Berlin, November 2002 – I have registered for a seminar in legal rhetoric and communication. When I arrive, I see only a few pitiful people in class. I wonder: “Should I really stay?”
“In the legal business, people don’t communicate, especially write, effectively.”, say the presenters.
Working in-between legal and finance, I know today that they were (and still are) right. Besides, I was right to stay, too.
On my blog, I want to make legal and finance easy. I hope you enjoy reading.
Thursday, December 26, 2013
The financial year in review – Q3/2013 – Portugal, physical commodities' trading, and JP Morgan fines
are seeing light at the end of the tunnel.”
Greek Public Order Minister
10 July 2013
The future of RBS is in
the news: Rothschild is said to advise the U.K. government on how to
divide RBS into a good and a bad bank. Citigroup has sold bad quality
mortgages to Fannie Mae and must pay 1 BUSD in damages. S&P
downgrades Barclays, Deutsche Bank, and Crédit Suisse from A- to A.
The agency's rationale is doubts about the future of the European
investment banking business model. The UK Government intends to sell
a 5-10 % stake in Lloyds Banking Group to retail investors from
September 2013 on. JP Morgan, Wells Fargo, Citigroup, and Morgan
Stanley report strong Q2 2013 results. Barclays has manipulated price
building in U.S. electricity markets and must pay a 470 MUSD fine. By
shrinking its balance sheet and issuing convertible bonds for 6 BEUR,
Deutsche Bank intends to reduce its leverage ratio. JP Morgan
considers the sale of its physical commodities trading business. The
reasons are higher capital requirements and a possible FED ban for
banks to hold physical commodities. Goldman Sachs' physical
commodities' trading unit is criticized in the U.S. Senate for long
warehousing queues which hamper the physical delivery of commodities.
Queues are profitable for Goldman Sachs because rental fees keep
falling during queuing. Ross Mc Ewan becomes new CEO of RBS.
Commodities Trading on the Chicago Board of Trade
The EU commission
investigates against 13 banks, Markit, and ISDA, alleging a violation
of EU competition rules by keeping trade exchanges out of the CDS
market. On the other side of the Atlantic ocean, the FED decides to
implement and even go beyond Basel III minimum rules in the US. The
target date is January 2014. The financial press criticizes the draft
European directive on bank recovery and resolution, saying that its
bail-in scheme for private creditors can trigger the risk of bank
runs. The Basel Committee on Banking Supervision says it is willing
to rethink Basel III regulation because the calculation of
risk-weighted assets impinges on the comparability of financial
institutions. European Banking Union again: The European Commission
intends to transfer substantial powers to the European resolution
authority; resistance comes from Germany. U.S. senators Warren and
Mc. Cain propose to separate depositary institutions and financial
products which did not exist at the time of the Glass Steagall act.
The FED thinks about banning banks from physical commodities trading;
the reason is that holding both financial and physical business might
lead to banks' dominant positions in the commodities trading
business. European payment card systems could become stricter
regulated in that the European Commission suggests a cap on interbank
transaction handling fees and a separation of entities which run
payment card schemes from entities that process transactions.
Struck by a political
crisis (Two ministers have resigned.), Portugal’s government bonds
raise by 130 bps and reach, later in July, almost 8 %. This, however,
does not lead to contagion in financial markets. In ongoing
restructuring negotiations, Greece has reached an agreement with its
troika lenders (i.e. European Commission, European Central Bank, and
International Monetary Fund). Positive news comes from Latvia: The
country is admitted to the Eurozone and will join the European
currency within two years. Due to a slowdown of economic activity in
emerging markets, the IMF reduces its forecast for global growth and
expects 3.1 % in 2013 and 3.8 % in 2014.
Thomson Reuters will stop
providing a service to high frequency trading companies to receive
financial data two seconds prior to other clients against payment of
an undisclosed extra fee. NYSE Euronext could take over the
administration of LIBOR benchmark rates. The U.S. government sues
hedge fund SAP and claims 10 BUSD damages for insider trading.
Ben Bernanke says the
FED's accommodative policy will remain in place for a foreseeable
future. Later on in July, the FED gets more concrete and outlines
that it will not change its accommodative monetary policy until the
unemployment rate in the U.S. is below 6.5 %.
you might be tempted to give someone the benefit of the doubt or not.
When the company's reputation is flying high, you tend to give them
the benefit of the doubt. When the company has been dragged through a
lot of scrutiny, not so much.”
