The Financial Services Club's Blog

Hubba-hubba UBS

It’s been fascinating to watch the rollercoaster of the finance industry over the past two years, with one or two banks illustrating the issues in the market well. But no bank can provide a better testament to the market’s ups and downs than the Swiss Bank UBS or, as most media reports talk about them, the ‘troubled Swiss bank’ with the largest losses from the credit crisis of all the banks in Europe.

Sure enough with $57.3 billion of losses declared to date, it’s not a good picture.

And, sure enough, with the loss of two Chief Executives (Peter Wuffli, June 2007 and Marcel Rohner in February 2009) and two Chairmen (Marcel Ospel in April 2008 and Peter Kurer in March 2009), it’s not a good picture.

And, sure enough, with an exodus of key investment banking talent, it’s not a good picture.

And, sure enough, with $171 billion of customer depostis withdrawn between April 2008 and October 2009, and a further $50 bilion in the last quarter alone, it’s not a good picture.

And with $38.7 billion of state aid, in the form of a TARP-style bailout from the Swiss Government, it’s not a good picture. 

And with the US authorities beating up the Swiss government over UBS being used as a tax haven and asking for details of all of their American customers accounts and dealings, it’s not a good picture.

And with a share price that has bottomed out about the level of Paris Hilton’s underwear, it’s not a good picture. 

The stock has fallen 6.5 percent in Swiss trading since the end of 2008 and traded at 1.24 times book value at the close on Feb. 5, about half the average of 2.56 times since 1997. Credit Suisse stock rose 55 percent in the same period and traded at 1.35 times book value, compared with an average of 1.74 times since 1990, Bloomberg data show.

I could go on, but with 18,500 jobs cut and eleven new management members on the board, the bank is trying to look forward rather than backwards.

And so they should as the new CEO, Oswald “Ossie” Gruebel, seems eminently sensible.

A mature 66-years of age, Herr Gruebel joined this sick dog of a bank a year ago and reported their first profit in seven quarters this morning:

UBS made a pre-tax profit of 1.2bn Swiss francs ($1.1bn; £722.9m) in the three months to 31 December.  This compares with a loss of 9.58bn francs in the same period in 2008.  The turnaround in the final three months of the year helped the bank to cut its annual net loss to 2.7bn Swiss francs last year (compared to 21.3 billion a year before). The bank's profit in the final quarter of 2009, which was much bigger than analysts had expected, was partly down to a tax credit worth 480m francs.

This is good news and perhaps signals there is life in the old dog yet (both of them!).

In a candid interview with Euromoney this month, Ossie makes some interesting statements.

Here’s a few of them:

"When I was at Credit Suisse, outsiders were forever telling me what a great bank UBS was and what a rotten bank Credit Suisse was. Now I am at UBS, they are telling me the reverse."

Oswald was at Credit Suisse for 37 years and took over as sole CEO in 2004. In the three years after he took over, Gruebel doubled Credit Suisse’s profit and share price. He ordered the bank to reduce its holdings in US subprime mortgage bonds in 2006 (UBS was still buying them) and told his clients to pull out of Bernie Madoff's funds after meeting him in 2000.

No wonder UBS wanted him, although they may not appreciate some of his comments:

"What happened here had nothing to do with risk management. It was down to sheer stupidity."

"If you ask me what most surprised me when I came here, it was how little integrated UBS was. It had the image of being integrated around the one brand, but internally everyone pretty much did their own thing."

"I talk to a lot of clients who want to know what is going on at the bank and always one of their key concerns is that they want to see us turning profitable again. No one likes a bank that’s losing money."

Now it’s profitable, that’s different then (even though the US tax investigations aren’t helping).

All in all, well worth the price of this month’s issue of Euromoney, particularly when you get little nuggets like this one:

"We are now giving private clients technology so that they can almost construct their own products. In equity or FX, for example, they can look at where markets and instruments are, then at where the forwards and other related derivatives are, the strike prices, the implied yields and then customize their own exposures. A few years ago, the technology to do all that simply didn’t exist."

Meanwhile, the turnaround king’s story appears to be working with Eric Bendahan, who manages Banque Syz’s €1.8 billion Oyster European Opportunities Fund, saying to Business Week: “UBS was a catastrophe but if things get back to normal, the potential is colossal, while Credit Suisse did its job so well that its potential in the future is much smaller”; and Matthew Clark, a London- based analyst at Keefe Bruyette & Woods Ltd, stating that: “there is a much greater scope for UBS to positively surprise than for Credit Suisse,” rating UBS “outperform” and Credit Suisse “market perform.”

So well done Herr Gruebel ... although one quarter does not make a turnaround, at least the sick bank of Europe is starting to show signs of life and hope.

That must be a good indicator for the whole banking sector.

 

Things worth reading: 9th February 2010

Things we're reading today include ...

 

Today's must read:

Brokers must think twice before tweeting, Facebooking - Ars Technica

The Financial Industry Regulatory Authority (FINRA) has updated its guidelines for interpreting the rules that govern how brokers present advice to the public to cover online social networks; and, in some cases, the guidelines rely on social network monitoring and archiving technology that doesn't even exist yet.

 

PayPal reversing India payments; here's why... - Computerworld
Plus Markets leadership duo stand aside - The Times
SAP chief Leo Apotheker resigns - BBC
Myners argues bonuses are bleeding pension funds - The Times
MPs say Treasury overpaid City bankers for advice - The Times
Investment bank fees leap to $66bn - The Telegraph
US exchanges - Financial Times
Spanish PM's crisis talks to bolster economy - The Independent
Indian economy 'to grow by 7.2%' - BBC

 

Spot the Bank Ad ...

I cannot believe it!

SuperBowl used to be a great American tradition with Visa, MasterCard and a variety of other financial firms champing at the bit to get a bit of attention.

Now, in these austere times of banks avoiding advertising, not a single bank or firm in these markets fezzed up the $3 million for a 30-second slot. According to the Wall Street Journal’s blog, this year’s advertisers were:

• Audi
• Boost Mobile
• Bridgestone tyres
• Budweiser
• Careerbuilder.com
• Cars.com
• Census
• Coca-cola
• Coke
• Denny’s
• Dockers
• Dodge
• Doritos
• Dove
• Dr Pepper
• e*trade
• Electronic Arts
• Emerald Nuts
• Flo TV
• GoDaddy
• Google
• Homeaway
• Hyundai
• Intel
• Kgb
• Kia
• McDonald’s
• Michelob
• Monster.com
• Motorola
• Pizza Hut
• Pop Secret
• Snickers
• Sun Life
• Taco Bell
• Tebow
• truTV
• Volkswagen

Sure, you may say that e*trade are a financial firm, which they are, but their baby ads are creepy:

And Sun Life, an insurance firm, have their name on the stadium and splashed out big time with Cirque:

... but where were the bank ads?

