Yes, it’s hardly a neutral document on the matter.
…Although we think they missed one.*
As fantasy banking M&A goes — this isn’t such an outlandish idea, we reckon.
But see what you think: Read more
Standard Chartered’s New York branch operated a “front for prohibited dealings with Iran – dealings that indisputably helped sustain a global threat to peace and stability,” the US state’s department of financial services alleged on Monday.
(Click pic to enlarge for filing) Read more
“I passed the instruction, as I had received it…”
Click the pic for the feed from the Wilson Room in Porticullis House: Read more
It comes from a hedge fund activist par excellence:
That’s a letter (hat-tip to Bloomberg) from Christopher Hohn, managing partner at The Children’s Investment Fund, to British financial regulators questioning “loss absorbency” of contingent capital at the state-backed lender. The FT reports: Read more
Click the pic to peruse the UK government’s white paper on bank reform, published on Thursday in response to Vickers…
The consultation is open until September. On a quick read-through we’d highlight some of the proposed exemptions from ring-fencing retail ops — also this move on leverage ratios: Read more
Just in case you missed it earlier — we thought it worth posting the full letter from Bob Diamond, Barclays chief executive, to Andrew Tyrie MP, Treasury Committee chairman, regarding HMT’s blocking of two tax schemes (one on buybacks of debt). This involved a rare use of retroactive legislation, if you recall.
Anyway, the letter (click image for full doc): Read more
Selected quotes/charts from the ‘Review of HM Treasury’s management response to the financial crisis‘, which reveals that there was a significant lack of personnel in the finance ministry who knew about banking crises, on the eve of the UK’s biggest ever banking crisis…
After serious concerns were first raised about Northern Rock in mid-August, it took the Treasury about four weeks to appreciate that there might be systemic dimensions which would mean wider handling and greater Treasury input Read more
David Miles of the Bank of England has given a paper at the NABE conference in the States. It’s about central banks and government debt, and therefore quantitative easing looms large.
There’s a nicely short and sweet explanation of why the ECB’s three-year liquidity ops aren’t quite quantitative easing in the way the BoE does it, for a start… Read more
HSBC pays top executives outside the UK almost twice as much as their British-based colleagues, contributing to a steep rise in costs in the bank’s annual results, the FT says. Underlying pre-tax profits fell six per cent, while total expenses rose 10 per cent. Hiring in key emerging markets has pushed wage costs up. Senior employees known as “code staff” received an average of $1.2m in salaries and bonuses in the UK last year, compared with $2.3m for similar level staff overseas. HSBC’s cost-efficiency ratio has risen to to 57.5% from 55.2%, the WSJ adds. However, pre-tax profit rose 31 per cent at the bank’s commercial lending unit as it stole market share from weakened European lenders. Read more
Stephen Hester, RBS chief executive, has said that larger losses posted on Thursday could in fact be interpreted as a good thing, showing the rapid removal of the bank’s legacy assets, the FT reports. Mr Hester added that the bank was “more than three-quarters of the way” through cleaning up its balance sheet, which has shrunk from £1.6tn to £977bn in three years, compared with a target of £1.2tn. But RBS has also been swept up in a tide of debt crisis losses at European banks, including the biggest income hit for Credit Agricole since it went public in 2001, the WSJ adds. Read more
Can’t beat a Sun headline to round off a national bonus neurosis:
The Government agrees that a limited statutory power of direction for the Chancellor over the Bank in a time of financial crisis would be helpful in clarifying lines of responsibility and accountability…
France and Germany are to call for a relaxation of global bank capital rules to prevent lending to the real economy being choked off, setting them at odds with the UK’s stricter approach to banks. A joint paper by Wolfgang Schäuble, German finance minister, and his French counterpart, François Baroin, will on Monday call for important elements of the Basel III rules to be watered down to mitigate any “negative effect” on growth. A draft of the paper seen by the FT calls for special treatment for banks that own insurance companies – a particular point of friction, as tweaks backed by France and Brussels will boost the capital of Société Générale and Crédit Agricole, which both own insurance companies. The draft also looks set to open a new faultline by suggesting the deadline to publish leverage ratios – the ratio of top-quality capital to total assets – should be pushed back from 2015 to 2018. That contrasts with UK regulators who have proposed that banks disclose the ratio as soon as next year, well in advance of the Basel III timetable requirement. Read more
UK homeowners could face higher mortgage costs and greater risk of foreclosure next year because of an obscure clause in the bank capital directive being worked on by the European parliament, says the FT. As part of a large reform package that seeks to make banks safer and regulation more uniform, the draft directive declares that all EU loans must be treated as if they are in default when they are 90 days in arrears. While this is common practice in much of the 27-nation bloc, it would overrule UK rules that give retail mortgage borrowers up to 180 days. The definition change pushes up the probability that mortgage loans will default, a key metric in determining capital charges. It will boost banks’ capital charges on UK mortgages by 15-20 per cent, forcing many institutions either to cut lending or charge more to customers. About half of 1 per cent of the UK’s 13.6m mortgages are already in “forbearance” compared with 1.2 per cent of mortgages that are in arrears, according to the Bank of England’s financial stability report. Italian public sector borrowers will also be hit but the Bank of Italy does not expect the impact to be as great. Read more
Nationwide, the UK’s largest building society, is considering offering loans to small and medium-sized businesses to broaden its traditional customer base and fill a void left by the country’s biggest banks. The plans are at an early stage and it is unlikely that Nationwide will be in a position to offer SME loans until at least next year. Graham Beale, chief executive of Nationwide, told the FT: “We have identified that SME lending would be a good strategic fit to our existing business, given our strong franchise, broad distribution network and current exposure to personal current accounts and commercial lending activities. We are developing plans to enter the market, but this will not be for at least 18 months or longer.” Read more
It’s the middle of 2007. Executives at RBS are joining the dots about how even super senior tranches of CDOs offer scant protection in the face of a tsunami of subprime defaults.
A structure which would become commonly understood by many, had some that should have been in the know scratching their heads. Given that CDO structures seem to be the answer to everything these days, it beggars belief that the captains of the industry had trouble grasping the problem. Read more
Britain’s financial regulator has called for UK laws to be changed to ban and fine executives of failed banks, in its 500-page report into the 2008 collapse of RBS, the FT reports. The FSA’s review focused on the bank’s disastrous acquisition of ABN Amro in 2007, at the time the biggest banking takeover ever. RBS required a $71bn taxpayer rescue a year later. The FSA blamed “multiple poor decisions” for the ABN Amro debacle, the WSJ says, though conceded that it did not do enough to make RBS raise capital in early 2008, adds Bloomberg. Read more
Banks face paying more to raise finance in traditional bond markets – and some will continue to be locked out completely – as a growing demand for collateral from other lenders is undermining the strength of their balance sheets, the Bank of England has warned. The FT reports the BoE said that the issue of secured lending to banks is of growing concern to regulators and markets, while the FSA said it was pushing banks to produce better data on how many of their assets are tied up, or ‘encumbered’, against their own borrowing. Andrew Haldane, director of financial stability at the Bank, said that banks around the world expected that the “very very strong skew towards secured” funding seen in the second half of this year would remain in 2012. If concerns about how much of the banks’ balance sheets have been pledged against secured borrowing become acute, he warned that unsecured creditors, who are already charging a higher price, “might refuse to provide unsecured credit on any terms.” FT Alphaville has more on the report. Read more