We suggest watching this story…
It looks like EU competition regulators paid some unannounced visits to oil company offices around Europe on Tuesday — note the reason: Read more
From the London Stock Exchange on Monday…
As part of a reorganisation of London Stock Exchange Group’s (“LSEG”) Italian legal entities earlier this year, a valuation report was prepared for the specific purposes of the reorganisation and was filed with the Companies Register of the Milan Chamber of Commerce and has recently been made public. This report included a LSEG revenue projection for the year ending 31st March 2016 of €1.4Bn with 12% annual LSEG revenue growth from the start of FY14. It also included 5 year (FY14 to FY18) financial projections for the Italian legal entities together with historic information for such entities for the 9 months to 31 December 2012.
Yes yes, the FSA had trouble passing the Wall Street Journal around the office in mid-2008.
They all come from this Stefan Ingves speech given on Thursday — in which the Basel Committee chair addresses “some concerns… that banks are not calculating risk weighted assets” – the denominator in a bank’s regulatory capital ratio – “consistently”.
Basel is about to release results of a probe into banking and trading books… Read more
On Friday, the FSA has published its feedback and responses to a review of the Financial Services Compensation Scheme funding model issued back in July. It’s long. Lucky for us then that we were looking for one thing and one thing only — the stance on “pre-funding”.
Pourquoi?
The revised Liquidity Coverage Ratio of course! Read more
The Basel Committee on Banking Supervision has finalised rules for bank liquidity. Some of the changes had been anticipated in recent weeks, particularly after the US banks ramped up their lobbying efforts. That said, they’re still quite a big departure from the 2010 draft rules, especially on what qualifies as a high quality liquid asset.
The complete set of changes is on the BIS website, but here are some highlights. Read more
We’re developing a soft spot for that Keith Horowitz at Citi. Ne’er did a man express so much joy at an interest rate sensitivity disclosure. That’s our kinda cute.
This time Horowitz has gone to meet Matt Zames, JPMorgan’s new co-chief operating officer and operating committee member. They talked pendulums: Read more
No doubt the California buyside was up early this morning… checking whether they had any disclosures to make under the new short-selling regulation which affects them.
That would be the European one. Read more
UPDATE: A Treasury official got in touch with us after reading this post to explain a little more clearly what happens next.
First a bit of background. Dodd-Frank section 120 authorises the FSOC “to provide for more stringent regulation of a financial activity by issuing recommendations to the primary financial regulatory agencies to apply new or heightened standards and safeguards… if the Council determines that the conduct, scope, nature, size, scale, concentration, or interconnectedness of such activity or practice could create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding companies and nonbank financial companies, financial markets of the United States.” Read more
Via Marc Ostwald at Monument Securities on Friday, credit factoid du jour (if not de l’année):
Total dealer positions in corporate bonds fell to $58.5b as of Aug 29 vs $60b the previous week. It was the lowest level since $55.1b March 13, 2002. Read more
It’s no secret that we’re big fans of Andy Haldane on this blog.
Exhibit A — a paper given to this year’s Jackson Hole conference by the Bank of England’s executive director for financial stability, and Vasileios Madouros (also of the Bank). Read more
Peter Eavis over at Dealbook notes an underrated aspect of the big M&T/Hudson City regional banking deal — regulatory capital:
To do well in annual Federal Reserve stress tests, M&T Bank may want to increase its Tier 1 common ratio substantially. Read more
European retail lending as a dying bank business model walking — charts via McKinsey, in this new report by the consultants:
What’s a bank to do when it has to sit on exposures that it doesn’t like?
Sell them of course! Especially if those exposures are expensive to hedge and costly in terms of regulatory capital charges. Read more
Click for Goldman’s ‘living will ‘ for regulators, listing how it would try to resolve by selling parts of its business under bankruptcy:
The WSJ reported on Thursday that JPMorgan’s regulators will conduct a thorough review of the bank’s models, according to “people close to the situation”.
