UK banks
I, for one, welcome our new AI-regulator overlords
Most people aren’t terribly excited about teaching computers how to do their jobs, but multi-million-dollar settlements after regulatory investigations seem like a pretty good motivator. IBM announced today that it’s buying Promontory Financial, a consultancy that came to represent some of the problems raised by the revolving door between regulators and Wall Street banks (it was founded by Eugene Ludwig, comptroller of the currency for the Clinton Administration). The company says it’ll build a machine-learning compliance platform, with Promontory’s staff training its Watson technology. Promontory’s recent regulatory history is the main reason this looks like a pretty good deal for them. Last year, the company was almost suspended indefinitely from consulting for New York-licensed banks suspected of wrongdoing. (It ended up getting cut to six months, with a $15 million fine.)
Regulating those Chinese Weapons of Mass Ponzi
Remember WMPs? The touchstones of China’s shadow market? The shadow market that China might actually be cracking down on … like for real this time … According to Credit Suisse, new regulatory guidelines or consultation papers about new regulations have been announced on almost a bi-weekly basis since May:
UK banks and their own decaying NIMs
This is a prophecy brought to you by Citi: Over the past five years the incumbent UK domestic banks have managed to maintain and improve net interest margins. As asset yields have declined the banks have been able to respond via careful liability management, lowering savings rates and retiring expensive legacy wholesale funding issued during the financial crisis. We believe this positive trend is now set to stall and reverse. While banks will probably be able to mitigate the impact of lower rates over the next 6 months, we fear that beyond this net interest margins [NIMs] could fall sharply.
The Panama Papers — what exactly is the problem?
It’s almost five months since 11m private documents leaked out of a Panamanian law firm, Mossack Fonseca. This guest post from Howard Bilton, chairman of off-shore advisory specialist The Sovereign Group, looks at the broader state of play for those looking to minimise their tax bills.
Brexit, the Target2 angle
Everybody knows much of the City of London was vehemently opposed to Brexit because of fears of what might happen to banks’ interests if so-called “passporting” rights into and out of the European system were lost. What is less talked about, however, is Brexit’s impact on the European payments clearing system, Target2 — and how the passporting issue connects by way of Target2 to the realm of sovereign monetary policy. At the absolute heart of the matter is the status and treatment of payment systems worldwide, and whether or not they can really be treated as something independent and thus distinct from national monetary policy (and hence open to commercial competition) — or as integral to sovereign interests.
The Fed’s FX swap facilities have been quiet… too quiet?
One interesting quirk of the post-Brexit market mess has been the lack of any mad dash for emergency dollar liquidity — so far, at least. Since the referendum, the use of the Federal Reserve’s foreign-exchange swap facilities, meant to help global banks in need of dollar funding, has been “dwarfed” by previous periods of global market stress, according to a Tuesday note from Citigroup analysts.
Who is Theresa May?
Theresa May has become the UK prime minister, and the internet — in the style of looking up what the EU is only after the Referendum — is only now alive with articles/tweets about who exactly Theresa May is. Indeed, amusingly enough, whilst a lot was being made of Andrea Leadsom’s “City” credentials, there was almost no word in the run up to the appointment of May’s own City credentials.