Donald Langevoort –
Georgetown University - 19 August 2013
EBA calls for aligning
supervisory differences in Europe. The administration finds that such
differences are responsible for multiple risk-weighted asset
calculation by European banks. Raghuram Rajan will become new
governor of the Reserve Bank of India in September 2013; he will have
to deal with India's slowing growth and the Rupee's devaluation. The
U.S. Treasury's bail-out of Freddie Mac will probably become
profitable by the end of 2013. The Financial Stability Board intends
to regulate shadow banks stronger.
post better than expected Q2 2013
Barclays envisages selling its retail business in the United Arab
investigations shake up JP Morgan in August: The
U.S. SEC investigates whether the
has hired sons and daughters of Chinese government officials to
business in China. Later
in the month, U.S.
has manipulated U.S. energy markets. Wells Fargo intends to cut 2,300
jobs in its mortgage business unit, due to a drop in demand for new
U.K. Parliamentary Commission on Banking Standards urges a break-up
of RBS into a good bank / bad bank structure. JP Morgan again:
The firm looses
50 MUSD in a lawsuit against investor Len Blavtnik; in
addition, the U.S. government demands more than 6 BUSD damages from
for mis-selling of mortgage-backed securities. Ecobank's
board is accused of selling assets, writing
off debt, and inflating
to the detriment of shareholders. KKR announces
a non-banking unit (Maritime Finance Company) to finance offshore
oilfield services and traditional shipping companies.
Brazil calls for a review
of the IMF program for the benefit of southern European countries
(namely Greece), questioning whether bail-outs are economically
viable. Banks with huge business in Asia experience bad results in
the region, linked to the decline of credit markets and the slowdown
of the Asian economy.
order to achieve fiscal consolidation, we have to overcome inflation
first and revitalize the economy. Otherwise, we cannot see the
increase in tax revenues.”
Japanese Prime Minister
27 September 2013
Italy introduces a high
frequency trading tax. Intermediaries such as market makers are
exempt from the tax. Borrowing costs for Spanish and Italian SMEs
fall to a two year low (5.46 % and 5.25 % respectively for 1 MEUR
with 5 years maturity). The new head of India's RBI, Raghuran Rajan,
intends to focus on the liberalization of the Indian banking sector.
Lawrence Summers withdraws as candidate for the FED chairman
position. The U.S. FED declares it will not start exiting its loose
monetary policy yet, as the growth outlook for the U.S. economy for
2013 is negative. Mario Draghi, ECB President, says that the ECB will
inject further liquidity into European banks to stimulate the economy
William Dudley, President of the New York FED says the economic
situation in the U.S. is too weak to justify an exit of the FED from
stimulating monetary policies.
GE Capital intends to
divest its consumer finance arm and, ultimately, to focus on
commercial lending. Lloyd's chairman, John Nelson, warns about
systemic risk in the insurance industry, due to too much capital flow
into the insurance industry, leading to (artificially) lower pricing
of insurance products. Crédit Suisse's CEO, Brady Dougan, targets an
after tax ROE between 10 % (in bad times) and 20 % (in good times). A
German court attests Deutsche Bank has wrongfully dismissed four
traders who submitted Euribor quotes. The court says DB's internal
Chinese walls were insufficient. JP Morgan intends to simplify its
business structure including selling its physical commodities
business, stop selling student loans, sell its private equity arm,
and review its correspondent banking business. Moreover, the bank
will face regulatory actions in connection with its 6 BUSD
derivatives loss early 2013. The bank is accused of improper
information of regulators. Finally, JP Morgan reaches an arrangement
with the U.K. FCA and settles allegations over the London Whale
derivative debacle. Citi will cut 1,000 jobs in its mortgage business
unit, due to lower volumes of refinancing in times of increasing
interest rates. Rabobank is about to settle LIBOR related charges
with U.K., U.S., and Dutch regulators. Enrico Cucchiani steps down as
CEO of Intesa Sanpaolo. The reason is disagreement with shareholders
about the disappointing performance of the bank in Q2 2013.
The Financial Stability
Board calls for banking regulation on a bail-in of bondholders of
failing financial institutions. According to the European Banking
Authority, Europe’s 42 biggest banks will meet Basel III
requirements within the following 6 months, five years ahead of
schedule. CLO issues are at the highest level since the financial
crisis: 55.41 BUSD in 2013 so far as opposed to 88.94 in total 2007.