The Financial Services Club's Blog

Regulators are cutting their nose off to spite their face

In another conversation, I gained a new dimension as to how the regulatory and governmental influence is changing a bank’s outlook.

I was talking with a very senior manager in a bank.  This person heads up risk, audit and compliance.  He is a member of the bank’s executive board.  A heavy hitting player.

He had been with the bank for a long time and had experience of every aspect of the bank’s business.  He knew the key people in every part of the bank, the foibles and fundamentals of all aspects of the business.

But he told me it meant nothing, was worth nothing and was no longer relevant.

All that experience, knowledge, understanding … for nought.

Fifty Shades of Law: America, Banking and World War III

No, it’s not about flagellation and sado-masochism, although the current regulatory regime is not far off that.  It’s also true that the regulatory regime is pretty mind-boggling these days, with fifty shades of interpretation of fifty shades of law.   This was made clear to me in dialogue with a group of European banks involved in the LIBOR fixing program last week. 

We were talking about the likely implications of American regulatory retaliation, and they made it clear to me that the United States is using LIBOR and money laundering as pure extortion from foreign banks to bolster their political coffers.

That sounds a bit extreme, but it made some sense as the conversation developed.

LIBOR - the future

I just updated the LIBOR timeline with what's happening this year when five currencies are discontinued from LIBOR publications.

In case you missed it, here's what's happening.

LIBOR fixing - the timeline

It’s the end of the first week of January and we want to end on an upbeat note.  So what do we get as this morning’s headlines?  A whole heap of dross about LIBOR, a sprinkling of stuff about mis-selling insurances and illegal mortgage foreclosures (read things worth reading every day if you want to keep up with these headlines).

Oh shoot.

That’s not a great way to start the year but then you have to remember that this is nothing to do with 2013 or the future, except in the way in which regulators will want to change the way they regulate the markets.  No, the daily headlines all relate to issues raised before 2010.

The most heinous of these issues that will dog the industry deadlines for most of this year will be LIBOR fixing.