The Financial Services Club is a unique service designed for Senior Executives and Decision Makers from any firm interested in understanding and planning strategies for the future of banking and finance.
Michael Joseph Gross raises some fascinating, and
disturbing, questions in “Silent War,” in the July issue of Vanity
Apparently drawing on extensive contacts in the rarified
world of extremely talented hackers, and finding some corroboration from
government and ex-government types, Gross recounts a consumer attack on ARAMCO
that did a full wipe of the hard drives on 30,000 company PCs.
“For good measure, as a kind of calling card, the hackers
lit up the screen of each machine they wiped with a single image, of an
American flag on fire.” A hacker told Gross the attack wasn’t sophisticated,
but it was effective — it overwrote the memory on each computer five or six
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.
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.
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.
sounds a bit extreme, but it made some sense as the conversation developed.
So all of the UK media were up in arms over
the selection of Mark Carney as the new Governor of the Bank of England.
Why such furor?
Because they were all duped into not seeing
him as being off the radar, with most bets on Deputy Governor of the Bank, Paul
Tucker, to take over.
Paul got besmirched in the LIBOR scandal during the summer, but was still viewed as #1
If not him, folks like Adair Turner,
chairman of the Financial Services Authority; John Vickers, a former BOE chief
economist and the chairman of the government's Independent Commission on
Banking; and Terry Burns, former Treasury permanent secretary and non-executive
chairman of Santander UK were seen as front runners.
This was because the other choices,
including Mark Carney, had ruled themselves out.
In the report, the ECB calls Bitcoin “the most successful — and probably most controversial — virtual currency scheme to date.”
The ECB goes on to say that the concept of Bitcoin stems from the Austrian school of economics, where business cycle theory developed by Mises, Hayek and Bohm-Bawerk floated the idea that virtual currencies could be the starting point for ending central bank money monopolies.
Derek Wylde, Group Head of Fraud at HSBC,
presented at the Financial Services Club last week.
He talked about many aspects of fraud and risk,
and presented quite a few numbers
related to the issue.
One of the charts raised questions in my
mind. It related to the total cost of payment card fraud. According to Derek, payment card fraud costs
an average of six to eight basis points on sales. For those who don’t use the terminology of basis points, a basis point
is 1/100th of a point, or 0.01 if you prefer. So fraud costs between 0.06% to 0.08% of the
total sales in payment cards.
I was going to write one final piece about Japan, on a more
serious note, as the SIBOS week really brought home to me the fact that there
is a two speed financial world being regulated under one regulatory agenda.
There are the growth markets of Asia, Africa and Latin
America, who want regulation to encourage banks to support growth; and there
are the recession markets of Europe and America, who want regulation to manage
austerity and budget cuts and avoid unacceptable risks within the financial
The result is that you have markets that do not work at all.
Banks and hedge funds will purely morph to where the money
is – Asia and its allies – and get out of the markets where there is no money,
such as Contintental Euorpe.
As I say, was about to write this piece when I read the Wall Street Journal’s headline opinion piece,
which pretty much said what I was going to write.
Therefore, if you missed it, here’s the real impact of
Dodd-Frank (and the European Market Infrastructures Regulation, EMIR):