There was a rumour that Bank of America was going to air this one:

... but I suppose they pulled it after last year’s outcry about their sponsorship or because it’s not really an upbeat Super Bowling ad.  Or maybe they just listened to my advice from a year ago (as HBOS should).

Jeffry at the Financial Brand spotted this one for Three Rivers Credit Union, which aired locally during the Bowl: 

Woof, woof.

But there were no ads in prime time nationally so, instead, we’re left with the rest.

Here’s a few of my favourites.

The Audi ad, ‘cos it feels this way these days:

The Intel ad, as it’s cute:

And the Doritos ad, it rocks!

See all the ads at i4u.com.

Oh yes, and congratulations to the New Orleans Saints and commiserations to the Indianapolis Colts.

Finally, via the Ridiculant and in the spirit of great puns, here's a Superb Owl:

 

This house believes that SEPA does matter ... or does it?

We had a great debate at the FSClub the other day, with the provocative title: “this house believes that SEPA (the Single Euro Payments Area) does matter”.

The evening was chaired by the more than capable Bob Lyddon, who coordinates the IBOS Association secretariat, and four panel members who ‘played’ parts in being proposes and opposer of the motion.

Proposing the motion were two leading European Proponents: Gilbert Lichter, CEO of the Euro Banking Association (EBA) Clearing Company that runs STEP2, a Pan-European ACH; and Fred Bär, Managing Director for Euro Services at Vocalink.

Opposing the motion were two devilish Brits, set up in the form of Paul Smee, Chief Executive of the UK Payments Council; and Simon Bailey, who is currently starring in 'The Phantom Of The Opera', at Her Majesty's Theatre where he plays the role of Raoul.

Pardon?

Whoops, sorry, it’s not that Simon Bailey. It’s Simon Bailey of Logica ... an easy mistake to make.

On the night, Bob kicked off the motion by making clear that there are four immutable facts about SEPA which were not up for debate. These are that there is no end-date set as of today (although I think one is coming); the Core and B2B SEPA Direct Debits schemes are in production; the fact that there is no requirement for central bank reporting for transactions under €50,000 is good for efficiency; and cross-border direct debit and credit transfer euro transactions must now cost the same as domestic transactions.

With those four foundation points, Bob then asked Gilbert to take the floor.

Gilbert gave a resoundingly balanced view, stating that the old days of cross-border margins and operations were a luxury. The way correspondent banks worked and the form filling required for cross-border payments were a big issue in inhibiting trade across Europe, and those days are now gone as European Commission Regulation 924/2009 makes it clear that every bank in Europe must now be reachable for SEPA Direct Debits.

As these changes will alter the behaviours of payments processors and payments users, innovations will follow, as innovation follows buying behaviours. By way of example, Gilbert cited Spain where SEPA payments have increased from 3.5% of transactions to 13.6% in the last quarter.

All of this means that SEPA does matter, because it is fundamentally changing European commerce and pushes banks to the management table.

Paul Smee responded with a worrying opening line that SEPA reminded him of the old Samuel Johnson saying that ‘a woman's preaching is like a dog's walking on his hind legs. It is not done well; but you are surprised to find it done at all’.

There was a sharp intake of breath as, in today’s politically correct world, Paul should really have substituted the word ‘dog’ for ‘bitch’ [editor: stop there!].

Paul’s comment was far more relevant to SEPA than the incorrectness of the statement however, in that if SEPA were that needed, then how come there haven’t been any SEPA street parties yet to celebrate. Again, I would claim that there have been a few ... but then SIBOS, EBA Days and IPS aren’t exactly street parties are they, as we all celebrate inside bars of the world but, there you go.

Paul continued by saying that the reason for the lack of celebrations is down to the fact that:

• SEPA is not critical and nor are payments. No-one wakes up thinking about how important any of this is, unless you abolish cheques;

• SEPA doesn’t matter because it has been a top-down process driven by politicians with no user involvement. The European Payments Council (EPC) must engage with the user communities, such as those represented by the UK Payments Council, for this to succeed; and

• SEPA is not working because, based upon the UK’s experience with the Faster Payments Service, if you have a regulatory mandate involving technology change, IT will support this but the business community will not. In other words, SEPA needs a business requirement to succeed, not just a technology change.

A few heckles raised meant that it was time for the seconder of the motion, Fred Bär, to respond to Paul’s comments.

Fred began with comments that banks do innovate, with the direct debit being a good example, but it can take a long time to be pervasive especially when there are so many constituencies, groups and actors involved (was he referring to Simon?). That is why it will take twenty years for a baby of this size to be born. Nevertheless, the fact that it is so difficult – with IBAN and BIC usage being a good case in point – does not make it worthless and SEPA is worthwhile and does matter.

However, it could have mattered more if the launch of the infrastructure was supported by a regulation that mattered. Unfortunately, this regulation – the Payments Services Directive – lost all credibility just as things were moving forward, and when we were at a point when the regulation needed to be more credible than ever before.

Then the Phantom that is Simon stood up and delivered the most damning attack on the program of all of the evening’s speakers who, remember, are all playing ‘a part’ in the program and do not necessarily believe the views they are presenting.

Anyways, Simon began by asking what exactly is SEPA, and to whom exactly is it supposed to matter for? His point is that there is no common definition of SEPA, as demonstrated by some referring to it as the Single Euro Payments Area and others the Single European Payments Area.

There is no clarity of ownership, which is why there is no ownership; there is no legal representation and the legislation meant to provide clarification is unclear; there is no business case for SEPA with users, the ACHs, the corporations or the banks and, where there is a business case such as with einvoicing, it has nothing to do with SEPA.

All in all, it is just a political need that is driving SEPA and nothing else. So what is SEPA? No-one knows, so how can it matter?

Bob then opened the evening to an open discussion with the audience, who asked intriguing questions, such as: “where are the imperatives for SEPA? What will make this happen?” and put the provocative point, such as: “SEPA doesn’t matter because there are far more important things taking over the agenda today, like Obama’s banking reforms, balance sheet capitalisation and liquidity”.

I think my favourite comment had to be from one panel member though, which was that SEPA seems to be moving in ever decreasing circles “having started with a vision and ended with a committee”.

Anyways, we concluded the evening with a vote and, surprisingly, the motion was carried by a single vote.

So yes, this house does believe that SEPA matters ... just.

Meantime, returning to the theme of the Phantom, the sequel to the Phantom of the Opera comes out soon. It’s called: Love Never Dies, and I wonder if that’s what we’ll see with SEPA.

SEPA Never Dies; it just goes on and on and on and on and on and on and on and on and on and on and on and on and on and on and on and on ... bring on the end-date ...

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Things worth reading: 8th February 2010

Things we're reading today include ...

