The video in this Finextra piece shares the vision Paypal have for shopping.  The integration of smart phones, product barcodes, store databases, payments and bypassing the cash register line up is fascinating and potentially disruptive for payments. Continue reading Paypal share their vision for shopping

It is simply delightful to read about the UBS loss today.  If you read this article by Tett at the FT you will be hard placed to understand how Mr Adoboli did anything illegal. In Europe, for example, so-called “synthetic” ETFs, or packages of derivatives, have become very hot and now account for almost half of all ETFs. I say delightful, because not only have no lessons been learned since 2008, things have in fact become worse.  The combination of the now “Delta One” derivatives desks, where Mr Adoboli worked at UBS allows derivatives based on ETF’s.  These are 100% … Continue reading The argument for ringfencing just gained another boost from Adoboli loss at UBS

The most controversial aspect of the Independent Commission on Banking is the ringfence.  Now we have a definition in the final report: The Commission’s view, in sum, is that domestic retail banking services should be inside the ring-fence, global wholesale/investment banking should be outside, and the provision of straightforward banking services to large domestic non-financial companies can be in or out. The aggregate balance sheet of UK banks is currently over £6 trillion – more than four times annual GDP. On the criteria above, between one sixth and one third of this would be within the retail ring-fence. The novel … Continue reading ICB report provides definition of ringfence and flexibility on certain commercial banking components

The Independent Commission on Banking released its Final Report on 12 September 2011. It is available here (ICB site pdf). Continue reading The Independent Commission on Banking released its Final Report on 12 September 2011

Some early indications tonight about the implications of the Vickers report tomorrow.  Ring fencing is in, but with the qualification that banks can pick what is in or out, and customers can pick too. It will be interesting to watch the unintended consequences of the higher funding charges and how banks will allocate. UK banks eye £6bn cost of reforms As foreshadowed, the central recommendation of the Independent Commission on Banking, chaired by Sir John Vickers, will be that banks’ core operations – including consumer deposits and small business lending – must be ringfenced from the rest of their businesses. … Continue reading Vickers report tomorrow will implement ringfence of retail bank operations

This is a fascinating piece by Taleb (Black Swan) and Spitznagel.  It is fascinating because it summarises much of what I talk about here in a very concise manner yet goes way beyond by suggesting that portfolio managers should boycott investment in bank stocks. The Great Bank Robbery Project Syndicate by Nassim Nicholas Taleb and Mark Spitznagel Mainstream megabanks are puzzling in many respects. It is (now) no secret that they have operated so far as large sophisticated compensation schemes, masking probabilities of low-risk, high-impact “Black Swan” events and benefiting from the free backstop of implicit public guarantees. Excessive leverage, … Continue reading Review of “The Great Bank Robbery – Nassim Nicholas Taleb and Mark Spitznagel”

Some early hints about the scope of Project “New BAC” BofA to slash costs by 15% Bank of America is poised to announce a three-year programme to slash costs by as much as 15 per cent – or $10bn – shedding up to 40,000 jobs in the process. Continue reading Some early hints about the scope of Project “New BAC”

There is the usual talk that increased bank capital requirements will curtail bank lending.  I have been a fan of David Cameron, but he is wrong here.  His inexperience is showing through.   This from E&Y (pdf) who are as guilty. The combination of regulatory change, lower leverage and an uncertain economic outlook means that banks  may struggle to lift return-on-equity toward their 12-15% targets. We forecast total assets of the UK banking sector to expand at a significantly reduced rate of just 3%pa during 2011-15. Given these considerable headwinds, there remains a risk that credit shortages could restrict the pace … Continue reading David Camerons pending argument to leave banks unregulated is wrong and reeks of lobbying

John Kay is a smart author and columnist focussed on economics.  This piece is smart and incisive.  I particularly liked this quote and the reference to some of the financial products that contributed to the 2008 collapse [emphasis mine] Economics fails to resolve exceptions to the rule | ft.com The behaviour of great industrialists such as Henry Ford or Steve Jobs, or great investors such as Warren Buffett and George Soros, cannot be predicted by general rules. If such prediction were possible, their actions would have been anticipated and these individuals would not have been innovative or become rich. And … Continue reading Economics fails to resolve exceptions to the rule