Thanks to a letter from the the Office of the Comptroller of the Currency to Senator Sherrod Brown, we know that one particular model — the VaR model that JPMorgan’s Chief Investment Office switched to in January 2012, and which failed to alert management to outsized risks the division was taking — did not require regulatory approval before being used. Read more
As I watched the intricate social ballet that occurred as cars and bikes slowed to enter the circle (pedestrians were meant to cross at crosswalks placed a bit before the intersection) Monderman performed a favorite trick. He walked, backward and with his eyes closed, into the Laweiplein. The traffic made its way around him. No one honked, he wasn’t struck .Instead of a binary, mechanistic process – stop, go – the movement of traffic and pedestrians in the circle felt human and organic.”
The above quote is from the ever-readable Dylan Grice’s latest missive in which he argues that regulation acts much like traffic-lights, in that it lulls market participants into a false sense of security. Read more
It’s a commonly-held belief that the bailout of Spain’s banks won’t be sufficient to solve the country’s problems. It will increase the government’s borrowing, and may not be large enough anyway.
The real solution is fiscal banking political some kind of union. See if you can spot one of the barriers to moving forward with that: Read more
The full story of why JPMorgan entered into the trades that cost it so much money may never become public. However, thanks to Jamie Dimon’s testimony on Wednesday, we can conjecture a little more about the motivations behind the synthetic credit trades entered into by the bank’s Chief Investment Office.
The story begins with surplus deposits. JPMorgan was perceived as safe thanks to its size and relatively good record during the 2008 crisis, so it attracted significant deposit inflows. Much of this money was lent out, but not all of it was, giving rise to the problem of what to invest it in. With government bonds paying record low rates, the bank decided, understandably, to invest some of the funds in corporate and asset-backed securities. The CIO bought over $380bn of these bonds, a very substantial position. Read more
April 2012 was a pretty big month in Dodd-Frank Act rulemaking; the SEC and CFTC agreed how to define “swap dealer”, “major swap participant”, et al. under Title VII of the Act, dealing with over-the-counter derivatives.
Still a way to go though. Read more
In Part 1, we discussed the interest Spanish banks, and the likes of JP Morgan, have shown in securitisations that may lower their regulatory capital burdens by bundling up assets and selling the riskiest pieces of the resulting structures to investors.
Here, we look at another worrisome and expensive exposure on bank balance sheets, and discuss how the treatment of these deals has varied from regulator to regulator — something the Basel Committee has recently started to cast a critical eye on. Read more
Regulations set forth by the Basel Committee that govern the amount of capital that banks have to hold are meant to set a level playing field round the world.
Or at least, we thought harmonisation was the point. Read more
For this, our final post covering FT Alphaville’s meeting with Yves Smith of Naked Capitalism, we asked her about the regulations that have arisen from the ashes of the financial crisis. Not wanting to leave the series on a depressing note, we (gently) prodded Ms Smith to also share with us something to be optimistic about.
AV: What do you think some of the biggest pitfalls/missteps have been since the crisis in terms of regulation? Read more
In his latest move to support the development of China’s capital markets, Guo Shuqing, the newly installed head of the China Securities Regulatory Commission, will oversee the creation of a new body to control facilitate short-selling. The regulator is also going to be the largest shareholder of the new organisation.
FT Alphaville tips our hat to this rather neat piece of controlled capitalism. The venture will likely be a nice little money spinner for the CSRC, once the fees and transaction costs start rolling in. Read more
Older entries
1Bernanke weighs in on robot wars; brings Keynes for backup
2Pump up, debase
3S&P 2,100, by Goldman Sachs
4Collateral crunch-counting gets sophisticated
5Apple Operations International, facts (?) du jour
Show more6Secret liquidity and Scottish independence
7The risk of a Japanese VaR shock
8In which the FTSE puts the crisis behind it
9Further reading
10A Kazakh muddle
Show fewer