Today's must read:

EU vote deals blow to US terror data deal - Financial Times

US efforts to track down terrorist financing were dealt a blow on Thursday as the European parliament edged closer to rejecting a deal on financial data-sharing between the European Union and the US.  The civil liberties committee of the parliament voted against handing over data compiled by SWIFT.

Companies

Lord Mandelson pledges 'healthy profit' for UK taxpayer from RBS, Lloyds stake sales - The Telegraph
Bonus storm as losses hit £7bn at Royal Bank of Scotland - The Times
National Australia Bank plans team bid for RBS branches - The Telegraph
Santander readies £15bn float of British banks - The Times
Santander fault hits customers - BBC
State-owned rivals provide managers for Metro Bank - The Times
Nasdaq renews European efforts - Financial Times
HSBC denies US Senate accusations of corruption - The Independent
JP Morgan to face Lehman crash probe - The Times
CME plays down fears over trading reforms - Financial Times

People

JP Morgan's chief Jamie Dimon gets $18m pay package - The Telegraph
Goldman Sachs chief executive Lloyd Blankfein awarded $9m bonus - The Telegraph
Thain back from wilderness to head CIT - Financial Times
Barclays star Roger Jenkins back hunting for banks - The Times
Transcript: View from the Top with Tony James, president of Blackstone - Financial Times

Regulations

Financial groups' risk and control costs soar - Financial Times
UK plans to tax banks for bail-outs gain ground with G7 finance ministers - The Telegraph
Impasse threatens Obama's financial reform - The Times
Bank of England panel condemns draft EU hedge fund legislation - The Times (but take note: London home to most powerful hedge fund women - The Times)
ABI slams Brown's bank tax - The Telegraph

Economies

Uproar as Germany pays €2.5m for stolen Credit Suisse data - The Independent
G7: Europe must rescue Greece - The Times
Eurozone crisis threatens recovery - The Independent

 

Quote of the Day:

"I can completely understand why the general public are angry that RBS should be paying bonuses, but I know that if they don't pay the bonuses, people will leave RBS and that's the end of the bank."
Banker insists he deserves his bonus - BBC

 

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The Finanser's Week: 1st February - 7th February 2010

The biggest news stories of the week include ...

Reforming banks: a roundup of current proposals on how to make them smaller  - The Telegraph
How to Reform Our Financial System, by Paul Volcker - New York Times
'Pass my plans or I'll come back to haunt you,' says Volcker - The Independent
Stock markets plunge over Europe debt fears - The Times
The market has failed over bankers’ pay - The Times
Banks told to comply on bonuses or lose UK banking licences in shock FSA ultimatum - The Telegraph
Ken Lewis charged with fraud over Merrill deal - The Independent
Paulson repeats claim that Britain 'screwed' US over Lehman rescue - The Times
Mac Banker busted ogling at naked woman during live TV - the Age

And our biggest stories of the week are ...

Eye, eye - the future of customer identity?

After the news of a banker’s offspring trying to blow up a flight on Christmas Eve by hiding explosive materials in his underpants, we wonder how such individuals get away with such acts. Can’t we monitor them better? Is there no way to identify the honest person from the dishonest from the outright terrorist?  This is a core issue in all aspects of modern life, and particularly in banking where it is wrapped up in our AML and KYC rules. On the one hand, we want to give customers good service which should be helped by knowing the client; on the other, we want to avoid dishonest or politically-exposed customers, which is why we have such rigorous account opening and transaction reporting standards. But are they that rigorous?

The Amazing World of Social Connectivity

It's been a while since we posted numbers on social media, but it's time for an update and there's a great supplement in this week’s Economist discussing all things social networking. It's well worth reading the whole 20-page report but, if you don’t have time, here are all the key statistics (always useful) such as: Facebook took almost five years to get its first 150m users, but just eight months to double that number.

Monthly MiFID MTF Monitor: January 2010

The Financial Services Club is pleased to announce that we have recently agreed a partnership with Thomson Reuters Equity Market Share Reporter (EMSR) to provide a monthly MiFID MTF Monitor. Our aim is to show how the pan-European investment markets are changing as a result of the MiFID and the entry of the new MTFs.  Find out how Chi-X and friends rate against the Deutsche Bourse, Euronext and the LSE.

MiFID Wave 2

I've been meaning to write a few insights into the MiFID review, and will do so in the future.  Meantime, a colleague from Credit Agricole's subsidiary, CA Cheuvreux, sent me a really interesting white paper on the MiFID review and has kindly given me premission to post it here for Finanser readers. 

10,000 year thinking

Attended a great meeting this week, where 400 people gathered to hear the wise words of my friends Professor Michael Mainelli of Z/Yen Group and Bernard Lietaer, along with luminaries Brian Eno (yes, he from daze of old Roxy Music), Alexander Rose, Stewart Brand, Professor Sir Roderick Floud and fund manager Edward Bonham Carter.  The opening panel focused upon: "The Long Now - Long-Term Thinking and Responsibility In The Framework Of The Next 10,000 Years".  Who the hell cares about 10,000 years?

The Long Now of Finance

Following on from yesterday’s blog about 10,000 year thinking, how does this relate to or work in finance? The idea is to fund long-term projects. The sort of massive projects that no-one knows how to fund. The sort of project that governments shy away from as politicians only have four-year lives and thinking past the next term in office is hard for them. The sort of thing like building a Pyramid or a Cathedral, something that is long lasting and changes humanity forever. Who today would think about building such a thing?

Using demurrage for 10,000 year investing

In the final of three posts on 10,000 year thinking, we look at how alternative currencies could be created that actively encourage 10,000 year investing rather than discourage it.  Based upon the complex concept of demurrage - where you gain value based upon the holding of a basket of commodities - the Long Now of Finance becomes a reality.

Banking meets the BBC, an evening with Hugh Pym

After two years of non-stop bank bashing in the media, how do the journalists and press really see the banking system today? How do they report this news and is it really objective and neutral, or inflammatory and overdone?  Find out with an evening with Hugh Pym, Chief Economics Correspondent with the BBC.

2013 Vision of Banking

Commonwealth Bank of Australia put a video of their vision of 2013 banking service onto YouTube the other day.  Watch it here.

 

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Every little (bank) helps ...

 

Methinks change is afoot ...

 

The Amazing World of Social Connectivity

It's been a while since I did a numbers post on social media, but it's time for an update and there's a great supplement in this week’s Economist discussing all things social networking.

It's well worth reading the whole 20-page report but, if you don’t have time, here are the stats (always useful).

