The $2.6bn in fines levied against HSBC and Standard Chartered indicates that what used to be regarded as these banks’ biggest virtues – their exposure to emerging markets and new growth economies – are also weaknesses.
Foreign banks have been having a tough time at the hands of US bank regulators recently, and these fines have a hint of protectionism. There is clearly a feeling that foreign banks have destabilised the US financial system and systematically breached laws.
One indication of the mood in Washington is a proposal by Daniel Tarullo, a senior Federal Reserve regulatory official, to top up capital requirements on foreign banks to ensure they are in line with domestic banks. Read more
The Deutsche Bank case, in which three whistleblowers have accused the bank of hiding up to $12bn in derivatives losses during the financial crisis, is complex, confusing and opaque. But the underlying principle is simple and important.
Banks used to have a lot of leeway in how to treat bad loans at the bottom of the cycle. That allowed groups to avoid taking losses immediately, and instead to wait for the assets to rise in value again.
But the rules for recognising bad loans have tightened over the past three decades, while a lot of credit instruments are now carried on a mark-to-market basis instead of on the loan book. Their old freedom of manoeuvre has largely gone. Read more
It is somehow apt that the explanations for the sudden departure of Vikram Pandit from Citigroup this week were utterly baffling. “No strategic, regulatory or operating issue precipitated the resignation,” said Michael O’Neill, the bank’s chairman. “I had a very good conversation with Mike O’Neill,” insisted Mr Pandit.
Yeah, right. Read more
Michael Corbat looks like the most conventional chief executive Citigroup has appointed for 10, even 20 years. Certainly over the past decade, for a blue-chip, Fortune 500 banking institution, Citi has been led by a remarkably diverse range of CEO types:
1) An entrepreneur: the irrepressible Sandy Weill with his gargantuan appetite for deals. Having alienated his protege Jamie Dimon, Mr Weill appointed….
2) A lawyer: Chuck Prince, his general counsel and long-time legal fixer, who lasted only four years before being forced out as the banking crisis built, to make way for…. Read more
Simon Fox of Trinity Mirror, the UK newspaper and publishing group, is the latest chief executive to attempt to give a restructuring plan a sense of focus, simplicity and unity by attaching “One” to the company name. “One Trinity Mirror” – which unifies the regional and national newspaper divisions under a “flatter, more efficient management structure” – follows in the footsteps of One Ford, One Siemens, and One Anglo (at Anglo American), to name just a handful.
I prefer the “One” theme to some of the other names applied to past restructurings. Among my least favourite: “Shape 2012″ at Metro, the German retailer (“Pear-shaped 2012″ would have been more appropriate, as one observer pointed out ); Reuters’ “Fast Forward” – a scheme that predated the Thomson merger and led to mordant humour among the newly redundant about having been “fast-forwarded”; and law firm Linklaters’ “Project New World“, with its sinister Aldous Huxley overtones. Read more
There is a contradiction at the heart of legal actions piling up against large banks, including Barclays, for distorting Libor. Half the plaintiffs are complaining that the rate was kept too high; the other half that it was kept too low.
One lawsuit filed in New York by Berkshire Bank in July accuses the Libor-fixing banks of hurting lenders by artificially depressing the lending rate. As the Wall Street Journal reported:
The lawsuit effectively argues that the alleged manipulation short-changed lenders by helping borrowers pay less for mortgages and other loans.