Capital Markets Union

The muted plans for CMU will always remain half-baked without a common legal landscape. Only when buying shares in any company sited in the EU is as simple/safe/painless as buying shares in an Oregon company by an investor in Alabama will we reach this Nirvana. Pie in the Sky?

Capital and Chutzpah: Why US has more than Europe

Dark Pools - who brings light into them?

News that Credit Suisse has reached a settlement on the 'dark pool' probe may bring relief to its shareholders, management and some market professionals. But it still leaves open the question how the practice of executing orders in these pools is policed. By definition the transactions are designed to provide a certain (total?) amount of privacy and anonymity. Market impact is (hopefully in the eyes of the users) lessened. But are the prices achieved fair - especially for the ultimate owners of the assets bought or sold, the investors holding the mutual funds or pension funds that are using dark pools? Are all transactions logged and published so that the end investor can check them against a consolidated tape (price, amount and exact time?). If not then this leaves too much leeway and encourages trickery that would rival the abuses that came to light in the foreign exchange and interbank (Libor) markets.

Money Laudering: what is a 'suspicious' transaction?

Apart from finance professionals being clairvoyants it is extremely tricky to safely fulfil the regulator's insistence to report all suspicious transactions. With hindsight it is always possible for authorities to hit banks and asset managers with a big club and claim a transaction should have been reported. The only really safe procedure would be to report ALL transactions and put the burden of compliance on the shoulders of the regulators. Alternatively there should be an EXHAUSTIVE and detailed checklist giving details of any signs that should arouse suspicion. As always we want to remind readers that in our opinion poor and unnecessary legislation or sloppy work by police authorities are the real reasons for the anti-money laundering hysteria. There was no more crime before the politicians invented the need to control citizens more and more in a costly, intrusive - and ultimately ineffective - way.

Credit Suisse: Old wine in new bottles?

Sad as it is to see a proud Swiss institution (again) unable to find a local candidate to fill the vacancy at the top of the organisation I watch with interest the first pronouncements of its newly-installed CEO. But apart from the unresolved question of whether or not it is wise to combine the business of banking with asset management (there is a strong argument in favour of independent asset managers) it is quite an irony that Credit Suisse is now supposed to find salvation in asset management - after having shed quite a few parts of the business during the past few years. And do the private banking clients really want to be 'cross-sold' the goodies that the investment bankers are 'incentivised' (to put it mildly) to create for them?
Tidjane Thiam may have done a creditable job at Prudential but he was promoted in March 2009, at the very bottom of the bear market. Talking of good timing!

Buying a Hedge Fund is not so easy

Hedge fund firms are difficult to sell/buy as they depend - in general - too much on the style of a few individuals running the show. Quite often their mentality is not well suited to build a lasting institution. One of the main reasons - apart from the possibility of greater financial rewards - of starting a hedge fund was to be free of the bureaucratic constraints they experienced during their previous employment with a larger institution. So I am not surprised that Carlyle's acquisition of Vermillion asset management has hit rocky shores. (Wall street Journal, Paywall).

Future of 'Universal' Banking Model in doubt

The sudden exit of another Bank CEO - now at Barclays Bank - is a stark reminder that managing a 'Universal' Bank requires near-superhuman skills, and a good portion of luck (or friends in high places as JP Morgan's Jamie Dimon or Lloyd Blankfein at Goldman Sachs would probably confirm).The business model did work quite well in a period of slow technological change, markets that were quite insulated and regulation that kept unwanted competition out.But a universal bank is basically nothing but a financial conglomerate and the conglomerate model - while offering certain advantages - is not one that has demonstrated that it is likely to be successful in the long run. Who still remembers names such as LTV or Gulf+Western? Both were high-fliers on the stock market until they hit the buffers as they become unmanageable, their mastermind retired or they hit unfavourable economic headwinds.

Anti-Money Laudering measures bark up the wrong tree

Prevention, detection and prosecution of money laundering has become big business during the past 20-30 years. And it will keep on growing and feed an ever-expanding army of regulators, compliance officers and assorted consultants. By definition the term money-laundering can be applied to nearly all business transactions and it taints everyone - even innocent parties - that is involved in commerce. For who can with 100 percent certainty say that someone he transacts with is not in some way associated with a proscribed activity? As re-iterated on this site for a few times money-laundering legislation is only a get-out for poor legislation and poor government. If the crime (and quite a few of the proscribed activities do not rank as crime in everyone's eyes) would have been prevented, detected or prosecuted, or even better, bad laws would not have been enacted, the need for anti-money laundering would vanish. High and arbitrary taxes (tobacco, alcohol, VAT), discriminatory subsidies (EU agriculture), moral crusades (drugs, prostitution) are all imposed on upright citizens and cannot be justified by any standard. It is also noteworthy that money-laundering accusations are regularly added to accusations that are not really involving any money laundering. One example would be where the someone is accused of tax fraud. Naturally there will be some financial transactions involved but to claim that money laundering was involved is not grounded in any rational sense of justice. But it suits today's political class to create a climate of all-pervasive supervision and fear among the citizens they are supposed to serve.