Social Audiences

• Facebook is the globe’s largest online social network with over 350 million users.
• Facebook’s audience is bigger than any TV network that has ever existed on Earth.
• Were it a nation, Facebook would be the world’s third most populous after China and India.
• 70% of its audience is outside the United States.
• Twitter had 58 million web visitors in October 2009 ... or is it 23 million?  See end of this entry.
• Facebook took almost five years to get its first 150m users, but just eight months to double that number.
• LinkedIn has over 58 million members, and it took 16 months to reach its first million users whereas the most recent additional million came on board in only 11 days.

Mobile Social

• eMarketer estimate that over 600 million people will use their phones to tap into social networks by 2013, a more-than-fourfold increase on last year’s 140 million.
• Facebook has 65 million mobile users.

Social Content

• Facebook’s users post over 55 million updates a day and share more than 3.5 billion pieces of content with one another every week.
• Over 2.5 billion photos a month are uploaded to Facebook, making it one of the largest photo-sharing sites on the web.
• Facebook has one engineer for every 1.2 million users.
• Facebook has over 1 million developers creating software for it and its online directory contains over 500,000 apps.
• Twitter has spawned over 50,000 apps, including offerings from firms such as Twitpic, which lets people post photos to their Twitter feeds, and Twitscoop, which highlights popular topics being talked about on the service at any moment.

Social Revenues

• Facebook does not reveal numbers, but its revenues last year are thought to have been at least $500m and quite possibly more, which helped it to turn cash-flow positive in mid-2009.
• Although user numbers were sharply up last year, the social-networking industry’s revenues in America, its biggest advertising market, rose only by a modest 4% to $1.2 billion according to eMarketer, a market-research firm.
• That was still an achievement, because the total online advertising market shrank in 2009 and MySpace revenues, the largest share, are thought to have fallen last year.
• This year eMarketer expects revenues to grow by over 7%.
• ComScore found that one in five adverts viewed by American web users last June ran on social-networking sites, with MySpace still accounting for the biggest chunk of the total.

Social Games

• In 2008 Tencent, the Chinese ‘Facebook’ which runs QQ coins, listed on the Hong Kong Stock Exchange and reported revenues of just over $1 billion, with $720m coming from online gaming and sales of items such as digital swords and other virtual goods.
• Ning, another social networking tool, is targeting gifts rather than games and launched an initiative in October 2009 that allows people to sell customised digital items to their members. These cost anything from 50 cents to $10, and over 400,000 are being exchanged every month, splitting the profit equally with its customers.
• In the game “Sorority Life”, users complained about the lack of virtual men to date so Playdom quickly introduced some last November – some 10 million of the boyfriends were promptly snapped up with a few players buying as many as 500 boyfriends each; some paid for their digital darlings with virtual credits won in the game, but others stumped up over $5 a time for their beaux.
• Although Asia remains by far the biggest market for digital knick-knacks, Inside Network, a research firm, has estimated that sales of virtual wares in America on many different kinds of websites reached $1 billion last year and could grow to $1.6 billion in 2010.
• ThinkEquity, an investment bank, reckons that revenues in America from social games could hit $2.2 billion by 2012, a big leap from last year’s $375m million.
• “The best virtual goods have real currency,” says Mark Pincus who runs Zynga, on eof the biggest gaming firms on Facebook.

Social Marketing

• A survey of 1,000 heavy users of social networks and other digital media conducted in August 2009 by Razorfish, found that 44% of those following brands on Twitter said they did so because of the exclusive deals the firms offered to users.
• One in five tweets mention specific brand names in the updates.
• O2 found that 17% of Britain’s small businesses were using Twitter to attract new customers and some believe they have saved around £5,000 ($8,000) a year from other forms of marketing by doing so.

Social Hiring

• US Cellular, a telecoms company, says it saved over $1m last year by using a LinkedIn system that produced good candidates for its jobs faster than traditional recruitment channels.
• A survey by CareerBuilder.com of about 2,700 executives in America last year found that 45% of them looked at job candidates’ social-network pages as part of their research, and more than a third of those had unearthed information there that put them off hiring someone.

Social Not-working

• A survey of 500 small businesses in America conducted by Citibank last October found that most of them had not used online networks at all because they thought they would be a waste of time.
• Morse estimate that personal use of social networks during the working day was costing the British economy almost £1.4 billion ($2.3 billion) a year in lost productivity.
• Nucleus Research, an American firm, concluded that if companies banned employees from using Facebook while at work, their productivity would improve by 1.5%.
• A survey of 1,400 CIOs by Robert Half Technology last year found that only 1/10th gave employees full access to networks during the day, and many were blocking Facebook and Twitter altogether.

If you like this sort of thing, then please join our survey on social media in finance.

Click to take the survey: https://www.surveymonkey.com/s/NXWW2B3

The survey is closing very soon, so feel free to join the 425 professionals from banks, corporations, consultancies, governments and the professions who have responded so far.  Results published at the end of the month.

Meanwhile, if you like this sort of thing a lot, then here’s a few more social media numbers, this time from this year’s World Economic Forum (WEF):

• WEF reached a worldwide audience of 430 million readers online through the use of social networks this year.
• Facebook ran real-time pulses, polling over 200,000 people and bringing their views into the discussions.
• WEF has over 6,300 fans on Facebook.
• Webcasts of public sessions on Livestream reaching a cumulated audience of over 210,000 viewers.
• News conferences were seen by over 70,000 people, and they could put questions to panellists via Twitter and Facebook.
• Over 250 participants and 120 journalists continuously sharing their impressions on Twitter
• A Twitterwall allowed participants to see a running micro-commentary on the meeting as it progressed.
• ‘Davos’, ‘WEF’ and ‘WorldEconomicForum’ were mentioned 30,000 times on Twitter.
• 1,551,130 people are following the Forum on Twitter (http://twitter.com/davos)
• The Davos Debates on YouTube (http://www.youtube.com/davos) have been watched over 600,000 times.

 

UPDATE: I ran a competition related to this entry asking folks to say how many visitors went to twitter in October 2009.  The Economist had the figure 58 million but the winning entry sent me this from Usuable NZ:

In October 2009, unique visitors numbers were:

1. Facebook = 128,940,004 (+188.67% from 1 year ago)
2. Myspace = 49,903,567 (-9.18% from 1 year ago)
3. Twitter = 23,042,455 (+577.92% from 1 year ago)

Lies, darned lies and statistics!!

 

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Things worth reading: 5th February 2009

Things we're reading today include ...

