emerged as the standout loser in health checks aimed at restoring confidence in the euro area’s financial sector.
Nine Italian lenders fell short, out of 25 banks mainly in Europe’s periphery and Germany that need more capital following the stress tests. The general reaction, however, seems to be that the whole exercise is credible, without unpleasant surprises, and that we really need to talk about lending. Read more