Today's must read:

"Bank of America, through its top management, was motivated by self- interest, greed, hubris, and a palpable sense that the normal rules of fair play did not apply to them."
Andrew Cuomo, New York Attorney General
Ken Lewis charged with fraud over Merrill deal - The Independent

 

People

Model Miranda Kerr backs internet campaign to save Australian TV banker from sack - The Telegraph

Companies

Santander's march on UK continues and RBS is next - The Independent
Deutsche Bank pays £200m in bonus tax - The Independent
Nasdaq OMX Nordic predicts 25% volume growth - Financial Times

Europe

Stock markets plunge over Europe debt fears - The Times
Iceland 'lied' over the state of its banks before collapse, says Dutch central bank - The Telegraph
Iceland warns EU on Icesave row - BBC

Bonuses

The market has failed over bankers’ pay - The Times

Markets

Banks shut low-use credit cards - Financial Times
Bankers without Borders to expand microfinance programme - Financial Times
Bank halts QE at £200bn despite 'sluggish' recovery - The Independent

 

Quote of the Day:

"Plans for a £200 million flotation of Walton & Co, a start-up bank, have been pulled because of a lack of support from investors."
Shortage of funds forces start-up bank to pull IPO - The Times

 

Watch of the Day (2 minutes):

How Kwedit works: a new system for buying virtual goods if you don't have a debit or credit card, and then get others to pay for it later or pay in cash.

The Long Now of Finance, Part Three

In the last of three reports on the Long Now of Finance (Part One and  Part Two), the last part of the day focused upon new ways of banking and supporting 10,000 year thinking, with Bernard Lietaer opening the session with a dialogue around using demurrage to encourage this.

Demurrage is a hard thing to grapple with, as it gets into discussions about fiat currencies and usury which are far beyond the ken of a mere blog on banking ... or it is today anyway. If you want to know the ins and outs of all that stuff then go checkout a book like: “The Creature from Jekyll Island : A Second Look at the Federal Reserve” (ooh, that’s fun!), but the gist of the conversation goes something like this.

You plant a tree as an investment in the future.

When is it best to chop down the tree, and what is the tree’s value in a hundred years (remember the story about New College, Oxford from yesterday)?

Let’s say that you have $100 today, and you can invest that $100 in planting a tree which, in one hundred years, will retail at $1,000 based upon today’s pricing. So you now think the tree is worth that to you in a hundred years.

No.

In a hundred years, using interest based analysis of net present value and assuming you get a positive interest rate of 5% per year, then the tree is worth about $7.60 in a hundred years, based upon the deferred costs of your investment.

In other words, you are losing 5% per year by having your money tied up in an illiquid asset because you could have been earning 5% interest on that cash by putting it into other more liquid assets with faster, shorter-term returns.

This means you are punished for investing in long-term assets and incentivised to invest in short-term earning vehicles.

It is the nature of usury, interest and today’s financial market offerings.

But it doesn’t have to be.

According to Bernard, if you use demurrage, you can turn this on its head.

What is demurrage?

Normally, it is talking about a fee related to shipping costs but, in this context, it is the carrying cost of money. Here’s one definitive view from answers.com:

Demurrage is a cost associated with owning or holding currency over a given period of time. It is sometimes referred to as a carrying cost of money. For commodity money such as gold, demurrage is in practice nothing more than the cost of storing and securing the gold.

Now it’s not a well known field or term, but it is focused upon making it worthless to keep your cash in short-term things and incentivises to invest in long-term things by exchanging your cash for something else of value, such as a basket of commodities.

So here’s Bernard’s idea.

You take your money and swap it for a Terra.

Terra is a complementary currency designed for long-term investing, and 100 Terra = 1 barrel of oil + 10 bushels of wheat + 20 kg of copper + 1/10 oz of gold + 1000 carbon emission units and so on.

The fact is that here, you are investing in commodities that have lifelong values, so you lose nothing but gain.

This is why, when we see a ‘flight to safety’, it’s always oil, gold and commodities that fly through the roof in value. Meanwhile, the storage cost of your basket of commodities is passed to the issuer of the Terra currency who pay a demurrage fee.

The result is that you have a currency exchange that is: inflation proof by definition; automatically convertible without new international treaty; and provides a pure medium of exchange and planning currency, rather than a store of value.

Returning to our tree example therefore, the 100-year old tree is now worth $168,903.82 in a hundred years time, rather than $7.60, based upon the payment of a demurrage fee of 5% per annum.

In other words, it works the opposite way to the usury based system and encourages long-term investing.

It is also complementary to the commercial world of investing, and Bernard totally believes in this proposition. I’ve known Bernard for over a decade, and he knows his stuff. After all, he’s worked and invested alongside George Soros and was formerly a Belgium Central Banker who came up with the idea of the euro, or the ECU as it was back then. He knows his stuff.

But ...

... after a decade, his idea still has not got all the buy-in it should have.

This is because people’s behaviours won’t change unless they have to, and because the thing he’s talking about above is darned complex.

That’s why fund manager Edward Bonham Carter said: “if you ask people to think about the world in thirty years, they won’t because it’s not in our nature to do that.”

Professor Sir Roderick Floud cast doubt on Bernard’s contentions too, stating that we over-estimate the extent of market volatility and underestimate the benefits.

The debate raged on, and will do so a long time into the future. The Long Now of the Financial Future that is.

The learning for me is that there is a way to evolve and morph capitalism for the future to protect us from the crashes of the past and to invest in a sustainable, long-term protection for the planet. However, it’s just so complex and difficult that most politicians, regulators, bankers and investors don’t understand it, won’t invest in it, can’t see that far ahead anyway and need a good kicking if anyone wants them to focus upon it, e.g. force them to do it.

I guess that’s why Edward Bonham Carter’s comment that: “there are a lot of clever people out there. The challenge is to get them working on the problems before the dumb people get there”, got the biggest laugh of the session.

For more on Bernard’s projects and thinking, go to www.terratrc.com and www.lietaer.com.

For more on the Long Now, go to www.longnow.org.

For more on Long Finance, go to www.longfinance.net.

There are also a number of excellent white papers available for free download here including: “The Road to Long Finance: A Systems View of the Credit Scrunch”:

In their discussion paper, Michael Mainelli and Bob Giffords have laid out a provocative analysis of the global financial crisis in an attempt to widen the debate. The authors have worked hard to raise some new arguments, dismiss some old ones and change the priorities for others. They point out the dangers of an over-zealous regulatory reaction and of trampling over competition in the name of emergency measures, and they argue that a healthy system must be more diverse. Their key point is the importance of competition in open markets to prevent "too big to fail is too big to regulate", and they encourage more radical investigation of Long Finance.

Tree pictures sourced from funtimeshad.com and dmu.ac.uk

 

MiFID Wave 2

I've been meaning to write a few insights into the MiFID review, and will do so in the future.  Meantime, a colleague from Credit Agricole's subsidiary, CA Cheuvreux, sent me a really interesting white paper on the MiFID review and has kindly given me premission to post it here for Finanser readers. 

Issues linked to Crossing Engines (internal order crossing systems) can only be properly understood after a review of the new landscape that emerged following MiFID. We witnessed a destructuring of the market, which has resulted in a war of tick sizes and the emergence of a new category of entrants favoured by the pricing set up by exchanges. During this period, traditional players saw their costs soar, a factor that could lead to the exit of the weakest players without sufficient financial wherewithal to cope with the expenses resulting from MiFID. Pre-transparency, which was one of the major vectors of MiFID, has deteriorated, and liquidity on the lit markets has become an illusion. It is precisely the deterioration of the quality of the lit side that has driven participants to increase their use of dark venues (dark part of MTFs and Crossing Engines) in order to protect the interests of clients wishing to access all liquidity pools. Concerns that subsequently rose regarding price formation mechanisms cannot be lifted by regulating dark pools indiscriminately but rather by restoring the quality of the lit world.

Download the 7-page white paper here: CA Cheuvreux on MiFID

Things worth reading: 4th February 2010

Things we're reading today include ...

Today's must read:

The Least-Trusted Banks in America - New York Times
Customers of the biggest banks in the United States are the least likely to believe their financial institution does what’s best for them as opposed to what’s best for the bottom line, according to a new report from Forrester Research.

Bank Branding: How Banks Hope to Get Disgruntled Consumers to Stay Loyal - My Bank Tracker

Companies

RBS bailout faces legal attack thanks to bank's lending record - The Independent
BofA push for 2,000 more retail brokers - Financial Times
Goldman: Employees Don’t Mind Record Low Pay Ratios - Wall Street Journal

Bonuses

AIG plans to pay $100 million in another round of bonuses - Washington Post
'Outrageous' AIG bonuses attacked - BBC
Treasury writes to City investors urging them to scrutinise bankers' pay as bonuses loom - The Telegraph
FSA edict on bonuses to spark legal challenges - The Telegraph
FSA's ban on buying out bonuses sends recruitment market for bankers into disarray - The Telegraph
Wall Street Pay - New York Times

Markets

Bank may halt quantitative easing - BBC
High-speed traders seek bigger profile - Financial Times
Finance big guns fire furious broadside at Myners - The Times
Tougher action is needed over financial woes, EC tells Greece - The Independent

 

Quote of the Day:

73 percent of Internet bank clients share online banking password with non-financial sites, and 47 percent re-use both, their online banking user name and password, British firm Trusteer said, citing a sample of more than 4 million users.

Most web bank clients use same passwords elsewhere - Reuters

 

Banking meets the BBC, an evening with Hugh Pym

After two years of non-stop bank bashing in the media, how do the journalists and press really see the banking system today? How do they report this news and is it really objective and neutral, or inflammatory and overdone?

Find out with an evening with Hugh Pym, Chief Economics Correspondent with the BBC.

Hugh Pym is a financial and political journalist working for the BBC. He was a BBC radio journalist from 1986 to 1987, then producer of Business Daily at Channel 4, 1987-1988, correspondent with ITN, 1988-1998, and a freelance broadcaster with Sky Television in 1999-2000. He was a BBC special correspondent covering Economics until 2008, when he took on the role of acting Economics Editor during the maternity leave of Stephanie Flanders. Following her return, he became the BBC's Chief Economics Correspondent, a newly created role.

He has published books: What Happened? And Other Questions About the Credit Crunch (co-author with Nick Kochan), A Study Of Gordon Brown's First Year in Office as Chancellor of the Exchequer (also co-written with Nick Kochan), and a historical survey of the reign of Philip II of Spain, which he co-wrote with Welsh historian Alun Vaughn. In the 2001 General election Pym stood as Liberal Democrat parliamentary candidate in the North Wiltshire constituency.

If you would like to attend, then register here: http://www.fsclub.net/public-events-detail.cfm?id=82

The Long Now of Finance, Part Two

Following on from yesterday’s blog about 10,000 year thinking, how does this relate to or work in finance?

The idea is to fund long-term projects.

The sort of massive projects that no-one knows how to fund.

The sort of project that governments shy away from as politicians only have four-year lives and thinking past the next term in office is hard for them.

The sort of thing like building a Pyramid or a Cathedral, something that is long lasting and changes humanity forever.

Who today would think about building such a thing?

Back in the heady Egyptian and religious fervour days of old, building a huge monolithic testimonial for prayer and worship was the thing to do. But then, back then, you were rewarded with something other than finances.

Today, no-one would build such things.

However, there are other things we could, and probably should build, such as flood protection barriers, and the Long Now guys used the example of two countries to illustrate this. One that thinks and funds Long and the other Short.

The Long thinking is in the Netherlands.

The Dutch Government spent €450 million building the Maeslant barrier to protect the reclaimed land across the Coast of the Netherlands.

Rather relying on a boy to stick his finger in the dyke, the Dutch government decided they would fund such a project because, if catastrophe ever struck and the land was flooded, it would pretty much wipe out the most important parts of Holland.

So if you’re Dutch, a €450 million spend on an event that may never happen makes sense ... because if it did, the cost could be, let’s say, €60 billion.

What could cost €60 billion?

The devastation and disaster caused by a major flood of the Dutch coast.

And this is also the cost of the sinking of the major American coastal city, New Orleans, in 2005.

Hurricane Katrina cost the USA over $80 billion.

That’s €60 billion. If the USA had thought long, they would have spent the $1 billion it would have cost to build the flood defences for the southern coastline, and saved themselves $79 billion.

That’s the thing about Long Finance, it thinks long-term.

It recognises that the investment of millions today will save billions tomorrow.

For each euro or dollar spent today, it recognises it will save 100 times that amount tomorrow.

So long-term finance thinks long and invests long to save when the short now happens.

Stewart Brand, author of the Whole Earth Discipline, then expanded on this commentary further by quoting from the classic book by Robert Heinlein: Time for the Stars.

In the book, released in 1956, Heinlein recounts the work of the Long Range Foundation (LRF), a foundation that thinks the way outlined above:

“The charter goes on with a lot of lawyers' fog but the way the directors have interpreted it has been to spend money only on things that no government and no other corporation would touch . . . To make the LRF directors light up with enthusiasm you had to suggest something that cost a billion or more and probably wouldn't show results for ten generations, if ever . . .”

The key to the LRF is that they only invest in things so expensive and so far out that it wouldn’t be investable for a government. However, by adopting this strategy, they have become the most profitable company in the universe, making shedloads of cash thanks to those investments paying off when the inevitable disasters, catastrophes or just plain bets pay off.

Oh yes, there are long bets too. For example:

“Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S & P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.”  Predictor: Warren Buffett

But that’s an aside.

The bottom line is that Long Finance and Long Banking looks at uninvestable projects, the big ticket items, and takes them on board precisely because they are good for the long-term health and protection of mankind. That’s the nature of the Long Now.

Brian Eno likened it to the story of New College Oxford which, being British, was actually established in 1379 and isn’t new at all.

The College’s Great Hall has this fantastic arched ceiling with oak beams across.

After five hundred years, the beams inevitably were rotting and decaying so badly they needed to be replaced.

So the Dean of the College asked the groundsmen if they knew of anywhere to source some similar beams?

“Oh yes”, the head groundsman said. “Five hundred years ago, when they built the college”, he told the Dean, “the founders planted a forest of oaks of the same wood as the one’s used in the ceiling just over there.”

In other words, they had had the foresight to realise that, at a point in the Long Future, the ceiling beams would need replacing so they planted trees for just such an occasion in the Long Now.

That’s thinking Long, and this is what Long Finance is focusing upon.

I realise all of this sounds a bit tree-hugging or academic, but it's also critically important for those who care about an agenda that focuses upon more the just the right here, right now.

And, just in case you're wondering, yes, the College used the oak trees for their new ceiling and have since planted another small copse of oaks for the next time it may be needed.

A final thought on this tomorrow but, for now, think the Long Now.

Things worth reading: 3rd February 2010

Things we're reading today include ...

Bonuses

Banks told to comply on bonuses or lose UK banking licences in shock FSA ultimatum - The Telegraph
Multimillion-pound payments at Credit Suisse will escape bonus tax - The Times

Volcker

US to measure banks' trading volumes - The Times
Paul Volcker defends curbs on proprietary trading amid Republican dissent - The Telegraph
'Pass my plans or I'll come back to haunt you,' says Volcker - The Independent
Citigroup set to sell part of investment arms - Financial Times
MPs fly out to meet American financial leaders - The Times

Countries

Germany threatens to use bank data in tax crackdown - The Telegraph
Threat to City of London as EU Parliament seeks to whittle away power to veto - The Telegraph
Bleak mood among new EU states - BBC
A Glimpse Into the History of Top 10 Banks of the U.S. - Global Thoughtz

Technology

Mobile banking at Davos: “we know this train is coming” - CGAP
How Big Is Mobile Banking’s App-etite? - Celent Blog

Quote of the Day:

"On behalf of our viewers, we have expressed our concern to Macquarie. They have assured us they are taking the appropriate action."

Mac Banker busted ogling at naked woman during live TV, the Age

 

Eye, eye - the future of customer identity?

After the news of a banker’s offspring trying to blow up a flight on Christmas Eve by hiding explosive materials in his underpants, we wonder how such individuals get away with such acts. Can’t we monitor them better? Is there no way to identify the honest person from the dishonest from the outright terrorist?

This is a core issue in all aspects of modern life, and particularly in banking where it is wrapped up in our AML and KYC rules. On the one hand, we want to give customers good service which should be helped by knowing the client; on the other, we want to avoid dishonest or politically-exposed customers, which is why we have such rigorous account opening and transaction reporting standards.

But are they that rigorous?

9/11 was funded by hundreds of sub-$1,000 transactions, and a person who keeps a straight line until the day they walk across it is hard to pre-identity.

This is why we need to identify customers better in the future, and to avoid the lapses that account numbering systems expose us to. For example, we are meant to have a standard bank identification code for accounts across Europe in the form of IBAN and BIC, and yet the identifiers vary from 15 to 31 digits so there is no standard. Equally, there are no unique identifiers, in that I could have multiple accounts in multiple names or variations of a name: Chris Skinner, CM Skinner, Christopher Skinner.

This is why banks have been at the forefront of working with technologies that should help identity customers better and more easily and, today, the security services in the airports might provide answers for bankers’ dilemma’s over customer recognition and identification.

For example, for years banks have investigated biometrics as part of the solution to identity issues. Fingerprints and, more recently, iris-recognition ATMs, palmprint ATMs and facial scanners have been trialled at many banks worldwide. What these systems should deliver is instant recognition of anyone anywhere.

But we are a long way away from such solutions. For example, in my own travels, the number of times my ATM card is rejected in foreign climates on the basis of a ‘standard security check’ is becoming a common occurrence. Each time, it involves a telephone call to unlock the card, and this simple example shows just how far we are from finding viable method today of secure identification.

Sure, a telephone call seems fairly trivial in avoiding a potential fraud, but the customer inconvenience in both time and cost – a long-distance call to the bank is expensive – is intrusive and unwarranted for a world where technology has solved most other issues of convenience and access.

By way of illustration, almost a decade ago Steven Spielberg presented a vision of 21st century life in the film Minority Report, where everyone was known by the blink of their eyes.

Although the film was released in 2002, the vision of simple iris recognition is still far away from our reality – if you have tried such services at airports, you will know what I mean – but the effective and unique recognition of individuals is a key tenet of banking.

We need a unique single identifier of the individual, and something that can be easily used and presented anywhere, anytime by the individual, and fit for the second decade of the 21st century.

This does not mean a pure biometric recognition but, by adding a biometric recognition to an account at least it may overcome the clunky, chunky way we currently recognise customers through complex numbering systems and passwords that customer’s often forget.

And biometrics has become an area that is far more sophisticated than the ropey systems of a decade ago. For example, over a third of ATMs are based upon biometrics using palm vein authentication in Japan in 2008, and the number has been increasing rapidly to avoid fraud.

Or take the use of facial recognition systems in China. These were deployed extensively for the Beijing Olympics, with facial recognition chosen as the way to go because they are completely unobtrusive. These were accurate to the point of false positives or negatives only occurring on a rare occasion, with the ability to search over a million faces in under three seconds on a standard PC.

Now that’s simple.

What this shows is that banks and financial markets do have viable alternative customer recognition systems that are far more unique to the individual than an account number, password and PIN.

Using fingerprints on a mobile phone for example:

Using fingerprints on a mobile phone, palmprints at an ATM or facial recognition within branches all add an extra layer of security for a bank to uniquely identify the customer quickly and easily.

The real danger is that banks are no longer in the driving seat when it comes to customer identifiers ... governments are as they impose citizen identifiers.

Citizens are increasingly expecting biometrics to be imposed upon them by governments and until banks start to work with the security services on these programs, the danger will be that they end up having to use whatever the governments give them.

And that might just be something that works well in tracking pantsbombers, but will be incredibly onerous and anti-customer for a bank user.

The Long Now of Finance

So I finally got to attend a free lunch!

This was the launch of the largest event focused upon using long-term thinking in finance that I’ve ever seen, and sponsored by many organisations including the Financial Services Club.

Around 400 folks gathered to hear the wise words of legendary thinkers and speakers, including my good friends Professor Michael Mainelli of Z/Yen Group and Bernard Lietaer, along with luminaries Brian Eno (yes, he from daze of old Roxy Music), Alexander Rose, Stewart Brand, Professor Sir Roderick Floud and fund manager Edward Bonham Carter.

This was all ably chaired by Faisal Islam from Channel 4 News.

The gathering will be a source of material for quite a while but, to begin with, it’s worth discussing the opening session, a panel discussing: "The Long Now - Long-Term Thinking and Responsibility In The Framework Of The Next 10,000 Years".

What the hell is it all that about, you may ask. 10,000 years? Who the hell cares about 10,000 years?

Well, a lot of folks do and the Long Now is all about thinking for the long-term.

Brian Eno kicked off the session by talking about how the idea came to him, as he is the man everyone pointed to as the creater of the phrase: “the Long Now”.

He said the idea came to him when walking around New York and seeing everyone rushing about, real fast.

New York – like many capital cities of today – is all about fast.

Fast this, fast that.

And everyone is passing through, as they don’t see New York as their home but as their place of work. So they have very short-term thinking or, as Brian referred to it, they think like a "Short Man".

Ask the Short Man what he’s doing, and he’ll tell you his plan for today or this week. That’s as far as the Short Man thinks. There is no life plan, or after life plan. Just the Short Now.

The issue however, as anyone thinking about what planet we will be leaving to our children and grand children and great grandchildren, is that short-term thinking is killing the planet. So how do we think long term: the Long Now?

It’s challenging.

10,000 years from now is 12010 AD (which is why all the material of the Long Now refers to Now years with a 0 precursor; for example, this year is 02010).

10,000 years ago was 7990 BC.

There was no civilisation as such then. We had just converted from cavemen to men in caves and beaches and nomadics. Then, around 5000 BC, we became civilised (which is debatable).

10,000 years is hard to imagine or to see as relevant.

So what did the Long Now guys do to make it seem more relevant?

After all, the aim is to get us to think about what we will be leaving on this planet for the long-term, not just today.

The Long Now guys decided to build a clock that would last for 10,000 years.

A 10,000 year clock!

This would be a physical manifestation of the Long Now to inspire long-term thinking about what we leave on this planet.

The Clock was inspired by Danny Hillis, who had just created the world’s fastest computer back in the early 1990s, and it is a physical manifestation of the longness of time.

A clock that will last for 10,000 years.

The first question is how can you build a clock that will last that long?

And Danny responded by creating five guiding principles:

1. Longevity: with occasional maintenance, the clock should reasonably be expected to display the correct time for the next 10,000 years.
2. Maintainability: the clock should be maintainable with bronze-age technology.
3. Transparency: it should be possible to determine operational principles of the clock by close inspection.
4. Evolvability: it should be possible to improve the clock with time.
5. Scalability: it should be possible to build working models of the clock from table-top to monumental size using the same design.

The five principles can easily apply to anything you want to build for the long term.  

The Long Now team then built a prototype of the Clock in 1999, and are now building a massive underground 10,000 year clock in Nevada.

The clock has a really impressive algorithm which produces a different order for the ringing of the chimes each and every day for the next 10,000 years. That’s over 3.5 million combinations of chimes!

Amazing stuff.

All in all, the Long Now is very impressive. It’s also very academic, very expensive and very, very, very long-term, which raises the question ... so what?

OK, so it’s a big underground long now clock, but what’s it there for?

It’s there to get us to think about and answer long-term questions such as, what will happen to the clock if, in 1000 years, there’s another Dark Age?

It’s to get people to think long-term, which is what many are claiming we should now be doing in banking and finance.

And that was the point of this conference.

How can we think long?

I’ll add more to this entry through the week in bite-size chunks but, for sheer imagination, I like the idea of a 10,000 year clock.

Now, how about an Apple product that stays cool for more than one year?

Things worth reading: 2nd February 2010

Things we're reading today include ...

Today's must read:

Reforming banks: a roundup of current proposals on how to make them smaller - The Telegraph

How to reshape the world's banks will dominate this year. Here Banking editor Philip Aldrick looks at current proposals on taxing banks and splitting them up. 

 

Companies

Coutts remains the crème of private banking - The Telegraph
Swiss Justice Minister warns UBS over tax row - The Times
Royal Bank of Scotland to pay top talent 'cash bonuses' - The Telegraph
Goldman Sachs and the $100 million question - The Times
Gorman (CEO, Morgan Stanley) aims to strike a balance - Financial Times

Regulations

Warning of new housing crash because FSA's reform plan is too weak - The Times
Treasury says banks need to do more - The Telegraph
The elephants in the room tiptoed out of Davos - The Times
First sign of 'common ground' on bank rules - The Independent

Economy

Bank of England faces dilemma on future of QE - The Independent
Obama unveils $3.8tn US budget - BBC

 

Quote of the Day:

'He was so drunk, "he thought he had been dozing in his home."'
Rip Torn Heading to Rehab Following Alleged Boozy Bank Break-In - E! Online

And the news video if you missed it:

 

2013 Vision of Banking

Commonwealth Bank of Australia put this video onto YouTube the other day:

It's a vision of 2013. 

Come back here in three years and see if it's come true!

I'm fairly sure that, if it is, then this is how you'll be getting to work (thanks to Barclaycard):

Cool!

 

Monthly MiFID MTF Monitor: January 2010

The Financial Services Club is pleased to announce that we have recently agreed a partnership with Thomson Reuters Equity Market Share Reporter (EMSR) to provide a monthly MiFID MTF Monitor.  Our aim is to show how the pan-European investment markets are changing as a result of the MiFID and the entry of the new MTFs. 

EMSR provides extensive, amazing, insightful and very indepth analysis of pan-European trades via electronic and OTC trading, including trade reporting on and off exchange through internalisation reports via Markit BOAT, as well as a pure comparison of trading venues, including dark pools. 

For example, and to begin with, here are the trading stats in euro by trading venue* for January 2009 and January 2010 (doubleclick images to see larger version):

 
Source: Thomson Reuters Equity Market Share Reporter (ENX=Euronext, Xetra = Deutsche Bourse)

As can be seen, Chi-X have now reached the Number 1 spot for all European trading.  Interesting to see how this has changed over two years.  For example, here's the picture back in January 2008:

Meanwhile, if you include on- and off- exchange trades, including all OTC activity, the picture is more like this:

 

Source: Thomson Reuters Equity Market Share Reporter

Hmmmm ... no wonder LSE has been struggling.

Meanwhile, it's also interesting to compare the actual trading by value on the MTFs year-on-year:

 

Source: Thomson Reuters Equity Market Share Reporter

What happened to Turquoise you may ask?  (a) their stakeholders contracts expired; and (b) they got acquired.

Finally, if you really want the detail, then the numbers are interesting (doubleclick to enlarge):

So, there you have our first monthly MiFID monitor.   More to come, and lots of analysis and information we could share.  All in all, thanks to Thomson Reuters for sharing ...

 

* these figures reflect auction and non-auction transparent order book and dark pool trades, but excludes real-time and post-trade on-exchange reported and off-exchange OTC trades in order to provide a true comparison between the MTFs impact and the traditional exchanges.